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Nov 3, 2021

Benefitfocus Announces Third Quarter 2021 Financial Results

 Delivers on third quarter financial commitments
Focused on providing service excellence to deliver enhanced stakeholder value

CHARLESTON, S.C., Nov. 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 third quarter 2021 financial results.  

Third quarter financial highlights:

  • Revenue of $62.0 million exceeds guidance
  • GAAP EPS of ($0.59) vs. ($0.19) in third quarter 2020
  • Non-GAAP EPS of ($0.19) exceeds guidance
  • GAAP net loss of ($18.1) million vs. ($4.4) million in third quarter 2020
  • Adjusted EBITDA of $6.7 million, above midpoint of guidance
  • Operating cash flow of $9.4 million and free cash flow of $6.9 million
  • De-levered balance sheet and improved capital structure through convertible note repurchase
  • Cash and marketable securities of $94.5 million, down $98.7 million from prior quarter primarily reflecting repurchase of convertible notes

Other recent highlights:

“Our entire team is working with a great sense of urgency and discipline to deliver enhanced service excellence for our customers during this year’s open enrollment,” said Matt Levin, president and chief executive officer. “I expect this heightened focus, combined with the commitment and deep experience of our team, will result in stellar performance for our stakeholders including our customers, partners and shareholders.”

“I am pleased with our performance this quarter as we again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “Our strong cash position enabled us to opportunistically de-lever the balance sheet while preserving flexibility to invest strategically and advance our growth strategy.”

Third Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $62.0 million, down 2% compared to the third quarter of 2020.
  • Software services was $50.9 million, up 1% compared to the third quarter of 2020. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $44.8 million, relatively flat compared to the third quarter of 2020.
    • Platform revenue was $6.2 million, up 10% compared to the third quarter of 2020.
  • Professional services revenue was $11.1 million, down 15% compared to the third quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($19.7) million, compared to ($6.0) million in the third quarter of 2020. GAAP net loss per share was ($0.59), based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.19) for the third quarter of 2020, based on 32.3 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 ($6.3) million compared to ($2.7) million in the third quarter of 2020. Non-GAAP net loss per share was ($0.19) based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.08) in the third quarter of 2020, based on 32.3 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $6.7 million, compared to $10.5 million in the third quarter of 2020.
  • Free cash flow was $6.9 million, compared to $11.3 million in the third 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 September 30, 2021 totaled $94.5 million, compared to $193.2 million at the end of the second quarter of 2021 primarily reflecting the repurchase of approximately $100.2 million worth of our convertible notes
  • The full $50.0 million line of credit remains available to the company.

Business Outlook

Based on information available as of November 3, 2021, Benefitfocus is providing guidance for the fourth quarter and full year as indicated below.

Fourth Quarter 2021

  • Total revenue is expected to be in the range of $66 million to $72 million.
  • Adjusted EBITDA is expected to be in the range of $13 million to $19 million.
  • Non-GAAP net (loss) income available to common stockholders is expected to be between ($0.7) million and $5.3 million, or between ($0.02) per share based on 33.4 million basic and diluted weighted average shares outstanding and $0.15 per share based on 34.6 million diluted weighted average 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 Wednesday, November 3, 2021, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or +1 (201) 493-6784 (international). A live webcast of the conference call will be available on the Investor Relations page of the company’s website at http://investor.benefitfocus.com/. After the conference call, a replay will be available until November 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 13724236.

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 on our board of directors; our ability to compete effectively and implement our growth strategy; 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 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,
 
