BROOKFIELD, Wis., Aug. 6, 2015 (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 ended June 30, 2015.
"We are pleased to report another solid quarter, with results that exceeded our financial guidance," remarked Doug Schneider, CEO of Connecture. "Strong growth during the quarter was driven by new customer wins and further cross-selling within our health plan customer base. In addition, we have had a strong selling season thus far, including notable wins in our Private Exchange and Medicare segments, which bodes well for growth beyond 2015." Mr. Schneider added, "During the quarter we started to reduce our involvement in one of our state exchange projects that we view longer term as not strategic to our business. This will give us the opportunity to focus our resources on other promising market opportunities, including private exchanges."
Second Quarter 2015 Financial Results
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Total revenue was $23.4 million, an increase of 21.8% compared to $19.2 million in the second quarter of 2014.
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Adjusted gross margin was $10.6 million, or 45.3% of total revenue, an increase of 42.1% compared to $7.5 million, or 38.9% of total revenue, in the second quarter of 2014.
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Operating loss was ($2.8) million, narrowing from an operating loss of ($3.3) million in the second quarter of 2014.
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Net loss was ($4.3) million, compared to net loss of ($5.4) million in the second quarter of 2014.
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Adjusted EBITDA was ($0.4) million, compared to Adjusted EBITDA of ($1.7) million in the second quarter of 2014.
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Cash and cash equivalents at June 30, 2015 totaled $10.0 million, compared to $17.4 million at March 31, 2015. Total liquidity was $19.4 million at June 30, 2015, inclusive of $9.4 million of borrowing availability under our revolving credit facility.
- Cash used in operations for the three months ended June 30, 2015 was $7.0 million, improving from cash used in operations of $7.8 million for the same period last year.
Recent Business Highlights
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Notable customers added in the second quarter of 2015 include Towers Watson; FILCO, a reinsurance and group benefits package provider; Health Care Advisors, a southeastern brokerage agency focused on individual, retiree and group business; Memorial Herman Health Plan; and multiple new Blue Cross and Blue Shield plans via the retiree exchange relationship with the Blue Cross and Blue Shield Association.
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In addition, during the second quarter of 2015, relationships were expanded with many existing customers across the business, including Blue Cross and Blue Shield of Nebraska and United Healthcare.
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Total contracted backlog at June 30, 2015 was $85.5 million, down $10.7 million, or 11.1%, from $96.2 million at March 31, 2015. This sequential decrease was attributed to work completed and invoiced during the quarter, as well as the impact of reducing our contracted backlog by the remaining contract value of two customer contracts that ended during the second quarter.
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Subsequent to the end of the second quarter, we closed multiple important contracts in the Private Exchange segment.
- In May 2015, Steve Cohen, an executive with more than 25 years of sales and management experience working in the fields of health insurance, human resources and employee benefits, was appointed vice president of sales overseeing the private exchange product line for brokers. Mr. Cohen will draw on his experience helping customers utilize technology to streamline the administration of benefits and gain an advantage in the ongoing competition to attract and keep top talent.
Business Outlook
Connecture is providing guidance for third quarter 2015 and adjusting guidance for full year 2015 as indicated below:
Third quarter 2015
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Total revenue is expected to be at least $21.8 million.
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Adjusted EBITDA is expected to be at least $1.2 million.
- Net loss per share is expected to be no more than ($0.16), based on an estimated basic and diluted weighted-average common share count of 22.0 million, and includes estimated non-cash stock compensation expense of $1.9 million, or $0.09 per share.
Full year 2015
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Total revenue is expected to be in the range of $96.0 million to $100.0 million, down slightly from the previously expected range of $100.0 million to $104.0 million due primarily to lower support revenues expected from the state exchange project that we are starting to reduce our involvement in during the second half of 2015. In addition, while we anticipate that we will substantially exceed our expectation for contracted backlog in our Private Exchange segment at year-end as a result of an anticipated strong selling season, we expect that associated revenues will be less than bookings for 2015, due to the timing of revenue recognition.
