Benefitfocus Announces Third Quarter 2014 Financial Results

  • Total revenue of $34.2 million grew 30% year-over-year
  • Employer revenue of $14.9 million grew 52% year-over-year
  • Added 52 net new large employer customers, ended quarter with 540 large employer customers

Charleston, S.C. – November 6, 2014 – Benefitfocus, Inc. (NASDAQ: BNFT), a leading provider of cloud-based benefits software solutions, today announced its third quarter 2014 financial results.

"Benefitfocus reported strong third quarter results that exceeded guidance from both a revenue and profitability perspective," said Shawn Jenkins, President and Chief Executive Officer of Benefitfocus. "We experienced strong customer interest across both segments as carriers and employers recognize they need a new approach to ensure they properly manage the rapid changes in the benefits administration market."

Jenkins added, "We believe our continued market momentum is being driven by the generational shift of the enterprise to the cloud and customers are embracing the increased flexibility and enhanced consumer experience provided by our cloud-based benefits administration platform. At the same time, growing regulatory complexity and the continued rise in benefits expense are increasingly making the status quo unsustainable in the benefits administration industry. We believe Benefitfocus is well positioned to capitalize on these significant secular trends to drive growth across both business segments in this multi-billion dollar market opportunity."

 

Third Quarter 2014 Financial Highlights

Revenue

  • Total revenue was $34.2 million, an increase of 30% compared to the third quarter of 2013.
  • Software revenue was $30.7 million, an increase of 25% compared to the third quarter of 2013.
  • Professional services revenue was $3.5 million, an increase of 96% compared to the third quarter of 2013.
  • Employer revenue was $14.9 million, an increase of 52% compared to the third quarter of 2013.
  • Insurance carrier revenue was $19.3 million, an increase of 17% compared to the third quarter of 2013.

Loss from Operations

  • GAAP operating loss was ($17.8) million, compared to an operating loss of ($6.4) million in the third quarter of 2013.
  • Non-GAAP operating loss was ($15.7) million, compared to a loss of ($6.0) million in the third quarter of 2013.

Net Loss

  • GAAP net loss was ($18.9) million, compared to ($6.8) million for the third quarter of 2013. GAAP net loss per share was ($0.74), based on 25.5 million basic and diluted weighted average common shares outstanding, compared to a GAAP net loss per share of ($1.08) for the third quarter of 2013, based on 6.3 million basic and diluted weighted average common shares outstanding.
  • Non-GAAP net loss was ($15.9) million, compared to ($6.0) million in the third quarter of 2013. Non-GAAP net loss per diluted share was ($0.62) based on 25.5 million basic and diluted weighted average common shares outstanding, compared to ($0.28) for the third quarter of 2013, based on 21.6 million basic and diluted pro-forma weighted average common shares outstanding. These non-GAAP earnings per share calculations assume our convertible preferred stock was converted to common stock for the full third quarter of 2013.

Adjusted EBITDA

  • Adjusted EBITDA was ($13.5) million, compared to ($4.0) million in the third quarter of 2013.

Balance Sheet and Cash Flow

  • Cash, cash equivalents and marketable securities at September 30, 2014 totaled $60.9 million, compared to $71.7 million at the end of the second quarter of 2014.
  • Cash flow from operations was ($5.5) million and free cash flow was ($9.7) million for the third quarter of 2014 after taking into consideration $4.2 million of capital expenditures and capitalized software. This compares to cash flow from operations of $3.4 million and free cash flow of $168,000 for the third quarter of 2013, after taking into consideration $3.2 million of capital expenditures and capitalized software.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables accompanying this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

 
Third Quarter and Recent Business Highlights
  • Ended the quarter with 540 large employer customers, up from 379 at the end of the year ago period and 488 at the end of the second quarter of 2014, and 44 insurance carrier customers, up from 43 at the end of the second quarter of 2014.
  • Added new employer customer relationships with McDonald's, Keuhne + Nagel, Logan's Roadhouse, ICF Consulting, iQor, Inc., RHA Management, and Bauer Hockey, among others.
  • Blue Shield of California, an existing carrier customer with more than 3 million lives on their network, selected the Benefitfocus Marketplace offering for their new private exchange.
  • Announced the appointment of two independent directors to its Board of Directors. Mr. Douglas Dennerline, who currently serves as the Chief Executive Officer of Alfresco Software, Inc., was appointed to serve on the Benefitfocus Compensation Committee, and Mr. A. Lanham Napier, who formerly served as the Chief Executive Officer of Rackspace® (NYSE: RAX), was appointed to serve on the Compensation Committee and the Nominating and Corporate Governance Committee.
Business Outlook

Based on information available as of November 6, 2014, Benefitfocus is providing guidance for the fourth quarter and updating full year 2014 as indicated below.

Fourth Quarter 2014:

  • Total revenue is expected to be in the range of $38.1 million to $38.6 million.
  • Non-GAAP net loss is expected to be in the range of ($15.3) million to ($15.8) million, or ($0.60) to ($0.62) per share, based on 25.6 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($12.3) million to ($12.8) million.

Full Year 2014:

  • Total revenue is expected to be in the range of $135.3 million to $135.8 million.
  • Non-GAAP net loss is expected to be in the range of ($58.3) million to ($58.8) million, or ($2.31) to ($2.33) per share, based on 25.2 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of ($48.2) million to ($48.7) million.
Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, November 6, 2014 at 5:00 p.m. Eastern Time to discuss the company's financial results. To access this call, dial (855) 233-6991 (domestic) or (317) 586-4497 (international) with conference ID 18377471. 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 (855) 859-2056 (domestic) or (404) 537-3406 (international) until December 6, 2014.

About Benefitfocus

Benefitfocus, Inc. (NASDAQ: BNFT) is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus has served more than 23 million consumers on its platform that consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus Platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits including core medical, dental and other voluntary benefits plans as well as wellness programs. For more information, visit www.benefitfocus.com.

Non-GAAP Financial Measures

The company uses non-GAAP financial measures in this release and its conference call, including non-GAAP operating loss, net loss, net loss per share, adjusted gross profit, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow, 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 operating loss, net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering costs expensed and interest associated with building lease financing obligations. Adjusted gross profit excludes stock-based compensation, amortization of acquisition-related intangible assets, amortization of software development costs, and depreciation. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and expense related to the impairment of goodwill and intangible assets. We define free cash flow as cash flow from operations less capital expenditures and capitalized software. 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 determination of 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, the inclusion of the non-GAAP financial measures 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.

Forward-Looking Disclaimer

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: fluctuations in our financial results; the immature and volatile market for our products and services; the need to innovate and provide useful products and services; risks related to changing healthcare and other applicable regulations; our ability to maintain our culture and recruit and retain qualified personnel; our ability to compete effectively; privacy, security and other risks associated with our business; general economic risks; 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.cfm 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.

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