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Connecture Reports Record Revenue and Positive Adjusted EBITDA for Fourth Quarter and Full Year 2014

Full year 2014 revenue increased 45% to $84.6 million year over year;

Full year 2014 adjusted EBITDA of $1.3 million compared to adjusted EBITDA of $(17.3) million in 2013;

Fourth quarter 2014 revenue increased 11% to $27.8 million year over year;

Fourth quarter 2014 adjusted EBITDA increased 104% to $6.6 million year over year;

Provides initial financial outlook for 2015

BROOKFIELD, Wis., March 10, 2015 (GLOBE NEWSWIRE) -- Connecture, Inc. (Nasdaq:CNXR), a provider of web-based information systems used to create health insurance marketplaces, today announced financial results for the fourth quarter and full year ending December 31, 2014.

"2014 was a very successful year for Connecture, in terms of revenue growth, expanding margins, new customer additions, and organization building. We are also pleased with our fourth quarter performance, including our significant new customer wins," remarked Doug Schneider, chief executive officer of Connecture. "Our growth demonstrates that customers recognize the value of our solutions. Our technology solutions support the increasing impact of consumer choice and accountability around health insurance as the marketplace becomes more focused on the individual. Our data-driven, personalized tools help consumers optimize their health insurance choices. In addition, we are pleased to report that we achieved a significant milestone by generating positive adjusted EBITDA for the full year," added Mr. Schneider.

Full Year 2014 Financial Results

  • Total revenue was $84.6 million for 2014, reflecting an increase of 45.0% compared to $58.3 million in 2013.
  • Adjusted gross margin was $36.2 million for 2014, or 42.8% of total revenue, more than doubling in both amount and as a percentage of total revenue, compared to $12.0 million, or 20.5% of total revenue, in 2013.
  • Operating loss was ($4.3) million for 2014, compared to an operating loss of ($22.6) million in 2013.
  • Net loss was ($10.2) million for 2014, compared to a net loss of ($26.4) million in 2013.
  • Adjusted EBITDA was $1.3 million for 2014, including the impact of $2.3 million of one-time executive incentives related to the Company's capital raising efforts in 2014. Excluding the one-time incentives, adjusted EBITDA would have been $3.5 million compared to adjusted EBITDA of negative $(17.3) million in 2013.

Fourth Quarter 2014 Financial Results

  • Total revenue was $27.8 million for the fourth quarter of 2014, reflecting an increase of 11.5% compared to $25.0 million for the fourth quarter of 2013.
  • Adjusted gross margin was $14.6 million for the fourth quarter of 2014, reflecting an increase of 36.2% compared to $10.7 million in the fourth quarter of 2013. As a percentage of total revenue, adjusted gross margin increased to 52.4% for the fourth quarter of 2014 compared to 42.9% for the fourth quarter of 2013.
  • Operating income was $6.0 million for the fourth quarter of 2014, reflecting an increase of 336.1% compared to operating income of $1.8 million in the fourth quarter of 2013.
  • Net income was $4.8 million for the fourth quarter of 2014, reflecting an increase of 693.3% compared to net income of $0.7 million in the fourth quarter of 2013.
  • Adjusted EBITDA was $6.6 million for the fourth quarter of 2014, reflecting an increase of 104% compared to Adjusted EBITDA of $3.3 million in the fourth quarter of 2013.
  • During the fourth quarter ending December 31, 2014, we completed an initial public offering, which resulted in $34.8 million of net proceeds to Connecture.

Recent Business Highlights

  • Total contracted backlog at year-end 2014 increased to $78.2 million, an increase of $2.0 million from year-end 2013. Sequentially, contracted backlog at year-end 2014 was down from $87.5 million at the end of third quarter 2014 as certain contracts that were expected to close in the fourth quarter of 2014 closed subsequent to year end. As a result of these additional bookings in the first quarter of 2015, contracted backlog increased to approximately $95.0 million as of February 28, 2015.
  • We added eight customers in 2014 and ended 2014 with 101 customers. New customers added during 2014 included a mix of health plan, broker and retail customers. In addition, during 2014 we expanded our relationships with many of our existing customers across our business.
  • During 2014 we enhanced our capabilities for personalizing the consumer shopping and enrollment experience for individuals, employer groups and Medicare beneficiaries and streamlined our implementation processes to enable us to deliver solutions more effectively and efficiently. Also in 2014, we introduced On Ramp, our cloud-based broker private exchange solution which enables brokers to automate their entire book of business including group, individual, retiree, and ancillary.
  • On January 29, 2015, we announced that Russ Thomas, chief executive officer of Availity, joined our Board of Directors as an independent director. We look forward to Mr. Thomas' contributions as he draws on his extensive expertise gained in leadership positions in the health care information technology industry.

