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Benefitfocus Announces First Quarter 2020 Financial Results

Industry leading, AI-driven benefits platform accelerates innovation and actions to expand gross margins and operating margins

CHARLESTON, S.C., May 06, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (BNFT), the technology platform driving rapid innovation for employers and health plans, today announced its first quarter 2020 financial results. Recent highlights include: 

  • Grew net benefit eligible lives to 17.5 million at the end of the first quarter, up from 17.3 million at the end of the prior quarter and 15.5 million at the end of the first quarter of 2019;

  • Announced in February that Optima Health, Virginia’s largest health plan, selected Benefitfocus as its partner to deliver its next generation consumer experience;

  • Introduced the Community Resource Center in March to provide human resource leaders additional insight and tools to help guide them through the COVID-19 pandemic;

  • Launched benefitplace.com, a lower-cost, direct-to-consumer benefits alternative to COBRA that offers a greater breadth of benefit options, in April;

  • Exceeded high-end of Q1 adjusted EBITDA guidance by over 60%; GAAP net loss decreased compared to prior-year period.

“Benefitfocus continues to make meaningful progress on our mission to improve lives with benefits. We have accelerated our innovation amid the pandemic by responding to the shifting needs of our customers,” said Ray August, President and Chief Executive Officer of Benefitfocus. August added, “We have a durable business model and strong cash balance. We remain confident that we have the resources, market leadership and technical advantage to exit this experience stronger and better positioned to transform the benefits industry.”

First Quarter 2020 Financial Highlights

Revenue

  • Total revenue was $66.2 million, a decrease of 3% compared to the first quarter of 2019.

  • Software services was $52.0 million, a decrease of 2% compared to the first quarter of 2019. Software services is comprised of subscription and platform revenue.
    •  Subscription revenue was $46.0 million, a decrease of 4% compared to the first quarter of 2019.
    •  Platform revenue was $6.0 million, an increase of 17% compared to the first quarter of 2019.

  • Professional services revenue was $14.2 million, a decrease of 7% compared to the first quarter of 2019.

Net Loss

  • GAAP net loss was ($11.1) million, compared to ($14.2) million in the first quarter of 2019. GAAP net loss per share was ($0.34), based on 32.6 million basic and diluted weighted average common shares outstanding, compared to ($0.44) for the first quarter of 2019, based on 32.1 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($6.7) million, unchanged from the first quarter of 2019. Non-GAAP net loss per share was ($0.21) for both the first quarter 2020 and 2019, based on 32.6 million and 32.1 million basic and fully diluted weighted average common shares outstanding for the first quarter of 2020 and 2019, respectively.

  • Adjusted EBITDA was $4.1 million, compared to $3.6 million in the first quarter of 2019.

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

Balance Sheet

  • Cash and cash equivalents at March 31, 2020 totaled $114.7 million, compared to $131.0 million at the end of the fourth quarter of 2019. 

  • During the first quarter of 2020, the company repurchased approximately 1.1 million shares at a total cost of approximately $9.4 million.

Updated Business Outlook

Based on information available as of May 6, 2020, Benefitfocus is providing guidance for the second quarter and full year 2020 as indicated below.

Second Quarter 2020:

  • Total revenue is expected to be in the range of $55.0 million to $58.0 million.

  • Non-GAAP net loss is expected to be in the range of ($9.0) million to ($7.0) million, or ($0.28) to ($0.22) per share, based on 32.1 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $2.0 million to $4.0 million.

Full Year 2020:

  • Total revenue is expected to be in the range of $250.0 million to $270.0 million.

  • Non-GAAP net loss is expected to be in the range of ($18.0) million to ($8.0) million, or ($0.56) to ($0.25) 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 $25.0 million to $35.0 million.

  • Free cash flow usage is expected to be in the range of $(10.0) million to $(20.0) million.

Adjusted EBITDA and Free Cash Flow guidance excludes the impact of restructuring charges.

Management has not reconciled forward-looking non-GAAP net loss, Adjusted EBITDA or Free Cash Flow to their most directly comparable GAAP measures of GAAP net loss and 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 Q2 and Full Year 2020 business outlook on May 6, 2020, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or (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 May 13, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13703064.

