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Nov 5, 2020

Benefitfocus Announces Third Quarter 2020 Financial Results

Exceeds high end of revenue and adjusted EBITDA guidance
Outlines priorities to unlock shareholder value  

CHARLESTON, S.C., Nov. 05, 2020 (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 third quarter 2020 financial results.  

Highlights include:

  • Exceeded guidance for revenue and adjusted EBITDA
  • Enabled key customer implementations:
    -- Successful first open enrollment for University of Texas System
    -- Three new large health plan customers initiated use of the company’s end-to-end, quote to pay solution
  • Added new benefit catalog suppliers:
    -- Financial wellness partners, Lincoln Financial Group and PayActive
    -- Family planning and reproductive health innovator, Natalist
  • Delivered enhanced digital resources for benefits shopping experience and employee communications

“I am pleased to report exceptional third quarter results and am convinced we have the ability to unlock substantial shareholder value,” said Steve Swad, president and chief executive officer of Benefitfocus. “Achieving our enhanced value creation goal is based on three key priorities:

  • First is customer centricity; our team is 100% focused right now on the most important promise we make to our customers, which is to deliver a successful open enrollment.
  • Second is to improve profitability and become the most efficient and best performing company in our industry.
  • And third is a focus on three key strategic areas – enrollment, engagement and data – to drive industry leadership and future growth.”

Alpana Wegner, chief financial officer, said, “Benefitfocus exceeded the high end of our guidance for revenue and adjusted EBITDA. This financial performance was driven primarily by the decisive cost-reduction actions initiated earlier this year in response to the pandemic, and efficiencies from our investments in automation and process improvements. As we execute on our three key priorities, we expect to continue to improve profitability and invest in future growth opportunities.”  

Third Quarter 2020 Financial Highlights

Revenue

  • Total revenue was $63.6 million, down 11% compared to the third quarter of 2019.
  • Software services was $50.6 million, 7% lower compared to the third quarter of 2019. Software services comprise subscription and platform revenue.

    -- Subscription revenue was $45.0 million, a decrease of 10% compared to the third quarter of 2019.

    -- Platform revenue was $5.6 million, an increase of 36% compared to the third quarter of 2019.
  • Professional services revenue was $13.0 million, down 26% compared to the third quarter of 2019.

Net Loss

  • GAAP net loss was ($4.4) million, compared to ($12.6) million in the third quarter of 2019. GAAP net loss per share was ($0.19), based on ($6.0) million net loss available to common stockholders and 32.3 million basic and diluted weighted average common shares outstanding, compared to ($0.38) for the third quarter of 2019, based on ($12.6) million net loss available to common stockholders and 32.7 million basic and diluted weighted average common shares outstanding.

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

  • Non-GAAP net loss was ($1.1) million compared to ($7.5) million in the third quarter of 2019. Non-GAAP net loss per share was ($0.08) and ($0.23) in the third quarter of 2020 and 2019, respectively, based on ($2.7) million and ($7.6) million net loss available to common stockholders and 32.3 million and 32.7 million basic and fully diluted weighted average common shares outstanding for the third quarter of 2020 and 2019, respectively.
  • Adjusted EBITDA was $10.5 million, compared to $2.9 million in the third quarter of 2019.
  • Free cash flow was $11.3 million, compared to ($6.3) in the third quarter of 2019.

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 September 30, 2020 totaled $176.0 million, compared to $183.5 million at the end of the second quarter of 2020.  
  • During the third quarter of 2020, we repurchased $18.8 million of our convertible senior notes at a cost of approximately $14.6 million, which resulted in a gain of $1.1 million.

