Chronicle Journal: Finance

Benefitfocus Announces Fourth Quarter and Full Year 2020 Financial Results

Delivers record Q4 adjusted EBITDA of $20.2 million, GAAP EPS of $0.04 and non-GAAP EPS of $0.18
Executing on clear priorities to drive growth and operating leverage

CHARLESTON, S.C., March 08, 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 fourth quarter and full year 2020 financial results.  

Highlights include: 

  • Met or exceeded all fourth quarter and full year 2020 guidance metrics including revenue, adjusted EBITDA and free cash flow;
  • Augmented leadership team with hiring of first chief data officer to solidify the company as a leading, data-driven benefits technology platform;
  • Enhanced Benefit Catalog including partnership with Transamerica to enable integrated retirement plan enrollment directly through Benefitplace™;
  • Invested to remove friction in benefits management and improve the customer experience through AI-backed platform enrollment enhancements; and
  • Strengthened corporate governance and continued to enhance independence of company’s board structure.

“Benefitfocus continues to execute on its strategies to drive industry leadership and accelerate growth,” said Steve Swad, president and chief executive officer of Benefitfocus. “The investments we made in operational excellence, automation and enhanced customer interactions resulted in our best open enrollment yet.” Swad added, “To drive future growth, we are focused on simplifying the enrollment of benefits, improving our customers’ engagement with their benefits, and using data to personalize our offerings and create products that lower health care costs. I am confident we have the right strategy, the right assets and are building the right leadership team to unlock substantial shareholder value.”

“For the fourth quarter and full year, we delivered record EBITDA and free cash flow, moving us further towards our goal to become the most efficient and best-performing company in our industry,” said Alpana Wegner, chief financial officer of Benefitfocus. “I am pleased with the strong foundation we have established to deliver increased profitability and free cash flow, and remain focused on driving continued operating leverage in the business.”

Fourth Quarter 2020 Financial Highlights

Revenue

  • Total revenue was $76.2 million, down 13% compared to the fourth quarter of 2019.

  • Software services was $62.3 million, 9% lower compared to the fourth quarter of 2019. Software services is comprised of subscription and platform revenue.

    • Subscription revenue was $44.9 million, a decrease of 9% compared to the fourth quarter of 2019.

    • Platform revenue was $17.4 million, a decrease of 8% compared to the fourth quarter of 2019.

  • Professional services revenue was $13.9 million, down 26% compared to the fourth quarter of 2019.

Net Income (Loss)

  • GAAP net income was $3.1 million, compared to ($3.8) million in the fourth quarter of 2019. GAAP net income per share was $0.04, based on $1.3 million net income available to common stockholders and 33.5 million fully diluted weighted average common shares outstanding, compared to ($0.12) for the fourth quarter of 2019, based on ($3.8) million net loss available to common stockholders and 32.8 million basic and diluted weighted average common shares outstanding.

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

  • Non-GAAP net income was $8.7 million compared to $1.9 million in the fourth quarter of 2019. Non-GAAP net income per share was $0.18, based on $6.1 million net income available to common stockholders and 34.5 million fully diluted weighted average common shares outstanding, compared to $0.06 in the fourth quarter of 2019, based $1.9 million net income available to common stockholders and 33.2 million fully diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $20.2 million, compared to $12.5 million in the fourth quarter of 2019.

  • Free cash flow was $13.4 million, compared to $2.5 million in the fourth quarter of 2019.

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

Full Year 2020 Financial Highlights

Revenue

  • Total revenue was $268.1 million, down 9% compared to the full year 2019.

  • Software services was $214.8 million, 6% lower compared to the full year 2019. Software services is comprised of subscription and platform revenue.

    • Subscription revenue was $179.7 million, a decrease of 8% compared to the full year 2019.

    • Platform revenue was $35.1 million, an increase of 4% compared to the full year 2019.

  • Professional services revenue was $53.3 million, down 20% compared to the full year 2019.

Net Loss

  • GAAP net loss was ($24.3) million, compared to ($45.5) million in the full year 2019. GAAP net loss per share was ($0.87), based on ($28.0) million net loss available to common stockholders and 32.3 million basic and diluted weighted average common shares outstanding, compared to ($1.40) for the full year 2019, based on ($45.5) million net loss available to common stockholders and 32.5 million basic and diluted weighted average common shares outstanding.

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

  • Non-GAAP net loss was ($6.8) million, compared to ($22.3) million in the full year 2019. Non-GAAP net loss per share was ($0.32), based on ($10.5) million Non-GAAP net loss available to common stockholders and 32.3 million basic and diluted weighted average common shares outstanding, compared to ($0.69) for the full year 2019, based on ($22.3) million net loss available to common stockholders and 32.5 million basic and diluted weighted average common shares outstanding.

