Total revenue of $62.5 million grew 8% year-over-year
Employer revenue of $40.1 million grew 14% year-over-year

CHARLESTON, S.C., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Benefitfocus, Inc. (NASDAQ:BNFT), a leading provider of cloud-based benefits management software, today announced its third quarter 2017 financial results.

“Benefitfocus outperformed our third quarter profitability targets and our revenue came in at the high-end of our expectations,” said Shawn Jenkins, Co-Founder and Chief Executive Officer of Benefitfocus. “Our Q3 and year-to-date financial results demonstrate the inherent scale in our business and multi-year investment in operational excellence.”

Jenkins added, “As the only platform capable of serving both the employer and carrier segments we are uniquely positioned to take advantage of this massive market as the underlying fundamentals continue to strengthen.”

Third Quarter 2017 Financial Highlights

Revenue

• Total revenue was $62.5 million, an increase of 8% compared to the third quarter of 2016. 
  
  
• Software services revenue was $53.1 million, an increase of 8% compared to the third quarter of 2016. 
  
  
• Professional services revenue was $9.3 million, an increase of 7% compared to the third quarter of 2016. 
  
  
• Employer revenue was $40.1 million, an increase of 14% compared to the third quarter of 2016. 
  
  
• Insurance Carrier revenue was $22.3 million, a decrease of 2% compared to the third quarter of 2016.

Net Loss

• GAAP net loss was ($6.7) million, compared to ($8.6) million in the third quarter of 2016. GAAP net loss per share was ($0.21), based on 31.2 million basic and diluted weighted average common shares outstanding, compared to ($0.29) for the third quarter of 2016, based on 29.7 million basic and diluted weighted average common shares outstanding.

Non-GAAP Net Loss and Adjusted EBITDA

• Non-GAAP net loss was ($1.9) million, compared to ($4.1) million in the third quarter of 2016. Non-GAAP net loss per share was ($0.06), based on 31.2 million basic and diluted weighted average common shares outstanding, compared to ($0.14) for the third quarter of 2016, based on 29.7 million basic and diluted weighted average common shares outstanding.
• Adjusted EBITDA was $5.1 million, compared to $1.1 million in the third quarter of 2016.

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

Balance Sheet

• Cash, cash equivalents and marketable securities at September 30, 2017 totaled $54.6 million, compared to $59.4 million at the end of the second quarter of 2017.  

Third Quarter and Recent Business Highlights

• We ended the quarter with 903 large employer customers, up from 827 at the end of the year-ago period and 893 at the end of the second quarter of 2017.
• We ended the quarter with 54 insurance carrier customers, up from 53 at the end of the year-ago period and the end of the second quarter of 2017.
• We unveiled and made generally available the new Benefitfocus Consumer-Directed Healthcare Accounts and Benefitfocus COBRA Administration solutions.
• We announced the Autumn Software Release which includes new enhancements designed to drive success before, during and after open enrollment. For employers, new capabilities were designed around open enrollment planning and performance as well as year-round benefits management. The new release also includes enhancements for insurance carriers, such as simplified dependent management, data accuracy and timeliness, and responsive automatic enrollment.
• We opened a new office in Salt Lake City, UT.  This office is primarily home to our Customer Success Organization team members.

Business Outlook

Based on information available as of November 2, 2017, Benefitfocus is providing guidance for the fourth quarter and full year 2017 as indicated below.

Fourth Quarter 2017:

• Total revenue is expected to be in the range of $66.0 million to $67.0 million.
  
  
• Non-GAAP net loss is expected to be in the range of ($2.5) million to ($1.5) million, or ($0.08) to ($0.05) per share, based on 31.3 million basic and diluted weighted average common shares outstanding.
  
  
• Adjusted EBITDA is expected to be in the range of $4.5 million to $5.5 million.

Full Year 2017:

• Total revenue is expected to be in the range of $256.0 million to $257.0 million.
  
