8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 7, 2013

 

 

BENEFITFOCUS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36061   46-2346314

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

100 Benefitfocus Way, Charleston, South Carolina 29492

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (843) 849-7476

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On November 7, 2013, Benefitfocus, Inc. issued a press release announcing its operating results for the third quarter ended September 30, 2013. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference.

The information in this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

 

  (d) Exhibits

 

Exhibit

No.

 

Description

99.1   Press release dated November 7, 2013.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    BENEFITFOCUS, INC.
Date: November 7, 2013    

/s/ Milton A. Alpern

    Milton A. Alpern, Chief Financial Officer
EX-99.1

Exhibit 99.1

 

Benefitfocus, Inc.

843-284-1052 ext. 6907

pr@benefitfocus.com

 

Investor Relations:

ICR for Benefitfocus, Inc.

Brian Denyeau

646-277-1251

brian.denyeau@icrinc.com

  LOGO

Benefitfocus Announces Third Quarter 2013 Financial Results

 

    Total revenue of $26.3 million grew 26% year-over-year

 

    Employer revenue of $9.8 million grew 66% year-over-year

 

    Initial Public Offering raised $70.1 million in net proceeds

Charleston, S.C. – November 7, 2013 – Benefitfocus, Inc. (NASDAQ: BNFT), a leading provider of cloud-based benefits software solutions, today announced its third quarter 2013 financial results.

“Benefitfocus delivered strong third quarter results that were highlighted by 66% growth in our employer revenue,” said Shawn Jenkins, President and Chief Executive Officer of Benefitfocus. “We are seeing strong demand for next-generation, cloud-based benefits management solutions as employers need to more efficiently manage nearly 30% of their total employee compensation. In addition, the benefits management industry is evolving from a defined benefit model towards a more flexible, defined contribution approach that empowers employees and individuals to design the benefits package that best suits their needs. We believe Benefitfocus is uniquely positioned to capitalize on these trends in a multi-billion dollar market opportunity.”

Jenkins added, “Our recent IPO was a significant milestone for Benefitfocus and served to further increase our market awareness, while also providing us with additional resources to execute on our strategic growth initiatives.”

Third Quarter 2013 Financial Highlights

Revenue

 

    Total revenue was $26.3 million, an increase of 26% compared to the third quarter of 2012.

 

    Software revenue was $24.5 million, an increase of 29% compared to the third quarter of 2012.

 

    Professional services revenue was $1.8 million, an increase of 1% compared to the third quarter of 2012.

 

    Employer revenue was $9.8 million, an increase of 66% compared to the third quarter of 2012.

 

    Insurance carrier revenue was $16.5 million, an increase of 11% compared to the third quarter of 2012.

Operating Income

 

    GAAP operating loss was ($6.8) million, compared to an operating loss of ($2.3) million in the third quarter of 2012.

 

    Non-GAAP operating loss was ($6.4) million, compared to ($2.1) million in the third quarter of 2012.

Net Income

 

    GAAP net loss was ($6.8) million, compared to a net loss of ($2.4) million for the third quarter of 2012. GAAP net loss per share was ($1.08), based on 6.3 million basic and diluted weighted average common shares outstanding, compared to a GAAP net loss per share of ($0.49) for the third quarter of 2012, based on 4.8 million basic and diluted weighted average common shares outstanding.

 

    Non-GAAP net loss was ($6.4) million, compared to ($2.1) million in the third quarter of 2012. Non-GAAP net loss per diluted share was ($0.30), based on 21.6 million basic and diluted weighted average common shares outstanding, compared to ($0.10) for the third quarter of 2012, based on 21.3 million basic and diluted weighted average common shares outstanding. These non-GAAP earnings per share calculations assume our convertible preferred stock was converted to common stock for the full quarter.


Adjusted EBITDA

 

    Adjusted EBITDA was ($4.5) million, compared to ($0.4) million in the third quarter of 2012.

Balance Sheet and Cash Flow

 

    Cash and cash equivalents at September 30, 2013 totaled $84.7 million, compared with $13.7 million at the end of the second quarter of 2013. The increase in cash was due principally to the $70.1 million in net proceeds generated from the completion of the company’s initial public offering in September 2013.

 

    Cash flow from operations was $3.0 million and free cash flow was ($0.3) million for the third quarter of 2013, after taking into consideration $3.3 million of capital expenditures and capitalized software. This compares to cash flow from operations of $1.9 million and free cash flow of $0.1 million for the third quarter of 2012, after taking into consideration $1.8 million of capital expenditures and capitalized software.

