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Benefitfocus Announces Third Quarter 2022 Financial Results

CHARLESTON, S.C., Nov. 07, 2022 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading cloud-based benefits administration technology company that serves employers, health plans and brokers, today announced its third quarter 2022 financial results:  

Financial Highlights for the Third Quarter 2022:

  • Revenue of $56.2 million was within the guidance range of $55 million to $57 million.
  • Adjusted EBITDA of $5.7 million was at the high end of the guidance range of $4 million to $6 million.
  • GAAP net loss available to common stockholders was ($8.6) million, compared to ($19.7) million in the third quarter of 2021.
  • GAAP EPS was ($0.25) in the third quarter of 2022 and non-GAAP EPS was ($0.12).  

Operational Highlights for the Third Quarter 2022:

  • Developed Advanced Engagement Services – a personalized, action-oriented communications solution that helps employers and health plans create a more connected and engaging benefits experience for employees.
  • Named as a 2022 BenefitsPRO Luminaries honoree in the Humanizing Benefits category. The BenefitsPRO Luminaries awards, which are determined by a panel of industry experts, celebrate top benefits professionals and organizations that strive to transform the benefits business and set an example within the industry.
  • Successfully established a $140 million senior secured credit facility and repurchased the majority of our outstanding convertible senior notes.

“I want to thank and recognize our team for their efforts and accomplishments during the third quarter. Our team continued to make progress against our plan – delivering on our financial commitments as well as building on the momentum underway with key client wins and strong improvement in sales activity. Additionally, our team rolled out new, innovative products for our customers and delivered our solutions with service excellence,” said Benefitfocus President and Chief Executive Officer, Matt Levin.

Third Quarter 2022 Financial Highlights
Revenue

  • Total revenue was $56.2 million, down approximately 9% compared to the third quarter of 2021.   
  • Software services, which is comprised of both subscription and platform revenue, was $46.9 million, down 8% compared to the third quarter of 2021.
    • Subscription revenue was $41.2 million, down 8% compared to the third quarter of 2021.
    • Platform revenue was $5.6 million, down 8% compared to the third quarter of 2021.
  • Professional services revenue was $9.3 million, down 16% compared to the third quarter of 2021.

Net Loss

  • GAAP net loss was ($7.0) million, compared to ($18.1) million in the third quarter of 2021. GAAP net loss per share was ($0.25), based on ($8.6) million net loss available to common stockholders and 34.3 million basic and diluted weighted average common shares outstanding. This compares to GAAP net loss per share of ($0.59) for the third quarter of 2021, based on ($19.7) million net loss available to common stockholders and 33.4 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 ($4.0) million for the third quarter of 2022, compared to ($6.3) million in the third quarter of 2021. Non-GAAP net loss per share was ($0.12) based on both 34.3 million basic and diluted weighted average common shares outstanding. This compares to non-GAAP net loss of ($0.19) in the third quarter of 2021, based on 33.4 million for both basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $5.7 million, compared to $6.7 million in the third quarter of 2021.  
  • Cash provided by operations was $6.0 million and free cash flow was $7.8 million, compared to cash from operations of $5.6 million and $6.9 million of free cash flow in the third quarter of 2021.

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

Balance Sheet
Cash and cash equivalents at September 30, 2022, totaled $55.1 million compared to $51.5 million at the end of second quarter 2022.

Recent Developments
On November 1, 2022, we issued a joint press release with Voya Financial, Inc. (“Voya”) announcing that the companies have entered into a definitive agreement (the “Merger Agreement”) for Voya to acquire Benefitfocus, subject to the terms and conditions set forth in the Merger Agreement.

Details regarding the Merger Agreement and the transactions contemplated by the Merger Agreement can be found in our amended Form 8-K filed with the SEC on November 4, 2022 and the joint press release issued by the Company and Voya on November 1, 2022.

Business Outlook
As a result of the proposed transaction with Voya, Benefitfocus is suspending financial guidance for the fourth quarter and full year 2022. As previously announced, Benefitfocus has cancelled its earnings conference call for the quarter ended September 30, 2022, that had originally been scheduled for November 7, 2022, at 5:00 p.m. ET.

