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
[email protected]

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
[email protected]