BNFT Benefitfocus Inc

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