About Benefitfocus
Benefitfocus (NASDAQ: BNFT) is a cloud-based benefits administration technology company committed to helping our customers, and the people they serve, get the most out of their health care and benefit programs. Through exceptional service and innovative SaaS solutions, we aim to be the safest set of hands for our customers helping to simplify the complexity of benefits administration while delivering an experience that engages people and unlocks the potential for better health and improved outcomes.  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, change in fair value of contingently returnable consideration 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; transaction and acquisition-related costs expensed; restructuring costs; impairment of goodwill, intangible assets and long-lived assets; gain or loss on extinguishment of debt; other costs not core to our business; loss on settlement of lawsuits; and changes in fair value of contingently returnable consideration. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate cash paid for 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 need to increase sales and achieve consistent GAAP profitability; fluctuations in our financial results; our ability to maintain our culture and retain qualified personnel; our ability to compete effectively and implement our growth strategy; our reliance on channel relationships; market developments and opportunities; 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; volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic and war in Ukraine; 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.

Media Contact:
843-981-8898
pr@benefitfocus.com

Investor Relations:
Doug Kuckelman
843-790-7460
ir@benefitfocus.com   

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,
 
  2022  2021  2022  2021 
Revenue $56,190  $62,026  $174,002  $187,993 
Cost of revenue(1)(2)  29,864   31,247   88,845   87,870 
Gross profit  26,326   30,779   85,157   100,123 
Operating expenses:(1)(2)(3)                
Sales and marketing  10,029   12,669   30,596   34,481 
Research and development  12,376   11,062   35,782   32,997 
General and administrative  10,455   12,156   33,261   35,589 
Impairment of lease right-of-use assets        1,769   4,003 
Change in fair value of contingently returnable consideration        (719)   
Restructuring costs        1,006   4,127 
Total operating expenses  32,860   35,887   101,695   111,197 
Loss from operations  (6,534)  (5,108)  (16,538)  (11,074)
Other income (expense):                
Interest income  223   52   307   163 
Interest expense  (2,918)  (5,556)  (7,876)  (16,757)
Gain (loss) on repurchase of convertible senior notes  1,930   (7,520)  1,930   (7,520)
Other income  362   120   844   142 
Total other expense, net  (403)  (12,904)  (4,795)  (23,972)
Loss before income taxes  (6,937)  (18,012)  (21,333)  (35,046)
Income tax expense  49   42   94   125 
Net loss  (6,986)  (18,054)  (21,427)  (35,171)
Preferred dividends  (1,600)  (1,600)  (4,800)  (4,800)
Net loss available to common stockholders $(8,586) $(19,654) $(26,227) $(39,971)
Comprehensive loss $(6,986) $(18,054) $(21,427) $(35,171)
                 
Net loss per common share:                
Basic and diluted $(0.25) $(0.59) $(0.77) $(1.21)
Weighted-average common shares outstanding:                
Basic and diluted  34,279,464   33,354,624   33,937,778   32,978,394 
                 
                 
(1) Stock-based compensation included in above line items:                
Cost of revenue $648  $511  $1,852  $1,475 
Sales and marketing  916   963   2,662   2,470 
Research and development  752   589   1,766   1,210 
General and administrative  1,902   2,532   4,442   5,339 
                 
(2) Amortization of acquired intangible assets included in above line items:                
Cost of revenue $610  $332  $1,842  $1,005 
Sales and marketing  127   78   400   231 
Research and development  236   110   685   336 
General and administrative  100   48   292   133 
                 
(3) Transaction and acquisition-related costs expensed included in above line items:                
General and administrative $19  $80  $115  $240 


