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 OutlookAs 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 BenefitfocusBenefitfocus (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 MeasuresThe 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 StatementExcept 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:843-981-8898pr@benefitfocus.comInvestor Relations:Doug Kuckelman843-790-7460ir@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 EndedSeptember 30,     Nine Months EndedSeptember 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 ofSeptember 30,2022     As ofDecember 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 sharesauthorized, 1,777,778 and 1,777,778 shares issued and outstandingat 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 EndedSeptember 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 EndedSeptember 30,     Nine Months EndedSeptember 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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