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Benefitfocus Announces Fourth Quarter and Full Year 2016 Financial Results

/EIN News/ -- 2016 total revenue of $233.3 million grew 26% year-over-year 
2016 employer revenue of $140.5 million grew 48% year-over-year

CHARLESTON, S.C., Feb. 23, 2017 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management solutions, today announced its fourth quarter and full year 2016 financial results.

“The fourth quarter capped a year of numerous accomplishments for the Benefitfocus team,” said Shawn Jenkins, Chief Executive Officer of Benefitfocus.  “Driven by strong demand for our platform, during 2016 total revenue grew 26% year-over-year and we improved our profitability.  In addition, once again, our software revenue retention rate was over 95% for both the quarter and year.”

Jenkins added, “Our annualized revenue run rate now exceeds $250 million, a threshold that when coupled with the performance of our platform and our continued financial progress on key profitability metrics, we believe reflects a business set to accelerate the benefits of scale. As we look ahead to 2017, we expect our enterprise class system performance and the increasing financial benefits of operational scale to position Benefitfocus exceptionally well for long-term growth.”

Fourth Quarter 2016 Financial Highlights

Revenue

  • Total revenue was $62.6 million, an increase of 15% compared to the fourth quarter of 2015.
  • Software services revenue was $52.5 million, an increase of 13% compared to the fourth quarter of 2015.
  • Professional services revenue was $10.2 million, an increase of 26% compared to the fourth quarter of 2015.
  • Employer revenue was $36.7 million, an increase of 21% compared to the fourth quarter of 2015.
  • Insurance carrier revenue was $26.0 million, an increase of 8% compared to the fourth quarter of 2015.

Net Loss

  • GAAP net loss was ($7.1) million, compared to ($12.5) million in the fourth quarter of 2015. GAAP net loss per share was ($0.24), based on 30.0 million basic and diluted weighted average common shares outstanding, compared to ($0.43) for the fourth quarter of 2015, based on 29.1 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($2.6) million, compared to ($9.5) million in the fourth quarter of 2015. Non-GAAP net loss per share was ($0.09), based on 30.0 million basic and diluted weighted average common shares outstanding, compared to ($0.33) for the fourth quarter of 2015, based on 29.1 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was $2.9 million, compared to ($4.8) million in the fourth quarter of 2015.

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

Balance Sheet

  • Cash, cash equivalents and marketable securities at December 31, 2016 totaled $58.9 million, compared to $55.3 million at the end of the third quarter of 2016.

Full Year 2016 Financial Highlights

Revenue

  • Total revenue was $233.3 million, an increase of 26% compared to the full year 2015.
  • Software services revenue was $201.8 million, an increase of 25% compared to the full year 2015.
  • Professional services revenue was $31.5 million, an increase of 33% compared to the full year 2015.
  • Employer revenue was $140.5 million, an increase of 48% compared to the full year 2015.
  • Insurance carrier revenue was $92.8 million, an increase of 3% compared to the full year 2015.

Net Loss

  • GAAP net loss was ($40.1) million, compared to ($62.1) million in 2015. GAAP net loss per share was ($1.35), based on 29.6 million basic and diluted weighted average common shares outstanding, compared to ($2.19) in 2015, based on 28.3 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

  • Non-GAAP net loss was ($21.7) million, compared to ($50.8) million in 2015. Non-GAAP net loss per share was ($0.73), based on 29.6 million basic and diluted weighted average common shares outstanding, compared to ($1.79) in 2015, based on 28.3 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA was ($1.1) million, compared to ($32.2) million in 2015.

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

Fourth Quarter and Recent Business Highlights

  • We ended the quarter with 833 large employer customers, up from 723 at the end of the year-ago period and 827 at the end of the third quarter of 2016.
  • ACORD, the global data standards-setting body for the insurance industry, accepted an enrollment XML asset and specifications from Benefitfocus to provide standard file format for life and ancillary insurance carriers.
  • We announced our Winter Software Release, which includes enhanced reporting and data insight features that help increase employee engagement, improve productivity and reduce costs to enable HR leaders to more effectively manage benefits.
  • We published our second annual “State of Employee Benefits” research report, a snapshot of real, but anonymous benefit election data from employees across more than 500 large employers on our Platform. 
  • Deloitte recognized us as a member of the Technology Fast 500, a ranking of the 500 fastest growing technology, media, telecommunications, life sciences and energy tech companies in North America.
  • The Brandon Hall Group gave us its silver award for excellence in the Best Advance in Compensation and Benefits category.

Business Outlook

Based on information available as of February 23, 2017, Benefitfocus is providing guidance for the first quarter and full year 2017 as indicated below.

