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Benefitfocus Announces Third Quarter 2015 Financial Results

Total Revenue of $45.4 Million Grew 33% Year-Over-Year
Signed the Largest Employer Transaction in Company History
Large Employer Customer Count Grows to Over 700

CHARLESTON, S.C., Nov. 4, 2015 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits software solutions, today announced its third quarter 2015 financial results.

"Benefitfocus reported record third quarter financial results that exceeded expectations from both a revenue and profitability perspective," said Shawn Jenkins, Chief Executive Officer of Benefitfocus. "We experienced strong customer activity in both our carrier business and employer business resulting in the best quarter in the company's history. In addition, once again our software services revenue retention rate was over 95%."

Jenkins added, "We are also pleased to announce we recently signed the largest employer transaction in the company's history, which serves as a significant testament to the value the Benefitfocus platform brings to our customers. We remain focused on delivering a best-in-class cloud-based benefits management solution to our customers and we are confident that our expanding product portfolio and industry leadership puts us in an excellent position to capitalize on this multi-billion dollar market opportunity."

Third Quarter 2015 Financial Highlights

Revenue

  • Total revenue was $45.4 million, an increase of 33% compared to the third quarter of 2014.
  • Software services revenue was $39.3 million, an increase of 28% compared to the third quarter of 2014.
  • Professional services revenue was $6.1 million, an increase of 74% compared to the third quarter of 2014.
  • Employer revenue was $22.8 million, an increase of 53% compared to the third quarter of 2014.
  • Insurance carrier revenue was $22.6 million, an increase of 17% compared to the third quarter of 2014.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($13.2) million, compared to ($16.9) million in the third quarter of 2014. Non-GAAP net loss per share was ($0.46), based on 28.8 million basic and diluted weighted average common shares outstanding, compared to ($0.66) for the third quarter of 2014, based on 25.5 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was ($8.8) million, compared to ($13.5) million in the third quarter of 2014.
  • See important disclosures about non-GAAP measures, and a reconciliation of them to GAAP, below.

Balance Sheet and Cash Flow

  • Cash, cash equivalents and marketable securities at September 30, 2015 totaled $85.2 million, compared to $88.5 million at the end of the second quarter of 2015.

Third Quarter and Recent Business Highlights

  • Ended the quarter with 703 large employer customers, up from 540 at the end of the year ago period and 662 at the end of the second quarter of 2015, and 55 insurance carrier customers, up from 44 at the end of the year ago period and 52 at the end of the second quarter of 2015.
  • New employer customer relationships added during the quarter include Flowers Foods, Ubisoft Entertainment, Potash Corporation, Sargento Foods and Steve Madden.
  • Announced the launch of the Autumn Software Release, which includes several new platform configurations and feature enhancements as well as the general availability of BENEFITFOCUS® Core Analytics. We expect the latest release to improve the user experience and simplify the open enrollment process for Benefitfocus' employer and insurance carrier customers.
  • Introduced BENEFITFOCUS® ACA Management & Reporting and have received certification as an approved transmitter, allowing us to electronically file required ACA compliance documents with the Internal Revenue Service on behalf of our customers.
  • Announced a $46 million, three and a half year multi-product agreement to provide the benefits eligibility and enrollment services to the North Carolina State Health Plan's more than 500,000 active and retired members. The agreement includes the option to renew for two additional years in one- year increments and as part of the relationship Benefitfocus will deploy BENEFITFOCUS® Marketplace, BENEFITFOCUS® Benefits Service Center and BENEFITFOCUS® ACA Management & Reporting.

Business Outlook

Based on information available as of November 4, 2015, Benefitfocus is providing guidance for the fourth quarter and updating full year 2015 as indicated below.

Fourth Quarter 2015:

  • Total revenue is expected to be in the range of $51.2 million to $52.2 million.
  • Non-GAAP net loss is expected to be in the range of ($13.7) million to ($13.2) million, or ($0.47) to ($0.46) per share, based on 29.0 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($8.2) million to ($7.7) million.

Full Year 2015:

  • Total revenue is expected to be in the range of $182.0 million to $183.0 million.
  • Non-GAAP net loss is expected to be in the range of ($55.0) million to ($54.5) million, or ($1.94) to ($1.93) per share, based on 28.3 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($35.5) million to ($35.0) million.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, November 4, 2015 at 5:00 p.m. Eastern Time to discuss the company's financial results. To access this call, dial (855) 233-6991 (domestic) or (317) 586-4497 (international) with conference ID 61980950. 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/. A replay of this conference call can also be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) through November 11, 2015.

