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Benefitfocus Announces Third Quarter 2016 Financial Results

Total revenue of $58.0 million grew 28% year-over-year
Employer revenue of $35.4 million grew 55% year-over-year

CHARLESTON, S.C., Nov. 03, 2016 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management solutions, today announced its third quarter 2016 financial results.

“Benefitfocus continued its positive momentum and delivered strong third quarter results with total revenue growing 28% in the quarter,” said Shawn Jenkins, Chief Executive Officer of Benefitfocus. “Our employer revenue grew 55% driven by impressive demand for our platform, and once again, our software revenue retention rate was over 95%.”

Jenkins added, “We are also pleased that we achieved adjusted EBITDA profitability one quarter ahead of plan and continue to make excellent progress towards achieving our long-term goals. Throughout 2016 we have extended our leadership position within the dynamic cloud based benefits administration market as we remain focused on enabling our customers to engage employees, improve plan fit, reduce benefits expense and streamline administration.”

Third Quarter 2016 Financial Highlights

Revenue

  • Total revenue was $58.0 million, an increase of 28% compared to the third quarter of 2015.
  • Software services revenue was $49.3 million, an increase of 25% compared to the third quarter of 2015.
  • Professional services revenue was $8.7 million, an increase of 43% compared to the third quarter of 2015.
  • Employer revenue was $35.4 million, an increase of 55% compared to the third quarter of 2015.
  • Insurance carrier revenue was $22.7 million, approximately unchanged compared to the third quarter of 2015.

Net Loss

  • Net loss was ($8.6) million, compared to ($16.7) million in the third quarter of 2015. Net loss per share was ($0.29), based on 29.7 million basic and diluted weighted average common shares outstanding, compared to ($0.58) for the third quarter of 2015, based on 28.8 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($4.1) million, compared to ($13.2) million in the third quarter of 2015. Non-GAAP net loss per share was ($0.14), based on 29.7 million basic and diluted weighted average common shares outstanding, compared to ($0.46) for the third quarter of 2015, based on 28.8 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $1.1 million, compared to ($8.8) million in the third quarter of 2015.

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, 2016 totaled $55.3 million, compared to $68.0 million at the end of the second quarter of 2016.

Third Quarter and Recent Business Highlights

  • Ended the quarter with 827 large employer customers, up from 703 at the end of the year ago period and 803 at the end of the second quarter of 2016.
  • Signed 6 new national accounts with more than 10,000 lives during the third quarter.
  • Announced major platform upgrades in our Autumn 2016 Software Release. This latest release gives consumers on the BENEFITFOCUS® Platform the ability to complete open enrollment on their mobile device using the BENEFITFOCUS® App or directly through the mobile optimize BENEFITFOCUS® Marketplace.
  • Hosted our first Carrier Executive Forum with over 20 SVP level executives from the country’s largest health and voluntary insurance carriers.
  • Opportunistically expanded our revolving credit facility from $60 million to $95 million and extended the term to February 2020.
  • Appointed Jeffrey Laborde as Chief Financial Officer. Prior to joining Benefitfocus, Laborde served as Chief Financial Officer at Infor, Inc., a leading enterprise resource planning software vendor, and SumTotal Systems, a leading human capital management software provider. Prior to SumTotal, Laborde served as a managing director for Goldman Sachs & Co. in its Technology, Media & Telecom Group.

Business Outlook

Based on information available as of November 3, 2016, Benefitfocus is providing guidance for the fourth quarter and updating full year 2016 as indicated below.

Fourth Quarter 2016:

  • Total revenue is expected to be in the range of $62.3 million to $63.3 million.
  • Non-GAAP net loss is expected to be in the range of ($4.2) million to ($3.2) million, or ($0.14) to ($0.11) per share, based on 29.8 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $1.5 million to $2.5 million.

Full Year 2016:

  • Total revenue is expected to be in the range of $233.0 million to $234.0 million.
  • Non-GAAP net loss is expected to be in the range of ($23.4) million to ($22.4) million, or ($0.79) to ($0.76) per share, based on 29.5 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($2.5) million to ($1.5) 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, November 3, 2016 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/. A replay of this conference call can also be accessed by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) with replay passcode 13647185 through November 10, 2016.

