Benefitfocus Announces Fourth Quarter and Full Year 2017 Financial Results

2017 total revenue of $256.7 million grew 10% year-over-year
2017 employer revenue of $164.0 million grew 17% year-over-year

CHARLESTON, S.C., March 14, 2018 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management software, today announced its fourth quarter and full year 2017 financial results.

"Our results for the fourth quarter reflect total revenue and adjusted EBITDA exceeding the midpoint of our guidance and we achieved a major milestone of becoming free cash flow positive," said Ray August, President and Chief Executive Officer of Benefitfocus. "Overall, the fourth quarter was a successful one that reflects improved execution and progress across our growing company."

August added, "As we focus on 2018, our teams are aligned to improve our sales execution, expand our revenue opportunities and strengthen our core. Successfully executing on these three priorities will result in faster recurring revenue growth, improved profitability, and drive long-term shareholder value."

Fourth Quarter 2017 Financial Highlights

Revenue

  • Total revenue was $66.8 million, an increase of 7% compared to the fourth quarter of 2016.
  • Software services revenue was $55.1 million, an increase of 5% compared to the fourth quarter of 2016.
  • Professional services revenue was $11.7 million, an increase of 15% compared to the fourth quarter of 2016.
  • Employer revenue was $44.4 million, an increase of 21% compared to the fourth quarter of 2016.
  • Insurance carrier revenue was $22.4 million, a decline of 14% compared to the fourth quarter of 2016.

Net Loss

  • GAAP net loss was ($7.0) million, compared to ($7.1) million in the fourth quarter of 2016. GAAP net loss per share was ($0.22), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.24) for the fourth quarter of 2016, based on 30.0 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($1.9) million, compared to ($2.6) million in the fourth quarter of 2016. Non-GAAP net loss per share was ($0.06), based on 31.3 million basic and diluted weighted average common shares outstanding, compared to ($0.09) for the fourth quarter of 2016, based on 30.0 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $5.3 million, compared to $2.9 million in the fourth quarter of 2016.

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

Balance Sheet

  • Cash, cash equivalents and marketable securities at December 31, 2017 totaled $55.3 million, compared to $54.6 million at the end of the third quarter of 2017.

Full Year 2017 Financial Highlights

Revenue

  • Total revenue was $256.7 million, an increase of 10% compared to the full year 2016.
  • Software services revenue was $218.4 million, an increase of 8% compared to the full year 2016.
  • Professional services revenue was $38.3 million, an increase of 21% compared to the full year 2016.
  • Employer revenue was $164.0 million, an increase of 17% compared to the full year 2016.
  • Insurance carrier revenue was $92.7 million, approximately unchanged compared to the full year 2016.

Net Loss

  • GAAP net loss was ($25.9) million, compared to ($40.1) million in 2016. GAAP net loss per share was ($0.83), based on 31.1 million basic and diluted weighted average common shares outstanding, compared to ($1.35) in 2016, based on 29.6 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($8.4) million, compared to ($21.7) million in 2016. Non-GAAP net loss per share was ($0.27), based on 31.1 million basic and diluted weighted average common shares outstanding, compared to ($0.73) in 2016, based on 29.6 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $19.4 million, compared to ($1.1) million in 2016.

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

Fourth Quarter and Recent Business Highlights

  • We ended the quarter with 920 large employer customers, up from 833 at the end of the year-ago period and 903 at the end of the third quarter of 2017.
  • We announced our Winter Software Release, which included platform investments designed to simplify end-of-year reporting and deliver data-driven insights for 2018 planning. The release also included new communication capabilities to help increase transparency and improve personalization.
  • We published our third annual "State of Employee Benefits" report, a snapshot of real, but anonymous benefit election data from more than 1.3 million consumers from 540 large employers on our Platform.
  • The Brandon Hall Group awarded us its gold medal award for the Best Advance in Compensation and Benefits and/or Payroll Administration category.

Business Outlook

Based on information available as of March 14, 2018, Benefitfocus is providing guidance for the first quarter and full year 2018. Our guidance is based on the new ASC 606 revenue recognition standard that is effective beginning January 1, 2018.

First Quarter 2018:

  • Total revenue is expected to be in the range of $57.5 million to $59.5 million.
  • Adjusted EBITDA is expected to be in the range of ($6.0) million to ($4.0) million.
  • Non-GAAP net loss is expected to be in the range of ($13.0) million to ($11.0) million.
  • Diluted weighted average common shares outstanding is expected to be 31.3 million.

Full Year 2018:

  • Total revenue is expected to be in the range of $250.0 million to $258.0 million.
  • Adjusted EBITDA is expected to be in the range of $5.0 million to $13.0 million.
  • Non-GAAP net loss is expected to be in the range of ($25.0) million to ($17.0) million.
  • Diluted weighted average common shares outstanding is expected to be 31.7 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, March 14, 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/. A replay of this conference call can also be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with replay passcode 13675332 through March 21, 2018.

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.