A reconciliation of GAAP to non-GAAP financial measures has been provided in this press release, including in the accompanying tables. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Third Quarter and Recent Business Highlights

 

    Ended the quarter with 379 employer customers, an increase of 31 from the second quarter of 2013 and 110 from the year ago period.

 

    Added new employer customer relationships with Fiesta Restaurant Group, Inc., Sears Hometown and Outlets Stores, Inc., Sprouts Farmers Markets, Inc., Stolt-Nielsen USA and Western Kentucky University, among others.

 

    Announced the availability of BENEFITFOCUS HR INTOUCH® Mobile, a native app for iOS and Android mobile devices that can be downloaded from Google Play and the iTunes App Store. This new solution provides employees using BENEFITFOCUS HR INTOUCH® access to all their benefits information anytime and anywhere from their mobile devices.

 

    Announced a strategic alliance with Equifax Workforce Solutions making available the Equifax Look-Back Calculator through BENEFITFOCUS HR INTOUCH®, which allows employers to calculate look-back periods of hourly workforce populations using the safe harbor method introduced by the Employer Shared Responsibility provision of the Affordable Care Act.

 

    Successfully completed our initial public offering of approximately 4.94 million shares, including 3 million primary shares that generated net proceeds of $70.1 million to Benefitfocus.

Business Outlook

Based on information available as of November 7, 2013, Benefitfocus is issuing guidance for the fourth quarter and full year 2013 as indicated below.

Fourth Quarter 2013:

 

    Total revenue is expected to be in the range of $28.0 million to $29.0 million.

 

    Non-GAAP net loss is expected to be in the range of a loss of ($8.0) million to ($8.5) million, or ($0.33) to ($0.35) per share, based on 24.5 million basic and diluted weighted average common shares outstanding.

 

    Adjusted EBITDA is expected to be in the range of ($6.0) million to ($6.5) million.

Full Year 2013:

 

    Total revenue is expected to be in the range of $102.5 million to $103.5 million.

 

    Non-GAAP net loss is expected to be in the range of ($28.9) million to ($29.4) million, or ($1.30) to ($1.33) per share, based on 22.2 million basic and diluted weighted average common shares outstanding.

 

    Adjusted EBITDA is expected to be in the range of ($21.2) million to ($21.7) million.


Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, November 7, 2013 at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (855) 425-4205 (domestic) or (317) 586-4497 (international) with conference ID 89388506. 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/. A replay of this conference call can also be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) until December 7, 2013.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT), is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus serves more than 20 million consumers on its platform that consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus Platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits, including core medical, dental, and other voluntary benefits plans as well as wellness programs. For more information, visit www.benefitfocus.com.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP loss from operations, net loss, net loss per share, adjusted gross profit, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow, 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 loss from operations, net loss and net loss per share exclude stock-based compensation expenses and amortization of acquisition related intangible assets. Adjusted gross profit excludes stock-based compensation, amortization of acquisition-related intangible assets, amortization of software development costs and depreciation. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and expense related to the impairment of goodwill and intangible assets. We define free cash flow as cash flow from operations less capital expenditures and capitalized software. Please note that other companies might define their non-GAAP financial measures differently than we do.

Management presents certain 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, the inclusion of the non-GAAP financial measures 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: the immature and volatile market for our products and services; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; our ability to compete effectively; our ability to maintain our culture and recruit and retain qualified personnel; 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.cfm 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.


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,
 
     2013     2012     2013     2012  

Revenue

   $ 26,317      $ 20,833      $ 74,496      $ 59,531   

Cost of revenue (1)(2)

     16,379        10,899        43,549        33,130   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     9,938        9,934        30,947        26,401   

Operating expenses: (1)(2)

        

Sales and marketing

     7,426        6,727        27,331        21,791   

Research and development

     6,633        3,706        17,138        11,416   

General and administrative

     2,645        1,811        8,253        5,564   

Change in fair value of contingent consideration

     —          (1     (43     169   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     16,704        12,243        52,679        38,940   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (6,766     (2,309     (21,732     (12,539

Other income (expense):

        

Interest income

     8        9        31        41   

Interest expense

     (113     (37     (271     (139

Other expense

     9        (28     (29     (57
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (96     (56     (269     (155
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (6,862     (2,365     (22,001     (12,694