Business Outlook

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

Fourth Quarter 2020:

  • Total revenue is expected to be in the range of $68.1 million to $78.1 million.
  • Non-GAAP net income is expected to be between zero and $5 million, or ($0.05) per share based on 32.3 million basic shares outstanding and $0.08 per share based on 35.0 million diluted weighted average common shares outstanding based on a range of between ($1.6) million net loss to $3.0 million net income available to common shareholders.
  • Adjusted EBITDA is expected to be in the range of $11.2 million to $16.2 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 ($16.0) million to ($11.0) 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 income, non-GAAP net loss, adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of GAAP net income, 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 Thursday, November 5, 2020, at 5:00 p.m. ET. To access this call, dial (800) 738-1032 (domestic) or (212) 231-2935 (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 November 12, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 21971109.

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 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, if any, restructuring charges, if any, gain or loss on extinguishment of debt, 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, gain or loss on extinguishment of debt, 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. Beginning in the third quarter of 2020, we revised our definitions of non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA to also exclude gain or loss of extinguishment of debt. The revisions to these definitions had no impact on our reported non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA for periods prior to the three months ended September 30, 2020. 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 and uncertainties arising from the recent U.S. elections; 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
September 30,
    Nine Months Ended
September 30,
 
  2020     2019     2020     2019  
Revenue $ 63,583     $ 71,665     $ 191,911     $ 208,543  
Cost of revenue(1)(2)(3)   30,113       35,588       94,422       101,242  
Gross profit   33,470       36,077       97,489       107,301  
Operating expenses:(1)(2)(3)                              
Sales and marketing   12,405       18,527       39,863       57,464  
Research and development   11,439       14,088       34,252       41,639  
General and administrative   9,424       10,772       29,320       34,353  
Restructuring costs               5,616        
Total operating expenses   33,268       43,387       109,051       133,456  
Loss from operations   202       (7,310 )     (11,562 )     (26,155 )
Other income (expense):                              
Interest income   40       673       563       2,095  
Interest expense   (5,771 )     (5,926 )     (17,524 )     (17,577 )
Gain on repurchase of convertible senior notes   1,138             1,138        
Other (expense) income   1       3       8       (61 )
Total other expense, net   (4,592 )     (5,250 )     (15,815 )     (15,543 )
Loss before income taxes   (4,390 )     (12,560 )     (27,377 )     (41,698 )
Income tax expense   6       17       17       26  
Net loss   (4,396 )     (12,577 )     (27,394 )     (41,724 )
Preferred dividends   (1,600 )           (2,062 )      
Net loss available to common stockholders $ (5,996 )   $ (12,577 )   $ (29,456 )   $ (41,724 )
Comprehensive loss $ (5,996 )   $ (12,577 )   $ (29,456 )   $ (41,724 )
                               
Net loss per common share:                              
Basic and diluted $ (0.19 )   $ (0.38 )   $ (0.91 )   $ (1.29 )
Weighted-average common shares outstanding:                              
Basic and diluted   32,263,876       32,703,723       32,320,201       32,460,494  
                               
                               
(1) Stock-based compensation included in above line items:                              
Cost of revenue $ 1,304     $ 798     $ 2,604     $ 2,388  
Sales and marketing   766       923       2,240       2,597  
Research and development   785       690       1,717       2,600  
General and administrative   1,004       2,004       4,298       6,916  
                               
(2) Amortization of acquired intangible assets included in above line items:                              
Cost of revenue $ 321     $ 305     $ 961     $ 712  
Sales and marketing   82       97       256       246  
Research and development   119       118       342       289  
General and administrative   46       49       146       117  
                               
(3) Transaction and acquisition-related costs expensed included in above line items:                              
General and administrative $ 18     $ 3     $ 425     $ 1,005  
                               


Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  As of
September 30,
2020
    As of
December 31,
2019
 
