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Benefitfocus Announces Second Quarter 2021 Financial Results

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Delivers on second quarter financial commitments
Raising bar towards industry leadership in service excellence

CHARLESTON, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading benefits technology platform that simplifies benefits administration for employers, health plans and brokers, today announces its second quarter 2021 financial results.

Second quarter financial highlights:

  • Revenue of $60.9 million exceeds high end of guidance

  • GAAP EPS of ($0.50) vs. ($0.38) in second quarter 2020

  • Non-GAAP EPS of ($0.18) vs. ($0.26) in second quarter 2020

  • Adjusted EBITDA of $9.6 million, up 4% year over year

  • Operating cash flow of $9.2 million and free cash flow of $6.6 million

  • Cash and marketable securities of $193 million, up $4 million from prior quarter

Other recent highlights:

  • Announced addition of four accomplished and experienced industry leaders to Benefitfocus management team

  • Strengthened board experience, independence and diversity with addition of John Park

  • Added full suite of voluntary benefits offerings from Standard Insurance Company to Benefit Catalog

  • Delivered product enhancements for shopping and quoting functions for Health Plans to further simplify selling and distribution through an automated, insight-driven experience for brokers and groups

“Building a great business starts with building a great team,” said Matt Levin, president and chief executive officer. “I’m excited about the management announcements we made earlier today and believe we have attracted some of the best talent in the industry. My expectation is for these key additions, together with the dedicated team we have in place today, to raise the bar on service excellence in our industry. I believe delivering an exceptional customer experience is our most important priority and our biggest lever to drive higher levels of sustainable organic growth.”

“Benefitfocus again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “We are regaining momentum and seeing particularly strong traction in the public sector as we look to return to pre-pandemic levels. We continued to generate free cash flow and have a solid cash position which gives us the flexibility to invest strategically in order to advance our growth strategy.”

Second Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $60.9 million, down 2% compared to the second quarter of 2020.

  • Software services was $50.2 million, up 1% compared to the second quarter of 2020. Software services is comprised of subscription and platform revenue.

    • Subscription revenue was $44.3 million, up 1% compared to the second quarter of 2020.

    • Platform revenue was $5.9 million, down 4% compared to the second quarter of 2020.

  • Professional services revenue was $10.7 million, down 13% compared to the second quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($16.6) million, compared to ($12.3) million in the second quarter of 2020. GAAP net loss per share was ($0.50), based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.38) for the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.

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

  • Non-GAAP net loss available to common stockholders was ($5.9) million compared to ($8.2) million in the second quarter of 2020. Non-GAAP net loss per share was ($0.18) based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.26) in the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $9.6 million, compared to $9.3 million in the second quarter of 2020.

  • Free cash flow was $6.6 million, compared to $6.2 million in the second quarter of 2020.

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

Balance Sheet

  • Cash and cash equivalents and marketable securities at June 30, 2021 totaled $193.2 million, compared to $188.9 million at the end of the first quarter of 2021.

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

Business Outlook

Based on information available as of August 3, 2021, Benefitfocus is providing guidance for the third quarter as indicated below.

Third Quarter 2021

  • Total revenue is expected to be in the range of $58 million to $60 million.

  • Adjusted EBITDA is expected to be in the range of $5 million to $7 million.

  • Non-GAAP net loss available to common stockholders is expected to be between ($10.5) and ($8.0) million, or between ($0.31) and ($0.24) per share based on 33.1 million basic and diluted shares outstanding.

Full Year 2021

The company is reiterating guidance previously provided for Full Year 2021 as follows:

  • Total revenue is expected to be in the range of $254 million to $260 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 $20 million to $26 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, August 3, 2021, at 5:00 p.m. ET. To access this call, dial (855) 327-6837 (domestic) or +1 (631) 891-4304 (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 August 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 10015779.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire benefits industry through innovative technology solutions that bring efficiency, cost savings and simplicity to employee benefits administration. Our powerful cloud-based software, data-driven insights and thoughtfully designed services help employers, insurance brokers, health plans and suppliers address the complexity of benefits enrollment and engagement, while bringing easier access to health, wealth and lifestyle products through a world-class benefits experience. 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, expense related to the impairment of goodwill, intangible assets and long-lived assets, transaction and acquisition-related costs expensed, restructuring costs, gain or loss on extinguishment of debt, and costs not core to our business. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate 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 continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; our ability to maintain our culture and recruit, integrate and retain qualified personnel, including our board; our ability to compete effectively and implement our growth strategy; the need to innovate and provide useful products and services; the immature and volatile nature of the market for our products and services; risks related to changing healthcare and other applicable regulations; 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 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,

