Benefitfocus (BNFT) 8-K Benefitfocus Announces Third Quarter 2021 Financial Results

Exhibit 99.1

Benefitfocus, Inc. 843-981-8898 pr@benefitfocus.com   Investor Relations: Patti Leahy 843-981-8899 ir@benefitfocus.com   

Benefitfocus Announces Third Quarter 2021 Financial Results

Delivers on third quarter financial commitments

Focused on providing service excellence to deliver enhanced stakeholder value

Charleston, S.C. –November 3, 2021 –Benefitfocus, Inc. (NASDAQ: BNFT), an industry-leading benefits technology platform that simplifies benefits administration for employers, health plans and brokers, today announces its third quarter 2021 financial results.  

Third quarter financial highlights:  

• Revenue of $62.0 million exceeds guidance

• GAAP EPS of ($0.59) vs. ($0.19) in third quarter 2020

• Non-GAAP EPS of ($0.19) exceeds guidance

• GAAP net loss of ($18.1) million vs. ($4.4) million in third quarter 2020

• Adjusted EBITDA of $6.7 million, above midpoint of guidance

• Operating cash flow of $9.4 million and free cash flow of $6.9 million

• De-levered balance sheet and improved capital structure through convertible note repurchase

• Cash and marketable securities of $94.5 million, down $98.7 million from prior quarter primarily reflecting repurchase of convertible notes

Other recent highlights:

• Selected by State of Wisconsin Department of Employee Trust Funds for Employee Insurance Administration Modernization for 239,000 members

• Selected by State of Nevada Public Employees’ Benefits Program (PEBM) for Employee Enrollment Benefits Management System Modernization for 72,000 members

• Achieved HITRUST CSF® Certification to Enhance Third-Party Privacy, Security and Compliance for Customer Data

• Added Full Suite of Voluntary Insurance Offerings from American Public Life to Benefit Catalog

“Our entire team is working with a great sense of urgency and discipline to deliver enhanced service excellence for our customers during this year’s open enrollment,” said Matt Levin, president and chief executive officer

. “I expect this heightened focus, combined with the commitment and deep experience of our team, will result in stellar performance for our stakeholders including our customers, partners and shareholders.”

“I am pleased with our performance this quarter as we again delivered on our financial commitments,” said Alpana Wegner, chief financial officer. “Our strong cash position enabled us to opportunistically de-lever the balance sheet while preserving flexibility to invest strategically and advance our growth strategy.”

Third Quarter 2021 Financial Highlights

Revenue

• Total revenue was $62.0 million, down 2% compared to the third quarter of 2020.

• Software services was $50.9 million, up 1% compared to the third quarter of 2020. Software services is comprised of subscription and platform revenue.

o Subscription revenue was $44.8 million, relatively flat compared to the third quarter of 2020.

o Platform revenue was $6.2 million, up 10% compared to the third quarter of 2020.

• Professional services revenue was $11.1 million, down 15% compared to the third quarter of 2020.

Net Loss

• GAAP net loss available to common stockholders was ($19.7) million, compared to ($6.0)million in the third quarter of 2020. GAAP net loss per share was ($0.59), based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.19)for the third quarter of 2020, based on 32.3million 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 ($6.3) million compared to ($2.7) million in the third quarter of 2020. Non-GAAP net loss per share was ($0.19) based on 33.4 million basic and diluted weighted average common shares outstanding, compared to ($0.08) in the third quarter of 2020, based on 32.3 million basic and diluted weighted average common shares outstanding.

• Adjusted EBITDA was $6.7 million, compared to $10.5 millionin the third quarter of 2020.

• Free cash flow was $6.9 million, compared to $11.3 million in the third quarter of 2020.

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

Balance Sheet

• Cash and cash equivalents and marketable securities at September 30, 2021 totaled $94.5 million, compared to $193.2 million at the end of the second quarter of 2021 primarily reflecting the repurchase of approximately $100.2 million worth of our convertible notes

• The full $50.0 million line of credit remains available to the company.

Business Outlook

Based on information available as of November 3, 2021, Benefitfocus is providing guidance for the fourth quarter and full year as indicated below.

Fourth Quarter 2021

• Total revenue is expected to be in the range of $66 million to $72 million.

• Adjusted EBITDA is expected to be in the range of $13 million to $19 million.

• Non-GAAP net (loss) income available to common stockholders is expected to be between ($0.7) million and $5.3 million, or between ($0.02) per share based on 33.4 million basic and diluted weighted average shares outstanding and $0.15 per share based on 34.6 million diluted weighted average shares outstanding.