  
• Non-GAAP net loss is expected to be in the range of ($9.0) million to ($8.0) million, or ($0.29) to ($0.26) per share, based on 31.0 million basic and diluted weighted average common shares outstanding.
  
  
• Adjusted EBITDA is expected to be in the range of $18.6 million to $19.6 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, November 2, 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 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 9, 2017, and can be accessed by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) with passcode 13672057.

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 the consumers they serve 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, including non-GAAP gross profit, operating income (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 income (loss), net loss and net loss per share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, offering costs expensed, if any and costs not core to our business, 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, expense related to the impairment of goodwill and intangible assets, and costs not core to our business.  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 profitability; fluctuations in our financial results; risks related to changing healthcare and other applicable regulations; our ability to maintain our culture, recruit and retain qualified personnel and effectively expand our sales force; general economic risks;  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. Unaudited Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2017				2016				2017				2016
Revenue		$	62,453			$	58,022			$	189,972			$	170,688
Cost of revenue (1)(2)			30,467				29,112				90,896				88,159
Gross profit			31,986				28,910				99,076				82,529
Operating expenses:(1)(2)
Sales and marketing			16,180				13,607				51,103				41,942
Research and development			12,568				14,081				37,222				43,276
General and administrative			6,853				7,746				20,487				24,415
Total operating expenses			35,601				35,434				108,812				109,633
Loss from operations			(3,615	)			(6,524	)			(9,736	)			(27,104	)
Other income (expense):
Interest income			55				25				129				117
Interest expense on building lease financing obligations			(1,864	)			(1,704	)			(5,585	)			(5,130	)
Interest expense on other borrowings			(1,254	)			(262	)			(3,526	)			(691	)
Other expense			9				(133	)			(140	)			(136	)
Total other expense, net			(3,054	)			(2,074	)			(9,122	)			(5,840	)
Loss before income taxes			(6,669	)			(8,598	)			(18,858	)			(32,944	)
Income tax expense			5				5				10				15
Net loss		$	(6,674	)		$	(8,603	)		$	(18,868	)		$	(32,959	)
Comprehensive loss		$	(6,674	)		$	(8,603	)		$	(18,868	)		$	(32,959	)
Net loss per common share:
Basic and diluted		$	(0.21	)		$	(0.29	)		$	(0.61	)		$	(1.12	)
Weighted-average common shares outstanding:
Basic and diluted			31,181,141				29,651,230				30,974,116				29,442,023
(1) Stock-based compensation included in above line items:
Cost of revenue		$	682			$	754			$	1,803			$	2,072
Sales and marketing			1,319				886				3,575				2,356
Research and development			743				1,011				2,200				3,538
General and administrative			1,652				1,776				4,068				5,644
(2) Amortization of acquired intangible assets included in above line items:
Cost of revenue		$	34			$	37			$	105			$	111
Sales and marketing			12				10				38				30
Research and development			14				13				38				41
General and administrative			5				5				13				12

Benefitfocus, Inc. Unaudited Consolidated Balance Sheets (in thousands, except share and per share data)
		As of				As of
		September 30,				December 31,
		2017				2016
Assets
Current assets:
Cash and cash equivalents		$	54,573			$	56,853
Marketable securities			–				2,007
Accounts receivable, net			33,332				28,340
Accounts receivable, related party, net			–				4,626
Prepaid expenses and other current assets			5,417				4,449
Total current assets			93,322				96,275
Property and equipment, net			75,035				80,518
Intangible assets, net			215				408
Goodwill			1,634				1,634
Other non-current assets			1,014				1,575
Total assets		$	171,220			$	180,410
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable		$	1,401			$	5,829
Accrued expenses			8,979				10,867
Accrued compensation and benefits			11,926				17,347
Deferred revenue, current portion			32,649				35,426
Revolving line of credit, current portion			28,000				20,000
Financing and capital lease obligations, current portion			3,395				2,604
Total current liabilities			86,350				92,073
Deferred revenue, net of current portion			31,149				40,412
Revolving line of credit, net of current portion			32,246				20,246
Financing and capital lease obligations, net of current portion			56,132				57,934
Other non-current liabilities			2,304				3,056
Total liabilities			208,181				213,721
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.001, 5,000,000 shares authorized,    no shares issued and outstanding at September 30, 2017 and December 31, 2016			–				–
Common stock, par value $0.001, 50,000,000 shares authorized,    31,195,653 and 30,429,014 shares issued and outstanding    at September 30, 2017 and December 31, 2016, respectively			31				30
Additional paid-in capital			350,667				335,059
Accumulated deficit			(387,659	)			(368,400	)
Total stockholders' deficit			(36,961	)			(33,311	)
Total liabilities and stockholders' deficit		$	171,220			$	180,410