Benefitfocus, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Revenue $66,763 $62,647 $256,735 $233,335
Cost of revenue (1)(2) 33,260 32,522 124,156 120,681
Gross profit 33,503 30,125 132,579 112,654
Operating expenses:(1)(2)
Sales and marketing 18,177 13,546 69,280 55,488
Research and development 12,327 13,308 49,549 56,584
General and administrative 6,781 8,335 27,268 32,750
Total operating expenses 37,285 35,189 146,097 144,822
Loss from operations (3,782) (5,064) (13,518) (32,168)
Other income (expense):
Interest income 53 21 182 138
Interest expense on building lease financing obligations (1,865) (1,696) (7,450) (6,826)
Interest expense on other borrowings (1,405) (404) (4,931) (1,095)
Other expense 46 (140) (90)
Total other expense, net (3,217) (2,033) (12,339) (7,873)
Loss before income taxes (6,999) (7,097) (25,857) (40,041)
Income tax expense 5 2 15 17
Net loss $(7,004) $(7,099) $(25,872) $(40,058)
Comprehensive loss $(7,004) $(7,099) $(25,872) $(40,058)
Net loss per common share:
Basic and diluted $(0.22) $(0.24) $(0.83) $(1.35)
Weighted-average common shares outstanding:
Basic and diluted 31,285,263 30,030,164 31,052,378 29,589,857
(1) Stock-based compensation included in above line items:
Cost of revenue $705 $726 $2,508 $2,798
Sales and marketing 1,378 857 4,953 3,213
Research and development 790 994 2,990 4,532
General and administrative 1,618 1,901 5,686 7,545
(2) Amortization of acquired intangible assets included in
above line items:
Cost of revenue $36 $36 $141 $147
Sales and marketing 14 12 52 42
Research and development 12 13 50 54
General and administrative 2 2 15 14


Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
As of December 31,
2017 2016
Assets
Current assets:
Cash and cash equivalents $55,335 $56,853
Marketable securities 2,007
Accounts receivable, net 30,156 28,340
Accounts receivable, related party, net 4,626
Prepaid expenses and other current assets 4,337 4,449
Total current assets 89,828 96,275
Property and equipment, net 72,681 80,518
Intangible assets, net 150 408
Goodwill 1,634 1,634
Other non-current assets 816 1,575
Total assets $165,109 $180,410
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $4,260 $5,829
Accrued expenses 9,136 10,867
Accrued compensation and benefits 14,250 17,347
Deferred revenue, current portion 38,821 35,426
Revolving line of credit, current portion 24,000 20,000
Financing and capital lease obligations, current portion 3,423 2,604
Total current liabilities 93,890 92,073
Deferred revenue, net of current portion 19,898 40,412
Revolving line of credit, net of current portion 32,246 20,246
Financing and capital lease obligations, net of current portion 55,597 57,934
Other non-current liabilities 2,809 3,056
Total liabilities 204,440 213,721
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued
and outstanding at December 31, 2017 and 2016
- -
Common stock, par value $0.001, 50,000,000 shares authorized, 31,307,989 and
30,429,014 shares issued and outstanding at December 31, 2017 and 2016,
respectively
31 30
Additional paid-in capital 355,301 335,059
Accumulated deficit (394,663) (368,400)
Total stockholders' deficit (39,331) (33,311)
Total liabilities and stockholders' deficit $165,109 $180,410


Benefitfocus, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2017 2016 2015
Cash flows from operating activities
Net loss $(25,872) $(40,058) $(62,084)
Adjustments to reconcile net loss to net cash and cash equivalents
used in operating activities:
Depreciation and amortization 15,906 13,073 11,664
Stock-based compensation expense 16,137 18,088 10,454
Interest accrual on financing obligations 7,500 6,827 7,092
Provision for doubtful accounts 75 667 22
Loss on disposal or impairment of property and equipment 157 141 18
Changes in operating assets and liabilities:
Accounts receivable, net 2,735 (3,936) (7,800)
Accrued interest on short-term investments 7 220 205
Prepaid expenses and other current assets 112 1,626 (1,328)
Other non-current assets 759 339 1,380
Accounts payable (1,372) (1,849) 3,418
Accrued expenses (1,617) 990 2,961
Accrued compensation and benefits (3,097) (3,337) 3,310
Deferred revenue (17,119) (17,690) (1,189)
Other non-current liabilities (248) 2,073 332
Net cash and cash equivalents used in operating activities (5,937) (22,826) (31,545)
Cash flows from investing activities
Purchases of short-term investments held to maturity (2,004) (68,185)
Proceeds from short-term investments held to maturity 2,000 40,225 32,667
Purchases of property and equipment (8,279) (12,705) (14,727)
Net cash and cash equivalents (used in) provided by investing activities (6,279) 25,516 (50,245)
Cash flows from financing activities
Draws on revolving line of credit 105,000 84,000 57,492
Payments on revolving line of credit (89,000) (74,000) (44,903)
Proceeds from exercises of stock options and ESPP 3,715 6,870 4,229
Proceeds from issuance of common stock and
warrant, net of issuance costs
74,538
Payments of deferred financing costs and debt issuance costs (379) (566)
Remittance of taxes upon vesting of restricted stock units (202) (2,116)
Payments on financing and capital lease obligations (9,017) (10,200) (9,884)
Net cash and cash equivalents provided by financing activities 10,698 6,089 78,790
Net (decrease) increase in cash and cash equivalents (1,518) 8,779 (3,000)
Cash and cash equivalents, beginning of year 56,853 48,074 51,074
Cash and cash equivalents, end of year $55,335 $56,853 $48,074
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts
payable and accrued expenses
$389 $699 $1,489
Property and equipment purchased with financing
and capital lease obligations
$- $28,032 $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
Supplemental disclosure of cash flow information
Income taxes paid $14 $7 $18
Interest paid $10,911 $6,655 $6,525


