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Aug 3, 2022

Benefitfocus Announces Second Quarter 2022 Financial Results

Delivered on Second Quarter Financial Commitments

Executing on Transformational Plan to Return to Sustainable Growth

CHARLESTON, S.C., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading cloud-based benefits administration technology company that simplifies benefits administration for employers, health plans and brokers, today announces its second quarter 2022 financial results:  

Financial Highlights for the Second Quarter 2022:

  • Revenue of $56.6 million was at the high end of the guidance range of $55 to $57 million.
  • Adjusted EBITDA of $6.2 million was above the high end of the guidance range of $4 to $6 million.
  • GAAP net loss available to common stockholders was ($13.8) million, compared to ($16.6) million in the second quarter of 2021.  
  • GAAP EPS was ($0.40) in the second quarter of 2022 and non-GAAP EPS was ($0.10).  

Operational Highlights for the Second Quarter 2022:

  • Launched a new product called Claims Audit & Recovery Services, which is designed to analyze claims data to identify errors and waste, and seek reimbursement.
  • Entered into a strategic sales partnership with Lockton, expected to drive further penetration into the employer segment.
  • Appointed Ed Rumzis as our new Chief Technology Officer starting on August 8, adding another seasoned industry veteran to the leadership team.

“During the second quarter, the team continued to demonstrate a high say:do ratio against our three-pillar transformation plan.” said Benefitfocus President and Chief Executive Officer, Matt Levin. “We are establishing relationships with key players in the ecosystem and seeing early indicators that our go-to-market strategy is working, both a testament to our unwavering focus on service excellence.”

“We were once again able to deliver financial results at or better than our guidance ranges for this quarter,” said Alpana Wegner, Chief Financial Officer. “We are pleased with the progress we are making on executing our strategy to drive sustainable growth and are well-positioned to unlock long-term value for our shareholders.”

Second Quarter 2022 Financial Highlights
Revenue

  • Total revenue was $56.6 million, down approximately 7% compared to the second quarter of 2021.   
  • Software services, which is comprised of both subscription and platform revenue, was $48.6 million, down 3% compared to the second quarter of 2021.
    • Subscription revenue was $42.0 million, down 5% compared to the second quarter of 2021.
    • Platform revenue was $6.6 million, up 12% compared to the second quarter of 2021.
  • Professional services revenue was $8.0 million, down 25% compared to the second quarter of 2021.

Net Loss

  • GAAP net loss was ($12.2) million, compared to ($15.0) million in the second quarter of 2021. GAAP net loss per share was ($0.40), based on ($13.8) million net loss available to common stockholders and 34.0 million basic and diluted weighted average common shares outstanding. This compares to GAAP net loss per share of ($0.50) for the second quarter of 2021, based on ($16.6) million net loss available to common stockholders and 33.1 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 ($3.5) million for the second quarter of 2022, compared to ($5.9) million in the second quarter of 2021. Non-GAAP net loss per share was ($0.10) based on both 34.0 million basic and diluted weighted average common shares outstanding. This compares to non-GAAP net loss of ($0.18) in the second quarter of 2021, based on both 33.1 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $6.2 million, compared to $9.6 million in the second quarter of 2021.  
  • Cash used in operations was ($0.7) million and free cash flow was ($2.1) million, compared to cash from operations of $9.2 million and $6.6 million of free cash flow in the second quarter of 2021.

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

Balance Sheet
Cash and cash equivalents at June 30, 2022, totaled $51.5 million, compared to cash and cash equivalents and marketable securities of $68.1 million at the end of the of 2021, a decline driven by the timing of working capital changes.

The full $50.0 million line of credit remains available to the company.

Business Outlook
Benefitfocus is providing guidance for the third quarter and full year 2022 as indicated below.

Third Quarter 2022

  • Total revenue is expected to be in the range of $55 million to $57 million.
  • Adjusted EBITDA is expected to be in the range of $4 million to $6 million.
  • Non-GAAP net loss available to common stockholders is expected to be between ($6.0) million and ($4.0) million, or between ($0.18) and ($0.12) per share based on 34.0 million basic and diluted weighted average shares outstanding.