2021

2020

2021

2020

Revenue

$

60,904

$

62,174

$

125,967

$

128,328

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

28,030

30,397

56,623

64,309

Gross profit

32,874

31,777

69,344

64,019

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

Sales and marketing

10,921

11,828

21,812

27,458

Research and development

11,103

11,045

21,935

22,813

General and administrative

17,574

9,381

27,436

19,896

Restructuring costs

2,727

5,616

4,127

5,616

Total operating expenses

42,325

37,870

75,310

75,783

Loss from operations

(9,451

)

(6,093

)

(5,966

)

(11,764

)

Other income (expense):

Interest income

54

97

111

523

Interest expense

(5,646

)

(5,862

)

(11,201

)

(11,753

)

Other income

64

2

22

7

Total other expense, net

(5,528

)

(5,763

)

(11,068

)

(11,223

)

Loss before income taxes

(14,979

)

(11,856

)

(17,034

)

(22,987

)

Income tax expense

41

6

83

11

Net loss

(15,020

)

(11,862

)

(17,117

)

(22,998

)

Preferred dividends

(1,600

)

(462

)

(3,200

)

(462

)

Net loss available to common stockholders

$

(16,620

)

$

(12,324

)

$

(20,317

)

$

(23,460

)

Comprehensive loss

$

(15,020

)

$

(11,862

)

$

(17,117

)

$

(22,998

)

Net loss per common share:

Basic and diluted

$

(0.50

)

$

(0.38

)

$

(0.62

)

$

(0.73

)

Weighted-average common shares outstanding:

Basic and diluted

33,080,257

32,058,387

32,787,162

32,348,673

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

Cost of revenue

$

638

$

633

$

964

$

1,300

Sales and marketing

927

594

1,507

1,474

Research and development

503

590

621

932

General and administrative

2,308

1,506

2,807

3,294

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

Cost of revenue

$

336

$

323

$

673

$

640

Sales and marketing

77

83

153

174

Research and development

113

114

226

223

General and administrative

43

48

85

100

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

General and administrative

$

6

$

215

$

160

$

407


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

As of
June 30,
2021

As of
December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$

98,062

$

90,706

Marketable securities

95,107

95,085

Accounts receivable, net

20,886

22,240

Contract, prepaid and other current assets

18,838

21,354

Total current assets

232,893

229,385

Property and equipment, net

27,001

29,701

Financing lease right-of-use assets

60,291

68,670

Operating lease right-of-use assets

986

1,107

Intangible assets, net

9,257

10,393

Goodwill

12,857

12,857

Deferred contract costs and other non-current assets

9,011

10,259

Total assets

$

352,296

$

362,372

Liabilities, redeemable preferred stock and stockholders' deficit

Current liabilities:

Accounts payable

$

3,639

$

2,160

Accrued expenses

8,177

6,262

Accrued compensation and benefits

14,223

19,129

Deferred revenue, current portion

28,202

27,782

Lease liabilities and financing obligations, current portion

7,104

5,959

Total current liabilities

61,345

61,292

Deferred revenue, net of current portion

3,387

4,422

Convertible senior notes

190,089

184,308

Lease liabilities and financing obligations, net current portion

78,344

79,282

Other non-current liabilities

2,629

2,470

Total liabilities

335,794

331,774

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 June 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of June 30, 2021 and December 31, 2020, respectively

79,193

79,193

Stockholders' deficit:

Common stock, par value $0.001, 95,000,000 and 50,000,000 shares authorized,
33,234,786 and 32,327,439 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

33

32

Additional paid-in capital

430,451

427,431

Accumulated deficit

(493,175

)

(476,058

)

Total stockholders' deficit

(62,691

)

(48,595

)

Total liabilities, redeemable preferred stock and stockholders' deficit

$

352,296

$

362,372


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

Six Months Ended
June 30,

2021

2020

Cash flows from operating activities

Net loss

$

(17,117

)

$

(22,998

)

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

Depreciation and amortization

12,525

12,105

Stock-based compensation expense

5,899

7,000

Accretion of interest on convertible senior notes

5,780

5,894

Interest accrual on finance lease liabilities

3,244

44

Rent expense less than payments

(27

)

(16

)

Non-cash interest income on short-term investments

506

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

4,048

Provision for doubtful accounts

111

Changes in operating assets and liabilities:

Accounts receivable, net

1,354

3,711

Accrued interest on short-term investments

(101

)

Contract, prepaid and other current assets

2,410

3,672

Deferred costs and other non-current assets

1,249

740

Accounts payable and accrued expenses

3,520

(7,318

)

Accrued compensation and benefits

(4,907

)

(4,139

)

Deferred revenue

(615

)

(2,850

)

Other non-current liabilities

159

1,910

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

17,927

(2,134

)

Cash flows from investing activities

Purchases of short-term investments held to maturity

(48,427

)