Benefitfocus, Inc. Unaudited Consolidated Statements of Cash Flows (in thousands)
		Nine Months Ended
		September 30,
		2017				2016
Cash flows from operating activities
Net loss		$	(18,868	)		$	(32,959	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization			11,848				9,619
Stock-based compensation expense			11,646				13,610
Interest accrual on financing obligation			5,623				5,130
Loss on disposal or impairment of property and equipment			157				140
Provision for doubtful accounts			142				287
Changes in operating assets and liabilities:
Accounts receivable, net			(508	)			(1,655	)
Accrued interest on short-term investments			7				217
Prepaid expenses and other current assets			(968	)			465
Other non-current assets			561				142
Accounts payable			(4,343	)			(3,844	)
Accrued expenses			(2,152	)			4,726
Accrued compensation and benefits			(5,422	)			(3,460	)
Deferred revenue			(12,040	)			(13,819	)
Other non-current liabilities			(751	)			538
Net cash and cash equivalents used in operating activities			(15,068	)			(20,863	)
Cash flows from investing activities
Purchases of short-term investments held to maturity			–				(2,004	)
Proceeds from maturity of short-term investments held to maturity			2,000				37,725
Purchases of property and equipment			(6,151	)			(10,861	)
Net cash and cash equivalents (used in) provided by investing activities			(4,151	)			24,860
Cash flows from financing activities
Draws on revolving line of credit			81,000				64,000
Payments on revolving line of credit			(61,000	)			(59,000	)
Proceeds from exercises of stock options and ESPP			3,572				2,118
Remittance of taxes upon vesting of restricted stock units			–				(202	)
Payments on financing and capital lease obligations			(6,633	)			(8,187	)
Net cash and cash equivalents provided by (used in) financing activities			16,939				(1,271	)
Net (decrease) increase in cash and cash equivalents			(2,280	)			2,726
Cash and cash equivalents, beginning of period			56,853				48,074
Cash and cash equivalents, end of period		$	54,573			$	50,800
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses		$	878			$	856
Property and equipment purchased with financing and capital lease obligations		$	—			$	2,233
Post contract support purchased with financing obligations		$	—			$	1,048