Benefitfocus, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited, dollars in thousands except share and per share data)
Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
Reconciliation from Gross Profit to Non-GAAP Gross Profit:
Gross profit $33,503 $30,125 $132,579 $112,654
Amortization of acquired intangible assets 36 36 141 147
Stock-based compensation expense 705 726 2,508 2,798
Total net adjustments 741 762 2,649 2,945
Non-GAAP gross profit $34,244 $30,887 $135,228 $115,599
Reconciliation from Operating Loss to Non-GAAP Operating Loss:
Operating loss $(3,782) $(5,064) $(13,518) $(32,168)
Amortization of acquired intangible assets 64 63 258 257
Stock-based compensation expense 4,491 4,478 16,137 18,088
Costs not core to our business 578 1,058
Total net adjustments 5,133 4,541 17,453 18,345
Non-GAAP operating income (loss) $1,351 $(523) $3,935 $(13,823)
Reconciliation from Net Loss to Adjusted EBITDA:
Net loss $(7,004) $(7,099) $(25,872) $(40,058)
Depreciation 3,146 2,615 12,391 9,959
Amortization of software development costs 848 776 3,257 2,857
Amortization of acquired intangible assets 64 63 258 257
Interest income (53) (21) (182) (138)
Interest expense on building lease financing obligations 1,865 1,696 7,450 6,826
Interest expense on other borrowings 1,405 404 4,931 1,095
Income tax expense 5 2 15 17
Stock-based compensation expense 4,491 4,478 16,137 18,088
Costs not core to our business 578 1,058
Total net adjustments 12,349 10,013 45,315 38,961
Adjusted EBITDA $5,345 $2,914 $19,443 $(1,097)
Reconciliation from Net Loss to Non-GAAP Net Loss:
Net loss $(7,004) $(7,099) $(25,872) $(40,058)
Amortization of acquired intangible assets 64 63 258 257
Stock-based compensation expense 4,491 4,478 16,137 18,088
Costs not core to our business 578 1,058
Total net adjustments 5,133 4,541 17,453 18,345
Non-GAAP net loss $(1,871) $(2,558) $(8,419) $(21,713)
Calculation of Non-GAAP Earnings Per Share:
Non-GAAP net loss $(1,871) $(2,558) $(8,419) $(21,713)
Weighted average shares outstanding - basic and diluted 31,285,263 30,030,164 31,052,378 29,589,857
Shares used in computing non-GAAP net loss per share - basic and diluted 31,285,263 30,030,164 31,052,378 29,589,857
Non-GAAP net loss per common share - basic and diluted $(0.06) $(0.09) $(0.27) $(0.73)


Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges
(in millions, except per share data)
First Quarter 2018 Full Year 2018
Range Range
Low High Low High
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:
Net loss - Guidance range$(17.4) $(15.4) $(40.7) $(32.7)
Depreciation and amortization 4.1 4.1 17.8 17.8
Interest income (0.1) (0.1) (0.2) (0.2)
Interest expense 3.1 3.1 12.7 12.7
Income tax expense
Stock-based compensation expense 3.5 3.5 14.0 14.0
Costs not core to the business 0.8 0.8 1.4 1.4
Total net adjustments 11.4 11.4 45.7 45.7
Adjusted EBITDA - Guidance range$(6.0) $(4.0) $5.0 $13.0
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:
Net loss - Guidance range$(17.4) $(15.4) $(40.7) $(32.7)
Amortization of acquired intangible assets 0.1 0.1 0.3 0.3
Stock-based compensation expense 3.5 3.5 14.0 14.0
Costs not core to the business 0.8 0.8 1.4 1.4
Total net adjustments 4.4 4.4 15.7 15.7
Non-GAAP net loss - Guidance range$(13.0) $(11.0) $(25.0) $(17.0)
Calculation of Non-GAAP Earnings Per Share Guidance:
Non-GAAP net loss - Guidance range$(13.0) $(11.0) $(25.0) $(17.0)
Weighted average shares outstanding - basic and diluted 31.3 31.3 31.7 31.7
Shares used in computing non-GAAP
net loss per share - basic and diluted
31.3 31.3 31.7 31.7
Non-GAAP net loss per common share - basic and diluted$(0.42) $(0.35) $(0.79) $(0.54)

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.