Benefitfocus Announces Second Quarter 2020 Financial Results

Financial performance exceeded high end of revenue and adjusted EBITDA guidance
Strong execution and continued innovation positions company for long-term growth and value creation

CHARLESTON, S.C., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), a technology platform driving rapid innovation for employers and health plans, today announced its second quarter 2020 financial results.

“Benefitfocus delivered a strong quarter including enhanced profitability and liquidity. I am extremely proud of our team for delivering these results, particularly in the context of a challenging environment that was unthinkable just six months ago,” said Ray August, President and Chief Executive Officer of Benefitfocus. “Our team is executing well and delivering high-impact solutions for our customers and partners. As the world becomes more focused than ever on improving health outcomes, we have strengthened our resolve and commitment to our mission to transform our industry and improve lives with benefits.”

Steve Swad, Chief Financial Officer said, “We swiftly adjusted our cost base during the quarter in response to COVID-19, and at the same time substantially strengthened our cash position through an $80 million strategic investment from BuildGroup LLC. Our strong execution in the quarter allowed us to increase our profitability and cash flow outlook for the year, while also investing in automation and platform innovation to drive sustainable long-term growth.”  

Highlights include: 

  • Exceeded high end of Q2 revenue and adjusted EBITDA  guidance;

  • Increased full year 2020 adjusted EBITDA and free cash flow guidance on strength of Q2 operating performance;

  • Closed $80 million investment by BuildGroup LLC, substantially strengthening the company’s balance sheet; 

  • Won new health plan customer, Medica, to enable digital transformation and deliver a modern enrollment solution;

  • Enhanced our platform’s mobile and communication capabilities to streamline the enrollment experience, reduce administrative burden and increase customer engagement; and

  • Added insurance innovator Haven Life to Benefit Catalog, the industry’s leading marketplace for voluntary benefits.

Second Quarter 2020 Financial Highlights

Revenue

  • Total revenue was $62.2 million, a decrease of 9% compared to the second quarter of 2019.

  • Software services was $49.9 million, a decrease of 6% compared to the second quarter of 2019. Software services comprise subscription and platform revenue.

    • Subscription revenue was $43.8 million, a decrease of 8% compared to the second quarter of 2019.

    • Platform revenue was $6.1 million, an increase of 13% compared to the second quarter of 2019.

  • Professional services revenue was $12.3 million, a decrease of 21% compared to the second quarter of 2019.

Net Loss

  • GAAP net loss was ($11.9) million, compared to ($14.9) million in the second quarter of 2019. GAAP net loss per share was ($0.38), based on 32.1 million basic and diluted weighted average common shares outstanding, compared to ($0.46) for the second quarter of 2019, based on 32.6 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($7.8) million compared to ($10.0) million in the second quarter of 2019. Non-GAAP net loss per share was ($0.26) and ($0.31) in the second quarter of 2020 and 2019, respectively, based on 32.1 million and 32.6 million basic and fully diluted weighted average common shares outstanding for the second quarter of 2020 and 2019, respectively.

  • Adjusted EBITDA was $9.3 million, compared to roughly breakeven in the second quarter of 2019.

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

Balance Sheet

  • Cash and cash equivalents at June 30, 2020 totaled $183.5 million, compared to $114.7 million at the end of the first quarter of 2020. 

  • During the second quarter of 2020, the company repurchased approximately 36,000 shares of its common stock at a total cost of approximately $285,000, representing an average price per share of approximately $7.98.

  • Since initiating its share repurchase program last quarter, the company has repurchased slightly more than 1.1 million shares of its common stock for approximately $9.7 million, representing an average repurchase price of $8.71 per share.

Updated Business Outlook

Based on information available as of August 5, 2020, Benefitfocus is providing guidance for the third quarter and full year 2020 as indicated below.

Third Quarter 2020:

  • Total revenue is expected to be in the range of $59 million to $62 million.