Full-Year 2022

  • Total revenue is expected to be in the range of $252 million to $258 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 $18 million to $24 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 certain impairment charges, acquisition transactions and integration, costs not core to our business 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 Wednesday, August 3, 2022, at 5:00 p.m. ET. To access this call, dial (800) 941-4658 (domestic) or +1 (416) 981-9033 (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, 2022, at 11:59 p.m. ET and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 22019867.

About Benefitfocus
Benefitfocus (NASDAQ: BNFT) is a cloud-based benefits administration technology company committed to helping our customers, and the people they serve, get the most out of their health care and benefit programs. Through exceptional service and innovative SaaS solutions, we aim to be the safest set of hands for our customers helping to simplify the complexity of benefits administration while delivering an experience that engages people and unlocks the potential for better health and improved outcomes.  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, change in fair value of contingently returnable consideration 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; transaction and acquisition-related costs expensed; restructuring costs; impairment of goodwill, intangible assets and long-lived assets; gain or loss on extinguishment of debt; other costs not core to our business; loss on settlement of lawsuits; and, now, changes in fair value of contingently returnable consideration. The revision to our definition of adjusted EBITDA had no impact on our reported adjusted EBITDA in prior periods. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate cash paid for 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 need to increase sales and achieve consistent GAAP profitability; fluctuations in our financial results; our ability to maintain our culture and recruit, integrate and retain qualified personnel, including on our board of directors; our ability to compete effectively and implement our growth strategy; our reliance on channel relationships; market developments and opportunities; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; the immature and volatile nature of the market for our products and services; 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 war in Ukraine; 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.

Media Contact:
843-981-8898
pr@benefitfocus.com 

Investor Relations:
Doug Kuckelman
843-790-7460
ir@benefitfocus.com 

   
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,
 
    2022     2021     2022     2021  
Revenue   $ 56,587     $ 60,904     $ 117,812     $ 125,967  
Cost of revenue(1)(2)     29,095       28,030       58,981       56,623  
Gross profit     27,492       32,874       58,831       69,344  
Operating expenses:(1)(2)(3)                                
Sales and marketing     10,643       10,921       20,567       21,812  
Research and development     12,249       11,103       23,406       21,935  
General and administrative     13,517       13,571       22,806       23,433  
Impairment of lease right-of-use assets     1,769       4,003       1,769       4,003  
Change in fair value of contingently returnable consideration     (719 )           (719 )      
Restructuring costs           2,727       1,006       4,127  
Total operating expenses     37,459       42,325       68,835       75,310  
Loss from operations     (9,967 )     (9,451 )     (10,004 )     (5,966 )
Other income (expense):                                
Interest income     72       54       84       111  
Interest expense     (2,476 )     (5,646 )     (4,958 )     (11,201 )
Other income     236       64       482       22  
   Total other expense, net     (2,168 )     (5,528 )     (4,392 )     (11,068 )
Loss before income taxes     (12,135 )     (14,979 )     (14,396 )     (17,034 )
Income tax expense     29       41       45       83  
Net loss     (12,164 )     (15,020 )     (14,441 )     (17,117 )
Preferred dividends     (1,600 )     (1,600 )     (3,200 )     (3,200 )
Net loss available to common stockholders   $ (13,764 )   $ (16,620 )   $ (17,641 )   $ (20,317 )
Comprehensive loss   $ (12,164 )   $ (15,020 )   $ (14,441 )   $ (17,117 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.40 )   $ (0.50 )   $ (0.52 )   $ (0.62 )
Weighted-average common shares outstanding:                                
Basic and diluted     34,028,422       33,080,257       33,764,103       32,787,162  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
 Cost of revenue   $ 1,008     $ 638     $ 1,204     $ 964  
 Sales and marketing     1,110       927       1,746       1,507  
 Research and development     783       503       1,014       621  
 General and administrative     2,414       2,308       2,540       2,807  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
 Cost of revenue   $ 610     $ 336     $ 1,232     $ 673  
 Sales and marketing     131       77       273       153  
 Research and development     233       113       449       226  
 General and administrative     99       43       192       85  
                                 
(3) Transaction and acquisition-related costs expensed included in above line items:                                
 General and administrative   $ 13     $ 6     $ 96     $ 160  
                                 


Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
 
   
    As of
June 30,
2022
    As of
December 31,
2021
 
Assets                
Current assets:                
Cash and cash equivalents   $ 51,497     $ 31,001  
Marketable securities           37,049  
Accounts receivable, net     22,342       16,491  
Contract, prepaid and other current assets     33,558       27,615  
  Total current assets     107,397
      112,156  
Property and equipment, net     26,048       27,202  
Financing lease right-of-use assets     50,391       56,474  
Operating lease right-of-use assets     669       774  
Intangible assets, net     18,988       21,134  
Goodwill     34,237       34,237  
Deferred contract costs and other non-current assets     7,283       8,864  
  Total assets   $ 245,013     $ 260,841  
Liabilities, redeemable preferred stock and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 5,298     $ 10,565  
Accrued expenses     17,546       9,451  
Accrued compensation and benefits     11,557       16,411  
Deferred revenue, current portion     27,808       27,756  
Lease liabilities and financing obligations, current portion     6,387       7,378  
Contingent consideration           675  
  Total current liabilities     68,596
      72,236  
Deferred revenue, net of current portion     2,464       2,377  
Convertible senior notes     119,962       107,281  
Lease liabilities and financing obligations, net current portion     74,184       75,758  
Other non-current liabilities     372       313  
  Total liabilities     265,578       257,965  
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, 2022 and December 31, 2021, respectively,
  liquidation preference $45 per share as of June 30, 2022 and December 31, 2021,
  respectively
    79,193       79,193  
Stockholders' deficit:                
Common stock, par value $0.001, 95,000,000 shares authorized,
  34,172,079 and 33,460,545 issued and outstanding at June 30, 2022 and December
  31, 2021, respectively
    34       33  
Additional paid-in capital     382,204       431,874  
Accumulated deficit     (481,996 )     (508,224 )
  Total stockholders' deficit     (99,758 )     (76,317 )
     Total liabilities, redeemable preferred stock and stockholders' deficit   $ 245,013     $ 260,841  
                 


Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
   
    Six Months Ended
June 30,
 
    2022     2021  
Cash flows from operating activities                
Net loss   $ (14,441 )   $ (17,117 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
 Depreciation and amortization     13,462       12,525  
 Stock-based compensation expense     6,504       5,899  
 Accretion of interest on convertible senior notes     377       5,780  
 Interest accrual on finance lease liabilities     22       3,244  
 Rent expense less than payments     (54 )     (27 )
 Change in fair value of contingently returnable assets     (719 )      
 Non-cash accretion income from investments     29       506  
 Impairment or loss on disposal of right-of-use assets and property and equipment     1,769       4,048  
 Changes in operating assets and liabilities:                
  Accounts receivable, net     (5,851 )     1,354  
  Accrued interest on investments     284       (101 )
  Contract, prepaid and other current assets     4,016       2,410  
  Deferred costs and other non-current assets     1,582       1,249  
  Accounts payable and accrued expenses     (6,025 )     3,520  
  Accrued compensation and benefits     (4,853 )     (4,907 )
  Deferred revenue     139       (615 )
  Other non-current liabilities     60       159  
Net cash (used in) provided by operating activities     (3,699 )     17,927  
Cash flows from investing activities                
Purchases of investments held-to-maturity           (48,427 )
Proceeds from short-term investments held-to-maturity           48,000  
Maturities of investments available-for-sale     22,045        
Sales of investments available-for-sale     14,691        
Business combination, net of cash acquired     (500 )      
Purchases of property and equipment     (3,911 )     (4,483 )
Net cash provided by (used in) investing activities     32,325       (4,910 )
Cash flows from financing activities                
Payments of preferred dividends     (3,200 )     (3,200 )
Payments of contingent consideration     (675 )      
Proceeds from exercises of stock options and ESPP           322  
Payments on financing obligations     (2 )     (224 )
Payments of principal on finance lease liabilities     (4,253 )     (2,559 )
Net cash used in financing activities     (8,130 )     (5,661 )
Net increase in cash and cash equivalents     20,496       7,356  
Cash and cash equivalents, beginning of period     31,001       90,706  
Cash and cash equivalents, end of period   $ 51,497     $ 98,062  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 52     $  
                 


