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Benefitfocus Announces Third Quarter 2021 Financial Results

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Benefitfocus, Inc. (NASDAQ: BNFT) reported its third quarter 2021 results, showing a revenue of $62.0 million, down 2% year-over-year, but above guidance. GAAP net loss amounted to $19.7 million, a significant increase from the previous year's loss of $6.0 million. However, non-GAAP EPS loss of $0.19 exceeded expectations. Noteworthy achievements included securing contracts for modernization projects in Wisconsin and Nevada and obtaining HITRUST CSF® Certification. Looking ahead, the company anticipates Q4 revenue between $66 million and $72 million, reaffirming full-year guidance of $254 million to $260 million.

Positive
  • Revenue of $62.0 million exceeded guidance despite being down 2% year-over-year.
  • Non-GAAP EPS loss of $0.19 exceeded expectations.
  • Adjusted EBITDA of $6.7 million was above the midpoint of guidance.
  • Cash and cash equivalents totaled $94.5 million after convertible note repurchase.
Negative
  • GAAP net loss increased to $19.7 million, up from $6.0 million in Q3 2020.
  • Free cash flow decreased to $6.9 million from $11.3 million in the same period last year.
  • Professional services revenue fell by 15% compared to Q3 2020.

 Delivers on third quarter financial commitments
Focused on providing service excellence to deliver enhanced stakeholder value

CHARLESTON, S.C., Nov. 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 third quarter 2021 financial results.  

Third quarter financial highlights:

  • Revenue of $62.0 million exceeds guidance
  • GAAP EPS of ($0.59) vs. ($0.19) in third quarter 2020
  • Non-GAAP EPS of ($0.19) exceeds guidance
  • GAAP net loss of ($18.1) million vs. ($4.4) million in third quarter 2020
  • Adjusted EBITDA of $6.7 million, above midpoint of guidance
  • Operating cash flow of $9.4 million and free cash flow of $6.9 million
  • De-levered balance sheet and improved capital structure through convertible note repurchase
  • Cash and marketable securities of $94.5 million, down $98.7 million from prior quarter primarily reflecting repurchase of convertible notes

Other recent highlights:

“Our entire team is working with a great sense of urgency and discipline to deliver enhanced service excellence for our customers during this year’s open enrollment,” said Matt Levin, president and chief executive officer. “I expect this heightened focus, combined with the commitment and deep experience of our team, will result in stellar performance for our stakeholders including our customers, partners and shareholders.”

“I am pleased with our performance this quarter as we again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “Our strong cash position enabled us to opportunistically de-lever the balance sheet while preserving flexibility to invest strategically and advance our growth strategy.”

Third Quarter 2021 Financial Highlights

Revenue

  • Total revenue was $62.0 million, down 2% compared to the third quarter of 2020.
  • Software services was $50.9 million, up 1% compared to the third quarter of 2020. Software services is comprised of subscription and platform revenue.
    • Subscription revenue was $44.8 million, relatively flat compared to the third quarter of 2020.
    • Platform revenue was $6.2 million, up 10% compared to the third quarter of 2020.
  • Professional services revenue was $11.1 million, down 15% compared to the third quarter of 2020.

Net Loss

  • GAAP net loss available to common stockholders was ($19.7) million, compared to ($6.0) million in the third quarter of 2020. GAAP net loss per share was ($0.59), based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.19) for the third quarter of 2020, based on 32.3 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 ($6.3) million compared to ($2.7) million in the third quarter of 2020. Non-GAAP net loss per share was ($0.19) based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.08) in the third quarter of 2020, based on 32.3 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $6.7 million, compared to $10.5 million in the third quarter of 2020.
  • Free cash flow was $6.9 million, compared to $11.3 million in the third 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 September 30, 2021 totaled $94.5 million, compared to $193.2 million at the end of the second quarter of 2021 primarily reflecting the repurchase of approximately $100.2 million worth of our convertible notes
  • The full $50.0 million line of credit remains available to the company.

Business Outlook

Based on information available as of November 3, 2021, Benefitfocus is providing guidance for the fourth quarter and full year as indicated below.

Fourth Quarter 2021

  • Total revenue is expected to be in the range of $66 million to $72 million.
  • Adjusted EBITDA is expected to be in the range of $13 million to $19 million.
  • Non-GAAP net (loss) income available to common stockholders is expected to be between ($0.7) million and $5.3 million, or between ($0.02) per share based on 33.4 million basic and diluted weighted average shares outstanding and $0.15 per share based on 34.6 million diluted weighted average 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 Wednesday, November 3, 2021, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or +1 (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 November 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 13724236.

