BROOKFIELD, Wis., March 14, 2016 (GLOBE NEWSWIRE) -- Connecture, Inc. (Nasdaq:CNXR), a provider of web-based information systems used to create health insurance marketplaces, today announced financial results for the quarter and full year ended December 31, 2015.
“The fourth quarter of 2015 capped an important year for Connecture, highlighted by strong overall financial performance and many other accomplishments that position us well for the future,” remarked Jeff Surges, CEO of Connecture. “During 2015 we extended our Medicare.gov contract and expanded our customer base by approximately 20%, including 13 new health plans and eight private exchange clients. And on the delivery side, we successfully completed a number of important customer implementations as part of the annual enrollment cycle, including a significant payvider organization, Memorial Hermann, and one of our largest implementations in the Company’s history with United Healthcare, which will contribute to our growth story going forward.”
Surges added, “The $52 million investment we separately announced today, led by Francisco Partners, when closed, will not only provide us capital to support continued growth and product innovation, but also provides us with a partner that brings a wealth of relevant healthcare experience and resources to our company.”
Full Year 2015 Results
- Total revenue was $95.8 million, increasing 13.3% compared to $84.6 million in 2014. Excluding the Enterprise State segment, which was approximately 14% of total 2015 revenue, revenue increased approximately 31% over full year 2014.
- Adjusted gross margin was $49.9 million, or 52.1% of total revenue, increasing 38.1% compared to $36.2 million, or 42.8% of total revenue, in 2014.
- Operating loss was ($1.5) million, narrowing significantly from an operating loss of ($4.3) million in 2014.
- Net loss was ($7.3) million, compared to net loss of ($10.2) million in 2014.
- Adjusted EBITDA was $8.3 million, compared to Adjusted EBITDA of $1.3 million in 2014.
Fourth Quarter 2015 Financial Results
- Total revenue was $29.1 million, increasing 4.7% compared to $27.8 million in the fourth quarter of 2014. Excluding the Enterprise State segment, which was approximately 6.3% of total fourth quarter 2015 revenue, revenue growth was approximately 24% over the same period the prior year.
- Adjusted gross margin was $17.6 million, or 60.3% of total revenue, increasing 20.4% compared to $14.6 million, or 52.4% of total revenue, in the fourth quarter of 2014.
- Operating income was $5.9 million, compared to operating income of $6.0 million in the fourth quarter of 2014.
- Net income was $4.3 million, compared to net income of $4.8 million in the fourth quarter of 2014.
- Adjusted EBITDA was $8.6 million, increasing 29.4% compared to Adjusted EBITDA of $6.6 million in the fourth quarter of 2014.
- Cash and cash equivalents at December 31, 2015 totaled $5.4 million, compared to $7.4 million at September 30, 2015. Total liquidity was $14.9 million at December 31, 2015, inclusive of $9.5 million of our unused revolving credit facility.
- Cash used in operations for the three months ended December 31, 2015 was $1.4 million, improving from cash used in operations of $4.8 million for the same period last year. Of note, while an improvement from the same period last year, cash used in operations for the three months ended December 31, 2015 was affected by the timing of $3.5 million of cash receipts from several large customers which were due in the fourth quarter but not received until the first half of January 2016. Had these payments been received on time, cash generated in the fourth quarter of 2015 would have been $2.1 million.
Recent Business Highlights
- The Medicare.gov contract, which we have supported for the past eleven years, was renewed during the fourth quarter of 2015 for a multi-year period.
- Notable renewals, upsells and expansions during the fourth quarter included Aetna, BCBS of Massachusetts, BCBS of Michigan, Kaiser and Health Partners.
- Total contracted backlog at December 31, 2015 was $89.7 million, compared to $82.9 million at September 30, 2015 and $78.2 million at December 31, 2014. The sequential increase from September 30, 2015, was primarily due to the Medicare.gov contract renewal, offset by the expected completion of customer deliverables in the fourth quarter of 2015 associated with the open enrollment period.