    2021     2020     2021     2020  
Revenue   $ 62,026     $ 63,583     $ 187,993     $ 191,911  
Cost of revenue(1)(2)     31,247       30,113       87,870       94,422  
Gross profit     30,779       33,470       100,123       97,489  
Operating expenses:(1)(2)(3)                                
Sales and marketing     12,669       12,405       34,481       39,863  
Research and development     11,062       11,439       32,997       34,252  
General and administrative     12,156       9,424       39,592       29,320  
Restructuring costs                 4,127       5,616  
Total operating expenses     35,887       33,268       111,197       109,051  
Loss from operations     (5,108 )     202       (11,074 )     (11,562 )
Other income (expense):                                
Interest income     52       40       163       563  
Interest expense     (5,556 )     (5,771 )     (16,757 )     (17,524 )
(Loss) gain on repurchase of convertible senior notes     (7,520 )     1,138       (7,520 )     1,138  
Other income     120       1       142       8  
Total other expense, net     (12,904 )     (4,592 )     (23,972 )     (15,815 )
Loss before income taxes     (18,012 )     (4,390 )     (35,046 )     (27,377 )
Income tax expense     42       6       125       17  
Net loss     (18,054 )     (4,396 )     (35,171 )     (27,394 )
Preferred dividends     (1,600 )     (1,600 )     (4,800 )     (2,062 )
Net loss available to common stockholders   $ (19,654 )   $ (5,996 )   $ (39,971 )   $ (29,456 )
Comprehensive loss   $ (18,054 )   $ (4,396 )   $ (35,171 )   $ (27,394 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.59 )   $ (0.19 )   $ (1.21 )   $ (0.91 )
Weighted-average common shares outstanding:                                
Basic and diluted     33,354,624       32,263,876       32,978,394       32,320,201  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 511     $ 1,304     $ 1,475     $ 2,604  
Sales and marketing     963       766       2,470       2,240  
Research and development     589       785       1,210       1,717  
General and administrative     2,532       1,004       5,339       4,298  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 332     $ 321     $ 1,005     $ 961  
Sales and marketing     78       82       231       256  
Research and development     110       119       336       342  
General and administrative     48       46       133       146  
                                 
(3) Transaction and acquisition-related costs expensed included in above line items:                                
General and administrative   $ 80     $ 18     $ 240     $ 425  

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

    As of
September 30,
2021
    As of
December 31,
2020
 
Assets                
Current assets:                
Cash and cash equivalents   $ 12,589     $ 90,706  
Marketable securities     81,899       95,085  
Accounts receivable, net     20,368       22,240  
Contract, prepaid and other current assets     17,239       21,354  
Total current assets     132,095       229,385  
Property and equipment, net     27,259       29,701  
Financing lease right-of-use assets     58,503       68,670  
Operating lease right-of-use assets     925       1,107  
Intangible assets, net     8,688       10,393  
Goodwill     12,857       12,857  
Deferred contract costs and other non-current assets     12,078       10,259  
Total assets   $ 252,405     $ 362,372  
Liabilities, redeemable preferred stock and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 7,729     $ 2,160  
Accrued expenses     8,155       6,262  
Accrued compensation and benefits     16,993       19,129  
Deferred revenue, current portion     26,113       27,782  
Lease liabilities and financing obligations, current portion     7,226       5,959  
Total current liabilities     66,216       61,292  
Deferred revenue, net of current portion     2,651       4,422  
Convertible senior notes     105,637       184,308  
Lease liabilities and financing obligations, net current portion     77,265       79,282  
Other non-current liabilities     2,661       2,470  
Total liabilities     254,430       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 September 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of September 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,
33,386,994 and 32,327,439 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
    33       32  
Additional paid-in capital     429,978       427,431  
Accumulated deficit     (511,229 )     (476,058 )
Total stockholders' deficit     (81,218 )     (48,595 )
Total liabilities, redeemable preferred stock and stockholders' deficit   $ 252,405     $ 362,372  
                 

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

    Nine Months Ended
September 30,
 
    2021     2020  
Cash flows from operating activities                
Net loss   $ (35,171 )   $ (27,394 )
Adjustments to reconcile net loss to net cash and cash
equivalents provided by operating activities:
               
Depreciation and amortization     18,976       18,479  
Stock-based compensation expense     10,494       10,859  
Accretion of interest on convertible senior notes     8,590       8,834  
Interest accrual on finance lease liabilities     3,259       71  
Rent expense less than payments     (41 )     (24 )
Non-cash accretion income from investments     741       16  
Impairment or loss on disposal of right-of-use assets and property and equipment     4,074        
Loss (gain) on extinguishment of debt     7,520       (1,138 )
Provision for doubtful accounts           111  
Changes in operating assets and liabilities:                
Accounts receivable, net     1,872       3,685  
Accrued interest on investments     161       (38 )
Contract, prepaid and other current assets     4,009       7,502  
Deferred costs and other non-current assets     1,238       1,014  
Accounts payable and accrued expenses     6,960       (9,157 )
Accrued compensation and benefits     (2,136 )     490  
Deferred revenue     (3,441 )     (5,726 )
Other non-current liabilities     191       3,490  
Net cash and cash equivalents provided by operating activities     27,296       11,074  
Cash flows from investing activities                
Purchases of investments held to maturity     (91,361 )     (67,785 )
Proceeds from investments held to maturity     100,588        
Purchases of property and equipment     (7,454 )     (9,739 )
Net cash and cash equivalents provided by (used in) investing activities     1,773       (77,524 )
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     (98,678 )     (14,619 )
Payments of debt issuance costs           (154 )
Cancellation of convertible senior notes capped call hedge     98       26  
Proceeds from issuance of preferred stock, net of issuance costs           79,192  
Payments of preferred dividends     (4,800 )     (2,062 )
Repurchase of common stock           (9,667 )
Proceeds from exercises of stock options and ESPP     322       513  
Payments on financing obligations     (226 )     (635 )
Payments of principal on finance lease liabilities     (3,902 )     (8,880 )
Net cash and cash equivalents (used in) provided by financing activities     (107,186 )     43,714  
Net decrease in cash and cash equivalents     (78,117 )     (22,736 )
Cash and cash equivalents, beginning of period     90,706       130,976  
Cash and cash equivalents, end of period   $ 12,589     $ 108,240  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 945     $  
                 

