Benefitfocus Announces First Quarter 2018 Financial Results

Benefitfocus Announces First Quarter 2018 Financial Results

Total revenue of $62.4 million grew 8% year-over-year                         

CHARLESTON, S.C., May 03, 2018 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading cloud-based benefits management platform and services provider, today announced its first quarter 2018 financial results.

“I am extremely pleased with Benefitfocus’ accelerated financial momentum, as we achieved our key financial goals during the first quarter,” said Ray August, President and Chief Executive Officer of Benefitfocus.  “2018 and our selling season are off to a solid start.”

August added, “The launch of BenefitsPlace will open new opportunities across our platform and help position Benefitfocus as the technology choice to connect the benefits industry. As we focus on our business strategy, improve our sales execution, and strengthen the core of our operations, we believe our revenue opportunities will continue to expand, along with long-term value for our shareholders.”

First Quarter 2018 Financial Highlights

The prior periods presented have been adjusted to reflect the adoption of the new ASC 606 revenue recognition standard.

Revenue

  • Total revenue was $62.4 million, an increase of 8% compared to the first quarter of 2017.

  • Software services revenue was $48.2 million, an increase of 4% compared to the first quarter of 2017.

  • Professional services revenue was $14.2 million, an increase of 28% compared to the first quarter of 2017.

  • Employer revenue was $40.3 million, an increase of 12% compared to the first quarter of 2017.

  • Insurance carrier revenue was $22.1 million, an increase of 1% compared to the first quarter of 2017.

Net Loss

  • GAAP net loss was ($13.8) million, compared to ($15.6) million in the first quarter of 2017. GAAP net loss per share was ($0.44), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.51) for the first quarter of 2017, based on 30.7 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($8.0) million, compared to ($11.1) million in the first quarter of 2017. Non-GAAP net loss per share was ($0.26), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.36) for the first quarter of 2017, based on 30.7 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was ($1.0) million, compared to ($4.3) million in the first quarter of 2017.

See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.

Balance Sheet

  • Cash and cash equivalents at March 31, 2018 totaled $54.8 million, compared to $55.3 million at the end of the fourth quarter of 2017. 

First Quarter and Recent Business Highlights

  • We ended the quarter with 948 large employer customers, up from 853 at the end of the prior year period, and 920 at the end of the fourth quarter of 2017.

  • We had record attendance at our 8th annual One Place user conference in Orlando, Florida and announced enhancements to the Benefitfocus Platform.   

  • We launched Benefitfocus BenefitsPlace™, a new offering designed to connect the entire U.S. employee benefits industry, uniting brokers, employers, carriers and suppliers on a single platform. BenefitsPlace opens the Benefitfocus platform to create buyer-seller opportunities, provide greater access and choice of benefits, and deliver decision-support tools to consumers for more personalized, informed and hassle-free benefits enrollment and management.

  • We opened a new office in New York City as part of an expansion effort to broaden Benefitfocus’ operations in the key Northeast region of the United States.

  • We published our “State of Employee Benefits 2018 - Regional Edition” report, a snapshot of real, but anonymized employee benefits election data from over 1.2 million consumers.

Business Outlook

Based on information available as of May 3, 2018, Benefitfocus is providing guidance for the second quarter and full year 2018 as indicated below. Our guidance is based on the new ASC 606 revenue recognition standard that is effective beginning January 1, 2018.

Second Quarter 2018:

  • Total revenue is expected to be in the range of $55.5 million to $57.5 million.

  • Non-GAAP net loss is expected to be in the range of ($14.0) million to ($12.0) million, or ($0.44) to ($0.38) per share, based on 31.8 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of ($7.0) million to ($5.0) million.

Full Year 2018:

  • Total revenue is expected to be in the range of $250.0 million to $258.0 million.

  • Non-GAAP net loss is expected to be in the range of ($25.0) million to ($17.0) million, or ($0.79) to ($0.54) per share, based on 31.8 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $5.0 million to $13.0 million.

See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, May 3, 2018, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9039 (domestic) or (201) 689-8470 (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 May 10, 2018, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13678853.

Investor Presentation Details

An investor presentation providing additional information on the ASC 605 to ASC 606 accounting change can be found at http://investor.benefitfocus.com. 