- Successful Annual and Open Enrollment launches of over 50 health insurance carriers, many of whom experienced significant volume increases over prior years.
- Expanded product capabilities including: a new release of our Analytics suite and Executive Dashboard, and new mobile features for the consumer and broker markets, as well as new carrier additions for our Ancillary Store.
Business Outlook
Connecture is providing guidance for full year 2016 as indicated below:
- Total revenue is expected to be in the range of $100.0 million to $110.0 million.
- Adjusted EBITDA is expected to be in the range of $10.0 million to $15.0 million.
Conference Call
Connecture’s management will host a conference call at 5:00 p.m. EDT on Monday, March 14, 2016, to discuss the fourth quarter and full year 2015 results. The conference call will be accessible by dialing 877-930-8068 (U.S.) or 253-336-8043 (international) and referencing conference ID 48876082. A live webcast of the conference call will also be available on the investor relations section of the company's website at investors.connecture.com.
Use of Non-GAAP Measures
To provide additional information regarding Connecture’s financial results, Connecture has disclosed in this press release adjusted gross margin and adjusted EBITDA margin, each a non-GAAP financial measure. Connecture defines adjusted gross margin as gross margin before depreciation and amortization expense, as well as stock-based compensation expense. Connecture defines adjusted EBITDA as net income (loss) before net interest, other expense, taxes, depreciation and amortization expense, adjusted to eliminate stock-based compensation and non-cash changes in fair value of contingent consideration and impairments of goodwill, intangible and long-lived assets, if any.
Connecture has included adjusted gross margin and adjusted EBITDA as supplemental financial measures in this press release because they are key measures used by its management and board of directors to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans, and because management believes that they provide useful information in understanding and evaluating Connecture’s operating results. However, use of adjusted gross margin and adjusted EBITDA as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of Connecture’s financial results as reported under GAAP. A reconciliation to the closest GAAP measures of these non-GAAP measures is contained in the accompanying tables.
About Connecture
Connecture (NASDAQ:CNXR) is a leading web-based consumer shopping, enrollment and retention platform for health insurance distribution. Connecture offers a personalized health insurance shopping experience that recommends the best fit insurance plan based on an individual's preferences, health status, preferred providers, medications and expected out-of-pocket costs. Connecture's customers are health insurance marketplace operators such as health plans, brokers and exchange operators, who must distribute health insurance in a cost-effective manner to a growing number of insured consumers. Connecture's solutions automate key functions in the health insurance distribution process, allowing its customers to price and present plan options accurately to consumers and efficiently enroll, renew and manage plan members.
Forward-Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this press release, including statements regarding Connecture’s strategy, future operations, future financial position, ability to close on its $52 million financing, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
These forward-looking statements include, among other things, statements about management’s estimates regarding future market growth, revenues and financial performance and other statements about management’s beliefs, intentions or goals. Connecture may not actually achieve the plans, intentions or expectations disclosed in the forward-looking statements, and you should not place undue reliance on Connecture’s forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, risks related to (1) Connecture’s ability to successfully implement the strategic relationship with Francisco Partners; (2) Connecture’s ability to manage its growth, including accurately planning and forecasting its financial results and hiring, retaining and motivating employees; (3) the competitive environment for Connecture’s business and the market for Connecture’s solutions; (4) Connecture’s ability to maintain historical contract terms; (5) Connecture’s ability to operate its proprietary software, transition to new platforms and provide innovative and high quality software and services; (6) errors, interruptions or delays in Connecture’s services; (7) breaches of Connecture’s security measures; (8) Connecture’s ability to comply with regulatory requirements; (9) technological and regulatory developments; (10) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; and (11) other risks and potential factors that could affect Connecture’s business and financial results identified in Connecture’s filings with the Securities and Exchange Commission (the “SEC”), including Connecture’s Annual Report on Form 10-K and its quarterly reports on Form 10-Q. The forward-looking statements contained in this press release reflect Connecture’s current views with respect to future events, and Connecture assumes no obligation to update or revise any forward-looking statements except as required by applicable law.
