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Benefitfocus Announces Second Quarter 2019 Financial Results

Driven by its leading AI-powered Platform, Benefitfocus grew total revenue 13% year-over-year

CHARLESTON, S.C., Aug. 06, 2019 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (BNFT), a leading cloud-based benefits management platform and services provider, today announced its second quarter 2019 financial results.  Recent highlights include: 

  • Grew net benefit eligible lives to 16.5 million at the end of the second quarter, up from 15.5 million at the end of the prior quarter and 12.3 million at the end of the prior year period.
  • Expanded BenefitsPlace™ to 50 suppliers, up from 18 at the prior year period. 
  • Launched enterprise HCM API data exchange capabilities.
  • Strengthened executive leadership with appointment of Stephen M. Swad as Chief Financial Officer and Steve Malme as Senior Vice President of Platform Strategy.

“With our leading AI-powered platform for benefits, we are creating significant economic value and delivering growth and innovation through our platform strategy,” said Ray August, President and Chief Executive Officer of Benefitfocus. “In Q2, we added approximately 1 million net benefit eligible lives. This was our strongest quarter to date for growing lives on our platform. We are removing points of friction and further advancing our platform’s capabilities by automating inefficient, manual processes across our ecosystem.  Our intelligence engine is improving user experience, helping consumers make better, smarter decisions. All of this helps drive growth and contributed to our strong second quarter financial results.”

Second Quarter 2019 Financial Highlights

Revenue

  • Total revenue was $68.6 million, an increase of 13% compared to the second quarter of 2018.
  • Software services revenue was $53.1 million, an increase of 10% compared to the second quarter of 2018.
  • Professional services revenue was $15.5 million, an increase of 26% compared to the second quarter of 2018.

Net Loss

  • GAAP net loss was ($14.9) million, compared to ($14.3) million in the second quarter of 2018. GAAP net loss per share was ($0.46), based on 32.6 million basic and diluted weighted average common shares outstanding, compared to ($0.45) for the second quarter of 2018, based on 31.8 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($10.0) million, compared to ($7.7) million in the second quarter of 2018. Non-GAAP net loss per share was ($0.31), based on 32.6 million basic and diluted weighted average common shares outstanding, compared to ($0.24) for the second quarter of 2018, based on 31.8 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $0.1 million, compared to ($0.6) million in the second quarter of 2018.

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

Balance Sheet

  • Cash and cash equivalents at June 30, 2019 totaled $138.4 million, compared to $144.2 million at the end of the first quarter of 2019. 

Updated Business Outlook

Based on information available as of August 6, 2019, Benefitfocus is providing guidance for the third quarter and updated its full year 2019 as indicated below.

Third Quarter 2019:

  • Total revenue is expected to be in the range of $70.0 million to $72.0 million.
  • Non-GAAP net loss is expected to be in the range of ($14.0) million to ($12.0) million, or ($0.43) to ($0.37) per share, based on 32.7 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($3.5) million to ($1.5) million.

Full Year 2019:

  • Total revenue is expected to be in the range of $292.0 million to $300.0 million.
  • Non-GAAP net loss is expected to be in the range of ($31.0) million to ($26.0) million, or ($0.95) to ($0.80) per share, based on 32.5 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $10.0 million to $15.0 million.

Management has not reconciled forward-looking non-GAAP net loss and Adjusted EBITDA to their most directly comparable GAAP measure of GAAP net loss.  Management is unable to 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 today, August 6, 2019, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (international). 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/. After the conference call, a replay will be available until August 13, 2019, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13692514.

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, and adjusted EBITDA. 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, and costs not core to our business.   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 GAAP profitability; fluctuations in our financial results; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; 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
June 30,
    Six Months Ended
June 30,
 
