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. 3527pr@benefitfocus.com Investor Relations:Michael Bauer843-284-1052 ext. 6654michael.bauer@benefitfocus.com 

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