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Benefitfocus Announces Third Quarter 2021 Financial Results

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  • BNFT

Delivers on third quarter financial commitments
Focused on providing service excellence to deliver enhanced stakeholder value

CHARLESTON, S.C., Nov. 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 third quarter 2021 financial results.

Third quarter financial highlights:

  • Revenue of $62.0 million exceeds guidance

  • GAAP EPS of ($0.59) vs. ($0.19) in third quarter 2020

  • Non-GAAP EPS of ($0.19) exceeds guidance

  • GAAP net loss of ($18.1) million vs. ($4.4) million in third quarter 2020

  • Adjusted EBITDA of $6.7 million, above midpoint of guidance

  • Operating cash flow of $9.4 million and free cash flow of $6.9 million

  • De-levered balance sheet and improved capital structure through convertible note repurchase

  • Cash and marketable securities of $94.5 million, down $98.7 million from prior quarter primarily reflecting repurchase of convertible notes

Other recent highlights:

“Our entire team is working with a great sense of urgency and discipline to deliver enhanced service excellence for our customers during this year’s open enrollment,” said Matt Levin, president and chief executive officer. “I expect this heightened focus, combined with the commitment and deep experience of our team, will result in stellar performance for our stakeholders including our customers, partners and shareholders.”

“I am pleased with our performance this quarter as we again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “Our strong cash position enabled us to opportunistically de-lever the balance sheet while preserving flexibility to invest strategically and advance our growth strategy.”

Third Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $62.0 million, down 2% compared to the third quarter of 2020.

  • Software services was $50.9 million, up 1% compared to the third quarter of 2020. Software services is comprised of subscription and platform revenue.

    • Subscription revenue was $44.8 million, relatively flat compared to the third quarter of 2020.

    • Platform revenue was $6.2 million, up 10% compared to the third quarter of 2020.

  • Professional services revenue was $11.1 million, down 15% compared to the third quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($19.7) million, compared to ($6.0) million in the third quarter of 2020. GAAP net loss per share was ($0.59), based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.19) for the third quarter of 2020, based on 32.3 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 ($6.3) million compared to ($2.7) million in the third quarter of 2020. Non-GAAP net loss per share was ($0.19) based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.08) in the third quarter of 2020, based on 32.3 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $6.7 million, compared to $10.5 million in the third quarter of 2020.

  • Free cash flow was $6.9 million, compared to $11.3 million in the third 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 September 30, 2021 totaled $94.5 million, compared to $193.2 million at the end of the second quarter of 2021 primarily reflecting the repurchase of approximately $100.2 million worth of our convertible notes

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

Business Outlook

Based on information available as of November 3, 2021, Benefitfocus is providing guidance for the fourth quarter and full year as indicated below.

Fourth Quarter 2021

  • Total revenue is expected to be in the range of $66 million to $72 million.

  • Adjusted EBITDA is expected to be in the range of $13 million to $19 million.

  • Non-GAAP net (loss) income available to common stockholders is expected to be between ($0.7) million and $5.3 million, or between ($0.02) per share based on 33.4 million basic and diluted weighted average shares outstanding and $0.15 per share based on 34.6 million diluted weighted average 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 Wednesday, November 3, 2021, 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 November 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 13724236.

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 on our board of directors; our ability to compete effectively and implement our growth strategy; 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 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
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenue

$

62,026

$

63,583

$

187,993

$

191,911

Cost of revenue(1)(2)

31,247

30,113

87,870

94,422

Gross profit

30,779

33,470

100,123

97,489

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

Sales and marketing

12,669

12,405

34,481

39,863

Research and development

11,062

11,439

32,997

34,252

General and administrative

12,156

9,424

39,592

29,320

Restructuring costs

4,127

5,616

Total operating expenses

35,887

33,268

111,197

109,051

Loss from operations

(5,108

)

202

(11,074

)

(11,562

)

Other income (expense):

Interest income

52

40

163

563

Interest expense

(5,556

)

(5,771

)

(16,757

)

(17,524

)

(Loss) gain on repurchase of convertible senior notes

(7,520

)

1,138

(7,520

)

1,138

Other income

120

1

142

8

Total other expense, net

(12,904

)

(4,592

)

(23,972

)

(15,815

)

Loss before income taxes

(18,012

)

(4,390

)

(35,046

)

(27,377

)

Income tax expense

42

6

125

17

Net loss

(18,054

)

(4,396

)

(35,171

)

(27,394

)