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,
 
    2022     2021     2022     2021  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 27,492     $ 32,874     $ 58,831     $ 69,344  
Amortization of acquired intangible assets     610       336       1,232       673  
Stock-based compensation expense     1,008       638       1,204       964  
Total net adjustments     1,618       974       2,436       1,637  
Non-GAAP gross profit   $ 29,110     $ 33,848     $ 61,267     $ 70,981  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Income:                                
Operating loss   $ (9,967 )   $ (9,451 )   $ (10,004 )   $ (5,966 )
Amortization of acquired intangible assets     1,073       569       2,146       1,137  
Stock-based compensation expense     5,315       4,376       6,504       5,899  
Transaction and acquisition-related costs expensed     13       6       96       160  
Impairment of lease right-of-use assets     1,769       4,003       1,769       4,003  
Change in fair value of contingently returnable consideration     (719 )           (719 )      
Costs not core to our business     2,800       1,717       4,755       3,598  
Total net adjustments     10,251       10,671       14,551       14,797  
Non-GAAP operating income   $ 284     $ 1,220     $ 4,547     $ 8,831  
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (12,164 )   $ (15,020 )   $ (14,441 )   $ (17,117 )
Depreciation     3,264       3,444       6,498       7,067  
Amortization of software development costs     2,388       2,159       4,818       4,321  
Amortization of acquired intangible assets     1,073       569       2,146       1,137  
Interest income     (72 )     (54 )     (84 )     (111 )
Interest expense     2,476       5,646       4,958       11,201  
Income tax expense     29       41       45       83  
Stock-based compensation expense     5,315       4,376       6,504       5,899  
Transaction and acquisition-related costs expensed     13       6       96       160  
Impairment of lease right-of-use assets     1,769       4,003       1,769       4,003  
Change in fair value of contingently returnable consideration     (719 )           (719 )      
Restructuring costs           2,727       1,006       4,127  
Costs not core to our business     2,800       1,717       4,755       3,598  
Total net adjustments     18,336       24,634       31,792       41,485  
Adjusted EBITDA   $ 6,172     $ 9,614     $ 17,351     $ 24,368  
                                 
Reconciliation from Net Loss to Non-GAAP Net (Loss) Income:                                
Net loss   $ (12,164 )   $ (15,020 )   $ (14,441 )   $ (17,117 )
Amortization of acquired intangible assets     1,073       569       2,146       1,137  
Stock-based compensation expense     5,315       4,376       6,504       5,899  
Transaction and acquisition-related costs expensed     13       6       96       160  
Impairment of lease right-of-use assets     1,769       4,003       1,769       4,003  
Change in fair value of contingently returnable consideration     (719 )           (719 )      
Costs not core to our business     2,800       1,717       4,755       3,598  
Total net adjustments     10,251       10,671       14,551       14,797  
Non-GAAP net (loss) income   $ (1,913 )   $ (4,349 )   $ 110     $ (2,320 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net (loss) income   $ (1,913 )   $ (4,349 )   $ 110     $ (2,320 )
Preferred dividends     (1,600 )     (1,600 )     (3,200 )     (3,200 )
Non-GAAP net loss available to common stockholders   $ (3,513 )   $ (5,949 )   $ (3,090 )   $ (5,520 )
                                 
Weighted average shares outstanding - basic and diluted     34,028,422       33,080,257       33,764,103       32,787,162  
Shares used in computing non-GAAP net loss per share - basic
and diluted
    34,028,422       33,080,257       33,764,103       32,787,162  
Non-GAAP net loss per common share - basic and diluted   $ (0.10 )   $ (0.18 )   $ (0.09 )   $ (0.17 )
                                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                                
Net cash and cash equivalents (used in) provided by operating activities   $ (699 )   $ 9,163     $ (3,699 )   $ 17,927  
Purchases of property and equipment     (1,901 )     (2,590 )     (3,911 )     (4,483 )
Cash paid for restructuring costs     518       5       1,304       1,384  
Total net adjustments     (1,383 )     (2,585 )     (2,607 )     (3,099 )
Free Cash Flow   $ (2,082 )   $ 6,578     $ (6,306 )   $ 14,828  

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Source: Benefitfocus, Inc.