About Benefitfocus

Benefitfocus (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 loss, net loss, net loss 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 loss, net loss and net loss per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, 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 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 impact on our reported adjusted EBITDA and Free Cash Flow for the three months ended March 31, 2020 or prior periods. 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; 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
March 31,

 

 

 

2020

 

 

2019

 

Revenue

 

$

66,154

 

 

$

68,299

 

Cost of revenue(1)(2)(3)

 

 

33,912

 

 

 

32,852

 

Gross profit

 

 

32,242

 

 

 

35,447

 

Operating expenses:(1)(2)(3)

 

 

 

 

 

 

 

 

Sales and marketing

 

 

15,630

 

 

 

19,619

 

Research and development

 

 

11,768

 

 

 

13,090

 

General and administrative

 

 

10,515

 

 

 

11,796

 

Total operating expenses

 

 

37,913

 

 

 

44,505

 

Loss from operations

 

 

(5,671

)

 

 

(9,058

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

426

 

 

 

660

 

Interest expense

 

 

(5,891

)

 

 

(5,814

)

Other (expense) income

 

 

5

 

 

 

9

 

Total other expense, net

 

 

(5,460

)

 

 

(5,145

)

Loss before income taxes

 

 

(11,131

)

 

 

(14,203

)

Income tax expense

 

 

5

 

 

 

6

 

Net loss

 

$

(11,136

)

 

$

(14,209

)

Comprehensive loss

 

$

(11,136

)

 

$

(14,209

)

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.34

)

 

$

(0.44

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

32,638,805

 

 

 

32,056,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Cost of revenue

 

$

667

 

 

$

899

 

Sales and marketing

 

 

880

 

 

 

1,686

 

Research and development

 

 

342

 

 

 

1,192

 

General and administrative

 

 

1,788

 

 

 

2,590

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Cost of revenue

 

$

317

 

 

$

99

 

Sales and marketing

 

 

91

 

 

 

36

 

Research and development

 

 

109

 

 

 

40

 

General and administrative

 

 

52

 

 

 

15

 

 

 

 

 

 

 

 

 

 

(3) Transaction and acquisition-related costs expensed included in above line items:

 

 

 

 

 

 

 

 

General and administrative

 

$

192

 

 

$

642

 

 

 

 

 

 

 

 

 

 


 

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

 

 

 

 

 

 

 

 

 

As of
March 31,
2020

 

 

As of
December 31,
2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

114,714

 

 

$

130,976

 

Accounts receivable, net

 

 

33,450

 

 

 

33,754

 

Contract, prepaid and other current assets

 

 

21,271

 

 

 

21,523

 

Total current assets

 

 

169,435

 

 

 

186,253

 

Property and equipment, net

 

 

31,507

 

 

 

28,669

 

Financing lease right-of-use assets

 

 

75,687

 

 

 

78,520

 

Operating lease right-of-use assets

 

 

1,591

 

 

 

1,715

 

Intangible assets, net

 

 

12,099

 

 

 

12,667

 

Goodwill

 

 

12,857

 

 

 

12,857

 

Deferred contract costs and other non-current assets

 

 

10,445

 

 

 

11,002

 

Total assets

 

$

313,621

 

 

$

331,683

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,300

 

 

$

9,563

 

Accrued expenses

 

 

11,937

 

 

 

10,526

 

Accrued compensation and benefits

 

 

11,245

 

 

 

15,246

 

Deferred revenue, current portion

 

 

29,736

 

 

 

33,429

 

Lease liabilities and financing obligations, current portion

 

 

8,240

 

 

 

6,871

 

Total current liabilities

 

 

67,458

 

 

 

75,635

 

Deferred revenue, net of current portion

 

 

4,803

 

 

 

5,079

 

Convertible senior notes

 

 

190,873

 

 

 

187,949

 

Revolving line of credit

 

 

10,000

 

 

 

 

Lease liabilities and financing obligations, net current portion

 

 

82,891

 

 

 

88,572

 

Other non-current liabilities

 

 

68

 

 

 

92

 

Total liabilities

 

 

356,093

 

 

 

357,327

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, par value $0.001, 50,000,000 shares authorized, 31,778,075 and 32,788,980 shares issued and 31,775,214 and 32,788,980 shares outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

32

 

 

 

33

 

Additional paid-in capital

 

 

420,393

 

 

 

426,025

 

Accumulated deficit

 

 

(462,897

)

 

 

(451,702

)

Total stockholders' deficit

 

 

(42,472

)

 

 

(25,644

)

Total liabilities and stockholders' deficit

 

$

313,621

 

 

$

331,683

 

 

 

 

 

 

 

 

 

 


 

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

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(11,136

)

 

$

(14,209

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,884

 

 

 

5,335

 

Stock-based compensation expense

 

 

3,677

 

 

 

6,367

 

Accretion of interest on convertible senior notes

 

 

2,924

 

 

 

2,749

 

Interest accrual on finance lease liabilities

 

 

23

 

 

 

 

Rent expense (less than) in excess of payments

 

 

(9

)

 

 

9

 

Provision for doubtful accounts

 

 

55

 

 

 

265

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

189

 

 

 

(6,514

)

Contract, prepaid and other current assets

 

 

252

 

 

 

(2,495

)

Deferred costs and other non-current assets

 

 

557

 

 

 

1,568

 

Accounts payable and accrued expenses

 

 

(1,593

)

 

 

(4,867

)

