BNFT - Benefitfocus Announces Second Quarter 2020 Financial Results

August, 05 2020 04:05 PM Benefitfocus Inc.

Financial performance exceeded high end of revenue and adjusted EBITDA guidance
Strong execution and continued innovation positions company for long-term growth and value creation

CHARLESTON, S.C., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a technology platform driving rapid innovation for employers and health plans, today announced its second quarter 2020 financial results.

“Benefitfocus delivered a strong quarter including enhanced profitability and liquidity. I am extremely proud of our team for delivering these results, particularly in the context of a challenging environment that was unthinkable just six months ago,” said Ray August, President and Chief Executive Officer of Benefitfocus. “Our team is executing well and delivering high-impact solutions for our customers and partners. As the world becomes more focused than ever on improving health outcomes, we have strengthened our resolve and commitment to our mission to transform our industry and improve lives with benefits.”

Steve Swad, Chief Financial Officer said, “We swiftly adjusted our cost base during the quarter in response to COVID-19, and at the same time substantially strengthened our cash position through an $80 million strategic investment from BuildGroup LLC. Our strong execution in the quarter allowed us to increase our profitability and cash flow outlook for the year, while also investing in automation and platform innovation to drive sustainable long-term growth.”

Highlights include:

Exceeded high end of Q2 revenue and adjusted EBITDA guidance;
Increased full year 2020 adjusted EBITDA and free cash flow guidance on strength of Q2 operating performance;
Closed $80 million investment by BuildGroup LLC, substantially strengthening the company’s balance sheet;
Won new health plan customer, Medica, to enable digital transformation and deliver a modern enrollment solution;
Enhanced our platform’s mobile and communication capabilities to streamline the enrollment experience, reduce administrative burden and increase customer engagement; and
Added insurance innovator Haven Life to Benefit Catalog, the industry’s leading marketplace for voluntary benefits.

Second Quarter 2020 Financial Highlights

Revenue

Total revenue was $62.2 million, a decrease of 9% compared to the second quarter of 2019.
Software services was $49.9 million, a decrease of 6% compared to the second quarter of 2019. Software services comprise subscription and platform revenue.
- Subscription revenue was $43.8 million, a decrease of 8% compared to the second quarter of 2019.
- Platform revenue was $6.1 million, an increase of 13% compared to the second quarter of 2019.
Professional services revenue was $12.3 million, a decrease of 21% compared to the second quarter of 2019.

Net Loss

GAAP net loss was ($11.9) million, compared to ($14.9) million in the second quarter of 2019. GAAP net loss per share was ($0.38), based on 32.1 million basic and diluted weighted average common shares outstanding, compared to ($0.46) for the second quarter of 2019, based on 32.6 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

Non-GAAP net loss was ($7.8) million compared to ($10.0) million in the second quarter of 2019. Non-GAAP net loss per share was ($0.26) and ($0.31) in the second quarter of 2020 and 2019, respectively, based on 32.1 million and 32.6 million basic and fully diluted weighted average common shares outstanding for the second quarter of 2020 and 2019, respectively.
Adjusted EBITDA was $9.3 million, compared to roughly breakeven in the second 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 June 30, 2020 totaled $183.5 million, compared to $114.7 million at the end of the first quarter of 2020.
During the second quarter of 2020, the company repurchased approximately 36,000 shares of its common stock at a total cost of approximately $285,000, representing an average price per share of approximately $7.98.
Since initiating its share repurchase program last quarter, the company has repurchased slightly more than 1.1 million shares of its common stock for approximately $9.7 million, representing an average repurchase price of $8.71 per share.

Updated Business Outlook

Based on information available as of August 5, 2020, Benefitfocus is providing guidance for the third quarter and full year 2020 as indicated below.

Third Quarter 2020:

Total revenue is expected to be in the range of $59 million to $62 million.
Non-GAAP net loss is expected to be in the range of ($6) million to ($3) million, or ($0.21) to ($0.12) 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 $6 million to $9 million.

Full Year 2020:

Total revenue is expected to be in the range of $260 million to $270 million.
Non-GAAP net loss is expected to be in the range of ($16) million to ($11) million, or ($0.59) to ($0.44) 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 $35 million to $40 million.
Free cash flow is expected to be in the range of $10 million to $20 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 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 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 business outlook on Wednesday, August 5, 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 August 12, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13706867.