Benefitfocus, Inc. Unaudited Reconciliation of GAAP to Non-GAAP Measures (in thousands, except share and per share data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2017				2016				2017				2016
Reconciliation from Gross Profit to Non-GAAP Gross Profit:
Gross profit		$	31,986			$	28,910			$	99,076			$	82,529
Amortization of acquired intangible assets			34				37				105				111
Stock-based compensation expense			682				754				1,803				2,072
Total net adjustments			716				791				1,908				2,183
Non-GAAP gross profit		$	32,702			$	29,701			$	100,984			$	84,712
Reconciliation from Operating Loss to Non-GAAP Operating Income (Loss):
Operating loss		$	(3,615	)		$	(6,524	)		$	(9,736	)		$	(27,104	)
Amortization of acquired intangible assets			65				65				194				194
Stock-based compensation expense			4,396				4,427				11,646				13,610
Costs not core to our business			359				—				480				—
Total net adjustments			4,820				4,492				12,320				13,804
Non-GAAP operating income (loss)		$	1,205			$	(2,032	)		$	2,584			$	(13,300	)
Reconciliation from Net Loss to Adjusted EBITDA:
Net loss		$	(6,674	)		$	(8,603	)		$	(18,868	)		$	(32,959	)
Depreciation			3,053				2,482				9,245				7,344
Amortization of software development costs			785				762				2,409				2,081
Amortization of acquired intangible assets			65				65				194				194
Interest income			(55	)			(25	)			(129	)			(117	)
Interest expense on building lease financing obligations			1,864				1,704				5,585				5,130
Interest expense on other borrowings			1,254				262				3,526				691
Income tax expense			5				5				10				15
Stock-based compensation expense			4,396				4,427				11,646				13,610
Costs not core to our business			359				—				480				—
Total net adjustments			11,726				9,682				32,966				28,948
Adjusted EBITDA		$	5,052			$	1,079			$	14,098			$	(4,011	)
Reconciliation from Net Loss to Non-GAAP Net Loss:
Net loss		$	(6,674	)		$	(8,603	)		$	(18,868	)		$	(32,959	)
Amortization of acquired intangible assets			65				65				194				194
Stock-based compensation expense			4,396				4,427				11,646				13,610
Costs not core to our business			359				—				480				—
Total net adjustments			4,820				4,492				12,320				13,804
Non-GAAP net loss		$	(1,854	)		$	(4,111	)		$	(6,548	)		$	(19,155	)
Calculation of Non-GAAP Earnings Per Share:
Non-GAAP net loss		$	(1,854	)		$	(4,111	)		$	(6,548	)		$	(19,155	)
Weighted average shares outstanding - basic and diluted			31,181,141				29,651,230				30,974,116				29,442,023
Shares used in computing non-GAAP net loss per share - basic and diluted			31,181,141				29,651,230				30,974,116				29,442,023
Non-GAAP net loss per common share - basic and diluted		$	(0.06	)		$	(0.14	)		$	(0.21	)		$	(0.65	)

Benefitfocus, Inc. Unaudited Reconciliation of GAAP to Non-GAAP Guidance Ranges (in millions, except per share data)
		Fourth Quarter 2017								Full Year 2017
		Range								Range
		Low				High				Low				High
Reconciliation from Net Loss Guidance to Adjusted EBITDA Guidance:
Net loss - Guidance range		$	(8.0	)		$	(7.0	)		$	(26.9	)		$	(25.9	)
Depreciation and amortization			4.1				4.1				16				16
Interest income			—				—				—				—
Interest expense			3				3				12				12
Income tax expense			—				—				—				—
Stock-based compensation expense			5				5				16.7				16.7
Costs not core to business			0.4				0.4				0.8				0.8
Total net adjustments			12.5				12.5				45.5				45.5
Adjusted EBITDA - Guidance range		$	4.5			$	5.5			$	18.6			$	19.6
Reconciliation from Net Loss Guidance to Non-GAAP Net Loss Guidance:
Net loss - Guidance range		$	(8.0	)		$	(7.0	)		$	(26.9	)		$	(25.9	)
Amortization of acquired intangible assets			0.1				0.1				0.4				0.4
Stock-based compensation expense			5				5				16.7				16.7
Costs not core to business			0.4				0.4				0.8				0.8
Total net adjustments			5.5				5.5				17.9				17.9
Non-GAAP net loss - Guidance range		$	(2.5	)		$	(1.5	)		$	(9.0	)		$	(8.0	)
Calculation of Non-GAAP Earnings Per Share Guidance:
Non-GAAP net loss - Guidance range		$	(2.5	)		$	(1.5	)		$	(9.0	)		$	(8.0	)
Weighted average shares outstanding - basic and diluted			31.3				31.3				31				31
Shares used in computing non-GAAP			31.3				31.3				31				31
net loss per share - basic and diluted
Non-GAAP net loss per common share - basic and diluted		$	(0.08	)		$	(0.05	)		$	(0.29	)		$	(0.26	)

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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