BNFT - Benefitfocus Announces Third Quarter 2019 Financial Results

November, 06 2019 04:05 PM Benefitfocus Inc.

CHARLESTON, S.C., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a leading cloud-based benefits management platform and services provider, today announced its third quarter 2019 financial results. Recent highlights include:

Grew net benefit eligible lives to 16.8 million at the end of the third quarter, up from 16.5 million at the end of the prior quarter and 13.2 million at the end of the prior year period.
Extended platform to support growing gig economy and signed first customer exclusively serving independent contractors.
Added over 250 premier brokers, bringing our total premier broker count to over 700.
Announced MarketPlace for Carriers that provides end-to-end business rating, quoting, billing and payments.

“Benefitfocus delivered strong third quarter results and continues to make solid progress towards achieving our long-term goals,” said Ray August, President and Chief Executive Officer of Benefitfocus.

August added, “The benefits industry is undergoing a fundamental change and Benefitfocus is at the forefront helping to transform its future. For more than 25 million Americans, our platform delivers a rich experience as a result of providing enhanced consumer education and engagement with their benefits. With our considerable data assets we are transforming how benefits are bought, sold and used in the United States.”

Third Quarter 2019 Financial Highlights

Revenue

Total revenue was $71.7 million, an increase of 17% compared to the third quarter of 2018.
Software services revenue was $54.2 million, an increase of 16% compared to the third quarter of 2018.
Professional services revenue was $17.5 million, an increase of 23% compared to the third quarter of 2018.

Net Loss

GAAP net loss was ($12.6) million, compared to ($11.6) million in the third quarter of 2018. GAAP net loss per share was ($0.38), based on 32.7 million basic and diluted weighted average common shares outstanding, compared to ($0.36) for the third quarter of 2018, based on 31.9 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

Non-GAAP net loss was ($7.5) million, compared to ($7.2) million in the third quarter of 2018. Non-GAAP net loss per share was ($0.23), based on 32.7 million basic and diluted weighted average common shares outstanding, compared to ($0.23) for the third quarter of 2018, based on 31.9 million basic and diluted weighted average common shares outstanding.
Adjusted EBITDA was $2.9 million, compared to ($0.0) million in the third 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 September 30, 2019 totaled $130.7 million, compared to $138.4 million at the end of the second quarter of 2019.

Updated Business Outlook

Based on information available as of November 6, 2019, Benefitfocus is providing guidance for the fourth quarter and updated its full year 2019 as indicated below.

Fourth Quarter 2019:

Total revenue is expected to be in the range of $83.5 million to $91.5 million.
Non-GAAP net (loss)/income is expected to be in the range of ($4.8) million to $0.2 million, or ($0.15) to $0.01 per share, based on 32.8 million basic (for net loss) and 33.2 million diluted (for net income) weighted average common shares outstanding.
Adjusted EBITDA is expected to be in the range of $5.4 million to $10.4 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 ($29.0) million to ($24.0) million, or ($0.89) to ($0.74) 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 $12.0 million to $17.0 million.

Management has not reconciled forward-looking non-GAAP net loss/income and Adjusted EBITDA to their most directly comparable GAAP measure of GAAP net loss. 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 today, November 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 November 13, 2019, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13695735.

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, 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/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, 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


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018

Revenue

$
71,665


$
61,006


$
208,543


$
183,950

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


35,588



31,740



101,242



93,864

Gross profit


36,077



29,266



107,301



90,086

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
















Sales and marketing


18,527



17,661



57,464



55,978

Research and development


14,088



10,676



41,639



34,827

General and administrative


10,772



9,263



34,353



29,343

Total operating expenses


43,387



37,600



133,456



120,148

Loss from operations


(7,310
)


(8,334
)


(26,155
)


(30,062
)
Other income (expense):
















Interest income


673



73



2,095



199

Interest expense


(5,926
)


(1,458
)


(17,577
)


(4,190
)
Interest expense on building lease financing obligations


–



(1,868
)


–



(5,601
)
Other (expense) income


3



2



(61
)


15

Total other expense, net


(5,250
)


(3,251
)


(15,543
)