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 on our board of directors; our ability to compete effectively and implement our growth strategy; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; the immature and volatile nature of the market for our products and services; 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
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Revenue $62,026  $63,583  $187,993  $191,911 
Cost of revenue(1)(2)  31,247   30,113   87,870   94,422 
Gross profit  30,779   33,470   100,123   97,489 
Operating expenses:(1)(2)(3)                
Sales and marketing  12,669   12,405   34,481   39,863 
Research and development  11,062   11,439   32,997   34,252 
General and administrative  12,156   9,424   39,592   29,320 
Restructuring costs        4,127   5,616 
Total operating expenses  35,887   33,268   111,197   109,051 
Loss from operations  (5,108)  202   (11,074)  (11,562)
Other income (expense):                
Interest income  52   40   163   563 
Interest expense  (5,556)  (5,771)  (16,757)  (17,524)
(Loss) gain on repurchase of convertible senior notes  (7,520)  1,138   (7,520)  1,138 
Other income  120   1   142   8 
Total other expense, net  (12,904)  (4,592)  (23,972)  (15,815)
Loss before income taxes  (18,012)  (4,390)  (35,046)  (27,377)
Income tax expense  42   6   125   17 
Net loss  (18,054)  (4,396)  (35,171)  (27,394)
Preferred dividends  (1,600)  (1,600)  (4,800)  (2,062)
Net loss available to common stockholders $(19,654) $(5,996) $(39,971) $(29,456)
Comprehensive loss $(18,054) $(4,396) $(35,171) $(27,394)
                 
Net loss per common share:                
Basic and diluted $(0.59) $(0.19) $(1.21) $(0.91)
Weighted-average common shares outstanding:                
Basic and diluted  33,354,624   32,263,876   32,978,394   32,320,201 
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $511  $1,304  $1,475  $2,604 
Sales and marketing  963   766   2,470   2,240 
Research and development  589   785   1,210   1,717 
General and administrative  2,532   1,004   5,339   4,298 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $332  $321  $1,005  $961 
Sales and marketing  78   82   231   256 
Research and development  110   119   336   342 
General and administrative  48   46   133   146 
                 
(3) Transaction and acquisition-related costs expensed included in above line items:                
General and administrative $80  $18  $240  $425 

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

  As of
September 30,
2021
  As of
December 31,
2020
 
Assets        
Current assets:        
Cash and cash equivalents $12,589  $90,706 
Marketable securities  81,899   95,085 
Accounts receivable, net  20,368   22,240 
Contract, prepaid and other current assets  17,239   21,354 
Total current assets  132,095   229,385 
Property and equipment, net  27,259   29,701 
Financing lease right-of-use assets  58,503   68,670 
Operating lease right-of-use assets  925   1,107 
Intangible assets, net  8,688   10,393 
Goodwill  12,857   12,857 
Deferred contract costs and other non-current assets  12,078   10,259 
Total assets $252,405  $362,372 
Liabilities, redeemable preferred stock and stockholders' deficit        
Current liabilities:        
Accounts payable $7,729  $2,160 
Accrued expenses  8,155   6,262 
Accrued compensation and benefits  16,993   19,129 
Deferred revenue, current portion  26,113   27,782 
Lease liabilities and financing obligations, current portion  7,226   5,959 
Total current liabilities  66,216   61,292 
Deferred revenue, net of current portion  2,651   4,422 
Convertible senior notes  105,637   184,308 
Lease liabilities and financing obligations, net current portion  77,265   79,282 
Other non-current liabilities  2,661   2,470 
Total liabilities  254,430   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 September 30, 2021 and December 31, 2020, respectively,
liquidation preference $45 per share as of September 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,
33,386,994 and 32,327,439 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
  33   32 
Additional paid-in capital  429,978   427,431 
Accumulated deficit  (511,229)  (476,058)
Total stockholders' deficit  (81,218)  (48,595)
Total liabilities, redeemable preferred stock and stockholders' deficit $252,405  $362,372 
         

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

  Nine Months Ended
September 30,
 
  2021  2020 
Cash flows from operating activities        
Net loss $(35,171) $(27,394)
Adjustments to reconcile net loss to net cash and cash
equivalents provided by operating activities:
        
Depreciation and amortization  18,976   18,479 
Stock-based compensation expense  10,494   10,859 
Accretion of interest on convertible senior notes  8,590   8,834 
Interest accrual on finance lease liabilities  3,259   71 
Rent expense less than payments  (41)  (24)
Non-cash accretion income from investments  741   16 
Impairment or loss on disposal of right-of-use assets and property and equipment  4,074    
Loss (gain) on extinguishment of debt  7,520   (1,138)
Provision for doubtful accounts     111 
Changes in operating assets and liabilities:        
Accounts receivable, net  1,872   3,685 
Accrued interest on investments  161   (38)
Contract, prepaid and other current assets  4,009   7,502 
Deferred costs and other non-current assets  1,238   1,014 
Accounts payable and accrued expenses  6,960   (9,157)
Accrued compensation and benefits  (2,136)  490 
Deferred revenue  (3,441)  (5,726)
Other non-current liabilities  191   3,490 
Net cash and cash equivalents provided by operating activities  27,296   11,074 
Cash flows from investing activities        
Purchases of investments held to maturity  (91,361)  (67,785)
Proceeds from investments held to maturity  100,588    
Purchases of property and equipment  (7,454)  (9,739)
Net cash and cash equivalents provided by (used in) investing activities  1,773   (77,524)
Cash flows from financing activities        
Draws on revolving line of credit     10,000 
Payments on revolving line of credit     (10,000)
Repurchase of convertible senior notes  (98,678)  (14,619)
Payments of debt issuance costs     (154)
Cancellation of convertible senior notes capped call hedge  98   26 
Proceeds from issuance of preferred stock, net of issuance costs     79,192 
Payments of preferred dividends  (4,800)  (2,062)
Repurchase of common stock     (9,667)
Proceeds from exercises of stock options and ESPP  322   513 
Payments on financing obligations  (226)  (635)
Payments of principal on finance lease liabilities  (3,902)  (8,880)
Net cash and cash equivalents (used in) provided by financing activities  (107,186)  43,714 
Net decrease in cash and cash equivalents  (78,117)  (22,736)
Cash and cash equivalents, beginning of period  90,706   130,976 
Cash and cash equivalents, end of period $12,589  $108,240 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $945  $ 
         

