BNFT - Benefitfocus Announces Second Quarter 2019 Financial Results

August, 06 2019 04:05 PM Benefitfocus Inc.

CHARLESTON, S.C., Aug. 06, 2019 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: 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 (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, 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

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