  • Adjusted EBITDA was $44.0 million, compared to $19.0 million in the full year 2019.

  • Free cash flow was $19.9 million, compared to ($31.6) million in the full year 2019.

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 December 31, 2020 totaled $185.8 million, compared to $176.0 million at the end of the third quarter of 2020. 

  • The full $50.0 million line of credit remains available to the Company.

Business Outlook

Based on information available as of March 8, 2021, Benefitfocus is providing guidance for the first quarter and full year 2021 as indicated below. Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring charges.

First Quarter 2021

  • Total revenue is expected to be in the range of $59 million to $61 million.

  • Adjusted EBITDA is expected to be in the range of $9 million to $11 million.

  • Non-GAAP net loss is expected to be between $5.1 and $3.1 million, or between ($0.16) and ($0.10) per share based on 32.3 million basic shares outstanding.

Full Year 2021

  • 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.

In addition, Benefitfocus is providing mid-term financial targets and an update on continued enhancements to the company’s board structure as part of its conference call today.

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 Monday, March 8, 2021, 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 March 15, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13715704.

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 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, restructuring charges, 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 charges, gain or loss on extinguishment of debt, 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. Beginning in the fourth quarter of 2020, we revised our definition of non-GAAP net loss/income and net loss/income per common share to also exclude expense related to the impairment of goodwill, intangible assets and long-lived assets.  Additionally, we revised our definition of adjusted EBITDA  to also exclude expense related to the impairment of long-lived assets, restructuring charges and gains or loss on extinguishment of debt.  The revisions to these definitions had no impact on our reported non-GAAP net loss/income and net loss/income per common share and adjusted EBITDA for periods prior to the three months ended December 31, 2020. 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 and uncertainties arising from the recent U.S. elections; 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. 
Consolidated Statements of Operations and Comprehensive Loss 
(in thousands, except share and per share data) 
                 
  Three Months Ended  Year Ended 
  December 31,  December 31, 
   2020   2019   2020   2019 
Revenue $76,230  $87,143  $268,141  $295,686 
Cost of revenue (1)(2)(3)  34,966   42,848   129,388   144,090 
Gross profit  41,264   44,295   138,753   151,596 
Operating expenses:(1)(2)(3)                
Sales and marketing  12,347   18,585   52,210   76,049 
Research and development  11,923   13,085   46,175   54,724 
General and administrative  8,400   10,976   37,720   45,329 
Restructuring costs        5,616    
Total operating expenses  32,670   42,646   141,721   176,102 
Income (loss) from operations  8,594   1,649   (2,968)  (24,506)
Other income (expense):                
Interest income  69   518   632   2,613 
Interest expense  (5,547)  (5,947)  (23,071)  (23,524)
Gain on repurchase of convertible senior notes        1,138    
Other (expense) income  (14)  (10)  (6)  (71)
Total other expense, net  (5,492)  (5,439)  (21,307)  (20,982)
Income (loss) before income taxes  3,102   (3,790)  (24,275)  (45,488)
Income tax expense  5   1   22   27 
Net income (loss)  3,097   (3,791)  (24,297)  (45,515)
Preferred dividends  (1,600)     (3,662)   
Undistributed earnings allocated to preferred stockholders  (212)         
Net income (loss) available to common stockholders $1,285  $(3,791) $(27,959) $(45,515)
Comprehensive income (loss) $3,097  $(3,791) $(24,297) $(45,515)
                 
Net income (loss) per common share:                
Basic $0.04  $(0.12) $(0.87) $(1.40)
Diluted $0.04  $(0.12) $(0.87) $(1.40)
Weighted-average common shares outstanding:                
Basic  32,312,246   32,774,924   32,318,201   32,539,748 
Diluted  33,512,904   32,774,924   32,318,201   32,539,748 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $1,099  $1,181  $3,703  $3,569 
Sales and marketing  841   1,202   3,081   3,799 
Research and development  838   665   2,555   3,265 
General and administrative  900   2,023   5,198   8,939 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $330  $317  $1,291  $1,029 
Sales and marketing  75   91   331   337 
Research and development  118   111   460   400 
General and administrative  46   50   192   167 
                 


Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
         
  As of December 31, 
  2020  2019 
Assets        
Current assets:        
Cash and cash equivalents $90,706  $130,976 
Marketable securities  95,085    
Accounts receivable, net  22,240   33,754 
Contract, prepaid and other current assets  21,354   21,523 
Total current assets  229,385   186,253 
Property and equipment, net  29,701   28,669 
Financing lease right-of-use assets  68,670   78,520 
Operating lease right-of-use assets  1,107   1,715 
Intangible assets, net  10,393   12,667 
Goodwill  12,857   12,857 
Deferred contract costs and other non-current assets  10,259   11,002 
Total assets $362,372  $331,683 
Liabilities and stockholders' deficit        
Current liabilities:        
Accounts payable $2,160  $9,563 
Accrued expenses  6,262   10,526 
Accrued compensation and benefits  19,129   15,246 
Deferred revenue, current portion  27,782   33,429 
Lease liabilities and financing obligations, current portion  5,959   6,871 
Total current liabilities  61,292   75,635 
Deferred revenue, net of current portion  4,422   5,079 
Convertible senior notes  184,308   187,949 
Lease liabilities and financing obligations, net of current portion  79,282   88,572 
Other non-current liabilities  2,470   92 
Total liabilities  331,774   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 December 31, 2020 and 2019, respectively,
liquidation preference $45 per share as of December 31, 2020
  79,193    
Stockholders' deficit:        
Common stock, par value $0.001, 50,000,000 shares authorized,
32,327,439 and 32,788,980 shares issued and outstanding
at December 31, 2020 and 2019, respectively
  32   33 
Additional paid-in capital  427,431   426,025 
Accumulated deficit  (476,058)  (451,702)
Total stockholders' deficit  (48,595)  (25,644)
Total liabilities, redeemable preferred stock and stockholders' deficit $362,372  $331,683 
         


Benefitfocus, Inc. 
Consolidated Statements of Cash Flows 
(in thousands) 
             
  Year Ended December 31, 
   2020   2019   2018 
Cash flows from operating activities            
Net loss $(24,297) $(45,515) $(52,627)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:            
Depreciation and amortization  25,014   22,351   15,815 
Stock-based compensation expense  14,537   19,572   28,868 
Accretion of interest on convertible senior notes  11,656   11,256    
Interest accrual on finance lease liabilities  97   33    
Interest accrual on financing obligations (prior to adoption of ASC 842)        7,521 
Rent payments in excess of expense  (32)  (16)   
Non-cash interest income for short-term investments  143       
Loss on disposal or impairment of property and equipment  918   9   7 
Gain on extinguishment of debt  (1,138)      
Provision for doubtful accounts  43   111   364 
Changes in operating assets and liabilities:            
Accounts receivable, net  11,412   (11,875)  8,650 
Accrued interest on short-term investments  (102)      
Contract, prepaid and other current assets  169   (3,642)  (570)
Deferred costs and other non-current assets  743   2,893   3,137 
Accounts payable and accrued expenses  (11,468)  426   6,566 
Accrued compensation and benefits  3,884   161   649 
Deferred revenue  (6,304)  (14,047)  (9,165)
Other non-current liabilities  2,376   (92)  (234)
Net cash and cash equivalents provided by (used in) operating activities  27,651   (18,375)  8,981 
Cash flows from investing activities            
Purchases of short-term investments held to maturity  (104,125)      
Proceeds from short-term investments held to maturity  9,000       
Business combination, net of cash acquired     (20,914)   
Purchases of property and equipment  (13,085)  (13,248)  (8,290)
Net cash and cash equivalents used in investing activities  (108,210)  (34,162)  (8,290)
Cash flows from financing activities            
Draws on revolving line of credit  10,000      115,000 
Payments on revolving line of credit  (10,000)     (171,246)
Proceeds from issuance of convertible senior notes        240,000 
Repurchase of convertible senior notes  (14,619)      
Payments of debt issuance costs  (154)  (357)  (6,000)
Purchase of convertible note capped call hedge        (33,024)
Cancellation of convertible note capped call hedge  26       
Proceeds from issuance of preferred stock, net of issuance costs  79,192       
Payment of preferred dividends  (3,662)      
Repurchase of common stock  (9,667)      
Proceeds from exercises of stock options and ESPP  585   453   712 
Payments on capital lease and financing obligations  (1,212)  (1,627)  (10,540)
Payments of principal on finance lease liabilities  (10,200)  (5,884)   
Net cash and cash equivalents provided by (used in) financing activities  40,289   (7,415)  134,902 
Net (decrease) increase in cash and cash equivalents  (40,270)  (59,952)  135,593 
Cash and cash equivalents, beginning of year  130,976   190,928   55,335 
Cash and cash equivalents, end of year $90,706  $130,976  $190,928 
             
