Form 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) May 4, 2016

 

 

BENEFITFOCUS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of incorporation)

 

001-36061   46-2346314
(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 May 4, 2016, Benefitfocus, Inc. issued a press release announcing its operating results for the quarter ended March 31, 2016. 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 May 4, 2016.


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: May 4, 2016

     

/s/ Raymond A. August

     

Raymond A. August

     

President and Chief Operating Officer

EX-99.1

Exhibit 99.1

 

Benefitfocus, Inc.

843-284-1052 ext. 3527

pr@benefitfocus.com

     LOGO     

Investor Relations:

Michael Bauer

843-284-1052 ext. 6654

michael.bauer@benefitfocus.com

  

Benefitfocus Announces First Quarter 2016 Financial Results

Total revenue of $54.8 million grew 28% year-over-year

Employer revenue of $32.2 million grew 54% year-over-year

Charleston, S.C. – May 4, 2016 – Benefitfocus, Inc. (NASDAQ: BNFT), a leading provider of cloud-based benefits management software, today announced its first quarter 2016 financial results.

“Benefitfocus continued its impressive momentum and delivered a great start to 2016, as our revenue and profitability exceeded the high-end of our guidance,” said Shawn Jenkins, Chief Executive Officer of Benefitfocus. “Driven by strong demand from both new and existing customers, our employer segment delivered 54% year-over-year revenue growth for the first quarter. In addition, once again, our software revenue retention rate was over 95%.”

Jenkins added, “We are making significant progress on achieving our long-term goals and we remain on track to achieve Q4 adjusted EBITDA profitability. The combination of the rapid growth of our cloud-based platform, leadership position and loyal customer base are all leading indicators of the tremendous market opportunity for the company.”

First Quarter 2016 Financial Highlights

Revenue

 

    Total revenue was $54.8 million, an increase of 28% compared to the first quarter of 2015.

 

    Software services revenue was $49.0 million, an increase of 30% compared to the first quarter of 2015.

 

    Professional services revenue was $5.8 million, an increase of 18% compared to the first quarter of 2015.

 

    Employer revenue was $32.2 million, an increase of 54% compared to the first quarter of 2015.

 

    Insurance carrier revenue was $22.6 million, an increase of 4% compared to the first quarter of 2015.

Non-GAAP Net Loss and Adjusted EBITDA

 

    Non-GAAP net loss was ($8.6) million, compared to ($12.7) million in the first quarter of 2015. Non-GAAP net loss per share was ($0.29), based on 29.2 million basic and diluted weighted average common shares outstanding, compared to ($0.48) for the first quarter of 2015, based on 26.7 million basic and diluted weighted average common shares outstanding.

 

    Adjusted EBITDA was ($3.7) million, compared to ($7.8) million in the first quarter of 2015.

 

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

 

1


Balance Sheet

 

    Total available liquidity at the end of the quarter was $92.8 million, which is comprised of cash, cash equivalents, marketable securities and available line of credit.

First Quarter and Recent Business Highlights

 

    Ended the quarter with 741 large employer customers, up from 568 at the end of the year-ago period and 723 at the end of the fourth quarter of 2015.

 

    Added new employer customer relationships during the quarter with Atria Senior Living, Electric Power Association of Mississippi, Growmark, KLX Inc., among others.

 

    Hosted our 5th annual One Place user conference in Orlando, Florida and announced the expansion of the Benefitfocus Ecosystem to provide employers access to the largest community of health, wealth, and wellness providers available in one place.

 

    Introduced the next generation BENEFITFOCUS® Platform. Available in time for open enrollment, new capabilities include full mobile enrollment capabilities in the BENEFITFOCUS® Mobile App, intuitive search and filtering capabilities in BENEFITFOCUS® Core Analytics, and the BENEFITFOCUS® Certified Carrier Program to improve data transmission standards, reduce costs and increase sales for insurance carriers.

 

    Announced Dennis Story will join the company on July 1, 2016 as our chief financial officer, and as such will serve as our principal financial and accounting officer. Since January 2006, Mr. Story has served as chief financial officer and treasurer for Manhattan Associates, Inc.

Business Outlook

Based on information available as of May 4, 2016, Benefitfocus is providing guidance for the second quarter and full year 2016 as indicated below.

Second Quarter 2016:

 

    Total revenue is expected to be in the range of $56.5 million to $57.0 million.

 

    Non-GAAP net loss is expected to be in the range of ($11.3) million to ($10.8) million, or ($0.39) to ($0.37) per share, based on 29.3 million basic and diluted weighted average common shares outstanding.

 

    Adjusted EBITDA is expected to be in the range of ($6.0) million to ($5.5) million.

Full Year 2016:

 

    Total revenue is expected to be in the range of $232.0 million to $235.5 million.

 

    Non-GAAP net loss is expected to be in the range of ($33.5) million to ($30.0) million, or ($1.14) to ($1.02) per share, based on 29.4 million basic and diluted weighted average common shares outstanding.

