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Benefitfocus Announces First Quarter 2022 Financial Results

Benefitfocus, Inc.
Benefitfocus, Inc.

Delivered Revenue and Adjusted EBITDA in Excess of Guidance Ranges
Executing on Strategic Plan to Return to Sustainable Growth

CHARLESTON, S.C., May 03, 2022 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading cloud-based benefits administration technology company that simplifies benefits administration for employers, health plans and brokers, today announces its first quarter 2022 financial results:

Financial Highlights for the First Quarter 2022:

  • First quarter 2022 revenue of $61.2 million was above the high end of the guidance range of $59 to $61 million.

  • Adjusted EBITDA of $11.2 million during the first quarter was above the high end of the guidance range of $7 to $9 million.

  • GAAP net loss available to common stockholders was ($3.9) million, compared to ($3.7) million in the first quarter of 2021.

  • GAAP loss per share was ($0.12) in the first quarter of 2022 and non-GAAP income per share was $0.01.

Operational Highlights for the First Quarter:

  • The recent acquisition of Tango Health delivered another ACA season with 100% ontime performance in client IRS filings. Migration of Benefitfocus clients to the Tango Health platform has now begun, which is expected to deliver even stronger client performance in all areas going forward.

  • Selected for inclusion in Aon’s Connected Benefit Solution panel. Aon is one of the top brokers in the country.

  • Kristin Adams was appointed as our new Chief People Officer, further enhancing and diversifying the leadership team.

“We hit a number of strategic milestones in the quarter and we believe we are on our way to repositioning Benefitfocus for sustainable growth,” said Matt Levin, president and chief executive officer. “We have improved our go-to-market relationships and have a solid sales pipeline. We believe our efforts to date will enable us to grow market share and solidify our position as an industry leader.”

“We were once again able to deliver financial results at or better than our guidance ranges for this quarter,” said Alpana Wegner, chief financial officer. “I am pleased with the progress we are making on executing our strategy to drive sustainable growth. We look forward to providing additional insight into our strategy and longer-term financial targets at our Investor Day on May 10.”

First Quarter 2022 Financial Highlights

Revenue

  • Total revenue was $61.2 million, down approximately 6% compared to the first quarter of 2021.

  • Software services was $49.7 million, down 7% compared to the first quarter of 2021. Software services is comprised of subscription and platform revenue.

    • Subscription revenue was $43.1 million, down 5% compared to the first quarter of 2021.

    • Platform revenue was $6.6 million, down 16% compared to the first quarter of 2021.

  • Professional services revenue was $11.6 million, down 1% compared to the first quarter of 2021.

Net Income

  • GAAP net loss was ($2.3) million, compared to ($2.1) million in the first quarter of 2021. GAAP net loss per share was ($0.12), based on ($3.9) million net loss available to common stockholders and 33.5 million basic and diluted weighted average common shares outstanding. This compares to ($0.11) for the first quarter of 2021, based on ($3.7) million net loss available to common stockholders and 32.5 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Income, Adjusted EBITDA and Free Cash Flow

  • Non-GAAP net income available to common stockholders was $0.4 million for both the first quarter 2022 and 2021. Non-GAAP net income per share was $0.01 based on both 33.5 million basic and 35.2 million diluted weighted average common shares outstanding. This compares to $0.01 in the first quarter of 2021, based on both 32.5 million basic and 34.4 million diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $11.2 million, compared to $14.8 million in the first quarter of 2021.

  • Cash used in operations was ($3.0) million and free cash flow was ($4.2) million, compared to cash from operations of $8.8 million and $8.3 million of free cash flow in the first quarter of 2021.

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

Balance Sheet

Cash, cash equivalents and restricted cash at March 31, 2022 totaled $59.0 million, compared to cash and cash equivalents and marketable securities of $68.1 million at the end of the of 2021, a decline driven by the timing of working capital changes. Our debt to Adjusted EBITDA ratio was 4.4x as of March 31, 2022.

The full $50.0 million line of credit remains available to the company.

Business Outlook

Benefitfocus is providing guidance for the second quarter and full year 2022 as indicated below.

Second Quarter 2022

  • Total revenue is expected to be in the range of $55 million to $57 million.

  • Adjusted EBITDA is expected to be in the range of $4 million to $6 million.

  • Non-GAAP net loss available to common stockholders is expected to be between ($6.0) million and ($4.0) million, or between ($0.17) and ($0.11) per share based on 34.0 million basic and diluted weighted average shares outstanding.