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/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 loss/income, 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, if any, restructuring charges, 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. 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


Six Months Ended

June 30,
June 30,

2020


2019


2020


2019

Revenue
$
62,174


$
68,579


$
128,328


$
136,878

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

30,397



32,802



64,309



65,654

Gross profit

31,777



35,777



64,019



71,224

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















Sales and marketing

11,828



19,318



27,458



38,937

Research and development

11,045



14,461



22,813



27,551

General and administrative

9,381



11,785



19,896



23,581

Restructuring costs

5,616



–



5,616



–

Total operating expenses

37,870



45,564



75,783



90,069

Loss from operations

(6,093
)


(9,787
)


(11,764
)


(18,845
)
Other income (expense):















Interest income

97



762



523



1,422

Interest expense

(5,862
)


(5,837
)


(11,753
)


(11,651
)
Other (expense) income

2



(73
)


7



(64
)
Total other expense, net

(5,763
)


(5,148
)


(11,223
)


(10,293
)
Loss before income taxes

(11,856
)


(14,935
)


(22,987
)


(29,138
)
Income tax expense

6



3



11



9

Net loss

(11,862
)


(14,938
)


(22,998
)


(29,147
)
Preferred dividends

(462
)


–



(462
)


–

Net loss available to common stockholders
$
(12,324
)

$
(14,938
)

$
(23,460
)

$
(29,147
)
Comprehensive loss
$
(12,324
)

$
(14,938
)

$
(23,460
)

$
(29,147
)
















Net loss per common share:















Basic and diluted
$
(0.38
)

$
(0.46
)

$
(0.73
)

$
(0.90
)
Weighted-average common shares outstanding:















Basic and diluted

32,058,387



32,613,718



32,348,673



32,336,864

































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















Cost of revenue
$
633


$
691


$
1,300


$
1,590

Sales and marketing

594



(12
)


1,474



1,674

Research and development

590



718



932



1,910

General and administrative

1,506



2,322



3,294



4,912

















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















Cost of revenue
$
323


$
308


$
640


$
407

Sales and marketing

83



113



174



149

Research and development

114



131



223



171

General and administrative

48



53



100



68

















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















General and administrative
$
215


$
360


$
407


$
1,002

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


As of


As of

June 30,
December 31,
2020
2019
Assets







Current assets:







Cash and cash equivalents
$
183,496


$
130,976

Accounts receivable, net

29,872



33,754

Contract, prepaid and other current assets

17,851



21,523

Total current assets

231,219



186,253

Property and equipment, net

31,430



28,669

Financing lease right-of-use assets

73,372



78,520

Operating lease right-of-use assets

1,529



1,715

Intangible assets, net

11,530



12,667

Goodwill

12,857



12,857

Deferred contract costs and other non-current assets

10,263



11,002

Total assets
$
372,200


$
331,683

Liabilities and stockholders' deficit







Current liabilities:







Accounts payable
$
6,648


$
9,563

Accrued expenses

6,526



10,526

Accrued compensation and benefits

11,107



15,246

Deferred revenue, current portion

31,020



33,429

Lease liabilities and financing obligations, current portion

6,536



6,871

Total current liabilities

61,837



75,635

Deferred revenue, net of current portion

4,638



5,079

Convertible senior notes

193,843



187,949

Lease liabilities and financing obligations, net current portion

82,294



88,572

Other non-current liabilities

2,000



92

Total liabilities

344,612



357,327

Commitments and contingencies







Redeemable preferred stock:







Series A preferred stock, par value $0.001, 5,000,000 shares authorized, 1,777,778 and 0 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively, liquidation preference $45 per share as of June 30, 2020

79,193



–

Stockholders' deficit:







Common stock, par value $0.001, 50,000,000 shares authorized, 32,175,444 and 32,788,980 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

32



33

Additional paid-in capital

423,122



426,025

Accumulated deficit

(474,759
)


(451,702
)
Total stockholders' deficit

(51,605
)


(25,644
)
Total liabilities, redeemable preferred stock and stockholders' deficit
$
372,200


$
331,683

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


Six Months Ended

June 30,

2020


2019

Cash flows from operating activities







Net loss
$
(22,998
)

$
(29,147
)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:







Depreciation and amortization

12,105



10,949

Stock-based compensation expense

7,000



10,086

Accretion of interest on convertible senior notes

5,894



5,541

Interest accrual on finance lease liabilities

44



–

Rent expense (less than) in excess of payments

(16
)


3

Provision for doubtful accounts

111



265

Changes in operating assets and liabilities:







Accounts receivable, net

3,711



(10,671
)
Contract, prepaid and other current assets

3,672



(476
)
Deferred costs and other non-current assets

740



2,851

Accounts payable and accrued expenses

(7,318
)