Income tax (benefit) expense

     (59     10        (19     49   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (6,803   $ (2,375   $ (21,982   $ (12,743
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss

   $ (6,803   $ (2,375   $ (21,982   $ (12,743
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share:

        

Basic and diluted

   $ (1.08   $ (0.49   $ (4.14   $ (2.64
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding:

        

Basic and diluted

     6,320,731        4,836,179        5,315,008        4,824,182   
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)    Stock-based compensation included in above line items:

        

Cost of revenue

   $ 57      $ 42      $ 188      $ 126   

Sales and marketing

     29        15        93        45   

Research and development

     56        28        189        85   

General and administrative

     142        68        351        208   

(2)    Amortization of acquired intangible assets included in above line items:

        

Cost of revenue

   $ 60      $ 66      $ 186      $ 190   

Sales and marketing

     6        7        22        26   

Research and development

     11        9        31        28   

General and administrative

     2        2        7        7   


Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)

 

     As of
September 30,
2013
    As of
December 31,
2012
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 84,672      $ 19,703   

Accounts receivable, net

     21,177        13,372   

Prepaid expenses and other current assets

     2,495        1,483   
  

 

 

   

 

 

 

Total current assets

     108,344        34,558   

Property and equipment, net

     16,474        14,150   

Intangible assets, net

     1,333        1,579   

Goodwill

     1,634        1,634   
  

 

 

   

 

 

 

Total assets

   $ 127,785      $ 51,921   
  

 

 

   

 

 

 

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

    

Current liabilities:

    

Accounts payable

   $ 5,596      $ 1,726   

Accrued expenses

     3,219        2,453   

Accrued compensation and benefits

     15,737        9,661   

Deferred revenue, current portion

     14,192        11,165   

Capital lease obligations, current portion

     1,170        1,171   

Notes payable, current portion

     —          2,420   

Contingent consideration related to acquisition, current portion

     310        328   
  

 

 

   

 

 

 

Total current liabilities

     40,224        28,924   
  

 

 

   

 

 

 

Deferred revenue, net of current portion

     58,166        46,355   

Revolving line of credit

     5,757        —     

Capital lease obligations, net of current portion

     604        550   

Notes payable, net of current portion

     —          3,561   

Other non-current liabilities

     2,593        2,301   
  

 

 

   

 

 

 

Total liabilities

     107,344        81,691   
  

 

 

   

 

 

 

Commitments and contingencies

    

Redeemable convertible preferred stock:

    

Convertible Series A preferred stock, no par value, no shares authorized, issued and outstanding at September 30, 2013; 14,055,851 shares authorized, issued and outstanding at December 31, 2012

     —          105,505   

Convertible Series B preferred stock, no par value, no shares authorized, issued and outstanding at September 30, 2013; 2,441,009 shares authorized, issued and outstanding, at December 31, 2012

     —          29,973   
  

 

 

   

 

 

 

Total redeemable convertible preferred stock

     —          135,478   
  

 

 

   

 

 

 

Stockholders’ equity (deficit):

    

Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2013 and December 31, 2012

     —          —     

Common stock, no par value, no shares authorized issued and outstanding at September 30, 2013; 100,000,000 shares authorized, 20,125,063 shares issued and 4,792,347 shares outstanding at December 31, 2012

     —          6,109   

Common stock, par value $0.001, 50,000,000 shares authorized, 24,441,228 shares issued and outstanding at September 30, 2013; no shares authorized, issued and outstanding at December 31, 2012

     24        —     

Additional paid-in capital

     213,756        —     

Accumulated deficit

     (193,339     (171,357
  

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     20,441        (165,248
  

 

 

   

 

 

 

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

   $ 127,785      $ 51,921   
  

 

 

   

 

 

 


Benefitfocus, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

     Nine Months Ended
September 30,
 
     2013     2012  

Cash flows from operating activities

    

Net loss

   $ (21,982   $ (12,743

Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:

    

Depreciation and amortization

     5,727        6,567   

Stock-based compensation expense

     821        464   

Change in fair value and accretion of warrant

     669        320   

Change in fair value of contingent consideration

     (18     225   

Provision for doubtful accounts

     55        80   

Loss on disposal of property and equipment

     20        9   

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (7,860     (2,437

Prepaid expenses and other current assets

     (1,012     228   

Accounts payable

     3,870        405   

Accrued expenses

     766        456   

Accrued compensation and benefits

     6,076        3,659   

Contingent consideration related to acquisition

     —          (320

Deferred revenue

     14,838        9,165   

Other non-current liabilities

     293        319   
  

 