Preferred dividends

(1,600

)

(1,600

)

(4,800

)

(2,062

)

Net loss available to common stockholders

$

(19,654

)

$

(5,996

)

$

(39,971

)

$

(29,456

)

Comprehensive loss

$

(18,054

)

$

(4,396

)

$

(35,171

)

$

(27,394

)

Net loss per common share:

Basic and diluted

$

(0.59

)

$

(0.19

)

$

(1.21

)

$

(0.91

)

Weighted-average common shares outstanding:

Basic and diluted

33,354,624

32,263,876

32,978,394

32,320,201

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

Cost of revenue

$

511

$

1,304

$

1,475

$

2,604

Sales and marketing

963

766

2,470

2,240

Research and development

589

785

1,210

1,717

General and administrative

2,532

1,004

5,339

4,298

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

Cost of revenue

$

332

$

321

$

1,005

$

961

Sales and marketing

78

82

231

256

Research and development

110

119

336

342

General and administrative

48

46

133

146

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

General and administrative

$

80

$

18

$

240

$

425

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

As of
September 30,
2021

As of
December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$

12,589

$

90,706

Marketable securities

81,899

95,085

Accounts receivable, net

20,368

22,240

Contract, prepaid and other current assets

17,239

21,354

Total current assets

132,095

229,385

Property and equipment, net

27,259

29,701

Financing lease right-of-use assets

58,503

68,670

Operating lease right-of-use assets

925

1,107

Intangible assets, net

8,688

10,393

Goodwill

12,857

12,857

Deferred contract costs and other non-current assets

12,078

10,259

Total assets

$

252,405

$

362,372

Liabilities, redeemable preferred stock and stockholders' deficit

Current liabilities:

Accounts payable

$

7,729

$

2,160

Accrued expenses

8,155

6,262

Accrued compensation and benefits

16,993

19,129

Deferred revenue, current portion

26,113

27,782

Lease liabilities and financing obligations, current portion

7,226

5,959

Total current liabilities

66,216

61,292

Deferred revenue, net of current portion

2,651

4,422

Convertible senior notes

105,637

184,308

Lease liabilities and financing obligations, net current portion

77,265

79,282

Other non-current liabilities

2,661

2,470

Total liabilities

254,430

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 September 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of September 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,
33,386,994 and 32,327,439 issued and outstanding at September 30, 2021 and December 31, 2020, respectively

33

32

Additional paid-in capital

429,978

427,431

Accumulated deficit

(511,229

)

(476,058

)

Total stockholders' deficit

(81,218

)

(48,595

)

Total liabilities, redeemable preferred stock and stockholders' deficit

$

252,405

$

362,372

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

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities

Net loss

$

(35,171

)

$

(27,394

)

Adjustments to reconcile net loss to net cash and cash
equivalents provided by operating activities:

Depreciation and amortization

18,976

18,479

Stock-based compensation expense

10,494

10,859

Accretion of interest on convertible senior notes

8,590

8,834

Interest accrual on finance lease liabilities

3,259

71

Rent expense less than payments

(41

)

(24

)

Non-cash accretion income from investments

741

16

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

4,074

Loss (gain) on extinguishment of debt

7,520

(1,138

)

Provision for doubtful accounts

111

Changes in operating assets and liabilities:

Accounts receivable, net

1,872

3,685

Accrued interest on investments

161

(38

)

Contract, prepaid and other current assets

4,009

7,502

Deferred costs and other non-current assets

1,238

1,014

Accounts payable and accrued expenses

6,960

(9,157

)

Accrued compensation and benefits

(2,136

)

490

Deferred revenue

(3,441

)

(5,726

)

Other non-current liabilities

191

3,490

Net cash and cash equivalents provided by operating activities

27,296

11,074

Cash flows from investing activities

Purchases of investments held to maturity

(91,361

)

(67,785

)

Proceeds from investments held to maturity

100,588

Purchases of property and equipment

(7,454

)

(9,739

)

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

1,773

(77,524

)

Cash flows from financing activities

Draws on revolving line of credit

10,000

Payments on revolving line of credit

(10,000

)

Repurchase of convertible senior notes

(98,678

)

(14,619

)

Payments of debt issuance costs

(154

)

Cancellation of convertible senior notes capped call hedge

98

26

Proceeds from issuance of preferred stock, net of issuance costs

79,192

Payments of preferred dividends

(4,800

)

(2,062

)

Repurchase of common stock

(9,667

)