First Quarter 2017:

  • Total revenue is expected to be in the range of $62.5 million to $63.5 million.
  • Non-GAAP net loss is expected to be in the range of ($4.5) million to ($3.5) million, or ($0.15) to ($0.11) per share, based on 30.6 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $2.0 million to $3.0 million.

Full Year 2017:

  • Total revenue is expected to be in the range of $263.5 million to $268.5 million.
  • Non-GAAP net loss is expected to be in the range of ($11.5) million to ($7.5) million, or ($0.37) to ($0.24) per share, based on 30.9 million basic and diluted weighted average common shares outstanding.
  • Adjusted EBITDA is expected to be in the range of $13.0 million to $17.0 million.

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

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call today, February 23, 2017, at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (877) 407-9039 (domestic) or (201) 689-8470 (international). 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 (844) 512-2921 (domestic) or (412) 317-6671 (international) with replay passcode 13653318 through March 2, 2017.

About Benefitfocus

Benefitfocus (NASDAQ:BNFT) provides a leading cloud-based benefits management platform that simplifies how organizations and individuals shop for, enroll in, manage and exchange benefits. Every day leading employers, insurance companies and millions of consumers rely on our platform to manage, scale and exchange benefits data seamlessly. In an increasingly complex benefits landscape, we bring order to chaos so our clients and their employees have access to better information, make better decisions and lead better lives. Learn more at www.benefitfocus.com, LinkedIn and Twitter.

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release and the accompanying tables, including non-GAAP gross profit, operating loss, net loss, net loss per common share and adjusted EBITDA. 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 loss, net loss and net loss per share exclude stock-based compensation expenses and amortization of acquisition-related intangible assets and offering costs expensed, if any.  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. 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, 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 profitability; fluctuations in our financial results; general economic risks;  risks related to changing healthcare and other applicable regulations; our ability to maintain our culture and recruit and retain qualified personnel; the immature and volatile market for our products and services; 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.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.


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,  
      2016       2015       2016       2015  
Revenue   $ 62,647     $ 54,340     $ 233,335     $ 185,143  
Cost of revenue (1)(2)     32,522       30,483       120,681       102,851  
Gross profit     30,125       23,857       112,654       82,292  
Operating expenses:(1)(2)                                
Sales and marketing     13,546       13,092       55,488       58,589  
Research and development     13,308       14,244       56,584       52,250  
General and administrative     8,335       7,146       32,750       25,727  
Total operating expenses     35,189       34,482       144,822       136,566  
Loss from operations     (5,064 )     (10,625 )     (32,168 )     (54,274 )
Other income (expense):                                
Interest income     21       58       138       188  
Interest expense on building lease financing obligations     (1,696 )     (1,721 )     (6,826 )     (7,092 )
Interest expense on other borrowings     (404 )     (192 )     (1,095 )     (877 )
Other expense     46       (7 )     (90 )     (4 )
Total other expense, net     (2,033 )     (1,862 )     (7,873 )     (7,785 )
Loss before income taxes     (7,097 )     (12,487 )     (40,041 )     (62,059 )
Income tax expense     2             17       25  
Net loss   $ (7,099 )   $ (12,487 )   $ (40,058 )   $ (62,084 )
Comprehensive loss   $ (7,099 )   $ (12,487 )   $ (40,058 )   $ (62,084 )
                                 
Net loss per common share:                                
Basic and diluted   $ (0.24 )   $ (0.43 )   $ (1.35 )   $ (2.19 )
Weighted-average common shares outstanding:                                
Basic and diluted     30,030,164       29,120,171       29,589,857       28,344,680  
                                 
(1) Stock-based compensation included in above line items:                                
Cost of revenue   $ 726     $ 729     $ 2,798     $ 1,950  
Sales and marketing     857       1,115       3,213       2,861  
Research and development     994       647       4,532       2,399  
General and administrative     1,901       332       7,545       3,244  
                                 
(2) Amortization of acquired intangible assets included in above line items:                                
Cost of revenue   $ 36     $ 49     $ 147     $ 218  
Sales and marketing     12       6       42       25  
Research and development     13       8       54       35  
General and administrative     2       2       14       8  