Full Year 2021

The company is reiterating guidance previously provided for Full Year 2021 as follows:

• Total revenue is expected to be in the range of $254 million to $260 million.

• Adjusted EBITDA is expected to be in the range of $44 million to $50 million.

• Free cash flow is expected to be in the range of $20 million to $26 million.

Adjusted EBITDA and free cash flow guidance excludes the impact of restructuring and impairment charges.

Management has not reconciled forward-looking non-GAAP net loss, adjusted EBITDA or free cash flow to their most directly comparable GAAP measure of GAAP net loss or GAAP operating cash flows. This is because we cannot predict with reasonable certainty the ultimate outcome of the various necessary GAAP components of such reconciliations, including, for example, those related to compensation, acquisition transactions and integration, or others that may arise during the year, without unreasonable effort. These components and other factors could materially impact the amount of future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts. See below for additional important disclosures regarding our non-GAAP financial measures.

Conference Call Details:

In conjunction with this announcement, Benefitfocus will host a conference call to discuss the company’s financial results and business outlook on Wednesday, November 3, 2021, at 5:00 p.m. ET. To access this call, dial (877) 407-9208 (domestic) or +1 (201) 493-6784 (international). A live webcast of the conference call will be available on the Investor Relations page of the company’s website at http://investor.benefitfocus.com/. After the conference call, a replay will be available until November 10, 2021, and can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) with passcode 13724236.

About Benefitfocus

Benefitfocus (NASDAQ: BNFT) unifies the entire benefits industry through innovative technology solutions that bring efficiency, cost savings and simplicity to employee benefits administration. Our powerful cloud-based software, data-driven insights and thoughtfully designed services help employers, insurance brokers, health plans and suppliers address the complexity of benefits enrollment and engagement, while bringing easier access to health, wealth and lifestyle products through a world-class benefits experience. Our mission is simple: to improve lives with benefits. 

Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in this release, including non-GAAP gross profit, operating income/loss, net loss/income, net loss/income per common share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. 

Non-GAAP gross profit, operating income/loss, net loss/income and net loss/income per common share exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, transaction and acquisition-related costs expensed, expense related to the impairment of goodwill, intangible assets and long-lived assets, gain or loss on extinguishment of debt, and costs not core to our business. We define adjusted EBITDA as net loss before net interest, taxes, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense, expense related to the impairment of goodwill, intangible assets and long-lived assets, transaction and acquisition-related costs expensed, restructuring costs, gain or loss on extinguishment of debt, and costs not core to our business. We define free cash flow as cash provided by or used in operating activities less capital expenditures, adjusted to eliminate 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 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 GAAP profitability; fluctuations in our financial results; our ability to maintain our culture and recruit, integrate and retain qualified personnel, including on our board of directors; our ability to compete effectively and implement our growth strategy; 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; management of growth; volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic; 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.

Source: Benefitfocus, Inc.

Benefitfocus, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	62,026		$	63,583		$	187,993		$	191,911
Cost of revenue(1)(2)		31,247			30,113			87,870			94,422
Gross profit		30,779			33,470			100,123			97,489
Operating expenses:(1)(2)(3)
Sales and marketing		12,669			12,405			34,481			39,863
Research and development		11,062			11,439			32,997			34,252
General and administrative		12,156			9,424			39,592			29,320
Restructuring costs		–			–			4,127			5,616
Total operating expenses		35,887			33,268			111,197			109,051
Loss from operations		(5,108	)		202			(11,074	)		(11,562	)
Other income (expense):
Interest income		52			40			163			563
Interest expense		(5,556	)		(5,771	)		(16,757	)		(17,524	)
(Loss) gain on repurchase of convertible senior notes		(7,520	)		1,138			(7,520	)		1,138
Other income		120			1			142			8
Total other expense, net		(12,904	)		(4,592	)		(23,972	)		(15,815	)
Loss before income taxes		(18,012	)		(4,390	)		(35,046	)		(27,377	)
Income tax expense		42			6			125			17
Net loss		(18,054	)		(4,396	)		(35,171	)		(27,394	)
Preferred dividends		(1,600	)		(1,600	)		(4,800	)		(2,062	)
Net loss available to common stockholders	$	(19,654	)	$	(5,996	)	$	(39,971	)	$	(29,456	)
Comprehensive loss	$	(18,054	)	$	(4,396	)	$	(35,171	)	$	(27,394	)
Net loss per common share:
Basic and diluted	$	(0.59	)	$	(0.19	)	$	(1.21	)	$	(0.91	)
Weighted-average common shares outstanding:
Basic and diluted		33,354,624			32,263,876			32,978,394			32,320,201
(1) Stock-based compensation included in above line items:
Cost of revenue	$	511		$	1,304		$	1,475		$	2,604
Sales and marketing		963			766			2,470			2,240
Research and development		589			785			1,210			1,717
General and administrative		2,532			1,004			5,339			4,298
(2) Amortization of acquired intangible assets included in above line items:
Cost of revenue	$	332		$	321		$	1,005		$	961
Sales and marketing		78			82			231			256
Research and development		110			119			336			342
General and administrative		48			46			133			146
(3) Transaction and acquisition-related costs expensed included in above line items:
General and administrative	$	80		$	18		$	240		$	425