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) provides a leading cloud-based benefits management platform that simplifies how organizations and individuals shop for, enroll in, manage and exchange benefits. Every day leading employers, insurance companies and millions of consumers rely on our platform to manage, scale and exchange benefits data seamlessly. In an increasingly complex benefits landscape, we bring order to chaos so our clients and their employees have access to better information, make better decisions and lead better lives. Learn more at www.benefitfocus.com, LinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release and the accompanying tables, 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 and amortization of acquisition-related intangible assets and offering costs expensed, 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 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 determination of 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 profitability; 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 maintain our culture and recruit and retain qualified personnel; 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.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,
2016 2015 2016 2015
Revenue $58,022 $45,426 $170,688 $130,803
Cost of revenue (1)(2) 29,112 26,265 88,159 72,368
Gross profit 28,910 19,161 82,529 58,435
Operating expenses:(1)(2)
Sales and marketing 13,607 14,218 41,942 45,497
Research and development 14,081 12,958 43,276 38,006
General and administrative 7,746 6,777 24,415 18,581
Total operating expenses 35,434 33,953 109,633 102,084
Loss from operations (6,524) (14,792) (27,104) (43,649)
Other income (expense):
Interest income 25 56 117 130
Interest expense on building lease financing obligations (1,704) (1,727) (5,130) (5,371)
Interest expense on other borrowings (262) (195) (691) (685)
Other (expense) income (133) (1) (136) 3
Total other expense, net (2,074) (1,867) (5,840) (5,923)
Loss before income taxes (8,598) (16,659) (32,944) (49,572)
Income tax expense 5 5 15 25
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Comprehensive loss $(8,603) $(16,664) $(32,959) $(49,597)
Net loss per common share:
Basic and diluted $(0.29) $(0.58) $(1.12) $(1.77)
Weighted-average common shares outstanding:
Basic and diluted 29,651,230 28,847,493 29,442,023 28,083,343
(1) Stock-based compensation included in above line items:
Cost of revenue $754 $467 $2,072 $1,221
Sales and marketing 886 710 2,356 1,746
Research and development 1,011 700 3,538 1,752
General and administrative 1,776 1,137 5,644 2,912
(2) Amortization of acquired intangible assets included in above line items:
Cost of revenue $37 $52 $111 $169
Sales and marketing 10 6 30 19
Research and development 13 8 41 27
General and administrative 5 2 12 6


Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
As of
September 30,
2016
As of
December 31,
2015
Assets
Current assets:
Cash and cash equivalents $50,800 $48,074
Marketable securities 4,510 40,448
Accounts receivable, net 27,538 27,616
Accounts receivable, related party 3,527 2,082
Prepaid expenses and other current assets 5,610 5,725
Total current assets 91,985 123,945
Property and equipment, net 57,874 55,037
Intangible assets, net 472 665
Goodwill 1,634 1,634
Other non-current assets 1,394 838
Total assets $153,359 $182,119
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $4,189 $7,953
Accrued expenses 14,403 10,449
Accrued compensation and benefits 17,224 20,684
Deferred revenue, current portion 34,899 37,858
Revolving line of credit, current portion 15,000 25,000
Financing and capital lease obligations, current portion 2,017 3,648
Total current liabilities 87,732 105,592
Deferred revenue, net of current portion 44,811 55,671
Revolving line of credit, net of current portion 20,246 5,246
Financing and capital lease obligations, net of current portion 33,038 31,183
Other non-current liabilities 2,974 2,436
Total liabilities 188,801 200,128
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.001, 5,000,000 shares authorized,
no shares issued and outstanding at September 30, 2016
and December 31, 2015
Common stock, par value $0.001, 50,000,000 shares authorized,
29,673,292 and 29,194,332 shares issued and outstanding
at September 30, 2016 and December 31, 2015, respectively
30 29
Additional paid-in capital 325,829 310,304
Accumulated deficit (361,301) (328,342)
Total stockholders' deficit (35,442) (18,009)
Total liabilities and stockholders' deficit $153,359 $182,119


Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
September 30,
2016 2015
Cash flows from operating activities
Net loss $(32,959) $(49,597)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Depreciation and amortization 9,619 8,686
Stock-based compensation expense 13,610 7,631
Interest accrual on financing obligation 5,130 5,371
Loss on disposal or impairment of property and equipment 140 10
Provision for doubtful accounts 287
Changes in operating assets and liabilities:
Accounts receivable, net (1,655) (814)
Accrued interest on short-term investments 217 165
Prepaid expenses and other current assets 465 (1,900)
Other non-current assets 142 1,047
Accounts payable (3,844) 117
Accrued expenses 4,726 1,780
Accrued compensation and benefits (3,460) 3,445
Deferred revenue (13,819) (1,849)
Other non-current liabilities 538 222
Net cash and cash equivalents used in operating activities (20,863) (25,686)
Cash flows from investing activities
Purchases of short-term investments held to maturity (2,004) (59,141)
Proceeds from maturity of short-term investments held to maturity 37,725 21,867
Purchases of property and equipment (10,861) (11,018)
Net cash and cash equivalents provided by (used in) investing activities 24,860 (48,292)
Cash flows from financing activities
Draws on revolving line of credit 64,000 32,492
Payments on revolving line of credit (59,000) (34,902)
Proceeds from exercises of stock options 2,118 2,944
Proceeds from issuance of common stock and warrant, net of issuance costs 74,538
Payment of deferred financing costs and debt issuance costs (566)
Remittance of taxes upon vesting of restricted stock units (202) (1,224)
Payments on financing and capital lease obligations (8,187) (7,386)
Net cash and cash equivalents (used in) provided by financing activities (1,271) 65,896
Net increase (decrease) in cash and cash equivalents 2,726 (8,082)
Cash and cash equivalents, beginning of period 48,074 51,074
Cash and cash equivalents, end of period $50,800 $42,992
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses $856 $1,797
Property and equipment purchased with financing and capital lease obligations $2,233 $914
Post contract support purchased with financing obligations $1,048 $272
Allocation of proceeds to deferred revenue from issuance of
common stock based on relative selling price
$ $207


Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Reconciliation from Gross Profit to Non-GAAP Gross Profit:
Gross profit $28,910 $19,161 $82,529 $58,435
Amortization of acquired intangible assets 37 52 111 169
Stock-based compensation expense 754 467 2,072 1,221
Total net adjustments 791 519 2,183 1,390
Non-GAAP gross profit $29,701 $19,680 $84,712 $59,825
Reconciliation from Operating Loss to Non-GAAP Operating Loss:
Operating loss $(6,524) $(14,792) $(27,104) $(43,649)
Amortization of acquired intangible assets 65 68 194 221
Stock-based compensation expense 4,427 3,014 13,610 7,631
Offering costs expensed 347 483
Total net adjustments 4,492 3,429 13,804 8,335
Non-GAAP operating loss $(2,032) $(11,363) $(13,300) $(35,314)
Reconciliation from Net Loss to Adjusted EBITDA:
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Depreciation 2,482 2,254 7,344 6,480
Amortization of software development costs 762 638 2,081 1,985
Amortization of acquired intangible assets 65 68 194 221
Interest income (25) (56) (117) (130)
Interest expense on building lease financing obligations 1,704 1,727 5,130 5,371
Interest expense on other borrowings 262 195 691 685
Income tax expense 5 5 15 25
Stock-based compensation expense 4,427 3,014 13,610 7,631
Total net adjustments 9,682 7,845 28,948 22,268
Adjusted EBITDA $1,079 $(8,819) $(4,011) $(27,329)
Reconciliation from Net Loss to Non-GAAP Net Loss:
Net loss $(8,603) $(16,664) $(32,959) $(49,597)
Amortization of acquired intangible assets 65 68 194 221
Stock-based compensation expense 4,427 3,014 13,610 7,631
Offering costs expensed 347 483
Total net adjustments 4,492 3,429 13,804 8,335
Non-GAAP net loss $(4,111) $(13,235) $(19,155) $(41,262)
Calculation of Non-GAAP Earnings Per Share:
Non-GAAP net loss $(4,111) $(13,235) $(19,155) $(41,262)
Weighted average shares outstanding - basic and diluted 29,651,230 28,847,493 29,442,023 28,083,343
Shares used in computing non-GAAP net loss per share - basic and
diluted
29,651,230 28,847,493 29,442,023 28,083,343
Non-GAAP net loss per common share - basic and diluted $(0.14) $(0.46) $(0.65) $(1.47)


Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
Fourth Quarter 2016 Full Year 2016
Range Range
Low High Low High
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:
Net loss - Guidance range $(9.2) $(8.2) $(42.2) $(41.2)
Depreciation and amortization 3.6 3.6 13.2 13.2
Interest income (0.1) (0.1)
Interest expense 2.2 2.2 8.0 8.0
Income tax expense
Stock-based compensation expense 4.9 4.9 18.6 18.6
Total net adjustments 10.7 10.7 39.7 39.7
Adjusted EBITDA - Guidance range $1.5 $2.5 $(2.5) $(1.5)
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:
Net loss - Guidance range $(9.2) $(8.2) $(42.2) $(41.2)
Amortization of acquired intangible assets 0.1 0.1 0.2 0.2
Stock-based compensation expense 4.9 4.9 18.6 18.6
Total net adjustments 5.0 5.0 18.8 18.8
Non-GAAP net loss - Guidance range $(4.2) $(3.2) $(23.4) $(22.4)
Calculation of Non-GAAP Earnings Per Share Guidance:
Non-GAAP net loss - Guidance range $(4.2) $(3.2) $(23.4) $(22.4)
Weighted average shares outstanding - basic and diluted 29.8 29.8 29.5 29.5
Shares used in computing non-GAAP
net loss per share - basic and diluted
29.8 29.8 29.5 29.5
Non-GAAP net loss per common share - basic and diluted $(0.14) $(0.11) $(0.79) $(0.76)


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.