Supplemental disclosure of non-cash investing and financing activities            
Property and equipment purchases in accounts payable and accrued expenses $142  $154  $244 
Property and equipment purchased with financing and capital lease obligations (prior to adoption of ASC 842) $-  $-  $4,810 
Post contract support purchased with financing obligations $-  $1,287  $790 
Debt issuance costs included in accounts payable and accrued expenses $-  $-  $358 
Supplemental disclosure of cash flow information            
Income taxes paid $22  $28  $28 
Interest paid $11,408  $12,374  $11,884 
             


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,
 
  2020  2019  2020  2019 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $41,264  $44,295  $138,753  $151,596 
Amortization of acquired intangible assets  330   317   1,291   1,029 
Stock-based compensation expense  1,099   1,181   3,703   3,569 
Impairment of long-lived assets  468      468    
Total net adjustments  1,897   1,498   5,462   4,598 
Non-GAAP gross profit $43,161  $45,793  $144,215  $156,194 
                 
Reconciliation from Operating Income (Loss) to Non-GAAP Operating Income (Loss):                
Operating income (loss) $8,594  $1,649  $(2,968) $(24,506)
Amortization of acquired intangible assets  569   569   2,274   1,933 
Stock-based compensation expense  3,678   5,071   14,537   19,572 
Transaction and acquisition-related costs expensed  25   30   450   1,035 
Impairment of long-lived assets  916      916    
Costs not core to our business  457      457   649 
Total net adjustments  5,645   5,670   18,634   23,189 
Non-GAAP operating income (loss) $14,239  $7,319  $15,666  $(1,317)
                 
Reconciliation from Net Income (Loss) to Adjusted EBITDA:                
Net income (loss) $3,097  $(3,791) $(24,297) $(45,515)
Depreciation  3,789   3,783   15,285   15,288 
Amortization of software development costs  2,177   1,370   7,455   5,130 
Amortization of acquired intangible assets  569   569   2,274   1,933 
Interest income  (69)  (518)  (632)  (2,613)
Interest expense  5,547   5,947   23,071   23,524 
Income tax expense  5   1   22   27 
Stock-based compensation expense  3,678   5,071   14,537   19,572 
Transaction and acquisition-related costs expensed  25   30   450   1,035 
Restructuring costs        5,616    
Impairment of long-lived assets  916      916    
Gain on repurchase of convertible senior notes        (1,138)   
Costs not core to our business  457      457   649 
Total net adjustments  17,094   16,253   68,313   64,545 
Adjusted EBITDA $20,191  $12,462  $44,016  $19,030 
                 
Reconciliation from Net Income (Loss) to Non-GAAP Net Income (Loss):                
Net income (loss) $3,097  $(3,791) $(24,297) $(45,515)
Amortization of acquired intangible assets  569   569   2,274   1,933 
Stock-based compensation expense  3,678   5,071   14,537   19,572 
Transaction and acquisition-related costs expensed  25   30   450   1,035 
Impairment of long-lived assets  916      916    
Gain on repurchase of convertible senior notes        (1,138)   
Costs not core to our business  457      457   649 
Total net adjustments  5,645   5,670   17,496   23,189 
Non-GAAP net income (loss) $8,742  $1,879  $(6,801) $(22,326)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net income (loss) $8,742  $1,879  $(6,801) $(22,326)
Preferred dividends  (1,600)     (3,662)   
Undistributed earnings allocated to preferred stockholders  (1,012)         
Non-GAAP net income (loss) available to common stockholders $6,130  $1,879  $(10,463) $(22,326)
                 
Weighted average shares outstanding - basic  32,312,246   32,774,924   32,318,201   32,539,748 
Weighted average shares outstanding - diluted  34,556,833   32,774,924   32,318,201   32,539,748 
Shares used in computing non-GAAP
net income (loss) per share - basic
  32,312,246   32,774,924   32,318,201   32,539,748 
Shares used in computing non-GAAP
net income (loss) per share - diluted
  33,512,904   33,209,220   32,318,201   32,539,748 
Non-GAAP net income (loss) per common share - basic $0.19  $0.06  $(0.32) $(0.69)
Non-GAAP net income (loss) per common share - diluted $0.18  $0.06  $(0.32) $(0.69)
                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                
Net cash and cash equivalents provided by (used in) operating activities $16,577  $5,140  $27,651  $(18,375)
Purchases of property and equipment  (3,346)  (2,644)  (13,085)  (13,248)
Cash paid for restructuring costs  141      5,342    
Total net adjustments  (3,205)  (2,644)  (7,743)  (13,248)
Free Cash Flow $13,372  $2,496  $19,908  $(31,623)
                 

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

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


Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.