 

    Adjusted EBITDA is expected to be in the range of ($12.0) million to ($8.5) million.

 

    Free cash flow is expected to be in the range of ($37.0) million to ($32.0) million.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, May 4, 2016, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (855) 233-6991 (domestic) or (317) 586-4497 (international) with conference ID 91214060. 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) through May 11, 2016.

 

2


About Benefitfocus

Benefitfocus (NASDAQ: BNFT) provides a leading cloud-based benefits management platform that simplifies how organizations and individuals shop for, enroll in, manage and exchange benefits. Every day leading employers, insurance companies and millions of consumers rely on our platform to manage, scale and exchange benefits data seamlessly. In an increasingly complex benefits landscape, we bring order to chaos so our clients and their employees have access to better information, make better decisions and lead better lives. 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, net loss per common share and 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 loss, net loss and net loss per share exclude stock-based compensation expenses and amortization of acquisition-related intangible assets and offering costs expensed, 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 and expense related to the impairment of goodwill and intangible assets. We define free cash flow as cash from operations plus purchases of property and equipment. 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 profitability; our ability to maintain our culture and recruit and retain qualified personnel; fluctuations in our financial results; general economic risks; 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; 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.

Source: Benefitfocus, Inc.

 

3


Benefitfocus, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

 

     Three Months Ended
March 31,
 
     2016     2015  

Revenue

   $ 54,792      $ 42,669   

Cost of revenue (1)(2)

     29,297        22,463   
  

 

 

   

 

 

 

Gross profit

     25,495        20,206   

Operating expenses:(1)(2)

    

Sales and marketing

     13,574        15,475   

Research and development

     15,015        11,777   

General and administrative

     8,395        5,411   
  

 

 

   

 

 

 

Total operating expenses

     36,984        32,663   
  

 

 

   

 

 

 

Loss from operations

     (11,489     (12,457

Other income (expense):

    

Interest income

     56        18   

Interest expense on building lease financing obligations

     (1,716     (1,915

Interest expense on other borrowings

     (198     (280
  

 

 

   

 

 

 

Total other expense, net

     (1,858     (2,177
  

 

 

   

 

 

 

Loss before income taxes

     (13,347     (14,634

Income tax expense

     5        15   
  

 

 

   

 

 

 

Net loss

   $ (13,352   $ (14,649
  

 

 

   

 

 

 

Comprehensive loss

   $ (13,352   $ (14,649
  

 

 

   

 

 

 

Net loss per common share:

    

Basic and diluted

   $ (0.46   $ (0.55
  

 

 

   

 

 

 

Weighted-average common shares outstanding:

    

Basic and diluted

     29,213,198        26,745,444   
  

 

 

   

 

 

 

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

    

Cost of revenue

   $ 548      $ 320   

Sales and marketing

     632        323   

Research and development

     1,468        439   

General and administrative

     2,085        754   

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

    

Cost of revenue

   $ 36      $ 58   

Sales and marketing

     10        7   

Research and development

     15        10   

General and administrative

     3        2   

 

4


Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)

 

     As of
March 31,
2016
    As of
December 31,
2015
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 22,253      $ 48,074   

Marketable securities

     15,797        40,448   

Accounts receivable, net

     31,066        27,616   

Accounts receivable, related party

     2,216        2,082   

Prepaid expenses and other current assets

     6,775        5,725   
  

 

 

   

 

 

 

Total current assets

     78,107        123,945   

Property and equipment, net

     54,284        55,037   

Intangible assets, net

     601        665   

Goodwill

     1,634        1,634   

Other non-current assets

     1,345        838   
  

 

 

   

 

 

 

Total assets

   $ 135,971      $ 182,119   
  

 

 

   

 

 

 

Liabilities and stockholders’ deficit

    

Current liabilities:

    

Accounts payable

   $ 3,900      $ 7,953   

Accrued expenses

     12,188        10,449   

Accrued compensation and benefits

     15,380        20,684   

Deferred revenue, current portion

     33,411        37,858   

Revolving line of credit, current portion

     —          25,000   

Financing and capital lease obligations, current portion

     3,641        3,648   
  

 

 

   

 

 

 

Total current liabilities

     68,520        105,592   
  

 

 

   

 

 

 

Deferred revenue, net of current portion

     54,699        55,671   

Revolving line of credit, net of current portion

     5,246        5,246   

Financing and capital lease obligations, net of current portion

     31,812        31,183   

Other non-current liabilities

     2,361        2,436   
  

 

 

   

 

 

 

Total liabilities

     162,638        200,128   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ deficit:

    

Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2016 and December 31, 2015

     —          —     

Common stock, par value $0.001, 50,000,000 shares authorized, 29,225,503 and 29,194,332 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively

     29        29   

Additional paid-in capital

     314,998        310,304   

Accumulated deficit

     (341,694     (328,342
  

 

 

   

 

 

 

Total stockholders’ deficit

     (26,667     (18,009
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 135,971      $ 182,119   
  