Proceeds from exercises of stock options and ESPP

322

513

Payments on financing obligations

(226

)

(635

)

Payments of principal on finance lease liabilities

(3,902

)

(8,880

)

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

(107,186

)

43,714

Net decrease in cash and cash equivalents

(78,117

)

(22,736

)

Cash and cash equivalents, beginning of period

90,706

130,976

Cash and cash equivalents, end of period

$

12,589

$

108,240

Supplemental disclosure of non-cash investing and financing activities

Property and equipment purchases in accounts payable and accrued expenses

$

945

$

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Reconciliation from Gross Profit to Non-GAAP Gross Profit:

Gross profit

$

30,779

$

33,470

$

100,123

$

97,489

Amortization of acquired intangible assets

332

321

1,005

961

Stock-based compensation expense

511

1,304

1,475

2,604

Total net adjustments

843

1,625

2,480

3,565

Non-GAAP gross profit

$

31,622

$

35,095

$

102,603

$

101,054

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

Operating (loss) income

$

(5,108

)

$

202

$

(11,074

)

$

(11,562

)

Amortization of acquired intangible assets

568

568

1,705

1,705

Stock-based compensation expense

4,595

3,859

10,494

10,859

Transaction and acquisition-related costs expensed

80

18

240

425

Impairment of long-lived assets

4,003

Costs not core to our business

542

4,140

Total net adjustments

5,785

4,445

20,582

12,989

Non-GAAP operating income

$

677

$

4,647

$

9,508

$

1,427

Reconciliation from Net Loss to Adjusted EBITDA:

Net loss

$

(18,054

)

$

(4,396

)

$

(35,171

)

$

(27,394

)

Depreciation

3,615

3,774

10,682

11,496

Amortization of software development costs

2,268

2,032

6,589

5,278

Amortization of acquired intangible assets

568

568

1,705

1,705

Interest income

(52

)

(40

)

(163

)

(563

)

Interest expense

5,556

5,771

16,757

17,524

Income tax expense

42

6

125

17

Stock-based compensation expense

4,595

3,859

10,494

10,859

Transaction and acquisition-related costs expensed

80

18

240

425

Restructuring costs

4,127

5,616

Impairment of long-lived assets

4,003

Loss (gain) on repurchase of convertible senior notes

7,520

(1,138

)

7,520

(1,138

)

Costs not core to our business

542

4,140

Total net adjustments

24,734

14,850

66,219

51,219

Adjusted EBITDA

$

6,680

$

10,454

$

31,048

$

23,825

Reconciliation from Net Loss to Non-GAAP Net Loss:

Net loss

$

(18,054

)

$

(4,396

)

$

(35,171

)

$

(27,394

)

Amortization of acquired intangible assets

568

568

1,705

1,705

Stock-based compensation expense

4,595

3,859

10,494

10,859

Transaction and acquisition-related costs expensed

80

18

240

425

Impairment of long-lived assets

4,003

Loss (gain) on repurchase of convertible senior notes

7,520

(1,138

)

7,520

(1,138

)

Costs not core to our business

542

4,140

Total net adjustments

13,305

3,307

28,102

11,851

Non-GAAP net loss

$

(4,749

)

$

(1,089

)

$

(7,069

)

$

(15,543

)

Calculation of Non-GAAP Earnings Per Share:

Non-GAAP net loss

$

(4,749

)

$

(1,089

)

$

(7,069

)

$

(15,543

)

Preferred dividends

(1,600

)

(1,600

)

(4,800

)

(2,062

)

Non-GAAP net loss available to common stockholders

$

(6,349

)

$

(2,689

)

$

(11,869

)

$

(17,605

)

Weighted average shares outstanding - basic and diluted

33,354,624

32,263,876

32,978,394

32,320,201

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

33,354,624

32,263,876

32,978,394

32,320,201

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

$

(0.19

)

$

(0.08

)

$

(0.36

)

$

(0.54

)

Reconciliation of Cash Flows from Operations to Free Cash Flow:

Net cash and cash equivalents provided by operating activities

$

9,369

$

13,208

$

27,296

$

11,074

Purchases of property and equipment

(2,971

)

(2,664

)

(7,454

)

(9,739

)

Cash paid for restructuring costs

502

745

1,886

5,201

Total net adjustments

(2,469

)

(1,919

)

(5,568

)

(4,538

)

Free Cash Flow

$

6,900

$

11,289

$

21,728

$

6,536

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

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