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Adjusted EBITDA is expected to be in the range of $9.5 million to $11.5 million, down slightly from the previously expected range of $10.5 million to $12.5 million due to the factors impacting our revised revenue guidance.
- Net loss per share is expected to be in the range of ($0.19) to ($0.28), based on an estimated basic and diluted weighted-average common share count of 22.0 million, and includes non-cash stock compensation expense of $5.0 million, or $0.23 per share.
Conference Call
Connecture's management will host a conference call at 5:00 p.m. EDT on Thursday, August 6, 2015, to discuss the second quarter 2015 results. The conference call will be accessible by dialing 877-930-8068 (U.S.) or 253-336-8043 (international) and referencing conference ID 89658620. 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, 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 manage its growth, including accurately planning and forecasting its financial results and hiring, retaining and motivating employees; (2) the competitive environment for Connecture's business and the market for Connecture's solutions; (3) Connecture's ability to maintain historical contract terms; (4) Connecture's ability to operate its proprietary software, transition to new platforms and provide innovative and high quality products and services; (5) errors, interruptions or delays in Connecture's services; (6) breaches of Connecture's security measures; (7) Connecture's ability to comply with regulatory requirements; (8) technological and regulatory developments; (9) litigation related to intellectual property and other matters and any related claims, negotiations and settlements; (10) the impact and integration of future acquisitions; 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 Loss | ||||
| (In thousands, except share and per share data) | ||||
| (unaudited) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2015 | 2014 | 2015 | 2014 | |
| Revenue | $23,393 | $19,201 | $44,041 | $35,251 |
| Cost of revenue (1) | 14,019 | 12,787 | 25,340 | 25,354 |
| Gross margin | 9,374 | 6,414 | 18,701 | 9,897 |
| Operating expenses: | ||||
| Research and development (1) | 6,056 | 4,585 | 12,584 | 8,685 |
| Sales and marketing (1) | 2,302 | 1,903 | 5,185 | 3,709 |
| General and administrative (1) | 3,858 | 3,244 | 7,463 | 6,351 |
| Total operating expenses | 12,216 | 9,732 | 25,232 | 18,745 |
| Loss from operations | (2,842) | (3,318) | (6,531) | (8,848) |
| Other expenses: | ||||
| Interest expense | 1,424 | 1,372 | 2,837 | 2,386 |
| Other (income) expense, net | 1 | 751 | 9 | 826 |
| Loss before Income taxes | (4,267) | (5,441) | (9,377) | (12,060) |
| Income tax benefit (expense) | 8 | 3 | 19 | (11) |
| Net loss | ($4,259) | ($5,438) | ($9,358) | ($12,071) |
| Comprehensive loss | ($4,259) | ($5,438) | ($9,358) | ($12,071) |
| Net loss per common share: | ||||
| Basic | ($0.20) | ($34.77) | ($0.43) | ($76.11) |
| Diluted | ($0.20) | ($34.77) | ($0.43) | ($76.11) |
| Weighted-average common shares outstanding: | ||||
| Basic | 21,710,951 | 184,051 | 21,703,483 | 184,051 |
| Diluted | 21,710,951 | 184,051 | 21,703,483 | 184,051 |
| (1) Cost of revenue and operating expenses include following stock-based compensation expense: | ||||
| Cost of revenue | $277 | $ 31 | $424 | $ 61 |
| Research and development | 327 | 20 | 542 | 40 |
| Sales and marketing | 142 | 8 | 188 | 17 |
| General and administrative | 423 | 303 | 732 | 589 |
| Connecture, Inc. | ||
| Condensed Consolidated Balance Sheets | ||
| (In thousands) | ||
