Benefitfocus Inc.

03/08/2021 | Press release | Distributed by Public on 03/08/2021 15:16

Current Report (SEC Filing - 8-K)

bnft-ex991_28.htm

Exhibit 99.1

Benefitfocus, Inc.

843-981-8898

[email protected]

Investor Relations:

Patti Leahy

843-981-8899

[email protected]

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 8, 2021 -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.

o

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

o

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 32.8million 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 millionin 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.

o

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

o

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 32.5million 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 millionin 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-filingsor 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

)