Assets              
Current assets:              
Cash and cash equivalents $ 108,240     $ 130,976  
Marketable securities   67,807        
Accounts receivable, net   29,899       33,754  
Contract, prepaid and other current assets   14,021       21,523  
Total current assets   219,967       186,253  
Property and equipment, net   30,502       28,669  
Financing lease right-of-use assets   70,970       78,520  
Operating lease right-of-use assets   1,467       1,715  
Intangible assets, net   10,962       12,667  
Goodwill   12,857       12,857  
Deferred contract costs and other non-current assets   9,987       11,002  
Total assets $ 356,712     $ 331,683  
Liabilities and stockholders' deficit              
Current liabilities:              
Accounts payable $ 2,475     $ 9,563  
Accrued expenses   8,116       10,526  
Accrued compensation and benefits   15,736       15,246  
Deferred revenue, current portion   28,239       33,429  
Lease liabilities and financing obligations, current portion   6,297       6,871  
Total current liabilities   60,863       75,635  
Deferred revenue, net of current portion   4,543       5,079  
Convertible senior notes   181,486       187,949  
Lease liabilities and financing obligations, net current portion   80,885       88,572  
Other non-current liabilities   3,582       92  
Total liabilities   331,359       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 September 30, 2020 and December 31, 2019, respectively,
liquidation preference $45 per share as of September 30, 2020
  79,193        
Stockholders' deficit:              
Common stock, par value $0.001, 50,000,000 shares authorized,
32,288,044 and 32,788,980 shares issued and outstanding
at September 30, 2020 and December 31, 2019, respectively
  32       33  
Additional paid-in capital   425,283       426,025  
Accumulated deficit   (479,155 )     (451,702 )
Total stockholders' deficit   (53,840 )     (25,644 )
Total liabilities, redeemable preferred stock and stockholders' deficit $ 356,712     $ 331,683  
               


Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
  Nine Months Ended
September 30,
 
  2020     2019  
Cash flows from operating activities              
Net loss $ (27,394 )   $ (41,724 )
Adjustments to reconcile net loss to net cash and cash
 equivalents used in operating activities:
             
Depreciation and amortization   18,479       16,629  
Stock-based compensation expense   10,859       14,501  
Accretion of interest on convertible senior notes   8,834       8,377  
Interest accrual on finance lease liabilities   71       25  
Rent expense less than payments   (24 )     (6 )
Non-cash interest income for short-term investments   16        
Gain on extinguishment of debt   (1,138 )      
Provision for doubtful accounts   111       108  
Changes in operating assets and liabilities:              
Accounts receivable, net   3,685       (12,791 )
Accrued interest on short-term investments   (38 )      
Contract, prepaid and other current assets   7,502       1,282  
Deferred costs and other non-current assets   1,014       3,746  
Accounts payable and accrued expenses   (9,157 )     (642 )
Accrued compensation and benefits   490       (1,524 )
Deferred revenue   (5,726 )     (11,427 )
Other non-current liabilities   3,490       (69 )
Net cash and cash equivalents provided by (used in) operating activities   11,074       (23,515 )
Cash flows from investing activities              
Purchases of short term investments held to maturity   (67,785 )      
Business combination, net of cash acquired         (20,914 )
Purchases of property and equipment   (9,739 )     (10,604 )
Net cash and cash equivalents used in investing activities   (77,524 )     (31,518 )
Cash flows from financing activities              
Draws on revolving line of credit   10,000        
Payments on revolving line of credit   (10,000 )      
Repurchase of convertible senior notes   (14,619 )      
Payments of debt issuance costs   (154 )     (357 )
Cancellation of convertible senior notes capped call hedge   26        
Proceeds from issuance of preferred stock, net of issuance costs   79,192        
Payments of preferred dividends   (2,062 )      
Repurchase of common stock   (9,667 )      
Proceeds from exercises of stock options and ESPP   513       305  
Payments on financing obligations   (635 )     (1,032 )
Payments of principal on finance lease liabilities   (8,880 )     (4,112 )
Net cash and cash equivalents provided by (used in) financing activities   43,714       (5,196 )
Net decrease in cash and cash equivalents   (22,736 )     (60,229 )
Cash and cash equivalents, beginning of period   130,976       190,928  
Cash and cash equivalents, end of period $ 108,240     $ 130,699  




 
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share date)
 
  Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
  2020     2019     2020     2019  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                              
Gross profit $ 33,470     $ 36,077     $ 97,489     $ 107,301  
Amortization of acquired intangible assets   321       305       961       712  
Stock-based compensation expense   1,304       798       2,604       2,388  
Total net adjustments   1,625       1,103       3,565       3,100  
Non-GAAP gross profit $ 35,095     $ 37,180     $ 101,054     $ 110,401  
                               
Reconciliation from Operating Income (Loss) to Non-GAAP Operating Income (Loss):                              
Operating income (loss) $ 202     $ (7,310 )   $ (11,562 )   $ (26,155 )
Amortization of acquired intangible assets   568       569       1,705       1,364  
Stock-based compensation expense   3,859       4,415       10,859       14,501  
Transaction and acquisition-related costs expensed   18       3       425       1,005  
Costs not core to our business         63             649  
Total net adjustments   4,445       5,050       12,989       17,519  
Non-GAAP operating income (loss) $ 4,647     $ (2,260 )   $ 1,427     $ (8,636 )
                               
Reconciliation from Net Loss to Adjusted EBITDA:                              
Net loss $ (4,396 )   $ (12,577 )   $ (27,394 )   $ (41,724 )
Depreciation   3,774       3,848       11,496       11,505  
Amortization of software development costs   2,032       1,263       5,278       3,760  
Amortization of acquired intangible assets   568       569       1,705       1,364  
Interest income   (40 )     (673 )     (563 )     (2,095 )
Interest expense   5,771       5,926       17,524       17,577  
Income tax expense   6       17       17       26  
Stock-based compensation expense   3,859       4,415       10,859       14,501  
Transaction and acquisition-related costs expensed   18       3       425       1,005  
Restructuring costs               5,616        
Gain on repurchase of convertible senior notes   (1,138 )           (1,138 )      
Costs not core to our business         63             649  
Total net adjustments   14,850       15,431       51,219       48,292  
Adjusted EBITDA $ 10,454     $ 2,854     $ 23,825     $ 6,568  
                               
Reconciliation from Net Loss to Non-GAAP Net Loss:                              
Net loss $ (4,396 )   $ (12,577 )   $ (27,394 )   $ (41,724 )
Amortization of acquired intangible assets   568       569       1,705       1,364  
Stock-based compensation expense   3,859       4,415       10,859       14,501  
Transaction and acquisition-related costs expensed   18       3       425       1,005  
Gain on repurchase of convertible senior notes   (1,138 )           (1,138 )      
Costs not core to our business         63             649  
Total net adjustments   3,307       5,050       11,851       17,519  
Non-GAAP net loss $ (1,089 )   $ (7,527 )   $ (15,543 )   $ (24,205 )
                               
Calculation of Non-GAAP Earnings Per Share:                              
Non-GAAP net loss $ (1,089 )   $ (7,527 )   $ (15,543 )   $ (24,205 )
Preferred dividends   (1,600 )           (2,062 )      
Non-GAAP net loss available to common stockholders $ (2,689 )   $ (7,527 )   $ (17,605 )   $ (24,205 )
                               
Weighted average shares outstanding - basic and diluted   32,263,876       32,703,723       32,320,201       32,460,494  
Shares used in computing non-GAAP net loss per share - basic and diluted   32,263,876       32,703,723       32,320,201       32,460,494  
Non-GAAP net loss per common share - basic and diluted $ (0.08 )   $ (0.23 )   $ (0.54 )   $ (0.75 )
                               
Reconciliation of Cash Flows from Operations to Free Cash Flow:                              
Net cash and cash equivalents provided by (used in) operating activities $ 13,208     $ (3,054 )   $ 11,074     $ (23,515 )
Purchases of property and equipment   (2,664 )     (3,203 )     (9,739 )     (10,604 )
Cash paid for restructuring costs   745             5,201        
Total net adjustments   (1,919 )     (3,203 )     (4,538 )     (10,604 )
Free Cash Flow $ 11,289     $ (6,257 )   $ 6,536     $ (34,119 )


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.