(9,577
)
Loss before income taxes


(12,560
)


(11,585
)


(41,698
)


(39,639
)
Income tax expense


17



13



26



22

Net loss

$
(12,577
)

$
(11,598
)

$
(41,724
)

$
(39,661
)
Comprehensive loss

$
(12,577
)

$
(11,598
)

$
(41,724
)

$
(39,661
)

















Net loss per common share:
















Basic and diluted

$
(0.38
)

$
(0.36
)

$
(1.29
)

$
(1.25
)
Weighted-average common shares outstanding:
















Basic and diluted


32,703,723



31,883,029



32,460,494



31,678,360



































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
















Cost of revenue

$
798


$
542


$
2,388


$
2,153

Sales and marketing


923



759



2,597



2,970

Research and development


690



494



2,600



2,103

General and administrative


2,004



1,552



6,916



5,120


















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
















Cost of revenue

$
305


$
12


$
712


$
81

Sales and marketing


97



4



246



31

Research and development


118



4



289



27

General and administrative


49



2



117



11


















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
















General and administrative

$
3


$
–


$
1,005


$
257

Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)





As of


As of



September 30,


December 31,



2019


2018

Assets








Current assets:








Cash and cash equivalents

$
130,699


$
190,928

Accounts receivable, net


34,672



21,077

Contract, prepaid and other current assets


15,312



16,667

Total current assets


180,683



228,672

Property and equipment, net


28,689



69,965

Financing lease right-of-use assets


80,665



–

Operating lease right-of-use assets


1,868



–

Intangible assets, net


13,236



–

Goodwill


12,857



1,634

Deferred contract costs and other non-current assets


10,150



13,668

Total assets

$
328,148


$
313,939

Liabilities and stockholders' deficit








Current liabilities:








Accounts payable

$
8,552


$
8,687

Accrued expenses


10,333



11,461

Accrued compensation and benefits


13,561



17,269

Deferred revenue, current portion


33,911



36,540

Lease liabilities and financing obligations, current portion


7,022



4,486

Total current liabilities


73,379



78,443

Deferred revenue, net of current portion


7,216



9,323

Convertible senior notes


185,069



176,692

Lease liabilities and financing obligations, net current portion


89,438



57,116

Other non-current liabilities


115



2,575

Total liabilities


355,217



324,149

Commitments and contingencies








Stockholders' deficit:








Preferred stock, par value $0.001, 5,000,000 shares authorized,








no shares issued and outstanding at September 30, 2019








and December 31, 2018


–



–

Common stock, par value $0.001, 50,000,000 shares authorized,








32,710,032 and 32,017,773 shares issued and outstanding








at September 30, 2019 and December 31, 2018, respectively


33



32

Additional paid-in capital


420,808



403,631

Accumulated deficit


(447,910
)


(413,873
)
Total stockholders' deficit


(27,069
)


(10,210
)
Total liabilities and stockholders' deficit

$
328,148


$
313,939

Benefitfocus, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)





Nine Months Ended



September 30,



2019


2018

Cash flows from operating activities








Net loss

$
(41,724
)

$
(39,661
)
Adjustments to reconcile net loss to net cash and cash








equivalents used in operating activities:





Depreciation and amortization


16,629



11,912

Stock-based compensation expense


14,501



12,346

Accretion of interest on convertible senior notes


8,377



–

Interest accrual on finance lease liabilities


25



–

Interest accrual on financing obligations (prior to adoption of ASC 842)


–



5,639

Rent payments in excess of expense


(6
)


–

Provision for doubtful accounts


108



364

Changes in operating assets and liabilities:








Accounts receivable, net


(12,791
)


2,103

Contract, prepaid and other current assets


1,282



5,179

Deferred costs and other non-current assets


3,746



2,590

Accounts payable and accrued expenses


(642
)


4,385

Accrued compensation and benefits


(1,524
)


(1,068
)
Deferred revenue


(11,427
)


(7,443
)
Other non-current liabilities


(69
)


(328
)
Net cash and cash equivalents used in operating activities


(23,515
)


(3,982
)
Cash flows from investing activities








Business combination, net of cash acquired


(20,914
)


