Benefitfocus Announces Second Quarter 2021 Financial Results

 Delivers on second quarter financial commitments
Raising bar towards industry leadership in service excellence

CHARLESTON, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) --  Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading benefits technology platform that simplifies benefits administration for employers, health plans and brokers, today announces its second quarter 2021 financial results.  

Second quarter financial highlights:

  • Revenue of $60.9 million exceeds high end of guidance
  • GAAP EPS of ($0.50) vs. ($0.38) in second quarter 2020
  • Non-GAAP EPS of ($0.18) vs. ($0.26) in second quarter 2020
  • Adjusted EBITDA of $9.6 million, up 4% year over year
  • Operating cash flow of $9.2 million and free cash flow of $6.6 million
  • Cash and marketable securities of $193 million, up $4 million from prior quarter

Other recent highlights:

  • Announced addition of four accomplished and experienced industry leaders to Benefitfocus management team
  • Strengthened board experience, independence and diversity with addition of John Park
  • Added full suite of voluntary benefits offerings from Standard Insurance Company to Benefit Catalog
  • Delivered product enhancements for shopping and quoting functions for Health Plans to further simplify selling and distribution through an automated, insight-driven experience for brokers and groups

“Building a great business starts with building a great team,” said Matt Levin, president and chief executive officer. “I’m excited about the management announcements we made earlier today and believe we have attracted some of the best talent in the industry. My expectation is for these key additions, together with the dedicated team we have in place today, to raise the bar on service excellence in our industry. I believe delivering an exceptional customer experience is our most important priority and our biggest lever to drive higher levels of sustainable organic growth.”

“Benefitfocus again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “We are regaining momentum and seeing particularly strong traction in the public sector as we look to return to pre-pandemic levels. We continued to generate free cash flow and have a solid cash position which gives us the flexibility to invest strategically in order to advance our growth strategy.”

Second Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $60.9 million, down 2% compared to the second quarter of 2020.
  • Software services was $50.2 million, up 1% compared to the second quarter of 2020. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $44.3 million, up 1% compared to the second quarter of 2020.
    • Platform revenue was $5.9 million, down 4% compared to the second quarter of 2020.
  • Professional services revenue was $10.7 million, down 13% compared to the second quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($16.6) million, compared to ($12.3) million in the second quarter of 2020. GAAP net loss per share was ($0.50), based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.38) for the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss, Adjusted EBITDA and Free Cash Flow

  • Non-GAAP net loss available to common stockholders was ($5.9) million compared to ($8.2) million in the second quarter of 2020. Non-GAAP net loss per share was ($0.18) based on 33.1 million basic and diluted weighted average common shares outstanding, compared to ($0.26) in the second quarter of 2020, based on 32.1 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $9.6 million, compared to $9.3 million in the second quarter of 2020.
  • Free cash flow was $6.6 million, compared to $6.2 million in the second quarter of 2020.

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

Balance Sheet

  • Cash and cash equivalents and marketable securities at June 30, 2021 totaled $193.2 million, compared to $188.9 million at the end of the first quarter of 2021.
  • The full $50.0 million line of credit remains available to the company.

Business Outlook

Based on information available as of August 3, 2021, Benefitfocus is providing guidance for the third quarter as indicated below.

Third Quarter 2021

  • Total revenue is expected to be in the range of $58 million to $60 million.
  • Adjusted EBITDA is expected to be in the range of $5 million to $7 million.
  • Non-GAAP net loss available to common stockholders is expected to be between ($10.5) and ($8.0) million, or between ($0.31) and ($0.24) per share based on 33.1 million basic and diluted shares outstanding.

Full Year 2021

The company is reiterating guidance previously provided for Full Year 2021 as follows:

  • Total revenue is expected to be in the range of $254 million to $260 million.
  • Adjusted EBITDA is expected to be in the range of $44 million to $50 million.
  • Free cash flow is expected to be in the range of $20 million to $26 million.

Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring and impairment 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 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 Tuesday, August 3, 2021, at 5:00 p.m. ET. To access this call, dial (855) 327-6837 (domestic) or +1 (631) 891-4304 (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 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 10015779.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire benefits industry through innovative technology solutions that bring efficiency, cost savings and simplicity to employee benefits administration. Our powerful cloud-based software, data-driven insights and thoughtfully designed services help employers, insurance brokers, health plans and suppliers address the complexity of benefits enrollment and engagement, while bringing easier access to health, wealth and lifestyle products through a world-class benefits experience. Our mission is simple: to improve lives with benefits. 