About Benefitfocus

Benefitfocus, Inc. (NASDAQ:BNFT) is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus has served more than 25 million consumers on its platform, which consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits, including core medical, dental and other voluntary benefits plans, as well as wellness programs. For more information, visit www.benefitfocus.com.

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 share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets and offering costs expensed. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and expense related to the impairment of goodwill and intangible assets. 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: fluctuations in our financial results; general economic risks; the immature and volatile market for our products and services; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; our ability to compete effectively; our ability to maintain our culture and recruit and retain qualified personnel; 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.cfm 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.

Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Revenue $ 45,426 $ 34,200 $ 130,803 $ 97,233
Cost of revenue (1)(2) 26,265 23,355 72,368 63,618
Gross profit 19,161 10,845 58,435 33,615
Operating expenses:(1)(2)
Sales and marketing 14,218 12,105 45,497 37,159
Research and development 12,958 11,469 38,006 30,619
General and administrative 6,777 5,033 18,581 12,834
Total operating expenses 33,953 28,607 102,084 80,612
Loss from operations (14,792) (17,762) (43,649) (46,997)
Other income (expense):
Interest income 56 14 130 64
Interest expense on building lease financing obligations (1,727) (943) (5,371) (2,050)
Interest expense on other borrowings (195) (198) (685) (476)
Other (expense) income (1) (8) 3 (11)
Total other expense, net (1,867) (1,135) (5,923) (2,473)
Loss before income taxes (16,659) (18,897) (49,572) (49,470)
Income tax expense (benefit) 5 (9) 25 20
Net loss $ (16,664) $ (18,888) $ (49,597) $ (49,490)
Comprehensive loss $ (16,664) $ (18,888) $ (49,597) $ (49,490)
Net loss per common share:
Basic and diluted $ (0.58) $ (0.74) $ (1.77) $ (1.97)
Weighted-average common shares outstanding:
Basic and diluted 28,847,493 25,503,194 28,083,343 25,085,072
(1) Stock-based compensation included in above line items:
Cost of revenue $ 467 $ 327 $ 1,221 $ 619
Sales and marketing 710 341 1,746 876
Research and development 700 436 1,752 951
General and administrative 1,137 549 2,912 1,098
(2) Amortization of acquired intangible assets included in above line items:
Cost of revenue $ 52 $ 58 $ 169 $ 175
Sales and marketing 6 7 19 20
Research and development 8 9 27 28
General and administrative 2 2 6 6
Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
As of
September 30,
2015
As of
December 31,
2014
Assets
Current assets:
Cash and cash equivalents $ 42,992 $ 51,074
Marketable securities 42,245 5,135
Accounts receivable, net 20,738 21,311
Accounts receivable, related party 1,996
Prepaid expenses and other current assets 6,296 4,242
Total current assets 114,267 81,762
Property and equipment, net 54,555 54,021
Intangible assets, net 730 951
Goodwill 1,634 1,634
Other non-current assets 1,169 1,650
Total assets $ 172,355 $ 140,018
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 4,925 $ 5,589
Accrued expenses 9,302 9,171
Accrued compensation and benefits 20,820 17,374
Deferred revenue, current portion 36,523 20,384
Revolving line of credit, current portion 10,000
Financing and capital lease obligations, current portion 4,383 4,197
Total current liabilities 85,953 56,715
Deferred revenue, net of current portion 56,345 74,126
Revolving line of credit, net of current portion 5,246 17,657
Financing and capital lease obligations, net of current portion 31,224 32,240
Other non-current liabilities 2,325 2,103
Total liabilities 181,093 182,841
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2015 and December 31, 2014 -- --
Common stock, par value $0.001, 50,000,000 shares authorized, 28,986,398 and 25,608,937 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively 29 26
Additional paid-in capital 307,088 223,409
Accumulated deficit (315,855) (266,258)
Total stockholders' deficit (8,738) (42,823)
Total liabilities and stockholders' deficit $ 172,355 $ 140,018
Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
September 30,
2015 2014
Cash flows from operating activities
Net loss $ (49,597) $ (49,490)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization 8,686 7,600