Benefitfocus, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)

	As of September 30, 2021			As of December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	12,589		$	90,706
Marketable securities		81,899			95,085
Accounts receivable, net		20,368			22,240
Contract, prepaid and other current assets		17,239			21,354
Total current assets		132,095			229,385
Property and equipment, net		27,259			29,701
Financing lease right-of-use assets		58,503			68,670
Operating lease right-of-use assets		925			1,107
Intangible assets, net		8,688			10,393
Goodwill		12,857			12,857
Deferred contract costs and other non-current assets		12,078			10,259
Total assets	$	252,405		$	362,372
Liabilities, redeemable preferred stock and stockholders' deficit
Current liabilities:
Accounts payable	$	7,729		$	2,160
Accrued expenses		8,155			6,262
Accrued compensation and benefits		16,993			19,129
Deferred revenue, current portion		26,113			27,782
Lease liabilities and financing obligations, current portion		7,226			5,959
Total current liabilities		66,216			61,292
Deferred revenue, net of current portion		2,651			4,422
Convertible senior notes		105,637			184,308
Lease liabilities and financing obligations, net current portion		77,265			79,282
Other non-current liabilities		2,661			2,470
Total liabilities		254,430			331,774
Commitments and contingencies
Redeemable preferred stock:
Series A preferred stock, par value $0.001, 5,000,000 shares   authorized, 1,777,778 and 1,777,778 shares issued and outstanding   at September 30, 2021 and December 31, 2020, respectively,   liquidation preference $45 per share as of September 30, 2021 and December 31, 2020, respectively		79,193			79,193
Stockholders' deficit:
Common stock, par value $0.001, 95,000,000 and 50,000,000 shares authorized,    33,386,994 and 32,327,439 issued and outstanding at September 30, 2021 and December 31, 2020, respectively		33			32
Additional paid-in capital		429,978			427,431
Accumulated deficit		(511,229	)		(476,058	)
Total stockholders' deficit		(81,218	)		(48,595	)
Total liabilities, redeemable preferred stock and stockholders' deficit	$	252,405		$	362,372

Benefitfocus, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(35,171	)	$	(27,394	)
Adjustments to reconcile net loss to net cash and cash    equivalents provided by operating activities:
Depreciation and amortization		18,976			18,479
Stock-based compensation expense		10,494			10,859
Accretion of interest on convertible senior notes		8,590			8,834
Interest accrual on finance lease liabilities		3,259			71
Rent expense less than payments		(41	)		(24	)
Non-cash accretion income from investments		741			16
Impairment or loss on disposal of right-of-use assets and property and equipment		4,074			–
Loss (gain) on extinguishment of debt		7,520			(1,138	)
Provision for doubtful accounts		–			111
Changes in operating assets and liabilities:
Accounts receivable, net		1,872			3,685
Accrued interest on investments		161			(38	)
Contract, prepaid and other current assets		4,009			7,502
Deferred costs and other non-current assets		1,238			1,014
Accounts payable and accrued expenses		6,960			(9,157	)
Accrued compensation and benefits		(2,136	)		490
Deferred revenue		(3,441	)		(5,726	)
Other non-current liabilities		191			3,490
Net cash and cash equivalents provided by operating activities		27,296			11,074
Cash flows from investing activities
Purchases of investments held to maturity		(91,361	)		(67,785	)
Proceeds from investments held to maturity		100,588			–
Purchases of property and equipment		(7,454	)		(9,739	)
Net cash and cash equivalents provided by (used in) investing activities		1,773			(77,524	)
Cash flows from financing activities
Draws on revolving line of credit		–			10,000
Payments on revolving line of credit		–			(10,000	)
Repurchase of convertible senior notes		(98,678	)		(14,619	)
Payments of debt issuance costs		–			(154	)
Cancellation of convertible senior notes capped call hedge		98			26
Proceeds from issuance of preferred stock, net of issuance costs		–			79,192
Payments of preferred dividends		(4,800	)		(2,062	)
Repurchase of common stock		–			(9,667	)
Proceeds from exercises of stock options and ESPP		322			513
Payments on financing obligations		(226	)		(635	)
Payments of principal on finance lease liabilities		(3,902	)		(8,880	)
Net cash and cash equivalents (used in) provided by financing activities		(107,186	)		43,714
Net decrease in cash and cash equivalents		(78,117	)		(22,736	)
Cash and cash equivalents, beginning of period		90,706			130,976
Cash and cash equivalents, end of period	$	12,589		$	108,240
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses	$	945		$	–

Benefitfocus, Inc.