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) provides technology and services that improve the way employers of all sizes manage their benefits investment. Through a combination of powerful cloud-based software, data-driven insights and thoughtfully-designed services, we provide employers, their brokers and insurance carriers with a single partner to 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 income (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 income (loss), net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering 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, and costs not core to our business.  We define free cash flow as cash from operations plus purchases of property and equipment.  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; risks related to changing healthcare and other applicable regulations; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; cyber-security risks;  the immature and volatile market for our products and services; 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,
  2018  2017 
Revenue $62,363  $57,623 
Cost of revenue (1)(2)  31,403   32,202 
Gross profit  30,960   25,421 
Operating expenses:(1)(2)        
Sales and marketing  19,917   18,023 
Research and development  12,023   12,181 
General and administrative  9,693   7,757 
Total operating expenses  41,633   37,961 
Loss from operations  (10,673)  (12,540)
Other income (expense):        
Interest income  58   27 
Interest expense on building lease financing obligations  (1,866)  (1,860)
Interest expense on other borrowings  (1,317)  (1,062)
Other expense  –   (148)
Total other expense, net  (3,125)  (3,043)
Loss before income taxes  (13,798)  (15,583)
Income tax expense  4   – 
Net loss $(13,802) $(15,583)
Comprehensive loss $(13,802) $(15,583)
         
Net loss per common share:        
Basic and diluted $(0.44) $(0.51)
Weighted-average common shares outstanding:        
Basic and diluted  31,333,348   30,658,468 
         
         
(1) Stock-based compensation included in above line items:        
Cost of revenue $711  $661 
Sales and marketing  954   1,332 
Research and development  768   719 
General and administrative  1,892   1,676 
         
(2) Amortization of acquired intangible assets included in above line items:        
Cost of revenue $34  $36 
Sales and marketing  14   13 
Research and development  12   12 
General and administrative  4   3 
         


         
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets 
(in thousands, except share and per share data) 
  
  As of  As of 
March 31,December 31,
20182017
Assets        
Current assets:        
Cash and cash equivalents $54,785  $55,335 
Accounts receivable, net  29,678   30,091 
Contract, prepaid and other current assets  15,077   15,859 
Total current assets  99,540   101,285 
Property and equipment, net  71,233   72,681 
Intangible assets, net  86   150 
Goodwill  1,634   1,634 
Deferred contract costs and other non-current assets  15,262   16,253 
Total assets $187,755  $192,003 
Liabilities and stockholders' deficit        
Current liabilities:        
Accounts payable $5,557  $4,260 
Accrued expenses  10,599   9,110 
Accrued compensation and benefits  11,288   14,250 
Deferred revenue, current portion  36,167   43,804 
Revolving line of credit, current portion  24,000   24,000 
Financing and capital lease obligations, current portion  3,716   3,423 
Total current liabilities  91,327   98,847 
Deferred revenue, net of current portion  16,733   11,223 
Revolving line of credit, net of current portion  39,246   32,246 
Financing and capital lease obligations, net of current portion  55,724   55,597 
Other non-current liabilities  2,699   2,809 
Total liabilities  205,729   200,722 
Commitments and contingencies        
Stockholders' deficit:        
Preferred stock, par value $0.001, 5,000,000 shares authorized,  –   – 
  no shares issued and outstanding at March 31, 2018
  and December 31, 2017
Common stock, par value $0.001, 50,000,000 shares authorized,  31   31 
  31,339,469 and 31,307,989 shares issued and outstanding
  at March 31, 2018 and December 31, 2017, respectively
Additional paid-in capital  357,043   352,496 
Accumulated deficit  (375,048)  (361,246)
Total stockholders' deficit  (17,974)  (8,719)
Total liabilities and stockholders' deficit $187,755  $192,003 
  


         
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows 
(in thousands) 
  
  Three Months Ended 
March 31,
  2018  2017 
Cash flows from operating activities        
Net loss $(13,802) $(15,583)
Adjustments to reconcile net loss to net cash and cash        
  equivalents used in operating activities:
Depreciation and amortization  3,930   4,005 
Stock-based compensation expense  4,325   4,388 
Interest accrual on financing obligation  1,879   1,873 
Loss on disposal or impairment of property and equipment  –   148 
Provision for doubtful accounts  359   22 
Changes in operating assets and liabilities:        
 Accounts receivable, net  54   5,654 
 Accrued interest on short-term investments  –   7 
 Contract, prepaid and other current assets  881   1,092 
 Deferred contract costs and other non-current assets  1,166   1,945 
 Accounts payable and accrued expenses  2,722   (1,039)
 Accrued compensation and benefits  (2,962)  (6,593)
 Deferred revenue  (2,127)  (3,110)
 Other non-current liabilities  (108)  (222)
Net cash and cash equivalents used in operating activities  (3,683)  (7,413)
Cash flows from investing activities        
Proceeds from maturity of short-term investments held to maturity  –   2,000 
Purchases of property and equipment  (1,641)  (2,103)
Net cash and cash equivalents used in investing activities  (1,641)  (103)
Cash flows from financing activities        
Draws on revolving line of credit  31,000   28,000 
Payments on revolving line of credit  (24,000)  (20,000)
Proceeds from exercises of stock options and ESPP  222   2,454 
Payments on financing and capital lease obligations  (2,448)  (2,120)
Net cash and cash equivalents provided by financing activities  4,774   8,334 
Net (decrease) increase in cash and cash equivalents  (550)  818 
Cash and cash equivalents, beginning of period  55,335   56,853 
Cash and cash equivalents, end of period $54,785  $57,671 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $452  $200 
Property and equipment purchased with financing and capital lease obligations $713  $— 
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 
March 31,
  2018  2017 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:        
Gross profit $30,960  $25,421 
Amortization of acquired intangible assets  34   36 
Stock-based compensation expense  711   661 
Total net adjustments  745   697 
Non-GAAP gross profit $31,705  $26,118 
         
