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Nov 6, 2019

Benefitfocus Announces Third Quarter 2019 Financial Results

Driven by its leading AI-powered platform, Benefitfocus grew total revenue 17% year-over-year

CHARLESTON, S.C., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a leading cloud-based benefits management platform and services provider, today announced its third quarter 2019 financial results. Recent highlights include: 

  • Grew net benefit eligible lives to 16.8 million at the end of the third quarter, up from 16.5 million at the end of the prior quarter and 13.2 million at the end of the prior year period.
  • Extended platform to support growing gig economy and signed first customer exclusively serving independent contractors.
  • Added over 250 premier brokers, bringing our total premier broker count to over 700.
  • Announced MarketPlace for Carriers that provides end-to-end business rating, quoting, billing and payments.

“Benefitfocus delivered strong third quarter results and continues to make solid progress towards achieving our long-term goals,” said Ray August, President and Chief Executive Officer of Benefitfocus.

August added, “The benefits industry is undergoing a fundamental change and Benefitfocus is at the forefront helping to transform its future. For more than 25 million Americans, our platform delivers a rich experience as a result of providing enhanced consumer education and engagement with their benefits. With our considerable data assets we are transforming how benefits are bought, sold and used in the United States.”

Third Quarter 2019 Financial Highlights

Revenue

  • Total revenue was $71.7 million, an increase of 17% compared to the third quarter of 2018.

  • Software services revenue was $54.2 million, an increase of 16% compared to the third quarter of 2018.

  • Professional services revenue was $17.5 million, an increase of 23% compared to the third quarter of 2018.

Net Loss

  • GAAP net loss was ($12.6) million, compared to ($11.6) million in the third quarter of 2018. GAAP net loss per share was ($0.38), based on 32.7 million basic and diluted weighted average common shares outstanding, compared to ($0.36) for the third quarter of 2018, based on 31.9 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($7.5) million, compared to ($7.2) million in the third quarter of 2018. Non-GAAP net loss per share was ($0.23), based on 32.7 million basic and diluted weighted average common shares outstanding, compared to ($0.23) for the third quarter of 2018, based on 31.9 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $2.9 million, compared to ($0.0) million in the third quarter of 2018.

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

Balance Sheet

  • Cash and cash equivalents at September 30, 2019 totaled $130.7 million, compared to $138.4 million at the end of the second quarter of 2019. 

Updated Business Outlook

Based on information available as of November 6, 2019, Benefitfocus is providing guidance for the fourth quarter and updated its full year 2019 as indicated below.

Fourth Quarter 2019:

  • Total revenue is expected to be in the range of $83.5 million to $91.5 million.

  • Non-GAAP net (loss)/income is expected to be in the range of ($4.8) million to $0.2 million, or ($0.15) to $0.01 per share, based on 32.8 million basic (for net loss) and 33.2 million diluted (for net income) weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $5.4 million to $10.4 million.

Full Year 2019:

  • Total revenue is expected to be in the range of $292.0 million to $300.0 million.

  • Non-GAAP net loss is expected to be in the range of ($29.0) million to ($24.0) million, or ($0.89) to ($0.74) per share, based on 32.5 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $12.0 million to $17.0 million.

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

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, November 6, 2019, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (international). A live webcast, as well as the replay, of the conference call will be available on the Investor Relations page of the company’s website at http://investor.benefitfocus.com/. After the conference call, a replay will be available until November 13, 2019, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13695735.

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

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating loss, net loss/income, net loss/income per common share, and adjusted EBITDA. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. 

Non-GAAP gross profit, operating loss, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, if any, and costs not core to our business, if any.  We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense, expense related to the impairment of goodwill and intangible assets, transaction and acquisition-related costs expensed, and costs not core to our business.   Please note that other companies might define their non-GAAP financial measures differently than we do.

Management presents these non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company’s future earnings discussions and, therefore, their inclusion should provide consistency in the company’s financial reporting.

Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release, including in the accompanying tables.