  • Non-GAAP net loss is expected to be in the range of ($6) million to ($3) million, or ($0.21) to ($0.12) per share, based on 32.3 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $6 million to $9 million.

Full Year 2020:

  • Total revenue is expected to be in the range of $260 million to $270 million.

  • Non-GAAP net loss is expected to be in the range of ($16) million to ($11) million, or ($0.59) to ($0.44) per share, based on 32.3 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA is expected to be in the range of $35 million to $40 million.

  • Free cash flow is expected to be in the range of $10 million to $20 million.

Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring charges.

Management has not reconciled forward-looking non-GAAP net loss, adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of GAAP net loss or GAAP operating cash flows. This is because we cannot predict with reasonable certainty the ultimate outcome of the various necessary GAAP components of such reconciliations, including, for example, those related to compensation, acquisition transactions and integration, or others that may arise during the year, without unreasonable effort. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts. See below for additional important disclosures regarding our non-GAAP financial measures.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call to discuss the company’s financial results and business outlook on Wednesday, August 5, 2020, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or (201) 493-6784 (international). A live webcast of the conference call will be available on the Investor Relations page of the company’s website at http://investor.benefitfocus.com/. After the conference call, a replay will be available until August 12, 2020, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13706867.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire U.S. benefits industry on a single technology platform to protect consumers' health, wealth, property and lifestyle. Our powerful cloud-based software, data-driven insights and thoughtfully-designed services, enable employers, insurance brokers, carriers and suppliers to simplify the complexity of benefits administration and 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 loss, net loss/income, net loss/income 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 loss/income, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, if any, restructuring charges, 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, transaction and acquisition-related costs expensed, restructuring charges and costs not core to our business. We define free cash flow as cash used in operating activities less capital expenditures, adjusted to eliminate restructuring charges. 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: volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic; our continuing losses and need to achieve GAAP profitability; fluctuations in our financial results; our ability to maintain our culture, retain and motivate qualified personnel; the immature and volatile market for our products and services; risks related to changing healthcare and other applicable regulations; risks associated with acquisitions; cyber-security risks; 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.

Source: Benefitfocus, Inc.

Benefitfocus, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)

 Three Months Ended  Six Months Ended 
June 30,June 30,
 2020  2019  2020  2019 
Revenue$62,174  $68,579  $128,328  $136,878 
Cost of revenue(1)(2)(3) 30,397   32,802   64,309   65,654 
Gross profit 31,777   35,777   64,019   71,224 
Operating expenses:(1)(2)(3)               
Sales and marketing 11,828   19,318   27,458   38,937 
Research and development 11,045   14,461   22,813   27,551 
General and administrative 9,381   11,785   19,896   23,581 
Restructuring costs 5,616      5,616    
Total operating expenses 37,870   45,564   75,783   90,069 
Loss from operations (6,093)  (9,787)  (11,764)  (18,845)
Other income (expense):               
Interest income 97   762   523   1,422 
Interest expense (5,862)  (5,837)  (11,753)  (11,651)
Other (expense) income 2   (73)  7   (64)
Total other expense, net (5,763)  (5,148)  (11,223)  (10,293)
Loss before income taxes (11,856)  (14,935)  (22,987)  (29,138)
Income tax expense 6   3   11   9 
Net loss (11,862)  (14,938)  (22,998)  (29,147)
Preferred dividends (462)     (462)   
Net loss available to common stockholders$(12,324) $(14,938) $(23,460) $(29,147)
Comprehensive loss$(12,324) $(14,938) $(23,460) $(29,147)
                
Net loss per common share:               
Basic and diluted$(0.38) $(0.46) $(0.73) $(0.90)
Weighted-average common shares outstanding:               
Basic and diluted 32,058,387   32,613,718   32,348,673   32,336,864 
                
                
(1) Stock-based compensation included in above line items:               
Cost of revenue$633  $691  $1,300  $1,590 
Sales and marketing 594   (12)  1,474   1,674 
Research and development 590   718   932   1,910 
General and administrative 1,506   2,322   3,294   4,912 
                