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):        
Operating loss $(10,673) $(12,540)
Amortization of acquired intangible assets  64   64 
Stock-based compensation expense  4,325   4,388 
Costs not core to our business  1,371   — 
Total net adjustments  5,760   4,452 
Non-GAAP operating income (loss) $(4,913) $(8,088)
         
Reconciliation from Net Loss to Adjusted EBITDA:        
Net loss $(13,802) $(15,583)
Depreciation  2,977   3,110 
Amortization of software development costs  889   831 
Amortization of acquired intangible assets  64   64 
Interest income  (58)  (27)
Interest expense on building lease financing obligations  1,866   1,860 
Interest expense on other borrowings  1,317   1,062 
Income tax expense  4   — 
Stock-based compensation expense  4,325   4,388 
Costs not core to our business  1,371   — 
Total net adjustments  12,755   11,288 
Adjusted EBITDA $(1,047) $(4,295)
         
Reconciliation from Net Loss to Non-GAAP Net Loss:        
Net loss $(13,802) $(15,583)
Amortization of acquired intangible assets  64   64 
Stock-based compensation expense  4,325   4,388 
Costs not core to our business  1,371   — 
Total net adjustments  5,760   4,452 
Non-GAAP net loss $(8,042) $(11,131)
         
Calculation of Non-GAAP Earnings Per Share:        
Non-GAAP net loss $(8,042) $(11,131)
         
Weighted average shares outstanding - basic and diluted  31,333,348   30,658,468 
Shares used in computing non-GAAP net loss per share - basic and  31,333,348   30,658,468 
  diluted
Non-GAAP net loss per common share - basic and diluted $(0.26) $(0.36)


                 
                 
Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges 
(in millions, except per share data) 
  
  Second Quarter 2018  Full Year 2018 
  Range  Range 
  Low  High  Low  High 
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                
Net loss - Guidance range $(20.1) $(18.1) $(41.5) $(33.5)
Depreciation and amortization  4.2   4.2   17.8   17.8 
Interest income  (0.1)  (0.1)  (0.2)  (0.2)
Interest expense  3.0   3.0   12.7   12.7 
Income tax expense  —   —   —   — 
Stock-based compensation expense  5.7   5.7   14.8   14.8 
Costs not core to business  0.3   0.3   1.4   1.4 
Total net adjustments  13.1   13.1   46.5   46.5 
Adjusted EBITDA - Guidance range $(7.0) $(5.0) $5.0  $13.0 
                 
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                
Net loss - Guidance range $(20.1) $(18.1) $(41.5) $(33.5)
Amortization of acquired intangible assets  0.1   0.1   0.3   0.3 
Stock-based compensation expense  5.7   5.7   14.8   14.8 
Costs not core to business  0.3   0.3   1.4   1.4 
Total net adjustments  6.1   6.1   16.5   16.5 
Non-GAAP net loss - Guidance range $(14.0) $(12.0) $(25.0) $(17.0)
                 
Calculation of Non-GAAP Earnings Per Share Guidance:                
Non-GAAP net loss - Guidance range $(14.0) $(12.0) $(25.0) $(17.0)
                 
Weighted average shares outstanding - basic and diluted  31.8   31.8   31.8   31.8 
Shares used in computing non-GAAP  31.8   31.8   31.8   31.8 
  net loss per share - basic and diluted
Non-GAAP net loss per common share - basic and diluted $(0.44) $(0.38) $(0.79) $(0.54) 
                 

Benefitfocus, Inc.
843-284-1052 ext. 3527
[email protected]

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
[email protected]