 

 

   

 

 

 

 

5


Benefitfocus, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

     Three Months Ended
March 31,
 
     2016     2015  

Cash flows from operating activities

    

Net loss

   $ (13,352   $ (14,649

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

    

Depreciation and amortization

     3,043        2,823   

Stock-based compensation expense

     4,733        1,836   

Interest accrual on financing obligation

     1,716        1,915   

Provision for doubtful accounts

     (22     —     

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (3,562     2,457   

Accrued interest on short-term investments

     130        80   

Prepaid expenses and other current assets

     (2     (915

Other non-current assets

     (508     421   

Accounts payable

     (3,911     (295

Accrued expenses

     2,715        299   

Accrued compensation and benefits

     (5,304     1,938   

Deferred revenue

     (5,419     (2,170

Other non-current liabilities

     (75     85   
  

 

 

   

 

 

 

Net cash and cash equivalents used in operating activities

     (19,818     (6,175
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchases of short-term investments held to maturity

     (2,004     (38,830

Proceeds from maturity of short-term investments held to maturity

     26,525        5,065   

Purchases of property and equipment

     (2,610     (6,003
  

 

 

   

 

 

 

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

     21,911        (39,768
  

 

 

   

 

 

 

Cash flows from financing activities

    

Draws on revolving line of credit

     —          22,492   

Payments on revolving line of credit

     (25,000     (30,903

Proceeds from exercises of stock options

     163        379   

Proceeds from issuance of common stock and warrant, net of issuance costs

     —          74,538   

Payments of deferred financing costs and debt issuance costs

     —          (566

Remittance of taxes upon vesting of restricted stock units

     (202     —     

Payments on financing and capital lease obligations

     (2,875     (2,460
  

 

 

   

 

 

 

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

     (27,914     63,480   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (25,821     17,537   

Cash and cash equivalents, beginning of period

     48,074        51,074   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 22,253      $ 68,611   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

    

Property and equipment purchases in accounts payable and accrued expenses

   $ 428      $ 708   
  

 

 

   

 

 

 

Property and equipment purchased with financing and capital lease obligations

   $ 733      $ 236   
  

 

 

   

 

 

 

Post contract support purchased with financing obligations

   $ 1,048      $ —     
  

 

 

   

 

 

 

Allocation of proceeds to deferred revenue from issuance of common stock based on relative selling price

   $ —        $ 207   
  

 

 

   

 

 

 

 

6


Benefitfocus, Inc.

Reconciliation of GAAP to Non-GAAP Measures

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

 

     Three Months Ended
March 31,
 
     2016     2015
 

Reconciliation from Gross Profit to Non-GAAP Gross Profit:

    

Gross profit

   $ 25,495      $ 20,206   

Amortization of acquired intangible assets

     36        58   

Stock-based compensation expense

     548        320   
  

 

 

   

 

 

 

Total net adjustments

     584        378   
  

 

 

   

 

 

 

Non-GAAP gross profit

   $ 26,079      $ 20,584   
  

 

 

   

 

 

 

Reconciliation from Operating Loss to Non-GAAP Operating Loss:

    

Operating loss

   $ (11,489   $ (12,457

Amortization of acquired intangible assets

     64        77   

Stock-based compensation expense

     4,733        1,836   
  

 

 

   

 

 

 

Total net adjustments

     4,797        1,913   
  

 

 

   

 

 

 

Non-GAAP operating loss

   $ (6,692   $ (10,544
  

 

 

   

 

 

 

Reconciliation from Net Loss to Adjusted EBITDA:

    

Net loss

   $ (13,352   $ (14,649

Depreciation

     2,353        2,070   

Amortization of software development costs

     626        676   

Amortization of acquired intangible assets

     64        77   

Interest income

     (56     (18

Interest expense on building lease financing obligations

     1,716        1,915   

Interest expense on other borrowings

     198        280   

Income tax expense

     5        15   

Stock-based compensation expense

     4,733        1,836   
  

 

 

   

 

 

 

Total net adjustments

     9,639        6,851   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ (3,713   $ (7,798
  

 

 

   

 

 

 

Reconciliation from Net Loss to Non-GAAP Net Loss:

    

Net loss

   $ (13,352   $ (14,649

Amortization of acquired intangible assets

     64        77   

Stock-based compensation expense

     4,733        1,836   
  

 

 

   

 

 

 

Total net adjustments

     4,797        1,913   
  

 

 

   

 

 

 

Non-GAAP net loss

   $ (8,555   $ (12,736
  

 

 

   

 

 

 

Calculation of Non-GAAP Earnings Per Share:

    

Non-GAAP net loss

   $ (8,555   $ (12,736

Weighted average shares outstanding - basic and diluted

     29,213,198        26,745,444   
  

 

 

   

 

 

 

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

     29,213,198        26,745,444   
  

 

 

   

 

 

 

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

   $ (0.29   $ (0.48
  

 

 

   

 

 

 

 

7