Benefitfocus Details Comprehensive Actions to Proactively Manage Impact of COVID-19 Pandemic
“The COVID-19 pandemic has had an unprecedented impact on our global economy,” said
Benefitfocus’ ecosystem is among the largest in the benefits industry and over 150,000 employers, as well as more than 25 million consumers who continue to rely on
Swad continued, “We are increasing our full-year 2020 Adjusted EBITDA and Free Cash Flow outlook, excluding the impact of restructuring charges, while lowering our previous full year 2020 revenue guidance. This is primarily due to aggressively managing our costs against the likelihood of lower professional services demand, potential decline in software revenue from lower customer employee counts, and the potential for weaker adoption of certain voluntary benefits.”
The company plans to provide a more detailed business update on its upcoming earnings conference call on
In response to the COVID-19 pandemic,
Caring for and supporting employees and customers:
- Implemented a mandatory work-from-home policy, beginning
March 19, to ensure the safety and well-being of employees;
- Established the
Benefitfocus Together Fundto financially support the company’s own at-risk employees and their families;
- Introduced the
COVID-19 Resource Centerand, subsequently, the Community Resource Center, which provide business continuity planning resources and support tools for employer customers; and,
- Introduced benefitplace.com to offer affordable individual and family health plan alternatives, and other benefits to support the well-being of displaced workers.
Strengthening expense management and liquidity profile:
The company has taken the following expense-related actions until conditions stabilize:
- Implemented executive compensation reductions including reducing the take home pay for the CEO to zero and a 20% salary reduction for the executive leadership team;
- Implemented reduction in take home pay for the Executive Chairman of the Board of Directors to zero and a 25% reduction in equity compensation for all other Board members;
- Eliminated all non-essential expenses including travel and third-party vendors;
- Suspended merit increases and promotions;
- Reduced global resources; and,
- Suspended 401(k) company match.
In addition, the company has suspended hiring for all open positions except critical roles and is reducing immediately its
Preliminary Financial Results for the First Quarter Ended
The unaudited financial results and selected operating metrics included in this press release for the first quarter ended
Based on current information, for the first quarter 2020,
- Total revenue of approximately
$66 million, compared to initial range of $67.5 millionto $69.5 million.
- Adjusted EBITDA of approximately
$4 million, above the initial range of $0.5 millionto $2.5 million.
- The company consumed approximately
$11 millionof Free Cash Flow in the quarter.
GAAP net loss is expected to be approximately
Updated Full Year 2020 Guidance
Based on current information,
- Total revenue of approximately
$250 millionto $270 million, compared to initial range of $310 millionto $320 million.
- Adjusted EBITDA of approximately
$25 millionto $35 million, above the initial range of $22 millionto $27 million.
- The company expects to consume
$10 millionto $20 millionof Free Cash Flow for the full year which incorporates estimates for increased working capital due to COVID-19. This compares to the initial range of $15 millionto $20 millionof Free Cash Flow usage.
Adjusted EBITDA and Free Cash Flow guidance excludes the impact of restructuring charges.
Management has not reconciled forward-looking Adjusted EBITDA and Free Cash Flow to their most directly comparable GAAP measure of GAAP net loss and GAAP operating income. 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.
Conference Call and Webcast
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in this release, including 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.
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 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 first quarter of 2020, we revised our definitions of adjusted EBITDA and Free Cash Flow to also exclude restructuring charges. The revisions to these definitions had no material impact on our reported adjusted EBITDA and Free Cash Flow for the three months ended
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; 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
|Unaudited Reconciliation of GAAP to Non-GAAP Measures|
|Three Months Ended
|Reconciliation from Net Loss to Adjusted EBITDA:|
|Depreciation and amortization||6|
|Income tax expense||—|
|Stock-based compensation expense||4|
|Transaction and acquisition-related costs expensed||—|
|Costs not core to our business||—|
|Total net adjustments||15|
|Reconciliation from Cash Flows from Operating Activities to Free Cash Flow:|
|Net cash and cash equivalents used in operating activities||$||(7||)|
|Purchases of property and equipment||(4||)|
|Free Cash Flow||$||(11||)|
Source: Benefitfocus, Inc.