Accrued compensation and benefits

 

 

(4,000

)

 

 

(3,580

)

Deferred revenue

 

 

(3,969

)

 

 

(5,089

)

Other non-current liabilities

 

 

(24

)

 

 

(23

)

Net cash and cash equivalents used in operating activities

 

 

(7,170

)

 

 

(20,484

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Business combination, net of cash acquired

 

 

 

 

 

(21,033

)

Purchases of property and equipment

 

 

(3,821

)

 

 

(2,955

)

Net cash and cash equivalents used in investing activities

 

 

(3,821

)

 

 

(23,988

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Draws on revolving line of credit

 

 

10,000

 

 

 

 

Payments of debt issuance costs

 

 

(154

)

 

 

(357

)

Repurchase of common stock

 

 

(9,383

)

 

 

 

Proceeds from exercises of stock options and ESPP

 

 

73

 

 

 

89

 

Payments on financing obligations

 

 

(207

)

 

 

(655

)

Payments of principal on finance lease liabilities

 

 

(5,600

)

 

 

(1,375

)

Net cash and cash equivalents used in financing activities

 

 

(5,271

)

 

 

(2,298

)

Net decrease in cash and cash equivalents

 

 

(16,262

)

 

 

(46,770

)

Cash and cash equivalents, beginning of period

 

 

130,976

 

 

 

190,928

 

Cash and cash equivalents, end of period

 

$

114,714

 

 

$

144,158

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

 

 

Property and equipment purchases in accounts payable and accrued expenses

 

$

31

 

 

$

382

 

 

 

 

 

 

 

 

 

 


 

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

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Reconciliation from Gross Profit to Non-GAAP Gross Profit:

 

 

 

 

 

 

 

 

Gross profit

 

$

32,242

 

 

$

35,447

 

Amortization of acquired intangible assets

 

 

317

 

 

 

99

 

Stock-based compensation expense

 

 

667

 

 

 

899

 

Total net adjustments

 

 

984

 

 

 

998

 

Non-GAAP gross profit

 

$

33,226

 

 

$

36,445

 

 

 

 

 

 

 

 

 

 

Reconciliation from Operating Loss to Non-GAAP Operating Loss:

 

 

 

 

 

 

 

 

Operating loss

 

$

(5,671

)

 

$

(9,058

)

Amortization of acquired intangible assets

 

 

569

 

 

 

190

 

Stock-based compensation expense

 

 

3,677

 

 

 

6,367

 

Transaction and acquisition-related costs expensed

 

 

192

 

 

 

642

 

Costs not core to our business

 

 

 

 

 

320

 

Total net adjustments

 

 

4,438

 

 

 

7,519

 

Non-GAAP operating loss

 

$

(1,233

)

 

$

(1,539

)

 

 

 

 

 

 

 

 

 

Reconciliation from Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,136

)

 

$

(14,209

)

Depreciation

 

 

3,796

 

 

 

3,967

 

Amortization of software development costs

 

 

1,519

 

 

 

1,178

 

Amortization of acquired intangible assets

 

 

569

 

 

 

190

 

Interest income

 

 

(426

)

 

 

(660

)

Interest expense

 

 

5,891

 

 

 

5,814

 

Income tax expense

 

 

5

 

 

 

6

 

Stock-based compensation expense

 

 

3,677

 

 

 

6,367

 

Transaction and acquisition-related costs expensed

 

 

192

 

 

 

642

 

Costs not core to our business

 

 

 

 

 

320

 

Total net adjustments

 

 

15,223

 

 

 

17,824

 

Adjusted EBITDA

 

$

4,087

 

 

$

3,615

 

 

 

 

 

 

 

 

 

 

Reconciliation from Net Loss to Non-GAAP Net Loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,136

)

 

$

(14,209

)

Amortization of acquired intangible assets

 

 

569

 

 

 

190

 

Stock-based compensation expense

 

 

3,677

 

 

 

6,367

 

Transaction and acquisition-related costs expensed

 

 

192

 

 

 

642

 

Costs not core to our business

 

 

 

 

 

320

 

Total net adjustments

 

 

4,438

 

 

 

7,519

 

Non-GAAP net loss

 

$

(6,698

)

 

$

(6,690

)

 

 

 

 

 

 

 

 

 

Calculation of Non-GAAP Earnings Per Share:

 

 

 

 

 

 

 

 

Non-GAAP net loss

 

$

(6,698

)

 

$

(6,690

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

32,638,805

 

 

 

32,056,934

 

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

 

 

32,638,805

 

 

 

32,056,934

 

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

 

$

(0.21

)

 

$

(0.21

)

 

 

 

 

 

 

 

 

 

Benefitfocus, Inc.
843-981-8898
pr@benefitfocus.com

Investor Relations:
Patti Leahy
843-981-8899
ir@benefitfocus.com