Business Outlook

Connecture's initial financial outlook for full year 2015 and first quarter 2015 is as follows:

Full year 2015

  • Total revenue for 2015 is expected to be in the range of $100 million to $104 million.
  • Adjusted EBITDA for 2015 is expected to be in the range of $10.5 million to $12.5 million.
  • Net loss per share for 2015 is expected to be in the range of $(0.02) to $(0.09), based on an estimated basic and diluted weighted-average common share count of 22.0 million, and includes the impact of non-cash stock compensation expense of approximately $3.2 million, or $0.14 per share.

First quarter 2015

  • Total revenue is expected to be at least $19.5 million. Of note, the first quarter of our fiscal year is typically the lowest quarter from a revenue and earnings perspective given the seasonality that exists in our business.
  • While we expect Adjusted EBITDA to be negative for the first quarter given the seasonality in our business, we do not expect that the Adjusted EBITDA loss will be more than $(2.0) million.
  • Net loss per share is expected to be no more than $(0.25), based on an estimated basic and diluted weighted-average common share count of 22.0 million, and includes non-cash stock compensation expense of $0.7 million, or $0.03 per share.

Conference Call

Connecture management will host a conference call at 5:00 p.m. (Eastern Time) on Tuesday, March 10, 2015, to discuss the fourth quarter and full year 2014 results. The conference call will be accessible by dialing 877-930-8068 and referencing conference ID 86813014. A live webcast of the conference call will also be available on the investor relations section of the company's website at investors.connecture.com.

Use of Non-GAAP Measures

To provide additional information regarding Connecture's financial results, Connecture has disclosed in this press release adjusted gross margin and adjusted EBITDA, each a non-GAAP financial measure. Connecture defines adjusted gross margin as gross margin before depreciation and amortization expense, as well as stock-based compensation expense. Connecture defines adjusted EBITDA as net income (loss) before net interest, other expense, taxes, depreciation and amortization expense, adjusted to eliminate stock-based compensation and non-cash changes in fair value of contingent consideration and impairments of goodwill, intangible and long-lived assets, if any.

Connecture has included adjusted gross margin and adjusted EBITDA as supplemental financial measures in this press release because they are key measures used by its management and board of directors to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans, and because management believes that they provide useful information in understanding and evaluating Connecture's operating results. However, use of adjusted gross margin and adjusted EBITDA as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of Connecture's financial results as reported under GAAP. A reconciliation to the closest GAAP measures of these non-GAAP measures is contained in the accompanying tables.

About Connecture

Connecture (Nasdaq:CNXR) is a leading web-based consumer shopping, enrollment and retention platform for health insurance distribution. Connecture offers a personalized health insurance shopping experience that recommends the best fit insurance plan based on an individual's preferences, health status, preferred providers, medications and expected out-of-pocket costs. Connecture's customers are health insurance marketplace operators such as health plans, brokers and exchange operators, who must distribute health insurance in a cost-effective manner to a growing number of insured consumers. Connecture's solutions automate key functions in the health insurance distribution process, allowing its customers to price and present plan options accurately to consumers and efficiently enroll, renew and manage plan members.

Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this press release, including statements regarding Connecture's strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about management's estimates regarding future market growth, revenues and financial performance and other statements about management's beliefs, intentions or goals. Connecture may not actually achieve the plans, intentions or expectations disclosed in the forward-looking statements, and you should not place undue reliance on Connecture's forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, risks related to (1) Connecture's ability to manage its growth, including accurately planning and forecasting its financial results and hiring, retaining and motivating employees; (2) the competitive environment for Connecture's business and the market for Connecture's solutions; (3) Connecture's ability to maintain historical contract terms; (4) Connecture's ability to operate its proprietary software, transition to new platforms and provide innovative and high quality products and services; (5) errors, interruptions or delays in Connecture's services; (6) breaches of Connecture's security measures; (7) Connecture's ability to comply with regulatory requirements; (8) technological and regulatory developments; (9) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (10) the impact and integration of future acquisitions; and (11) other risks and potential factors that could affect Connecture's business and financial results identified in Connecture's filings with the Securities and Exchange Commission (the "SEC"), including its prospectus filed with the SEC pursuant to Rule 424(b)(4) on December 12, 2014. Additional information will also be set forth in Connecture's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Connecture makes with the SEC. The forward-looking statements contained in this press release reflect Connecture's current views with respect to future events, and Connecture assumes no obligation to update or revise any forward-looking statements except as required by applicable law.