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/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 income/loss, 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, expense related to the impairment of goodwill, intangible assets and long-lived assets, gain or loss on extinguishment of debt, and costs not core to our business. 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, intangible assets and long-lived assets, transaction and acquisition-related costs expensed, restructuring costs, gain or loss on extinguishment of debt, and costs not core to our business. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate restructuring costs. 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; our ability to maintain our culture and recruit, integrate and retain qualified personnel, including our board; our ability to compete effectively and implement our growth strategy; the need to innovate and provide useful products and services; the immature and volatile nature of the market for our products and services; risks related to changing healthcare and other applicable regulations; privacy; security and other risks associated with our business; management of growth; volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic; 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
June 30,
  Six Months Ended
June 30,
 
  2021  2020  2021  2020 
Revenue $60,904  $62,174  $125,967  $128,328 
Cost of revenue(1)(2)(3)  28,030   30,397   56,623   64,309 
Gross profit  32,874   31,777   69,344   64,019 
Operating expenses:(1)(2)(3)                
Sales and marketing  10,921   11,828   21,812   27,458 
Research and development  11,103   11,045   21,935   22,813 
General and administrative  17,574   9,381   27,436   19,896 
Restructuring costs  2,727   5,616   4,127   5,616 
Total operating expenses  42,325   37,870   75,310   75,783 
Loss from operations  (9,451)  (6,093)  (5,966)  (11,764)
Other income (expense):                
Interest income  54   97   111   523 
Interest expense  (5,646)  (5,862)  (11,201)  (11,753)
Other income  64   2   22   7 
Total other expense, net  (5,528)  (5,763)  (11,068)  (11,223)
Loss before income taxes  (14,979)  (11,856)  (17,034)  (22,987)
Income tax expense  41   6   83   11 
Net loss  (15,020)  (11,862)  (17,117)  (22,998)
Preferred dividends  (1,600)  (462)  (3,200)  (462)
Net loss available to common stockholders $(16,620) $(12,324) $(20,317) $(23,460)
Comprehensive loss $(15,020) $(11,862) $(17,117) $(22,998)
                 
Net loss per common share:                
Basic and diluted $(0.50) $(0.38) $(0.62) $(0.73)
Weighted-average common shares outstanding:                
Basic and diluted  33,080,257   32,058,387   32,787,162   32,348,673 
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $638  $633  $964  $1,300 
Sales and marketing  927   594   1,507   1,474 
Research and development  503   590   621   932 
General and administrative  2,308   1,506   2,807   3,294 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $336  $323  $673  $640 
Sales and marketing  77   83   153   174 
Research and development  113   114   226   223 
General and administrative  43   48   85   100 
                 
(3) Transaction and acquisition-related costs expensed included in above line items:                
General and administrative $6  $215  $160  $407 


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

  As of
June 30,
2021
  As of
December 31,
2020
 
Assets        
Current assets:        
Cash and cash equivalents $98,062  $90,706 
Marketable securities  95,107   95,085 
Accounts receivable, net  20,886   22,240 
Contract, prepaid and other current assets  18,838   21,354 
Total current assets  232,893   229,385 
Property and equipment, net  27,001   29,701 
Financing lease right-of-use assets  60,291   68,670 
Operating lease right-of-use assets  986   1,107 
Intangible assets, net  9,257   10,393 
Goodwill  12,857   12,857 
Deferred contract costs and other non-current assets  9,011   10,259 
Total assets $352,296  $362,372 
Liabilities, redeemable preferred stock and stockholders' deficit        
Current liabilities:        
Accounts payable $3,639  $2,160 
Accrued expenses  8,177   6,262 
Accrued compensation and benefits  14,223   19,129 
Deferred revenue, current portion  28,202   27,782 
Lease liabilities and financing obligations, current portion  7,104   5,959 
Total current liabilities  61,345   61,292 
Deferred revenue, net of current portion  3,387   4,422 
Convertible senior notes  190,089   184,308 
Lease liabilities and financing obligations, net current portion  78,344   79,282 
Other non-current liabilities  2,629   2,470 
Total liabilities  335,794   331,774 
Commitments and contingencies        
Redeemable preferred stock:        
Series A preferred stock, par value $0.001, 5,000,000 shares
authorized, 1,777,778 and 1,777,778 shares issued and outstanding
at June 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of June 30, 2021 and December 31, 2020, respectively
  79,193   79,193 
Stockholders' deficit:        
Common stock, par value $0.001, 95,000,000 and 50,000,000 shares authorized,
33,234,786 and 32,327,439 issued and outstanding at June 30, 2021 and December 31, 2020, respectively
  33   32 
Additional paid-in capital  430,451   427,431 
Accumulated deficit  (493,175)  (476,058)
Total stockholders' deficit  (62,691)  (48,595)
Total liabilities, redeemable preferred stock and stockholders' deficit $352,296  $362,372 
         


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

  Six Months Ended
June 30,
 
  2021  2020 
Cash flows from operating activities        
Net loss $(17,117) $(22,998)
Adjustments to reconcile net loss to net cash and cash
equivalents provided by (used in) operating activities:
        