Safe Harbor Statement

Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include: our continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; cyber-security risks;  the need to innovate and provide useful products and services; our ability to compete effectively; privacy, security and other risks associated with our business; 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     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
Revenue   $ 71,665     $ 61,006     $ 208,543     $ 183,950  
Cost of revenue (1)(2)(3)     35,588       31,740       101,242       93,864  
Gross profit     36,077       29,266       107,301       90,086  
Operating expenses:(1)(2)(3)                                
Sales and marketing     18,527       17,661       57,464       55,978  
Research and development     14,088       10,676       41,639       34,827  
General and administrative     10,772       9,263       34,353       29,343  
Total operating expenses     43,387       37,600       133,456       120,148  
Loss from operations     (7,310 )     (8,334 )     (26,155 )     (30,062 )
Other income (expense):                                
Interest income     673       73       2,095       199  
Interest expense     (5,926 )     (1,458 )     (17,577 )     (4,190 )
Interest expense on building lease financing obligations           (1,868 )           (5,601 )
Other (expense) income     3       2       (61 )     15  
Total other expense, net     (5,250 )     (3,251 )     (15,543 )     (9,577 )
Loss before income taxes     (12,560 )     (11,585 )     (41,698 )     (39,639 )
Income tax expense     17       13       26       22  
Net loss   $ (12,577 )   $ (11,598 )   $ (41,724 )   $ (39,661 )
Comprehensive loss   $ (12,577 )   $ (11,598 )   $ (41,724 )   $ (39,661 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.38 )   $ (0.36 )   $ (1.29 )   $ (1.25 )
Weighted-average common shares outstanding:                                
Basic and diluted     32,703,723       31,883,029       32,460,494       31,678,360  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 798     $ 542     $ 2,388     $ 2,153  
Sales and marketing     923       759       2,597       2,970  
Research and development     690       494       2,600       2,103  
General and administrative     2,004       1,552       6,916       5,120  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 305     $ 12     $ 712     $ 81  
Sales and marketing     97       4       246       31  
Research and development     118       4       289       27  
General and administrative     49       2       117       11  
                                 
(3) Transaction and acquisition-related costs expensed included in above line items:                                
General and administrative   $ 3     $     $ 1,005     $ 257  
                                 


Benefitfocus, Inc.  
Unaudited Consolidated Balance Sheets  
(in thousands, except share and per share data)  
   
    As of     As of  
    September 30,     December 31,  
    2019     2018  
Assets                
Current assets:                
Cash and cash equivalents   $ 130,699     $ 190,928  
Accounts receivable, net     34,672       21,077  
Contract, prepaid and other current assets     15,312       16,667  
Total current assets     180,683       228,672  
Property and equipment, net     28,689       69,965  
Financing lease right-of-use assets     80,665        
Operating lease right-of-use assets     1,868        
Intangible assets, net     13,236        
Goodwill     12,857       1,634  
Deferred contract costs and other non-current assets     10,150       13,668  
Total assets   $ 328,148     $ 313,939  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 8,552     $ 8,687  
Accrued expenses     10,333       11,461  
Accrued compensation and benefits     13,561       17,269  
Deferred revenue, current portion     33,911       36,540  
Lease liabilities and financing obligations, current portion     7,022       4,486  
Total current liabilities     73,379       78,443  
Deferred revenue, net of current portion     7,216       9,323  
Convertible senior notes     185,069       176,692  
Lease liabilities and financing obligations, net current portion     89,438       57,116  
Other non-current liabilities     115       2,575  
Total liabilities     355,217       324,149  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized,                
no shares issued and outstanding at September 30, 2019                
and December 31, 2018            
Common stock, par value $0.001, 50,000,000 shares authorized,                
32,710,032 and 32,017,773 shares issued and outstanding                
at September 30, 2019 and December 31, 2018, respectively     33       32  
Additional paid-in capital     420,808       403,631  
Accumulated deficit     (447,910 )     (413,873 )
Total stockholders' deficit     (27,069 )     (10,210 )
Total liabilities and stockholders' deficit   $ 328,148     $ 313,939  
                 


Benefitfocus, Inc.  
Unaudited Consolidated Statements of Cash Flows  
(in thousands)  
   