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

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 30,779     $ 33,470     $ 100,123     $ 97,489  
Amortization of acquired intangible assets     332       321       1,005       961  
Stock-based compensation expense     511       1,304       1,475       2,604  
Total net adjustments     843       1,625       2,480       3,565  
Non-GAAP gross profit   $ 31,622     $ 35,095     $ 102,603     $ 101,054  
                                 
Reconciliation from Operating (Loss) Income to Non-GAAP Operating Income:                                
Operating (loss) income   $ (5,108 )   $ 202     $ (11,074 )   $ (11,562 )
Amortization of acquired intangible assets     568       568       1,705       1,705  
Stock-based compensation expense     4,595       3,859       10,494       10,859  
Transaction and acquisition-related costs expensed     80       18       240       425  
Impairment of long-lived assets                 4,003        
Costs not core to our business     542             4,140        
Total net adjustments     5,785       4,445       20,582       12,989  
Non-GAAP operating income   $ 677     $ 4,647     $ 9,508     $ 1,427  
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (18,054 )   $ (4,396 )   $ (35,171 )   $ (27,394 )
Depreciation     3,615       3,774       10,682       11,496  
Amortization of software development costs     2,268       2,032       6,589       5,278  
Amortization of acquired intangible assets     568       568       1,705       1,705  
Interest income     (52 )     (40 )     (163 )     (563 )
Interest expense     5,556       5,771       16,757       17,524  
Income tax expense     42       6       125       17  
Stock-based compensation expense     4,595       3,859       10,494       10,859  
Transaction and acquisition-related costs expensed     80       18       240       425  
Restructuring costs                 4,127       5,616  
Impairment of long-lived assets                 4,003        
Loss (gain) on repurchase of convertible senior notes     7,520       (1,138 )     7,520       (1,138 )
Costs not core to our business     542             4,140        
Total net adjustments     24,734       14,850       66,219       51,219  
Adjusted EBITDA   $ 6,680     $ 10,454     $ 31,048     $ 23,825  
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (18,054 )   $ (4,396 )   $ (35,171 )   $ (27,394 )
Amortization of acquired intangible assets     568       568       1,705       1,705  
Stock-based compensation expense     4,595       3,859       10,494       10,859  
Transaction and acquisition-related costs expensed     80       18       240       425  
Impairment of long-lived assets                 4,003        
Loss (gain) on repurchase of convertible senior notes     7,520       (1,138 )     7,520       (1,138 )
Costs not core to our business     542             4,140        
Total net adjustments     13,305       3,307       28,102       11,851  
Non-GAAP net loss   $ (4,749 )   $ (1,089 )   $ (7,069 )   $ (15,543 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (4,749 )   $ (1,089 )   $ (7,069 )   $ (15,543 )
Preferred dividends     (1,600 )     (1,600 )     (4,800 )     (2,062 )
Non-GAAP net loss available to common stockholders   $ (6,349 )   $ (2,689 )   $ (11,869 )   $ (17,605 )
                                 
Weighted average shares outstanding - basic and diluted     33,354,624       32,263,876       32,978,394       32,320,201  
Shares used in computing non-GAAP net loss per share - basic and diluted     33,354,624       32,263,876       32,978,394       32,320,201  
Non-GAAP net loss per common share - basic and diluted   $ (0.19 )   $ (0.08 )   $ (0.36 )   $ (0.54 )
                                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                                
Net cash and cash equivalents provided by operating activities   $ 9,369     $ 13,208     $ 27,296     $ 11,074  
Purchases of property and equipment     (2,971 )     (2,664 )     (7,454 )     (9,739 )
Cash paid for restructuring costs     502       745       1,886       5,201  
Total net adjustments     (2,469 )     (1,919 )     (5,568 )     (4,538 )
Free Cash Flow   $ 6,900     $ 11,289     $ 21,728     $ 6,536  
                                 

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.