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

  As of
September 30,
2022
  As of
December 31,
2021
 
Assets        
Current assets:        
Cash and cash equivalents $55,124  $31,001 
Marketable securities     37,049 
Accounts receivable, net  27,598   16,491 
Contract, prepaid and other current assets  18,307   27,615 
Total current assets  101,029   112,156 
Property and equipment, net  24,728   27,202 
Financing lease right-of-use assets  48,445   56,474 
Operating lease right-of-use assets  615   774 
Intangible assets, net  17,915   21,134 
Goodwill  34,237   34,237 
Deferred contract costs and other non-current assets  6,744   8,864 
Total assets $233,713  $260,841 
Liabilities, redeemable preferred stock and stockholders' deficit        
Current liabilities:        
Accounts payable $6,064  $10,565 
Accrued expenses  7,552   9,451 
Accrued compensation and benefits  15,208   16,411 
Deferred revenue, current portion  30,443   27,756 
Long-term debt, current portion  5,186    
Lease liabilities and financing obligations, current portion  6,607   7,378 
Contingent consideration     675 
Total current liabilities  71,060   72,236 
Deferred revenue, net of current portion  2,364   2,377 
Convertible senior notes  6,836   107,281 
Long-term debt, net of current portion  105,349    
Lease liabilities and financing obligations, net of current portion  72,581   75,758 
Other non-current liabilities  392   313 
Total liabilities  258,582   257,965 
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, 2022 and December 31, 2021, respectively,
liquidation preference $45 per share as of September 30, 2022 and December 31, 2021, respectively
  79,193   79,193 
Stockholders' deficit:        
Common stock, par value $0.001, 95,000,000 shares authorized,
34,392,269 and 33,460,545 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
  34   33 
Additional paid-in capital  384,886   431,874 
Accumulated deficit  (488,982)  (508,224)
Total stockholders' deficit  (104,062)  (76,317)
Total liabilities, redeemable preferred stock and stockholders' deficit $233,713  $260,841 


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

  Nine Months Ended
September 30,
 
  2022  2021 
Cash flows from operating activities        
Net loss $(21,427) $(35,171)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:        
Depreciation and amortization  19,955   18,976 
Stock-based compensation expense  10,722   10,494 
Accretion of interest on convertible senior notes  507   8,590 
Interest accrual on finance lease liabilities  19   3,259 
Rent expense less than payments  (82)  (41)
Change in fair value of contingently returnable assets  (719)   
Non-cash accretion income from investments  29   741 
Amortization of debt issuance costs  58    
Impairment or loss on disposal of right-of-use assets and property and equipment  1,769   4,074 
(Gain) loss on extinguishment of debt  (1,930)  7,520 
Changes in operating assets and liabilities:        
Accounts receivable, net  (11,107)  1,872 
Accrued interest on investments  284   161 
Contract, prepaid and other current assets  9,591   4,009 
Deferred costs and other non-current assets  2,493   1,238 
Accounts payable and accrued expenses  (5,696)  6,960 
Accrued compensation and benefits  (1,203)  (2,136)
Deferred revenue  2,674   (3,441)
Other non-current liabilities  80   191 
Net cash provided by operating activities  6,017   27,296 
Cash flows from investing activities        
Purchases of investments held-to-maturity     (91,361)
Proceeds from short-term investments held-to-maturity     100,588 
Maturities of investments available-for-sale  22,045    
Sales of investments available-for-sale  14,691    
Business combination, net of cash acquired  (500)   
Purchases of property and equipment  (6,116)  (7,454)
Net cash provided by investing activities  30,120   1,773 
Cash flows from financing activities        
Proceeds from long-term debt  112,000    
Repurchase of convertible senior notes  (111,628)  (98,678)
Payments of debt issuance costs  (1,841)   
Cancellation of convertible senior notes capped call hedge  6   98 
Payments of preferred dividends  (4,800)  (4,800)
Proceeds from contingently returnable consideration  879    
Payments of contingent consideration  (675)   
Proceeds from exercises of stock options and ESPP  58   322 
Payments on financing obligations  (327)  (226)
Payments of principal on finance lease liabilities  (5,686)  (3,902)
Net cash used in financing activities  (12,014)  (107,186)
Net increase (decrease) in cash and cash equivalents  24,123   (78,117)
Cash and cash equivalents, beginning of period  31,001   90,706 
Cash and cash equivalents, end of period $55,124  $12,589 
         
Supplemental disclosure of non-cash investing and financing activities        
Property and equipment purchases in accounts payable and accrued expenses $  $945 
Debt issuance costs included in accounts payable and accrued expenses $53  $ 