–

Purchases of property and equipment


(10,604
)


(5,855
)
Net cash and cash equivalents used in investing activities


(31,518
)


(5,855
)
Cash flows from financing activities








Draws on revolving line of credit


–



97,000

Payments on revolving line of credit


–



(84,000
)
Payments of debt issuance costs


(357
)


–

Proceeds from exercises of stock options and ESPP


305



462

Payments on capital lease and financing obligations


(1,032
)


(7,895
)
Payments of principal on finance lease liabilities


(4,112
)


–

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


(5,196
)


5,567

Net decrease in cash and cash equivalents


(60,229
)


(4,270
)
Cash and cash equivalents, beginning of period


190,928



55,335

Cash and cash equivalents, end of period

$
130,699


$
51,065










Supplemental disclosure of non-cash investing and financing activities








Property and equipment purchases in accounts payable and accrued expenses

$
—


$
83

Property and equipment purchased with financing and capital lease obligations (prior to adoption of ASC 842)

$
—


$
3,739

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


Nine Months Ended



September 30,


September 30,



2019


2018


2019


2018

Reconciliation from Gross Profit to Non-GAAP Gross Profit:
















Gross profit

$
36,077


$
29,266


$
107,301


$
90,086

Amortization of acquired intangible assets


305



12



712



81

Stock-based compensation expense


798



542



2,388



2,153

Total net adjustments


1,103



554



3,100



2,234

Non-GAAP gross profit

$
37,180


$
29,820


$
110,401


$
92,320


















Reconciliation from Operating Loss to Non-GAAP Operating Loss:
















Operating loss

$
(7,310
)

$
(8,334
)

$
(26,155
)

$
(30,062
)
Amortization of acquired intangible assets


569



22



1,364



150

Stock-based compensation expense


4,415



3,347



14,501



12,346

Transaction and acquisition-related costs expensed


3



—



1,005



257

Costs not core to our business


63



1,027



649



3,922

Total net adjustments


5,050



4,396



17,519



16,675

Non-GAAP operating loss

$
(2,260
)

$
(3,938
)

$
(8,636
)

$
(13,387
)

















Reconciliation from Net Loss to Adjusted EBITDA:
















Net loss

$
(12,577
)

$
(11,598
)

$
(41,724
)

$
(39,661
)
Depreciation


3,848



2,888



11,505



8,864

Amortization of software development costs


1,263



1,045



3,760



2,898

Amortization of acquired intangible assets


569



22



1,364



150

Interest income


(673
)


(73
)


(2,095
)


(199
)
Interest expense


5,926



1,458



17,577



4,190

Interest expense on building lease financing obligations (prior to adoption of ASC 842)


—



1,868



—



5,601

Income tax expense


17



13



26



22

Stock-based compensation expense


4,415



3,347



14,501



12,346

Transaction and acquisition-related costs expensed


3



—



1,005



257

Costs not core to our business


63



1,027



649



3,922

Total net adjustments


15,431



11,595



48,292



38,051

Adjusted EBITDA

$
2,854


$
(3
)

$
6,568


$
(1,610
)

















Reconciliation from Net Loss to Non-GAAP Net Loss:
















Net loss

$
(12,577
)

$
(11,598
)

$
(41,724
)

$
(39,661
)
Amortization of acquired intangible assets


569



22



1,364



150

Stock-based compensation expense


4,415



3,347



14,501



12,346

Transaction and acquisition-related costs expensed


3



—



1,005



257

Costs not core to our business


63



1,027



649



3,922

Total net adjustments


5,050



4,396



17,519



16,675

Non-GAAP net loss

$
(7,527
)

$
(7,202
)

$
(24,205
)

$
(22,986
)

















Calculation of Non-GAAP Earnings Per Share:
















Non-GAAP net loss

$
(7,527
)

$
(7,202
)

$
(24,205
)

$
(22,986
)

















Weighted average shares outstanding - basic and diluted


32,703,723



31,883,029



32,460,494



31,678,360

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


32,703,723



31,883,029



32,460,494



31,678,360

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

$
(0.23
)

$
(0.23
)

$
(0.75
)

$
(0.73
)

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