| (unaudited) | ||
| As of | As of | |
| June 30, | December 31, | |
| 2015 | 2014 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $10,045 | $28,252 |
| Accounts receivable - net of allowances | 9,549 | 12,128 |
| Prepaid expenses and other current assets | 1,290 | 1,557 |
| Total current assets | 20,884 | 41,937 |
| Property and equipment, net | 1,917 | 1,892 |
| Goodwill | 26,779 | 26,779 |
| Other intangibles, net | 13,320 | 15,350 |
| Deferred implementation costs | 23,908 | 24,552 |
| Other assets | 1,643 | 1,834 |
| Total assets | $88,451 | $112,344 |
| Liabilities and stockholders' deficit | ||
| Current liabilities: | ||
| Accounts payable | $5,839 | $5,737 |
| Accrued payroll and related liabilities | 5,686 | 3,880 |
| Other liabilities | 3,495 | 4,373 |
| Current maturities of debt | 1,482 | 4,479 |
| Deferred revenue | 32,660 | 42,578 |
| Total current liabilities | 49,162 | 61,047 |
| Deferred revenue | 26,941 | 31,159 |
| Long-term debt | 48,094 | 48,581 |
| Other long-term liabilities | 321 | 398 |
| Total liabilities | 124,518 | 141,185 |
| Total stockholders' deficit | (36,067) | (28,841) |
| Total liabilities and stockholders' deficit | $88,451 | $112,344 |
| Connecture, Inc. | ||
| Condensed Consolidated Statements of Cash Flows | ||
| (In thousands) | ||
| (unaudited) | ||
|
Six Months Ended June 30, |
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| 2015 | 2014 | |
| Cash flows from operating activities: | ||
| Net loss | ($9,358) | ($12,071) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 2,550 | 2,554 |
| Stock-based compensation expense | 1,886 | 707 |
| Other | 669 | 480 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 2,534 | 8,058 |
| Prepaid expenses and other assets | 277 | (204) |
| Deferred implementation costs | 644 | (3,517) |
| Accounts payable | 689 | (1,880) |
| Accrued expenses and other liabilities | 999 | (493) |
| Deferred revenue | (14,136) | (9,713) |
| Net cash used in operating activities | (13,246) | (16,079) |
| Cash flows from investing activities: | ||
| Purchase of property and equipment | (407) | (396) |
| Net cash used in financing activities | (407) | (396) |
| Cash flows from financing activities: | ||
| Net borrowings (repayments) of debt | (3,802) | 16,194 |
| Other | (752) | (1,699) |
| Net cash (used in) provided by financing activities | (4,554) | 14,495 |
| Net decrease in cash and cash equivalents | (18,207) | (1,980) |
| Cash and cash equivalents - beginning of period | 28,252 | 2,277 |
| Cash and cash equivalents - end of period | $10,045 | $297 |
| Connecture, Inc. | ||||
| Reconciliation of GAAP to Non-GAAP Measures | ||||
| (In thousands) | ||||
| (unaudited) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2015 | 2014 | 2015 | 2014 | |
| Reconciliation from Gross Margin to Adjusted Gross Margin: | ||||
| Gross margin | $9,374 | $6,414 | $18,701 | $9,897 |
| Depreciation and amortization | 952 | 1,018 | 1,900 | 1,989 |
| Stock-based compensation expense | 277 | 31 | 424 | 61 |
| Adjusted gross margin | $10,603 | $7,463 | $21,025 | $11,947 |
| Reconciliation from Net Loss to Adjusted EBITDA: | ||||
| Net loss | ($4,259) | ($5,438) | ($9,358) | ($12,071) |
| Depreciation and amortization | 1,280 | 1,283 | 2,550 | 2,554 |
| Interest expense | 1,424 | 1,372 | 2,837 | 2,386 |
| Other expense | 1 | 751 | 9 | 826 |
| Income taxes | (8) | (3) | (19) | 11 |
| Stock-based compensation expense | 1,169 | 362 | 1,886 | 707 |
| Total net adjustments | $3,866 | $3,765 | $7,263 | $6,484 |
| Adjusted EBITDA | ($393) | ($1,673) | ($2,095) | ($5,587) |