Benefitfocus, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
                   
    As of December 31,    
    2016     2015    
Assets                  
Current assets:                  
Cash and cash equivalents   $ 56,853     $ 48,074    
Marketable securities     2,007       40,448    
Accounts receivable, net     28,340       27,616    
Accounts receivable, related party, net     4,626       2,082    
Prepaid expenses and other current assets     4,449       5,725    
Total current assets     96,275       123,945    
Property and equipment, net     80,518       55,037    
Intangible assets, net     408       665    
Goodwill     1,634       1,634    
Other non-current assets     1,575       838    
Total assets   $ 180,410     $ 182,119    
Liabilities and stockholders' deficit                  
Current liabilities:                  
Accounts payable   $ 5,829     $ 7,953    
Accrued expenses     10,867       10,449    
Accrued compensation and benefits     17,347       20,684    
Deferred revenue, current portion     35,426       37,858    
Revolving line of credit, current portion     20,000       25,000    
Financing and capital lease obligations, current portion     2,604       3,648    
Total current liabilities     92,073       105,592    
Deferred revenue, net of current portion     40,412       55,671    
Revolving line of credit, net of current portion     20,246       5,246    
Financing and capital lease obligations, net of current portion     57,934       31,183    
Other non-current liabilities     3,056       2,436    
Total liabilities     213,721       200,128    
Commitments and contingencies                  
Stockholders' deficit:                  
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issues and outstanding at December 31, 2016 and 2015     -       -    
Common stock, par value $0.001, 50,000,000 shares authorized, 30,429,014 and 29,194,332 shares issued and outstanding at December 31, 2016 and 2015, respectively     30       29    
Additional paid-in capital     335,059       310,304    
Accumulated deficit     (368,400 )     (328,342 )  
Total stockholders' deficit     (33,311 )     (18,009 )  
  Total liabilities and stockholders' deficit   $ 180,410     $ 182,119    


Benefitfocus, Inc.  
Consolidated Statements of Cash Flows  
(in thousands)  
                         
    Year Ended December 31,  
      2016       2015       2014  
Cash flows from operating activities                        
Net loss   $ (40,058 )   $ (62,084 )   $ (63,179 )
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:                        
Depreciation and amortization     13,073       11,664       9,493  
Stock-based compensation expense     18,088       10,454       5,588  
Change in fair value and accretion of warrant                 744  
Interest accrual on financing obligation     6,827       7,092       3,624  
Provision for doubtful accounts     667       22        
Loss on disposal or impairment of property and equipment     141       18       25  
Changes in operating assets and liabilities:                        
  Accounts receivable, net     (3,936 )     (7,800 )     2,357  
  Accrued interest on short-term investments     220       205       162  
  Prepaid expenses and other current assets     1,626       (1,328 )     833  
  Other non-current assets     339       1,380       824  
  Accounts payable     (1,849 )     3,418       (199 )
  Accrued expenses     990       2,961       2,469  
  Accrued compensation and benefits     (3,337 )     3,310       3,192  
  Deferred revenue     (17,690 )     (1,189 )     14,288  
  Other non-current liabilities     2,073       332       901  
Net cash and cash equivalents used in operating activities     (22,826 )     (31,545 )     (18,878 )
Cash flows from investing activities                        
Purchases of short-term investments held to maturity     (2,004 )     (68,185 )     (12,959 )
Proceeds from short-term investments held to maturity     40,225       32,667       20,830  
Purchases of property and equipment     (12,705 )     (14,727 )     (9,824 )
Net cash and cash equivalents provided by (used in) investing activities     25,516       (50,245 )     (1,953 )
Cash flows from financing activities                        
Draws on revolving line of credit     84,000       57,492       14,000  
Payments on revolving line of credit     (74,000 )     (44,903 )     (2,100 )
Proceeds from exercises of stock options     6,870       4,229       2,817  
Proceeds from issuance of common stock and warrant, net of issuance costs           74,538        
Payments of deferred financing costs and debt issuance costs     (379 )     (566 )      
Remittance of taxes upon vesting of restricted stock units     (202 )     (2,116 )     (226 )
Payments on financing and capital lease obligations     (10,200 )     (9,884 )     (8,231 )
Net cash and cash equivalents provided by financing activities     6,089       78,790       6,260  
Net increase (decrease) in cash and cash equivalents     8,779       (3,000 )     (14,571 )
Cash and cash equivalents, beginning of year     48,074       51,074       65,645  
Cash and cash equivalents, end of year   $ 56,853     $ 48,074     $ 51,074  
                         
Supplemental disclosure of non-cash investing and financing activities                        
Property and equipment purchases in accounts payable and accrued expenses   $ 699     $ 1,489     $ 4,226  
Property and equipment purchased with financing and capital lease obligations   $ 28,032     $ 914     $ 21,739  
Post contract support purchased with financing obligations   $ 1,048     $ 272     $ 754  
Allocation of proceeds to deferred revenue from issuance of common stock based on relative selling price   $ -     $ 207     $ -  
Supplemental disclosure of cash flow information                        
Income taxes paid   $ 7     $ 18     $ 38  
Interest paid   $ 6,655     $ 6,525     $ 2,449  