    2019     2018     2019     2018  
Revenue   $ 68,579     $ 60,581     $ 136,878     $ 122,944  
Cost of revenue (1)(2)(3)     32,802       30,721       65,654       62,124  
Gross profit     35,777       29,860       71,224       60,820  
Operating expenses:(1)(2)(3)                                
Sales and marketing     19,318       18,400       38,937       38,317  
Research and development     14,461       12,128       27,551       24,151  
General and administrative     11,785       10,387       23,581       20,080  
Total operating expenses     45,564       40,915       90,069       82,548  
Loss from operations     (9,787 )     (11,055 )     (18,845 )     (21,728 )
Other income (expense):                                
Interest income     762       68       1,422       126  
Interest expense     (5,837 )     (1,415 )     (11,651 )     (2,732 )
Interest expense on building lease financing obligations           (1,867 )           (3,733 )
Other (expense) income     (73 )     13       (64 )     13  
Total other expense, net     (5,148 )     (3,201 )     (10,293 )     (6,326 )
Loss before income taxes     (14,935 )     (14,256 )     (29,138 )     (28,054 )
Income tax expense     3       5       9       9  
Net loss   $ (14,938 )   $ (14,261 )   $ (29,147 )   $ (28,063 )
Comprehensive loss   $ (14,938 )   $ (14,261 )   $ (29,147 )   $ (28,063 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.46 )   $ (0.45 )   $ (0.90 )   $ (0.89 )
Weighted-average common shares outstanding:                                
Basic and diluted     32,613,718       31,806,972       32,336,864       31,571,468  
                                 
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 691     $ 900     $ 1,590     $ 1,611  
Sales and marketing     (12 )     1,257       1,674       2,211  
Research and development     718       841       1,910       1,609  
General and administrative     2,322       1,676       4,912       3,568  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 308     $ 35     $ 407     $ 69  
Sales and marketing     113       13       149       27  
Research and development     131       11       171       23  
General and administrative     53       5       68       9  
                                 
(3) Transaction and acquisition-related costs expensed included in above line items:                                
General and administrative   $ 360     $ 257     $ 1,002     $ 257  


 
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
 
    As of
June 30,
2019
    As of
December 31,
2018
 
Assets                
Current assets:                
Cash and cash equivalents   $ 138,389     $ 190,928  
Accounts receivable, net     32,395       21,077  
Contract, prepaid and other current assets     17,070       16,667  
Total current assets     187,854       228,672  
Property and equipment, net     28,803       69,965  
Financing lease right-of-use assets     78,856        
Operating lease right-of-use assets     2,020        
Intangible assets, net     13,804        
Goodwill     12,857       1,634  
Deferred contract costs and other non-current assets     11,044       13,668  
Total assets   $ 335,238     $ 313,939  
Liabilities and stockholders' deficit                
Current liabilities:                
Accounts payable   $ 6,623     $ 8,687  
Accrued expenses     9,217       11,461  
Accrued compensation and benefits     15,358       17,269  
Deferred revenue, current portion     36,937       36,540  
Lease liabilities and financing obligations, current portion     6,245       4,486  
Total current liabilities     74,380       78,443  
Deferred revenue, net of current portion     9,613       9,323  
Convertible senior notes     182,234       176,692  
Lease liabilities and financing obligations, net current portion     87,952       57,116  
Other non-current liabilities     138       2,575  
Total liabilities     354,317       324,149  
Commitments and contingencies                
Stockholders' deficit:                
Preferred stock, par value $0.001, 5,000,000 shares authorized,
  no shares issued and outstanding at June 30, 2019
  and December 31, 2018
           
Common stock, par value $0.001, 50,000,000 shares authorized,
  32,642,706 and 32,017,773 shares issued and outstanding
  at June 30, 2019 and December 31, 2018, respectively
    33       32  
Additional paid-in capital     416,221       403,631  
Accumulated deficit     (435,333 )     (413,873 )
Total stockholders' deficit     (19,079 )     (10,210 )
Total liabilities and stockholders' deficit   $ 335,238     $ 313,939  


 
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
    Six Months Ended
June 30,
 
    2019     2018  
Cash flows from operating activities                
Net loss   $ (29,147 )   $ (28,063 )
Adjustments to reconcile net loss to net cash and cash
  equivalents used in operating activities:
               