 

   

 

 

 

Net cash and cash equivalents provided by operating activities

     2,263        6,397   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchases of property and equipment

     (6,695     (5,154

Proceeds from sale of property and equipment

     9        —     
  

 

 

   

 

 

 

Net cash and cash equivalents used in investing activities

     (6,686     (5,154
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from initial public offering, net of issuance costs

     70,064        —     

Draws on revolving line of credit

     10,757        —     

Payments on revolving line of credit

     (5,000     —     

Proceeds from notes payable borrowing

     1,465        —     

Repayment of notes payable

     (7,447     (835

Proceeds from exercises of stock options

     572        84   

Proceeds from issuance of common stock (excluding IPO)

     68        —     

Repurchases of common stock

     —          (593

Payments of contingent consideration

     —          (1,700

Payments on capital lease obligations

     (1,087     (1,071
  

 

 

   

 

 

 

Net cash and cash equivalents provided by (used in) financing activities

     69,392        (4,115
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     64,969        (2,872

Cash and cash equivalents, beginning of period

     19,703        15,856   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 84,672      $ 12,984   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

    

Property and equipment acquired with direct financing or leases

   $ 1,138      $ —     
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

Income taxes paid

   $ 168      $ 40   
  

 

 

   

 

 

 

Interest paid

   $ 248      $ 149   
  

 

 

   

 

 

 


Benefitfocus, Inc.

Reconciliation of GAAP to Non-GAAP Measures

(unaudited, dollars in thousands except share and per share data)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

Reconciliation from Gross Profit to Adjusted Gross Profit:

        

Gross profit

   $ 9,938      $ 9,934      $ 30,947      $ 26,401   

Depreciation

     999        999        2,910        3,008   

Amortization of software development costs

     661        554        1,904        2,664   

Amortization of acquired intangible assets

     60        66        186        190   

Stock-based compensation expense

     57        42        188        126   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit

   $ 11,715      $ 11,595      $ 36,135      $ 32,389   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation from Operating Loss to Non-GAAP Operating Loss:

        

Operating loss

   $ (6,766   $ (2,309   $ (21,732   $ (12,539

Amortization of acquired intangible assets

     79        84        246        251   

Stock-based compensation expense

     284        153        821        464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net adjustments

   $ 363      $ 237      $ 1,067      $ 715   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating loss

   $ (6,403   $ (2,072   $ (20,665   $ (11,824
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation from Net Loss to Adjusted EBITDA:

        

Net loss

   $ (6,803   $ (2,375   $ (21,982   $ (12,743

Depreciation

     1,235        1,175        3,577        3,652   

Amortization of software development costs

     661        554        1,904        2,664   

Amortization of acquired intangible assets

     79        84        246        251   

Interest income

     (8     (9     (31     (41

Interest expense

     113        37        271        139   

Income tax expense

     (59     10        (19     49   

Stock-based compensation expense

     284        153        821        464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net adjustments

   $ 2,305      $ 2,004      $ 6,769      $ 7,178   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (4,498   $ (371   $ (15,213   $ (5,565
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation from Net Loss to Non-GAAP Net Loss:

        

Net loss

   $ (6,803   $ (2,375   $ (21,982   $ (12,743

Amortization of acquired intangible assets

     79        84        246        251   

Stock-based compensation expense

     284        153        821        464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net adjustments

     363        237        1,067        715   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net loss

   $ (6,440   $ (2,138   $ (20,915   $ (12,028
  

 

 

   

 

 

   

 

 

   

 

 

 

Calculation of Non-GAAP Earnings Per Share:

        

Non-GAAP net loss

   $ (6,440   $ (2,138   $ (20,915   $ (12,028

Weighted average shares outstanding -basic and diluted

     6,320,731        4,836,179        5,315,008        4,824,182   

Additional weighted average shares giving effect to conversion of convertible preferred stock at the beginning of the period

     15,241,664        16,496,860        16,073,864        16,496,860   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing non-GAAP net loss per share - basic and diluted

     21,562,395        21,333,039        21,388,872        21,321,042   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net loss per common share - basic and diluted

   $ (0.30   $ (0.10   $ (0.98   $ (0.56