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,
 
  2022  2021  2022  2021 
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                
Gross profit $26,326  $30,779  $85,157  $100,123 
Amortization of acquired intangible assets  610   332   1,842   1,005 
Stock-based compensation expense  648   511   1,852   1,475 
Total net adjustments  1,258   843   3,694   2,480 
Non-GAAP gross profit $27,584  $31,622  $88,851  $102,603 
                 
Reconciliation from Operating Loss to Non-GAAP Operating (Loss) Income:                
Operating loss $(6,534) $(5,108) $(16,538) $(11,074)
Amortization of acquired intangible assets  1,073   568   3,219   1,705 
Stock-based compensation expense  4,218   4,595   10,722   10,494 
Transaction and acquisition-related costs expensed  19   80   115   240 
Impairment of lease right-of-use assets        1,769   4,003 
Change in fair value of contingently returnable consideration        (719)   
Costs not core to our business  1,171   542   5,926   4,140 
Total net adjustments  6,481   5,785   21,032   20,582 
Non-GAAP operating (loss) income $(53) $677  $4,494  $9,508 
                 
Reconciliation from Net Loss to Adjusted EBITDA:                
Net loss $(6,986) $(18,054) $(21,427) $(35,171)
Depreciation  2,958   3,615   9,456   10,682 
Amortization of software development costs  2,462   2,268   7,280   6,589 
Amortization of acquired intangible assets  1,073   568   3,219   1,705 
Interest income  (223)  (52)  (307)  (163)
Interest expense  2,918   5,556   7,876   16,757 
Income tax expense  49   42   94   125 
Stock-based compensation expense  4,218   4,595   10,722   10,494 
Transaction and acquisition-related costs expensed  19   80   115   240 
Impairment of lease right-of-use assets        1,769   4,003 
Change in fair value of contingently returnable consideration        (719)   
Restructuring costs        1,006   4,127 
(Gain) loss on repurchase of convertible senior notes  (1,930)  7,520   (1,930)  7,520 
Costs not core to our business  1,171   542   5,926   4,140 
Total net adjustments  12,715   24,734   44,507   66,219 
Adjusted EBITDA $5,729  $6,680  $23,080  $31,048 
                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                
Net loss $(6,986) $(18,054) $(21,427) $(35,171)
Amortization of acquired intangible assets  1,073   568   3,219   1,705 
Stock-based compensation expense  4,218   4,595   10,722   10,494 
Transaction and acquisition-related costs expensed  19   80   115   240 
Impairment of lease right-of-use assets        1,769   4,003 
Change in fair value of contingently returnable consideration        (719)   
(Gain) loss on repurchase of convertible senior notes  (1,930)  7,520   (1,930)  7,520 
Costs not core to our business  1,171   542   5,926   4,140 
Total net adjustments  4,551   13,305   19,102   28,102 
Non-GAAP net loss $(2,435) $(4,749) $(2,325) $(7,069)
                 
Calculation of Non-GAAP Earnings Per Share:                
Non-GAAP net loss $(2,435) $(4,749) $(2,325) $(7,069)
Preferred dividends  (1,600)  (1,600)  (4,800)  (4,800)
Non-GAAP net loss available to common stockholders $(4,035) $(6,349) $(7,125) $(11,869)
                 
Weighted average shares outstanding - basic and diluted  34,279,464   33,354,624   33,937,778   32,978,394 
Shares used in computing non-GAAP net loss per share - basic and diluted  34,279,464   33,354,624   33,937,778   32,978,394 
Non-GAAP net loss per common share - basic and diluted $(0.12) $(0.19) $(0.21) $(0.36)
                 
Reconciliation of Cash Flows from Operations to Free Cash Flow:                
Net cash and cash equivalents provided by operating activities $9,716  $9,369  $6,017  $27,296 
Purchases of property and equipment  (2,205)  (2,971)  (6,116)  (7,454)
Cash paid for restructuring costs  262   502   1,566   1,886 
Total net adjustments  (1,943)  (2,469)  (4,550)  (5,568)
Free Cash Flow $7,773  $6,900  $1,467  $21,728 

 


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