Depreciation and amortization  12,525   12,105 
Stock-based compensation expense  5,899   7,000 
Accretion of interest on convertible senior notes  5,780   5,894 
Interest accrual on finance lease liabilities  3,244   44 
Rent expense less than payments  (27)  (16)
Non-cash interest income on short-term investments  506    
Impairment or loss on disposal of right-of-use assets and property and equipment  4,048    
Provision for doubtful accounts     111 
Changes in operating assets and liabilities:        
Accounts receivable, net  1,354   3,711 
Accrued interest on short-term investments  (101)   
Contract, prepaid and other current assets  2,410   3,672 
Deferred costs and other non-current assets  1,249   740 
Accounts payable and accrued expenses  3,520   (7,318)
Accrued compensation and benefits  (4,907)  (4,139)
Deferred revenue  (615)  (2,850)
Other non-current liabilities  159   1,910 
Net cash and cash equivalents provided by (used in) operating activities  17,927   (2,134)
Cash flows from investing activities        
Purchases of short-term investments held to maturity  (48,427)   
Proceeds from short-term investments held to maturity  48,000    
Purchases of property and equipment  (4,483)  (7,075)
Net cash and cash equivalents used in investing activities  (4,910)  (7,075)
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)
Proceeds from issuance of preferred stock, net of issuance costs     79,840 
Payments of preferred dividends  (3,200)  (462)
Repurchase of common stock     (9,667)
Proceeds from exercises of stock options and ESPP  322   225 
Payments on financing obligations  (224)  (416)
Payments of principal on finance lease liabilities  (2,559)  (7,637)
Net cash and cash equivalents (used in) provided by financing activities  (5,661)  61,729 
Net increase in cash and cash equivalents  7,356   52,520 
Cash and cash equivalents, beginning of period  90,706   130,976 
Cash and cash equivalents, end of period $98,062  $183,496 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $  $37 
         


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

  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
  2021  2020  2021  2020 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $32,874  $31,777  $69,344  $64,019 
Amortization of acquired intangible assets  336   323   673   640 
Stock-based compensation expense  638   633   964   1,300 
Total net adjustments  974   956   1,637   1,940 
Non-GAAP gross profit $33,848  $32,733  $70,981  $65,959 
                 
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):                
Operating loss $(9,451) $(6,093) $(5,966) $(11,764)
Amortization of acquired intangible assets  569   568   1,137   1,137 
Stock-based compensation expense  4,376   3,323   5,899   7,000 
Transaction and acquisition-related costs expensed  6   215   160   407 
Impairment of long-lived assets  4,003      4,003    
Costs not core to our business  1,717      3,598    
Total net adjustments  10,671   4,106   14,797   8,544 
Non-GAAP operating income (loss) $1,220  $(1,987) $8,831  $(3,220)
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(15,020) $(11,862) $(17,117) $(22,998)
Depreciation  3,444   3,926   7,067   7,722 
Amortization of software development costs  2,159   1,727   4,321   3,246 
Amortization of acquired intangible assets  569   568   1,137   1,137 
Interest income  (54)  (97)  (111)  (523)
Interest expense  5,646   5,862   11,201   11,753 
Income tax expense  41   6   83   11 
Stock-based compensation expense  4,376   3,323   5,899   7,000 
Transaction and acquisition-related costs expensed  6   215   160   407 
Restructuring costs  2,727   5,616   4,127   5,616 
Impairment of long-lived assets  4,003      4,003    
Costs not core to our business  1,717      3,598    
Total net adjustments  24,634   21,146   41,485   36,369 
Adjusted EBITDA $9,614  $9,284  $24,368  $13,371 
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(15,020) $(11,862) $(17,117) $(22,998)
Amortization of acquired intangible assets  569   568   1,137   1,137 
Stock-based compensation expense  4,376   3,323   5,899   7,000 
Transaction and acquisition-related costs expensed  6   215   160   407 
Impairment of long-lived assets  4,003      4,003    
Costs not core to our business  1,717      3,598    
Total net adjustments  10,671   4,106   14,797   8,544 
Non-GAAP net loss $(4,349) $(7,756) $(2,320) $(14,454)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(4,349) $(7,756) $(2,320) $(14,454)
Preferred dividends  (1,600)  (462)  (3,200)  (462)
Non-GAAP net loss available to common stockholders $(5,949) $(8,218) $(5,520) $(14,916)
                 
Weighted average shares outstanding - basic and diluted  33,080,257   32,058,387   32,787,162   32,348,673 
Shares used in computing non-GAAP net loss per share - basic and diluted  33,080,257   32,058,387   32,787,162   32,348,673 
Non-GAAP net loss per common share - basic and diluted $(0.18) $(0.26) $(0.17) $(0.46)
                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                
Net cash and cash equivalents provided by (used in) operating activities $9,163  $5,036  $17,927  $(2,134)
Purchases of property and equipment  (2,590)  (3,254)  (4,483)  (7,075)
Cash paid for restructuring costs  5   4,456   1,384   4,456 
Total net adjustments  (2,585)  1,202   (3,099)  (2,619)
Free Cash Flow $6,578  $6,238  $14,828  $(4,753)
                 

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

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


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