Full Year 2022

  • Total revenue is expected to be in the range of $252 million to $258 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 $18 million to $24 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 Tuesday, May 3, 2022, 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 May 10, 2022 at 11:59 p.m. ET and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 13729373.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) is a cloud-based benefits administration technology company committed to helping our customers, and the people they serve, get the most out of their health care and benefit programs. Through exceptional service and innovative SaaS solutions, we aim to be the safest set of hands for our customers helping to simplify the complexity of benefits administration while delivering an experience that engages people and unlocks the potential for better health and improved outcomes. 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; transaction and acquisition-related costs expensed; restructuring costs; impairment of goodwill, intangible assets and long-lived assets; gain or loss on extinguishment of debt; other costs not core to our business; and loss on settlement of lawsuits. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate cash paid for 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 need to increase sales and achieve consistent 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; our reliance on channel relationships; market developments and opportunities; 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 war in Ukraine; 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.
843-981-8898
pr@benefitfocus.com

Investor Relations:
Doug Kuckelman
843-790-7460
ir@benefitfocus.com

Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)

Three Months Ended
March 31,

2022

2021

Revenue

$

61,225

$

65,063

Cost of revenue(1)(2)

29,886

28,593

Gross profit

31,339

36,470

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

Sales and marketing

9,924

10,891

Research and development

11,157

10,832

General and administrative

9,289

9,862

Restructuring costs

1,006

1,400

Total operating expenses

31,376

32,985

(Loss) income from operations

(37

)

3,485

Other income (expense):

Interest income

12

57

Interest expense

(2,482

)

(5,555

)

Other income (expense)

246

(42

)

Total other expense, net

(2,224

)

(5,540

)

Loss before income taxes

(2,261

)

(2,055

)

Income tax expense

16

42

Net loss

(2,277

)

(2,097

)

Preferred dividends

(1,600

)

(1,600

)

Net loss available to common stockholders

$

(3,877

)

$

(3,697

)

Comprehensive loss

$

(2,277

)

$

(2,097

)

Net loss per common share:

Basic and diluted

$

(0.12

)

$

(0.11

)

Weighted-average common shares outstanding:

Basic and diluted

33,496,846

32,490,811

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

Cost of revenue

$

196

$

326

Sales and marketing

636

580

Research and development

231

118

General and administrative

126

499

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

Cost of revenue

$

622

$

337

Sales and marketing

142

76

Research and development

216

113

General and administrative

93

42

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

General and administrative

$

83

$

154


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

As of
March 31,
2022

As of
December 31,
2021

Assets

Current assets:

Cash, cash equivalents and restricted cash

$

58,972

$

31,001

Marketable securities

37,049

Accounts receivable, net

23,504

16,491

Contract, prepaid and other current assets

25,757

27,615

Total current assets

108,233

112,156

Property and equipment, net

25,657

27,202

Financing lease right-of-use assets

54,332

56,474

Operating lease right-of-use assets

722

774

Intangible assets, net

20,061

21,134

Goodwill

34,237

34,237

Deferred contract costs and other non-current assets

8,076

8,864

Total assets

$

251,318

$

260,841

Liabilities, redeemable preferred stock and stockholders' deficit

Current liabilities:

Accounts payable

$

6,466

$

10,565

Accrued expenses

9,353

9,451

Accrued compensation and benefits

16,270

16,411

Deferred revenue, current portion

27,600

27,756

Lease liabilities and financing obligations, current portion

5,753

7,378

Contingent consideration

675

675

Total current liabilities

66,117

72,236

Deferred revenue, net of current portion

2,799

2,377

Convertible senior notes

119,774

107,281

Lease liabilities and financing obligations, net current portion

74,434

75,758

Other non-current liabilities

310

313

Total liabilities

263,434

257,965

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 March 31, 2022 and December 31, 2021, respectively,
liquidation preference $45 per share as of March 31, 2022 and December 31, 2021, respectively

79,193

79,193

Stockholders' deficit:

Common stock, par value $0.001, 95,000,000 shares authorized,
33,521,117 and 33,460,545 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

33

33

Additional paid-in capital

378,490

431,874

Accumulated deficit

(469,832

)

(508,224

)

Total stockholders' deficit

(91,309

)

(76,317

)

Total liabilities, redeemable preferred stock and stockholders' deficit

$

251,318

$

260,841


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

Three Months Ended
March 31,

2022

2021

Cash flows from operating activities

Net loss

$

(2,277

)

$

(2,097

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

6,737

6,353

Stock-based compensation expense

1,189

1,523

Accretion of interest on convertible senior notes

188

2,868

Interest accrual on finance lease liabilities

17

1,879

Rent expense less than payments

(27

)

(13

)