(2) Amortization of acquired intangible assets included in above line items:               
Cost of revenue$323  $308  $640  $407 
Sales and marketing 83   113   174   149 
Research and development 114   131   223   171 
General and administrative 48   53   100   68 
                
(3) Transaction and acquisition-related costs expensed included in above line items:               
General and administrative$215  $360  $407  $1,002 
                

 

Benefitfocus, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)

 As of  As of 
June 30,December 31,
20202019
Assets       
Current assets:       
Cash and cash equivalents$183,496  $130,976 
Accounts receivable, net 29,872   33,754 
Contract, prepaid and other current assets 17,851   21,523 
Total current assets 231,219   186,253 
Property and equipment, net 31,430   28,669 
Financing lease right-of-use assets 73,372   78,520 
Operating lease right-of-use assets 1,529   1,715 
Intangible assets, net 11,530   12,667 
Goodwill 12,857   12,857 
Deferred contract costs and other non-current assets 10,263   11,002 
Total assets$372,200  $331,683 
Liabilities and stockholders' deficit       
Current liabilities:       
Accounts payable$6,648  $9,563 
Accrued expenses 6,526   10,526 
Accrued compensation and benefits 11,107   15,246 
Deferred revenue, current portion 31,020   33,429 
Lease liabilities and financing obligations, current portion 6,536   6,871 
Total current liabilities 61,837   75,635 
Deferred revenue, net of current portion 4,638   5,079 
Convertible senior notes 193,843   187,949 
Lease liabilities and financing obligations, net current portion 82,294   88,572 
Other non-current liabilities 2,000   92 
Total liabilities 344,612   357,327 
Commitments and contingencies       
Redeemable preferred stock:       
Series A preferred stock, par value $0.001, 5,000,000 shares authorized,
1,777,778 and 0 shares issued and outstanding
at June 30, 2020 and December 31, 2019, respectively,
liquidation preference $45 per share as of June 30, 2020
 79,193    
Stockholders' deficit:       
Common stock, par value $0.001, 50,000,000 shares authorized,
32,175,444 and 32,788,980 shares issued and outstanding
at June 30, 2020 and December 31, 2019, respectively
 32   33 
Additional paid-in capital 423,122   426,025 
Accumulated deficit (474,759)  (451,702)
Total stockholders' deficit (51,605)  (25,644)
Total liabilities, redeemable preferred stock and stockholders' deficit$372,200  $331,683 
        

Benefitfocus, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

 Six Months Ended 
June 30,
 2020  2019 
Cash flows from operating activities       
Net loss$(22,998) $(29,147)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:       
Depreciation and amortization 12,105   10,949 
Stock-based compensation expense 7,000   10,086 
Accretion of interest on convertible senior notes 5,894   5,541 
Interest accrual on finance lease liabilities 44    
Rent expense (less than) in excess of payments (16)  3 
Provision for doubtful accounts 111   265 
Changes in operating assets and liabilities:       
Accounts receivable, net 3,711   (10,671)
Contract, prepaid and other current assets 3,672   (476)
Deferred costs and other non-current assets 740   2,851 
Accounts payable and accrued expenses (7,318)  (4,085)
Accrued compensation and benefits (4,139)  273 
Deferred revenue (2,850)  (6,004)
Other non-current liabilities 1,910   (46)
Net cash and cash equivalents used in operating activities (2,134)  (20,461)
Cash flows from investing activities       
Business combination, net of cash acquired    (20,914)
Purchases of property and equipment (7,075)  (7,401)
Net cash and cash equivalents used in investing activities (7,075)  (28,315)
Cash flows from financing activities       
Draws on revolving line of credit 10,000    
Payments on revolving line of credit (10,000)   
Payments of debt issuance costs (154)  (357)
Proceeds from issuance of preferred stock, net of issuance costs 79,840    
Payments of preferred dividends (462)   
Repurchase of common stock (9,667)   
Proceeds from exercises of stock options and ESPP 225   134 
Payments on financing obligations (416)  (841)
Payments of principal on finance lease liabilities (7,637)  (2,699)
Net cash and cash equivalents provided by (used in) financing activities 61,729   (3,763)
Net increase (decrease) in cash and cash equivalents 52,520   (52,539)
Cash and cash equivalents, beginning of period 130,976   190,928 
Cash and cash equivalents, end of period$183,496  $138,389 
        