Depreciation and amortization     10,949       7,957  
Stock-based compensation expense     10,086       8,999  
Accretion of interest on convertible senior notes     5,541        
Interest accrual on financing obligations (prior to adoption of ASC 842)           3,758  
Rent expense in excess of payments     3        
Provision for doubtful accounts     265       364  
Changes in operating assets and liabilities:                
Accounts receivable, net     (10,671 )     2,956  
Contract, prepaid and other current assets     (476 )     2,182  
Deferred costs and other non-current assets     2,851       2,003  
Accounts payable and accrued expenses     (4,085 )     (1,110 )
Accrued compensation and benefits     273       458  
Deferred revenue     (6,004 )     (4,059 )
Other non-current liabilities     (46 )     (218 )
Net cash and cash equivalents used in operating activities     (20,461 )     (4,773 )
Cash flows from investing activities                
Business combination, net of cash acquired     (20,914 )      
Purchases of property and equipment     (7,401 )     (3,561 )
Net cash and cash equivalents used in investing activities     (28,315 )     (3,561 )
Cash flows from financing activities                
Draws on revolving line of credit           59,000  
Payments on revolving line of credit           (48,000 )
Payments of debt issuance costs     (357 )      
Proceeds from exercises of stock options and ESPP     134       270  
Payments on capital lease and financing obligations     (841 )     (4,979 )
Payments of principal on financing lease obligations     (2,699 )      
Net cash and cash equivalents (used in) provided by financing activities     (3,763 )     6,291  
Net decrease in cash and cash equivalents     (52,539 )     (2,043 )
Cash and cash equivalents, beginning of period     190,928       55,335  
Cash and cash equivalents, end of period   $ 138,389     $ 53,292  
                 
Supplemental disclosure of non-cash investing and financing activities                
Property and equipment purchases in accounts payable and accrued expenses   $ 437     $ 272  
Property and equipment purchased with financing and capital lease obligations   $     $ 3,085  
Post contract support purchased with financing obligations   $     $ 275  


 
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)
 
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2019     2018     2019     2018  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 35,777     $ 29,860     $ 71,224     $ 60,820  
Amortization of acquired intangible assets     308       35       407       69  
Stock-based compensation expense     691       900       1,590       1,611  
Total net adjustments     999       935       1,997       1,680  
Non-GAAP gross profit   $ 36,776     $ 30,795     $ 73,221     $ 62,500  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                                
Operating loss   $ (9,787 )   $ (11,055 )   $ (18,845 )   $ (21,728 )
Amortization of acquired intangible assets     605       64       795       128  
Stock-based compensation expense     3,719       4,674       10,086       8,999  
Transaction and acquisition-related costs expensed     360       257       1,002       257  
Costs not core to our business     266       1,524       586       2,895  
Total net adjustments     4,950       6,519       12,469       12,279  
Non-GAAP operating loss   $ (4,837 )   $ (4,536 )   $ (6,376 )   $ (9,449 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (14,938 )   $ (14,261 )   $ (29,147 )   $ (28,063 )
Depreciation     3,690       2,999       7,657       5,976  
Amortization of software development costs     1,319       964       2,497       1,853  
Amortization of acquired intangible assets     605       64       795       128  
Interest income     (762 )     (68 )     (1,422 )     (126 )
Interest expense     5,837       1,415       11,651       2,732  
Interest expense on building lease financing obligations           1,867             3,733  
Income tax expense     3       5       9       9  
Stock-based compensation expense     3,719       4,674       10,086       8,999  
Transaction and acquisition-related costs expensed     360       257       1,002       257  
Costs not core to our business     266       1,524       586       2,895  
Total net adjustments     15,037       13,701       32,861       26,456  
Adjusted EBITDA   $ 99     $ (560 )   $ 3,714     $ (1,607 )
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (14,938 )   $ (14,261 )   $ (29,147 )   $ (28,063 )
Amortization of acquired intangible assets     605       64       795       128  
Stock-based compensation expense     3,719       4,674       10,086       8,999  
Transaction and acquisition-related costs expensed     360       257       1,002       257  
Costs not core to our business     266       1,524       586       2,895  
Total net adjustments     4,950       6,519       12,469       12,279  
Non-GAAP net loss   $ (9,988 )   $ (7,742 )   $ (16,678 )   $ (15,784 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (9,988 )   $ (7,742 )   $ (16,678 )   $ (15,784 )
                                 
Weighted average shares outstanding - basic and diluted     32,613,718       31,806,972       32,336,864       31,571,468  
Shares used in computing non-GAAP net loss per share - basic and diluted     32,613,718       31,806,972       32,336,864       31,571,468  
Non-GAAP net loss per common share - basic and diluted   $ (0.31 )   $ (0.24 )   $ (0.52 )   $ (0.50 )
 

Benefitfocus, Inc.
843-284-1052 ext. 3527
pr@benefitfocus.com

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
michael.bauer@benefitfocus.com