Stock-based compensation expense 7,631 3,544
Change in fair value and accretion of warrant 669
Interest accrual on financing obligation 5,371 2,050
Provision for doubtful accounts 5
Loss on disposal or impairment of property and equipment 10 15
Changes in operating assets and liabilities:
Accounts receivable, net (814) 5,701
Accrued interest on short-term investments 165 166
Prepaid expenses and other current assets (1,900) 234
Other non-current assets 1,047 546
Accounts payable 117 (1,323)
Accrued expenses 1,780 1,353
Accrued compensation and benefits 3,445 4,082
Deferred revenue (1,849) 11,181
Other non-current liabilities 222 987
Net cash and cash equivalents used in operating activities (25,686) (12,680)
Cash flows from investing activities
Purchases of short-term investments held to maturity (59,141) (12,959)
Proceeds from maturity of short-term investments held to maturity 21,867 18,830
Purchases of property and equipment (11,018) (7,985)
Net cash and cash equivalents used in investing activities (48,292) (2,114)
Cash flows from financing activities
Draws on revolving line of credit 32,492 7,000
Payments on revolving line of credit (34,902)
Proceeds from exercises of stock options 2,944 2,706
Proceeds from issuance of common stock and warrant, net of issuance costs 74,538
Payments of deferred financing costs and debt issuance costs (566)
Remittance of taxes upon vesting of restricted stock units (1,224) (19)
Payments on financing and capital lease obligations (7,386) (6,762)
Net cash and cash equivalents provided by financing activities 65,896 2,925
Net decrease in cash and cash equivalents (8,082) (11,869)
Cash and cash equivalents, beginning of period 51,074 65,645
Cash and cash equivalents, end of period $ 42,992 $ 53,776
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses $ 1,797 $ 726
Property and equipment purchased with financing and capital lease obligations $ 914 $ 14,777
Post contract support purchased with financing obligations $ 272 $ 604
Allocation of proceeds to deferred revenue from issuance of common stock based on relative selling price $ 207 $ –
Benefitfocus, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited, dollars in thousands except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Reconciliation from Gross Profit to Non-GAAP Gross Profit:
Gross profit $ 19,161 $ 10,845 $ 58,435 $ 33,615
Amortization of acquired intangible assets 52 58 169 175
Stock-based compensation expense 467 327 1,221 619
Total net adjustments 519 385 1,390 794
Non-GAAP gross profit $ 19,680 $ 11,230 $ 59,825 $ 34,409
Reconciliation from Operating Loss to Non-GAAP Operating Loss:
Operating loss $ (14,792) $ (17,762) $ (43,649) $ (46,997)
Amortization of acquired intangible assets 68 76 221 229
Stock-based compensation expense 3,014 1,653 7,631 3,544
Offering costs expensed 347 284 483 708
Total net adjustments 3,429 2,013 8,335 4,481
Non-GAAP operating loss $ (11,363) $ (15,749) $ (35,314) $ (42,516)
Reconciliation from Net Loss to Adjusted EBITDA:
Net loss $ (16,664) $ (18,888) $ (49,597) $ (49,490)
Depreciation 2,254 1,773 6,480 5,157
Amortization of software development costs 638 751 1,985 2,214
Amortization of acquired intangible assets 68 76 221 229
Interest income (56) (14) (130) (64)
Interest expense on building lease financing obligations 1,727 943 5,371 2,050
Interest expense on other borrowings 195 198 685 476
Income tax (benefit) expense 5 (9) 25 20
Stock-based compensation expense 3,014 1,653 7,631 3,544
Total net adjustments 7,845 5,371 22,268 13,626
Adjusted EBITDA $ (8,819) $ (13,517) $ (27,329) $ (35,864)
Reconciliation from Net Loss to Non-GAAP Net Loss:
Net loss $ (16,664) $ (18,888) $ (49,597) $ (49,490)
Amortization of acquired intangible assets 68 76 221 229
Stock-based compensation expense 3,014 1,653 7,631 3,544
Offering costs expensed 347 284 483 708
Total net adjustments 3,429 2,013 8,335 4,481
Non-GAAP net loss $ (13,235) $ (16,875) $ (41,262) $ (45,009)
Calculation of Non-GAAP Earnings Per Share:
Non-GAAP net loss $ (13,235) $ (16,875) $ (41,262) $ (45,009)
Weighted average shares outstanding - basic and diluted 28,847,493 25,503,194 28,083,343 25,085,072
Shares used in computing non-GAAP net loss per share - basic and diluted 28,847,493 25,503,194 28,083,343 25,085,072
Non-GAAP net loss per common share - basic and diluted $ (0.46) $ (0.66) $ (1.47) $ (1.79)

CONTACT: Benefitfocus, Inc. 843-284-1052 ext. 3527 pr@benefitfocus.com Investor Relations: Michael Bauer 843-284-1052 ext. 6654 michael.bauer@benefitfocus.com

Source:Benefitfocus, Inc.