    Nine Months Ended  
    September 30,  
    2019     2018  
Cash flows from operating activities                
Net loss   $ (41,724 )   $ (39,661 )
Adjustments to reconcile net loss to net cash and cash                
equivalents used in operating activities:          
Depreciation and amortization     16,629       11,912  
Stock-based compensation expense     14,501       12,346  
Accretion of interest on convertible senior notes     8,377        
Interest accrual on finance lease liabilities     25        
Interest accrual on financing obligations (prior to adoption of ASC 842)           5,639  
Rent payments in excess of expense     (6 )      
Provision for doubtful accounts     108       364  
Changes in operating assets and liabilities:                
Accounts receivable, net     (12,791 )     2,103  
Contract, prepaid and other current assets     1,282       5,179  
Deferred costs and other non-current assets     3,746       2,590  
Accounts payable and accrued expenses     (642 )     4,385  
Accrued compensation and benefits     (1,524 )     (1,068 )
Deferred revenue     (11,427 )     (7,443 )
Other non-current liabilities     (69 )     (328 )
Net cash and cash equivalents used in operating activities     (23,515 )     (3,982 )
Cash flows from investing activities                
Business combination, net of cash acquired     (20,914 )      
Purchases of property and equipment     (10,604 )     (5,855 )
Net cash and cash equivalents used in investing activities     (31,518 )     (5,855 )
Cash flows from financing activities                
Draws on revolving line of credit           97,000  
Payments on revolving line of credit           (84,000 )
Payments of debt issuance costs     (357 )      
Proceeds from exercises of stock options and ESPP     305       462  
Payments on capital lease and financing obligations     (1,032 )     (7,895 )
Payments of principal on finance lease liabilities     (4,112 )      
Net cash and cash equivalents (used in) provided by financing activities     (5,196 )     5,567  
Net decrease in cash and cash equivalents     (60,229 )     (4,270 )
Cash and cash equivalents, beginning of period     190,928       55,335  
Cash and cash equivalents, end of period   $ 130,699     $ 51,065  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $     $ 83  
Property and equipment purchased with financing and capital lease obligations (prior to adoption of ASC 842)   $     $ 3,739  
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)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 36,077     $ 29,266     $ 107,301     $ 90,086  
Amortization of acquired intangible assets     305       12       712       81  
Stock-based compensation expense     798       542       2,388       2,153  
Total net adjustments     1,103       554       3,100       2,234  
Non-GAAP gross profit   $ 37,180     $ 29,820     $ 110,401     $ 92,320  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                                
Operating loss   $ (7,310 )   $ (8,334 )   $ (26,155 )   $ (30,062 )
Amortization of acquired intangible assets     569       22       1,364       150  
Stock-based compensation expense     4,415       3,347       14,501       12,346  
Transaction and acquisition-related costs expensed     3             1,005       257  
Costs not core to our business     63       1,027       649       3,922  
Total net adjustments     5,050       4,396       17,519       16,675  
Non-GAAP operating loss   $ (2,260 )   $ (3,938 )   $ (8,636 )   $ (13,387 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (12,577 )   $ (11,598 )   $ (41,724 )   $ (39,661 )
Depreciation     3,848       2,888       11,505       8,864  
Amortization of software development costs     1,263       1,045       3,760       2,898  
Amortization of acquired intangible assets     569       22       1,364       150  
Interest income     (673 )     (73 )     (2,095 )     (199 )
Interest expense     5,926       1,458       17,577       4,190  
Interest expense on building lease financing obligations (prior to adoption of ASC 842)           1,868             5,601  
Income tax expense     17       13       26       22  
Stock-based compensation expense     4,415       3,347       14,501       12,346  
Transaction and acquisition-related costs expensed     3             1,005       257  
Costs not core to our business     63       1,027       649       3,922  
Total net adjustments     15,431       11,595       48,292       38,051  
Adjusted EBITDA   $ 2,854     $ (3 )   $ 6,568     $ (1,610 )
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (12,577 )   $ (11,598 )   $ (41,724 )   $ (39,661 )
Amortization of acquired intangible assets     569       22       1,364       150  
Stock-based compensation expense     4,415       3,347       14,501       12,346  
Transaction and acquisition-related costs expensed     3             1,005       257  
Costs not core to our business     63       1,027       649       3,922  
Total net adjustments     5,050       4,396       17,519       16,675  
Non-GAAP net loss   $ (7,527 )   $ (7,202 )   $ (24,205 )   $ (22,986 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (7,527 )   $ (7,202 )   $ (24,205 )   $ (22,986 )
                                 
Weighted average shares outstanding - basic and diluted     32,703,723       31,883,029       32,460,494       31,678,360  
Shares used in computing non-GAAP net loss per share - basic and diluted     32,703,723       31,883,029       32,460,494       31,678,360  
Non-GAAP net loss per common share - basic and diluted   $ (0.23 )   $ (0.23 )   $ (0.75 )   $ (0.73 )
                                 

Benefitfocus, Inc.
843-284-1052 ext. 3527 
pr@benefitfocus.com

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
michael.bauer@benefitfocus.com   

Benefitfocus logo.jpg

Source: Benefitfocus, Inc.