(4,085
)
Accrued compensation and benefits

(4,139
)


273

Deferred revenue

(2,850
)


(6,004
)
Other non-current liabilities

1,910



(46
)
Net cash and cash equivalents used in operating activities

(2,134
)


(20,461
)
Cash flows from investing activities







Business combination, net of cash acquired

–



(20,914
)
Purchases of property and equipment

(7,075
)


(7,401
)
Net cash and cash equivalents used in investing activities

(7,075
)


(28,315
)
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
)


(357
)
Proceeds from issuance of preferred stock, net of issuance costs

79,840



–

Payments of preferred dividends

(462
)


–

Repurchase of common stock

(9,667
)


–

Proceeds from exercises of stock options and ESPP

225



134

Payments on financing obligations

(416
)


(841
)
Payments of principal on finance lease liabilities

(7,637
)


(2,699
)
Net cash and cash equivalents provided by (used in) financing activities

61,729



(3,763
)
Net increase (decrease) in cash and cash equivalents

52,520



(52,539
)
Cash and cash equivalents, beginning of period

130,976



190,928

Cash and cash equivalents, end of period
$
183,496


$
138,389









Supplemental disclosure of non-cash investing and financing activities







Property and equipment purchases in accounts payable and accrued expenses
$
37


$
437

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


Three Months Ended


Six Months Ended

June 30,
June 30,

2020


2019


2020


2019

Reconciliation from Gross Profit to Non-GAAP Gross Profit:















Gross profit
$
31,777


$
35,777


$
64,019


$
71,224

Amortization of acquired intangible assets

323



308



640



407

Stock-based compensation expense

633



691



1,300



1,590

Total net adjustments

956



999



1,940



1,997

Non-GAAP gross profit
$
32,733


$
36,776


$
65,959


$
73,221

















Reconciliation from Operating Loss to Non-GAAP Operating Loss:















Operating loss
$
(6,093
)

$
(9,787
)

$
(11,764
)

$
(18,845
)
Amortization of acquired intangible assets

568



605



1,137



795

Stock-based compensation expense

3,323



3,719



7,000



10,086

Transaction and acquisition-related costs expensed

215



360



407



1,002

Costs not core to our business

—



266



—



586

Total net adjustments

4,106



4,950



8,544



12,469

Non-GAAP operating loss
$
(1,987
)

$
(4,837
)

$
(3,220
)

$
(6,376
)
















Reconciliation from Net Loss to Adjusted EBITDA:















Net loss
$
(11,862
)

$
(14,938
)

$
(22,998
)

$
(29,147
)
Depreciation

3,926



3,690



7,722



7,657

Amortization of software development costs

1,727



1,319



3,246



2,497

Amortization of acquired intangible assets

568



605



1,137



795

Interest income

(97
)


(762
)


(523
)


(1,422
)
Interest expense

5,862



5,837



11,753



11,651

Income tax expense

6



3



11



9

Stock-based compensation expense

3,323



3,719



7,000



10,086

Transaction and acquisition-related costs expensed

215



360



407



1,002

Restructuring costs

5,616



—



5,616



—

Costs not core to our business

—



266



—



586

Total net adjustments

21,146



15,037



36,369



32,861

Adjusted EBITDA
$
9,284


$
99


$
13,371


$
3,714

















Reconciliation from Net Loss to Non-GAAP Net Loss:















Net loss
$
(11,862
)

$
(14,938
)

$
(22,998
)

$
(29,147
)
Amortization of acquired intangible assets

568



605



1,137



795

Stock-based compensation expense

3,323



3,719



7,000



10,086

Transaction and acquisition-related costs expensed

215



360



407



1,002

Costs not core to our business

—



266



—



586

Total net adjustments

4,106



4,950



8,544



12,469

Non-GAAP net loss
$
(7,756
)

$
(9,988
)

$
(14,454
)

$
(16,678
)
















Calculation of Non-GAAP Earnings Per Share:















Non-GAAP net loss
$
(7,756
)

$
(9,988
)

$
(14,454
)

$
(16,678
)
Preferred dividends

(462
)


—



(462
)


—

Non-GAAP net loss available to common stockholders
$
(8,218
)

$
(9,988
)

$
(14,916
)

$
(16,678
)
















Weighted average shares outstanding - basic and diluted

32,058,387



32,613,718



32,348,673



32,336,864

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

32,058,387



32,613,718



32,348,673



32,336,864

Non-GAAP net loss per common share - basic and diluted
$
(0.26
)

$
(0.31
)

$
(0.46
)

$
(0.52
)

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