Non-cash accretion income from investments

29

227

Impairment or loss on disposal of right-of-use assets and property and equipment

45

Changes in operating assets and liabilities:

Accounts receivable, net

(7,014

)

(2,256

)

Accrued interest on investments

284

(136

)

Contract, prepaid and other current assets

1,859

463

Deferred costs and other non-current assets

789

823

Accounts payable and accrued expenses

(4,899

)

5,835

Accrued compensation and benefits

(141

)

(7,208

)

Deferred revenue

266

426

Other non-current liabilities

32

Net cash (used in) provided by operating activities

(3,000

)

8,764

Cash flows from investing activities

Purchases of investments held-to-maturity

(22,329

)

Maturities of investments held-to-maturity

22,500

Maturities of investments available-for-sale

22,045

Sales of investments available-for-sale

14,691

Business combination, net of cash acquired

(500

)

Purchases of property and equipment

(2,010

)

(1,893

)

Net cash provided by (used in) investing activities

34,226

(1,722

)

Cash flows from financing activities

Payments of preferred dividends

(1,600

)

(1,600

)

Change in amounts payable on behalf of customer members

1,151

Proceeds from exercises of stock options and ESPP

155

Payments on financing obligations

(223

)

Payments of principal on finance lease liabilities

(2,806

)

(2,034

)

Net cash used in financing activities

(3,255

)

(3,702

)

Net increase in cash, cash equivalents and restricted cash

27,971

3,340

Cash, cash equivalents and restricted cash, beginning of period

31,001

90,706

Cash, cash equivalents and restricted cash, end of period

$

58,972

$

94,046

Supplemental disclosure of non-cash investing and financing activities

Property and equipment purchases in accounts payable and accrued expenses

$

31

$

88


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

Three Months Ended
March 31,

2022

2021

Reconciliation from Gross Profit to Non-GAAP Gross Profit:

Gross profit

$

31,339

$

36,470

Amortization of acquired intangible assets

622

337

Stock-based compensation expense

196

326

Total net adjustments

818

663

Non-GAAP gross profit

$

32,157

$

37,133

Reconciliation from Operating (Loss) Income to Non-GAAP Operating Income:

Operating (loss) income

$

(37

)

$

3,485

Amortization of acquired intangible assets

1,073

568

Stock-based compensation expense

1,189

1,523

Transaction and acquisition-related costs expensed

83

154

Costs not core to our business

1,955

1,881

Total net adjustments

4,300

4,126

Non-GAAP operating income

$

4,263

$

7,611

Reconciliation from Net Loss to Adjusted EBITDA:

Net loss

$

(2,277

)

$

(2,097

)

Depreciation

3,234

3,623

Amortization of software development costs

2,430

2,162

Amortization of acquired intangible assets

1,073

568

Interest income

(12

)

(57

)

Interest expense

2,482

5,555

Income tax expense

16

42

Stock-based compensation expense

1,189

1,523

Transaction and acquisition-related costs expensed

83

154

Restructuring costs

1,006

1,400

Costs not core to our business

1,955

1,881

Total net adjustments

13,456

16,851

Adjusted EBITDA

$

11,179

$

14,754

Reconciliation from Net Loss to Non-GAAP Net Income:

Net loss

$

(2,277

)

$

(2,097

)

Amortization of acquired intangible assets

1,073

568

Stock-based compensation expense

1,189

1,523

Transaction and acquisition-related costs expensed

83

154

Costs not core to our business

1,955

1,881

Total net adjustments

4,300

4,126

Non-GAAP net income

$

2,023

$

2,029

Calculation of Non-GAAP Earnings Per Share:

Non-GAAP net income

$

2,023

$

2,029

Preferred dividends

(1,600

)

(1,600

)

Undistributed earnings allocated to preferred stockholders

(58

)

(61

)

Non-GAAP net income available to common stockholders

$

365

$

368

Weighted average shares outstanding - basic

33,496,846

32,490,811

Weighted average shares outstanding - diluted

35,159,370

34,352,380

Shares used in computing non-GAAP net income per share - basic

33,496,846

32,490,811

Shares used in computing non-GAAP net income per share - diluted

35,159,370

34,352,380

Non-GAAP net income per common share - basic

$

0.01

$

0.01

Non-GAAP net income per common share - diluted

$

0.01

$

0.01

Reconciliation of Cash Flows from Operations to Free Cash Flow:

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

$

(3,000

)

$

8,764

Purchases of property and equipment

(2,010

)

(1,893

)

Cash paid for restructuring costs

786

1,379

Total net adjustments

(1,224

)

(514

)

Free Cash Flow

$

(4,224

)

$

8,250