Supplemental disclosure of non-cash investing and financing activities       
Property and equipment purchases in accounts payable and accrued expenses$37  $437 
        

Benefitfocus, Inc.
Unaudited Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except share and per share data)

 Three Months Ended  Six Months Ended 
June 30,June 30,
 2020  2019  2020  2019 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:               
Gross profit$31,777  $35,777  $64,019  $71,224 
Amortization of acquired intangible assets 323   308   640   407 
Stock-based compensation expense 633   691   1,300   1,590 
Total net adjustments 956   999   1,940   1,997 
Non-GAAP gross profit$32,733  $36,776  $65,959  $73,221 
                
Reconciliation from Operating Loss to Non-GAAP Operating Loss:               
Operating loss$(6,093) $(9,787) $(11,764) $(18,845)
Amortization of acquired intangible assets 568   605   1,137   795 
Stock-based compensation expense 3,323   3,719   7,000   10,086 
Transaction and acquisition-related costs expensed 215   360   407   1,002 
Costs not core to our business    266      586 
Total net adjustments 4,106   4,950   8,544   12,469 
Non-GAAP operating loss$(1,987) $(4,837) $(3,220) $(6,376)
                
Reconciliation from Net Loss to Adjusted EBITDA:               
Net loss$(11,862) $(14,938) $(22,998) $(29,147)
Depreciation 3,926   3,690   7,722   7,657 
Amortization of software development costs 1,727   1,319   3,246   2,497 
Amortization of acquired intangible assets 568   605   1,137   795 
Interest income (97)  (762)  (523)  (1,422)
Interest expense 5,862   5,837   11,753   11,651 
Income tax expense 6   3   11   9 
Stock-based compensation expense 3,323   3,719   7,000   10,086 
Transaction and acquisition-related costs expensed 215   360   407   1,002 
Restructuring costs 5,616      5,616    
Costs not core to our business    266      586 
Total net adjustments 21,146   15,037   36,369   32,861 
Adjusted EBITDA$9,284  $99  $13,371  $3,714 
                
Reconciliation from Net Loss to Non-GAAP Net Loss:               
Net loss$(11,862) $(14,938) $(22,998) $(29,147)
Amortization of acquired intangible assets 568   605   1,137   795 
Stock-based compensation expense 3,323   3,719   7,000   10,086 
Transaction and acquisition-related costs expensed 215   360   407   1,002 
Costs not core to our business    266      586 
Total net adjustments 4,106   4,950   8,544   12,469 
Non-GAAP net loss$(7,756) $(9,988) $(14,454) $(16,678)
                
Calculation of Non-GAAP Earnings Per Share:               
Non-GAAP net loss$(7,756) $(9,988) $(14,454) $(16,678)
Preferred dividends (462)     (462)   
Non-GAAP net loss available to common stockholders$(8,218) $(9,988) $(14,916) $(16,678)
                
Weighted average shares outstanding - basic and diluted 32,058,387   32,613,718   32,348,673   32,336,864 
Shares used in computing non-GAAP net loss per share - basic and diluted 32,058,387   32,613,718   32,348,673   32,336,864 
Non-GAAP net loss per common share - basic and diluted$(0.26) $(0.31) $(0.46) $(0.52)
                

Benefitfocus, Inc.
843-981-8898
pr@benefitfocus.com 

Investor Relations:
Patti Leahy
843-981-8899
ir@benefitfocus.com 

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