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

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $30,779  $33,470  $100,123  $97,489 
Amortization of acquired intangible assets  332   321   1,005   961 
Stock-based compensation expense  511   1,304   1,475   2,604 
Total net adjustments  843   1,625   2,480   3,565 
Non-GAAP gross profit $31,622  $35,095  $102,603  $101,054 
                 
Reconciliation from Operating (Loss) Income to Non-GAAP Operating Income:                
Operating (loss) income $(5,108) $202  $(11,074) $(11,562)
Amortization of acquired intangible assets  568   568   1,705   1,705 
Stock-based compensation expense  4,595   3,859   10,494   10,859 
Transaction and acquisition-related costs expensed  80   18   240   425 
Impairment of long-lived assets        4,003    
Costs not core to our business  542      4,140    
Total net adjustments  5,785   4,445   20,582   12,989 
Non-GAAP operating income $677  $4,647  $9,508  $1,427 
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(18,054) $(4,396) $(35,171) $(27,394)
Depreciation  3,615   3,774   10,682   11,496 
Amortization of software development costs  2,268   2,032   6,589   5,278 
Amortization of acquired intangible assets  568   568   1,705   1,705 
Interest income  (52)  (40)  (163)  (563)
Interest expense  5,556   5,771   16,757   17,524 
Income tax expense  42   6   125   17 
Stock-based compensation expense  4,595   3,859   10,494   10,859 
Transaction and acquisition-related costs expensed  80   18   240   425 
Restructuring costs        4,127   5,616 
Impairment of long-lived assets        4,003    
Loss (gain) on repurchase of convertible senior notes  7,520   (1,138)  7,520   (1,138)
Costs not core to our business  542      4,140    
Total net adjustments  24,734   14,850   66,219   51,219 
Adjusted EBITDA $6,680  $10,454  $31,048  $23,825 
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(18,054) $(4,396) $(35,171) $(27,394)
Amortization of acquired intangible assets  568   568   1,705   1,705 
Stock-based compensation expense  4,595   3,859   10,494   10,859 
Transaction and acquisition-related costs expensed  80   18   240   425 
Impairment of long-lived assets        4,003    
Loss (gain) on repurchase of convertible senior notes  7,520   (1,138)  7,520   (1,138)
Costs not core to our business  542      4,140    
Total net adjustments  13,305   3,307   28,102   11,851 
Non-GAAP net loss $(4,749) $(1,089) $(7,069) $(15,543)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(4,749) $(1,089) $(7,069) $(15,543)
Preferred dividends  (1,600)  (1,600)  (4,800)  (2,062)
Non-GAAP net loss available to common stockholders $(6,349) $(2,689) $(11,869) $(17,605)
                 
Weighted average shares outstanding - basic and diluted  33,354,624   32,263,876   32,978,394   32,320,201 
Shares used in computing non-GAAP net loss per share - basic and diluted  33,354,624   32,263,876   32,978,394   32,320,201 
Non-GAAP net loss per common share - basic and diluted $(0.19) $(0.08) $(0.36) $(0.54)
                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                
Net cash and cash equivalents provided by operating activities $9,369  $13,208  $27,296  $11,074 
Purchases of property and equipment  (2,971)  (2,664)  (7,454)  (9,739)
Cash paid for restructuring costs  502   745   1,886   5,201 
Total net adjustments  (2,469)  (1,919)  (5,568)  (4,538)
Free Cash Flow $6,900  $11,289  $21,728  $6,536 
                 

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

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


FAQ

What are the Q3 2021 earnings results for BNFT?

BNFT reported Q3 2021 revenue of $62.0 million, with a GAAP net loss of $19.7 million.

What is the future outlook for Benefitfocus in Q4 2021?

Benefitfocus projects Q4 2021 revenue between $66 million and $72 million.

How did BNFT perform in terms of adjusted EBITDA for Q3 2021?

BNFT achieved adjusted EBITDA of $6.7 million in Q3 2021, above the midpoint of guidance.

What were the non-GAAP EPS results for BNFT in Q3 2021?

BNFT reported a non-GAAP EPS loss of $0.19, exceeding guidance expectations.

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