Proceeds from short-term investments held to maturity

48,000

Purchases of property and equipment

(4,483

)

(7,075

)

Net cash and cash equivalents used in investing activities

(4,910

)

(7,075

)

Cash flows from financing activities

Draws on revolving line of credit

10,000

Payments on revolving line of credit

(10,000

)

Payments of debt issuance costs

(154

)

Proceeds from issuance of preferred stock, net of issuance costs

79,840

Payments of preferred dividends

(3,200

)

(462

)

Repurchase of common stock

(9,667

)

Proceeds from exercises of stock options and ESPP

322

225

Payments on financing obligations

(224

)

(416

)

Payments of principal on finance lease liabilities

(2,559

)

(7,637

)

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

(5,661

)

61,729

Net increase in cash and cash equivalents

7,356

52,520

Cash and cash equivalents, beginning of period

90,706

130,976

Cash and cash equivalents, end of period

$

98,062

$

183,496

Supplemental disclosure of non-cash investing and financing activities

Property and equipment purchases in accounts payable and accrued expenses

$

$

37


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,

2021

2020

2021

2020

Reconciliation from Gross Profit to Non-GAAP Gross Profit:

Gross profit

$

32,874

$

31,777

$

69,344

$

64,019

Amortization of acquired intangible assets

336

323

673

640

Stock-based compensation expense

638

633

964

1,300

Total net adjustments

974

956

1,637

1,940

Non-GAAP gross profit

$

33,848

$

32,733

$

70,981

$

65,959

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

Operating loss

$

(9,451

)

$

(6,093

)

$

(5,966

)

$

(11,764

)

Amortization of acquired intangible assets

569

568

1,137

1,137

Stock-based compensation expense

4,376

3,323

5,899

7,000

Transaction and acquisition-related costs expensed

6

215

160

407

Impairment of long-lived assets

4,003

4,003

Costs not core to our business

1,717

3,598

Total net adjustments

10,671

4,106

14,797

8,544

Non-GAAP operating income (loss)

$

1,220

$

(1,987

)

$

8,831

$

(3,220

)

Reconciliation from Net Loss to Adjusted EBITDA:

Net loss

$

(15,020

)

$

(11,862

)

$

(17,117

)

$

(22,998

)

Depreciation

3,444

3,926

7,067

7,722

Amortization of software development costs

2,159

1,727

4,321

3,246

Amortization of acquired intangible assets

569

568

1,137

1,137

Interest income

(54

)

(97

)

(111

)

(523

)

Interest expense

5,646

5,862

11,201

11,753

Income tax expense

41

6

83

11

Stock-based compensation expense

4,376

3,323

5,899

7,000

Transaction and acquisition-related costs expensed

6

215

160

407

Restructuring costs

2,727

5,616

4,127

5,616

Impairment of long-lived assets

4,003

4,003

Costs not core to our business

1,717

3,598

Total net adjustments

24,634

21,146

41,485

36,369

Adjusted EBITDA

$

9,614

$

9,284

$

24,368

$

13,371

Reconciliation from Net Loss to Non-GAAP Net Loss:

Net loss

$

(15,020

)

$

(11,862

)

$

(17,117

)

$

(22,998

)

Amortization of acquired intangible assets

569

568

1,137

1,137

Stock-based compensation expense

4,376

3,323

5,899

7,000

Transaction and acquisition-related costs expensed

6

215

160

407

Impairment of long-lived assets

4,003

4,003

Costs not core to our business

1,717

3,598

Total net adjustments

10,671

4,106

14,797

8,544

Non-GAAP net loss

$

(4,349

)

$

(7,756

)

$

(2,320

)

$

(14,454

)

Calculation of Non-GAAP Earnings Per Share:

Non-GAAP net loss

$

(4,349

)

$

(7,756

)

$

(2,320

)

$

(14,454

)

Preferred dividends

(1,600

)

(462

)

(3,200

)

(462

)

Non-GAAP net loss available to common stockholders

$

(5,949

)

$

(8,218

)

$

(5,520

)

$

(14,916

)

Weighted average shares outstanding - basic and diluted

33,080,257

32,058,387

32,787,162

32,348,673

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

33,080,257

32,058,387

32,787,162

32,348,673

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

$

(0.18

)

$

(0.26

)

$

(0.17

)

$

(0.46

)

Reconciliation of Cash Flows from Operations to Free Cash Flow:

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

$

9,163

$

5,036

$

17,927

$

(2,134

)

Purchases of property and equipment

(2,590

)

(3,254

)

(4,483

)

(7,075

)

Cash paid for restructuring costs

5

4,456

1,384

4,456

Total net adjustments

(2,585

)

1,202

(3,099

)

(2,619

)

Free Cash Flow

$

6,578

$

6,238

$

14,828

$

(4,753

)

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

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