| Connecture, Inc. | |||||||||||||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||||
| Revenue | $ | 29,139 | $ | 27,825 | $ | 95,847 | $ | 84,579 | |||||||||||
| Cost of revenue (1) | 12,732 | 14,235 | 50,670 | 52,431 | |||||||||||||||
| Gross margin | 16,407 | 13,590 | 45,177 | 32,148 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||
| Research and development (1) | 4,860 | 4,447 | 22,718 | 18,125 | |||||||||||||||
| Sales and marketing (1) | 1,993 | 1,947 | 9,507 | 7,729 | |||||||||||||||
| General and administrative (1) | 3,616 | 1,241 | 14,439 | 10,552 | |||||||||||||||
| Total operating expenses | 10,469 | 7,635 | 46,664 | 36,406 | |||||||||||||||
| Income (loss) from operations | 5,938 | 5,955 | (1,487 | ) | (4,258 | ) | |||||||||||||
| Other expenses: | |||||||||||||||||||
| Interest expense | 1,390 | 1,705 | 5,665 | 5,937 | |||||||||||||||
| Other expense (income), net | 132 | (611 | ) | 140 | (68 | ) | |||||||||||||
| Income (loss) before income taxes | 4,416 | 4,861 | (7,292 | ) | (10,127 | ) | |||||||||||||
| Income tax expense | (93 | ) | (77 | ) | (51 | ) | (33 | ) | |||||||||||
| Net income (loss) | $ | 4,323 | $ | 4,784 | $ | (7,343 | ) | $ | (10,160 | ) | |||||||||
| Comprehensive income (loss) | $ | 4,323 | $ | 4,784 | $ | (7,343 | ) | $ | (10,160 | ) | |||||||||
| Net income (loss) per common share: | |||||||||||||||||||
| Basic | $ | 0.20 | 0.80 | $ | (0.34 | ) | (10.27 | ) | |||||||||||
| Diluted | $ | 0.19 | 0.30 | $ | (0.34 | ) | (10.27 | ) | |||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||
| Basic | 21,960,077 | 4,857,869 | 21,813,407 | 1,362,109 | |||||||||||||||
| Diluted | 22,784,888 | 12,979,040 | 21,813,407 | 1,362,109 | |||||||||||||||
| (1) Cost of revenue and operating expenses include following stock-based compensation expense: | |||||||||||||||||||
| Cost of revenue | $ | 184 | $ | 31 | $ | 922 | $ | 123 | |||||||||||
| Research and development | 479 | 18 | 1,379 | 78 | |||||||||||||||
| Sales and marketing | 146 | 7 | 519 | 32 | |||||||||||||||
| General and administrative | 585 | 307 | 1,892 | 1,203 | |||||||||||||||
| Connecture, Inc. | |||||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||||
| (In thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
As of December 31, 2015 | As of December 31, 2014 | ||||||||||||||
| Assets | |||||||||||||||
| Current assets: | |||||||||||||||
| Cash and cash equivalents | $ | 5,424 | $ | 28,252 | |||||||||||
| Accounts receivable - net of allowances | 10,792 | 12,128 | |||||||||||||
| Prepaid expenses and other current assets | 652 | 1,557 | |||||||||||||
| Total current assets | 16,868 | 41,937 | |||||||||||||
| Property and equipment, net | 2,109 | 1,892 | |||||||||||||
| Goodwill | 26,779 | 26,779 | |||||||||||||
| Other intangibles, net | 11,392 | 15,350 | |||||||||||||
| Deferred implementation costs | 24,565 | 24,552 | |||||||||||||
| Other assets | 976 | 880 | |||||||||||||
| Total assets | $ | 82,689 | $ | 111,390 | |||||||||||
| Liabilities and stockholders' deficit | |||||||||||||||
| Current liabilities: | |||||||||||||||
| Accounts payable | $ | 6,853 | $ | 5,737 | |||||||||||
| Accrued payroll and related liabilities | 3,560 | 3,880 | |||||||||||||
| Other liabilities | 2,188 | 4,373 | |||||||||||||
| Current maturities of debt | 1,441 | 4,479 | |||||||||||||
| Deferred revenue | 34,049 | 42,578 | |||||||||||||