Connecture, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share and per share data)
(unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 2014 2013
Revenue $27,825 $24,957 $84,579 $58,326
Cost of revenue (1) 14,235 15,269 52,431 50,173
Gross margin 13,590 9,688 32,148 8,153
Operating expenses:
Research and development (1) 4,447 2,970 18,125 11,806
Sales and marketing (1) 1,947 1,764 7,729 6,800
General and administrative (1) 1,241 3,182 10,552 12,187
Total operating expenses 7,635 7,916 36,406 30,793
Income (loss) from operations 5,955 1,772 (4,258) (22,640)
Other expenses:
Interest expense 1,705 1,036 5,937 4,644
Other (income) expense (611) -- (68) --
Income loss before Income taxes 4,861 736 (10,127) (27,284)
Income tax (expense) benefit (77) (46) (33) 900
Net income (loss) $4,784 $690 ($10,160) ($26,384)
Comprehensive income (loss) $4,784 $690 ($10,160) ($26,384)
Net income (loss) per common share:
Basic $0.80 ($1.25) ($10.27) ($163.37)
Diluted $0.30 ($1.25) ($10.27) ($163.37)
Weighted-average common shares outstanding:
Basic 4,857,869 184,051 1,362,109 184,051
Diluted 12,979,040 184,051 1,362,109 184,051
(1) Cost of revenue and operating expenses include following stock-based compensation expense:
Cost of revenue $31 $31 $123 $92
Research and development 18 20 78 55
Sales and marketing 7 9 32 34
General and administrative 307 170 1,203 458
Connecture, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
As of December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents $28,252 $2,277
Accounts receivable - net of allowances 12,128 20,935
Prepaid expenses and other current assets 1,557 1,010
Total current assets 41,937 24,222
Property and equipment, net 1,892 1,974
Goodwill 26,779 26,779
Other intangibles, net 15,350 19,414
Deferred implementation costs 24,552 19,899
Other assets 1,834 1,945
Total assets $112,344 $94,233
Liabilities, redeemable convertible preferred stock and stockholders' deficit
Current liabilities:
Accounts payable $5,737 $8,445
Accrued payroll and related liabilities 3,880 6,397
Other liabilities 4,373 7,737
Current maturities of debt 4,479 5,431
Deferred revenue 42,578 43,528
Total current liabilities 61,047 71,538
Deferred revenue 31,159 44,327
Long-term debt 48,581 32,818
Other long-term liabilities 398 1,859
Total liabilities 141,185 150,542
Redeemable convertible preferred stock -- 49,745
Total stockholders' deficit (28,841) (106,054)
Total liabilities, redeemable preferred stock and stockholders' deficit $112,344 $94,233
Connecture, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Year Ended
December 31
2014 2013
Cash flows from operating activities:
Net loss ($10,160) ($26,384)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 5,101 4,710
Stock-based compensation expense 1,436 639
Other 1,061 1,302
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 8,782 (11,340)
Prepaid expenses and other assets (495) (989)
Deferred implementation costs (4,653) (15,403)
Accounts payable (3,463) 5,573
Accrued expenses and other liabilities (3,744) 1,754
Deferred revenue (14,118) 41,840
Net cash (used in) provided by operating activities (20,253) 1,702
Cash flows from investing activities:
Purchase of property and equipment (837) (1,217)
Business acquisition, net of cash acquired -- (25,879)
Net cash used in financing activities (837) (27,096)
Cash flows from financing activities:
Net borrowings (repayments) of debt 13,631 28,090
Proceeds from initial public offering, net of issuance costs 45,907 --
Dividends paid (8,991) --
Other (3,482) (1,895)
Net cash provided by financing activities 47,065 26,195
Net increase in cash and cash equivalents 25,975 801
Cash and cash equivalents - beginning of year 2,277 1,476
Cash and cash equivalents - end of year $28,252 $2,277
Connecture, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands)
(unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 2014 2013
Reconciliation from Gross Margin to Adjusted Gross Margin:
Gross margin $13,590 $9,688 $32,148 $8,153
Depreciation and amortization 964 986 3,892 3,739
Stock-based compensation expense 31 31 123 92
Adjusted gross margin $14,585 $10,705 $36,163 $11,984
Reconciliation from Net Income (Loss) to Adjusted EBITDA:
Net income (loss) $4,784 $690 ($10,160) ($26,384)
Depreciation and amortization 1,260 1,249 5,101 4,710
Interest expense 1,705 1,036 5,937 4,644
Other expense (611) -- (68) --
Income taxes 77 46 33 (900)
Stock-based compensation 363 230 1,436 639
Change in fair value of contingent consideration (951) -- (951) --
Total net adjustments 1,843 2,561 11,488 9,093
Adjusted EBITDA $6,627 $3,251 $1,328 ($17,291)

CONTACT: Investor Contact: Peter Vozzo Westwicke Partners, LLC. peter.vozzo@westwicke.com Phone: 443.213.0500 Media Contact: Ken Phillips Davies Murphy Group Phone: 781.418.2437 connecture@daviesmurphy.com

Source:Connecture

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