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,
 
    2016     2015     2016     2015  
Reconciliation from Gross Profit to Non-GAAP Gross Profit:                                
Gross profit   $ 30,125     $ 23,857     $ 112,654     $ 82,292  
Amortization of acquired intangible assets     36       49       147       218  
Stock-based compensation expense     726       729       2,798       1,950  
Total net adjustments     762       778       2,945       2,168  
Non-GAAP gross profit   $ 30,887     $ 24,635     $ 115,599     $ 84,460  
                                 
Reconciliation from Operating Loss to Non-GAAP Operating Loss:                                
Operating loss   $ (5,064 )   $ (10,625 )   $ (32,168 )   $ (54,274 )
Amortization of acquired intangible assets     63       65       257       286  
Stock-based compensation expense     4,478       2,823       18,088       10,454  
Offering costs expensed           77             560  
Total net adjustments     4,541       2,965       18,345       11,300  
Non-GAAP operating loss   $ (523 )   $ (7,660 )   $ (13,823 )   $ (42,974 )
                                 
Reconciliation from Net Loss to Adjusted EBITDA:                                
Net loss   $ (7,099 )   $ (12,487 )   $ (40,058 )   $ (62,084 )
Depreciation     2,615       2,311       9,959       8,791  
Amortization of software development costs     776       602       2,857       2,587  
Amortization of acquired intangible assets     63       65       257       286  
Interest income     (21 )     (58 )     (138 )     (188 )
Interest expense on building lease financing obligations     1,696       1,721       6,826       7,092  
Interest expense on other borrowings     404       192       1,095       877  
Income tax expense     2             17       25  
Stock-based compensation expense     4,478       2,823       18,088       10,454  
Total net adjustments     10,013       7,656       38,961       29,924  
Adjusted EBITDA   $ 2,914     $ (4,831 )   $ (1,097 )   $ (32,160 )
                                 
Reconciliation from Net Loss to Non-GAAP Net Loss:                                
Net loss   $ (7,099 )   $ (12,487 )   $ (40,058 )   $ (62,084 )
Amortization of acquired intangible assets     63       65       257       286  
Stock-based compensation expense     4,478       2,823       18,088       10,454  
Offering costs expensed           77             560  
Total net adjustments     4,541       2,965       18,345       11,300  
Non-GAAP net loss   $ (2,558 )   $ (9,522 )   $ (21,713 )   $ (50,784 )
                                 
Calculation of Non-GAAP Earnings Per Share:                                
Non-GAAP net loss   $ (2,558 )   $ (9,522 )   $ (21,713 )   $ (50,784 )
                                 
Weighted average shares outstanding - basic and diluted     30,030,164       29,120,171       29,589,857       28,344,680  
Shares used in computing non-GAAP net loss per share - basic and diluted     30,030,164       29,120,171       29,589,857       28,344,680  
Non-GAAP net loss per common share - basic and diluted   $ (0.09 )   $ (0.33 )   $ (0.73 )   $ (1.79 )


Benefitfocus, Inc.  
Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges  
(in millions, except per share data)  
                               
  First Quarter 2017     Full Year 2017  
  Range     Range  
  Low     High     Low     High  
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:                              
Net loss - Guidance range $ (9.1 )   $ (8.1 )   $ (31.7 )   $ (27.7 )
Depreciation and amortization   4.0       4.0       14.9       14.9  
Interest income                      
Interest expense   2.6       2.6       10.0       10.0  
Income tax expense                      
Stock-based compensation expense   4.5       4.5       19.8       19.8  
Total net adjustments   11.1       11.1       44.7       44.7  
Adjusted EBITDA - Guidance range $ 2.0     $ 3.0     $ 13.0     $ 17.0  
                               
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:                              
Net loss - Guidance range $ (9.1 )   $ (8.1 )   $ (31.7 )   $ (27.7 )
Amortization of acquired intangible assets   0.1       0.1       0.4       0.4  
Stock-based compensation expense   4.5       4.5       19.8       19.8  
Total net adjustments   4.6       4.6       20.2       20.2  
Non-GAAP net loss - Guidance range $ (4.5 )   $ (3.5 )   $ (11.5 )   $ (7.5 )
                               
Calculation of Non-GAAP Earnings Per Share Guidance:                              
Non-GAAP net loss - Guidance range $ (4.5 )   $ (3.5 )   $ (11.5 )   $ (7.5 )
                               
Weighted average shares outstanding - basic and diluted   30.6       30.6       30.9       30.9  
Shares used in computing non-GAAP net loss per share - basic and diluted   30.6       30.6       30.9       30.9  
Non-GAAP net loss per common share - basic and diluted $ (0.15 )   $ (0.11 )   $ (0.37 )   $ (0.24 )
Benefitfocus, Inc.
843-284-1052 ext. 3527
pr@benefitfocus.com 

Investor Relations:
Michael Bauer
843-284-1052 ext. 6654
michael.bauer@benefitfocus.com 

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