| Total current liabilities | 48,091 | 61,047 | |||||||||||||
| Deferred revenue | 18,529 | 31,159 | |||||||||||||
| Long-term debt | 46,964 | 47,627 | |||||||||||||
| Other long-term liabilities | 285 | 398 | |||||||||||||
| Total liabilities | 113,869 | 140,231 | |||||||||||||
| Total stockholders' deficit | (31,180 | ) | (28,841 | ) | |||||||||||
| Total liabilities and stockholders' deficit | $ | 82,689 | $ | 111,390 | |||||||||||
| Connecture, Inc. | ||||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||||
| (In thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Year Ended December 31, | ||||||||||||||
| 2015 | 2014 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | (7,343 | ) | $ | (10,160 | ) | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | 5,043 | 5,101 | ||||||||||||
| Stock-based compensation expense | 4,712 | 1,436 | ||||||||||||
| Other | 970 | 1,061 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | 1,291 | 8,782 | ||||||||||||
| Prepaid expenses and other assets | 757 | (495 | ) | |||||||||||
| Deferred implementation costs | (13 | ) | (4,653 | ) | ||||||||||
| Accounts payable | 1,856 | (3,463 | ) | |||||||||||
| Accrued expenses and other liabilities | (2,306 | ) | (3,744 | ) | ||||||||||
| Deferred revenue | (21,159 | ) | (14,118 | ) | ||||||||||
| Net cash used in operating activities | (16,192 | ) | (20,253 | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchase of property and equipment | (1,317 | ) | (837 | ) | ||||||||||
| Net cash used in financing activities | (1,317 | ) | (837 | ) | ||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Net (repayments) borrowings of debt | (4,365 | ) | 13,631 | |||||||||||
| Other | (954 | ) | 33,434 | |||||||||||
| Net cash (used in) provided by financing activities | (5,319 | ) | 47,065 | |||||||||||
| Net (decrease) increase in cash and cash equivalents | (22,828 | ) | 25,975 | |||||||||||
| Cash and cash equivalents - beginning of period | 28,252 | 2,277 | ||||||||||||
| Cash and cash equivalents - end of period | $ | 5,424 | $ | 28,252 | ||||||||||
| Connecture, Inc. | ||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Measures | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||
| Reconciliation from Gross Margin to Adjusted Gross Margin: | ||||||||||||||||||
| Gross margin | $ | 16,407 | $ | 13,590 | $ | 45,177 | $ | 32,148 | ||||||||||
| Depreciation and amortization | 974 | 964 | 3,846 | 3,892 | ||||||||||||||
| Stock-based compensation expense | 184 | 31 | 922 | 123 | ||||||||||||||
| Adjusted gross margin | $ | 17,565 | $ | 14,585 | $ | 49,945 | $ | 36,163 | ||||||||||
| Reconciliation from Net Income (Loss) to Adjusted EBITDA: | ||||||||||||||||||
| Net income (loss) | $ | 4,323 | $ | 4,784 | $ | (7,343 | ) | $ | (10,160 | ) | ||||||||
| Depreciation and amortization | 1,246 | 1,260 | 5,043 | 5,101 | ||||||||||||||
| Interest expense | 1,390 | 1,705 | 5,665 | 5,937 | ||||||||||||||
| Other expense (income) | 132 | (611 | ) | 140 | (68 | ) | ||||||||||||
| Income taxes | 93 | 77 | 51 | 33 | ||||||||||||||
| Stock-based compensation expense | 1,394 | 363 | 4,712 | 1,436 | ||||||||||||||
| Change in fair value of contingent consideration | - | (951 | ) | - | (951 | ) | ||||||||||||
| Total net adjustments | 4,255 | 1,843 | 15,611 | 11,488 | ||||||||||||||
| Adjusted EBITDA | $ | 8,578 | $ | 6,627 | $ | 8,268 | $ | 1,328 | ||||||||||