BNFT - Benefitfocus Announces First Quarter 2020 Financial Results

May, 06 2020 04:05 PM Benefitfocus Inc.

CHARLESTON, S.C., May 06, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: 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 (NASDAQ: 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

Company Name:	Benefitfocus Inc.
Stock Symbol:	BNFT
Market:	NASDAQ
Website:	benefitfocus.com