Unaudited Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Reconciliation from Gross Profit to Non-GAAP Gross Profit:
Gross profit	$	30,779		$	33,470		$	100,123		$	97,489
Amortization of acquired intangible assets		332			321			1,005			961
Stock-based compensation expense		511			1,304			1,475			2,604
Total net adjustments		843			1,625			2,480			3,565
Non-GAAP gross profit	$	31,622		$	35,095		$	102,603		$	101,054
Reconciliation from Operating (Loss) Income to Non-GAAP Operating Income:
Operating (loss) income	$	(5,108	)	$	202		$	(11,074	)	$	(11,562	)
Amortization of acquired intangible assets		568			568			1,705			1,705
Stock-based compensation expense		4,595			3,859			10,494			10,859
Transaction and acquisition-related costs expensed		80			18			240			425
Impairment of long-lived assets		—			—			4,003			—
Costs not core to our business		542			—			4,140			—
Total net adjustments		5,785			4,445			20,582			12,989
Non-GAAP operating income	$	677		$	4,647		$	9,508		$	1,427
Reconciliation from Net Loss to Adjusted EBITDA:
Net loss	$	(18,054	)	$	(4,396	)	$	(35,171	)	$	(27,394	)
Depreciation		3,615			3,774			10,682			11,496
Amortization of software development costs		2,268			2,032			6,589			5,278
Amortization of acquired intangible assets		568			568			1,705			1,705
Interest income		(52	)		(40	)		(163	)		(563	)
Interest expense		5,556			5,771			16,757			17,524
Income tax expense		42			6			125			17
Stock-based compensation expense		4,595			3,859			10,494			10,859
Transaction and acquisition-related costs expensed		80			18			240			425
Restructuring costs		—			—			4,127			5,616
Impairment of long-lived assets		—			—			4,003			—
Loss (gain) on repurchase of convertible senior notes		7,520			(1,138	)		7,520			(1,138	)
Costs not core to our business		542			—			4,140			—
Total net adjustments		24,734			14,850			66,219			51,219
Adjusted EBITDA	$	6,680		$	10,454		$	31,048		$	23,825
Reconciliation from Net Loss to Non-GAAP Net Loss:
Net loss	$	(18,054	)	$	(4,396	)	$	(35,171	)	$	(27,394	)
Amortization of acquired intangible assets		568			568			1,705			1,705
Stock-based compensation expense		4,595			3,859			10,494			10,859
Transaction and acquisition-related costs expensed		80			18			240			425
Impairment of long-lived assets		—			—			4,003			—
Loss (gain) on repurchase of convertible senior notes		7,520			(1,138	)		7,520			(1,138	)
Costs not core to our business		542			—			4,140			—
Total net adjustments		13,305			3,307			28,102			11,851
Non-GAAP net loss	$	(4,749	)	$	(1,089	)	$	(7,069	)	$	(15,543	)
Calculation of Non-GAAP Earnings Per Share:
Non-GAAP net loss	$	(4,749	)	$	(1,089	)	$	(7,069	)	$	(15,543	)
Preferred dividends		(1,600	)		(1,600	)		(4,800	)		(2,062	)
Non-GAAP net loss available to common stockholders	$	(6,349	)	$	(2,689	)	$	(11,869	)	$	(17,605	)
Weighted average shares outstanding - basic and diluted		33,354,624			32,263,876			32,978,394			32,320,201
Shares used in computing non-GAAP net loss per share - basic and diluted		33,354,624			32,263,876			32,978,394			32,320,201
Non-GAAP net loss per common share - basic and diluted	$	(0.19	)	$	(0.08	)	$	(0.36	)	$	(0.54	)

Reconciliation of Cash Flows from Operations to Free Cash Flow:
Net cash and cash equivalents provided by operating activities	$	9,369		$	13,208		$	27,296		$	11,074
Purchases of property and equipment		(2,971	)		(2,664	)		(7,454	)		(9,739	)
Cash paid for restructuring costs		502			745			1,886			5,201
Total net adjustments		(2,469	)		(1,919	)		(5,568	)		(4,538	)
Free Cash Flow	$	6,900		$	11,289		$	21,728		$	6,536