Carbonite Announces Second Quarter 2017 Financial Results

August 3, 2017 at 4:05 PM EDT

Bookings Growth and Operational Efficencies Driving Profitability

 

BOSTON, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Carbonite, Inc. (NASDAQ:CARB), a leading provider of data protection solutions for businesses, today announced financial results for the quarter ended June 30, 2017.

Second Quarter 2017 Highlights:

  • Revenue of $59.0 million increased 10% year-over-year.
  • Non-GAAP revenue of $61.1 million increased 13% year-over-year.1
  • Bookings of $63.9 million increased 19% year-over-year.2
  • Lifetime company bookings surpassed $1.0 billion.2
  • Net (loss) income per share was ($0.23), as compared to $0.04 in 2016 (basic and diluted).
  • Non-GAAP net income per share was $0.15, as compared to $0.19 in 2016 (basic and diluted).4

"We continued our momentum through the second quarter of 2017 and saw strong interest in our portfolio of data protection solutions, in part generated by the increasing market awareness of ransomware threats.  Carbonite has helped more than 10,000 customers defeat ransomware attacks, saving important files and critical business data, while ensuring our customers successfully recovered without paying a ransom," said Mohamad Ali, President and CEO of Carbonite.

"We delivered another quarter of solid results across all of our key financial metrics, including strong business subscription bookings, and non-GAAP net income.  We remain ahead of plan integrating our recent acquisitions and I am confident that our continued focus on operating discipline will yield increased profitability while we deliver balanced organic and inorganic growth," said Anthony Folger, CFO of Carbonite.

The Company uses a variety of operational and financial metrics, including non-GAAP financial measures, to evaluate its performance and financial condition. The accompanying financial data includes additional information regarding these metrics and a reconciliation of non-GAAP financial information to GAAP. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Second Quarter 2017 Results:

  • Revenue for the second quarter was $59.0 million, an increase of 10% from $53.4 million in the second quarter of 2016. Non-GAAP revenue for the second quarter was $61.1 million, an increase of 13% from $54.2 million in the second quarter of 2016.1
  • Bookings for the second quarter were $63.9 million, an increase of 19% from $53.7 million in the second quarter of 2016.2
  • Gross margin for the second quarter was 69.0%, compared to 70.3% in the second quarter of 2016. Non-GAAP gross margin was 74.1% in the second quarter, compared to 72.5% in the second quarter of 2016.3
  • Net loss for the second quarter was ($6.4) million, compared to net income of $1.2 million in the second quarter of 2016. Non-GAAP net income for the second quarter was $4.3 million, compared to non-GAAP net income of $5.2 million in the second quarter of 2016.4
  • Net loss per share for the second quarter was ($0.23) (basic and diluted), compared to net income per share of $0.04 (basic and diluted) in the second quarter of 2016. Non-GAAP net income per share was $0.15 (basic and diluted) for the second quarter, compared to non-GAAP net income per share of $0.19 (basic and diluted) in the second quarter of 2016.4
  • Cash flow from operations for the second quarter was $2.9 million, compared to $5.1 million in the second quarter of 2016. Adjusted free cash flow for the second quarter was $2.1 million, compared to $7.3 million in the second quarter of 2016.5

Non-GAAP revenue excludes the impact of purchase accounting adjustments for significant acquisitions.
Bookings represent the aggregate dollar value of customer subscriptions and software arrangements, which may include multiple revenue elements, such as software licenses, hardware, professional services and post-contractual support, received during a period and are calculated as revenue recognized during a particular period plus the change in total deferred revenue, excluding deferred revenue recorded in connection with acquisitions and divestitures, net of foreign exchange during the same period.
Non-GAAP gross margin excludes the impact of purchase accounting adjustments on acquired deferred revenue, amortization expense on intangible assets, stock-based compensation expense and acquisition-related expense.
Non-GAAP net income and non-GAAP net income per share excludes the impact of purchase accounting adjustments on acquired deferred revenue, amortization expense on intangible assets, stock-based compensation expense, litigation-related expense, restructuring-related expense, acquisition-related expense, non-cash convertible debt interest expense and the income tax effect of non-GAAP adjustments.
Adjusted free cash flow is calculated by subtracting the cash paid for the purchase of property and equipment and adding the payments related to acquisition-related payments, restructuring-related payments, litigation-related payments and the cash portion of the lease exit charge from net cash provided by operating activities.

Business Outlook

Based on the information available as of August 3, 2017, Carbonite expects the following for the third quarter and full year of 2017:

Third Quarter 2017:

  Current Guidance
(8/3/2017)
GAAP Revenue $59.0 -$61.0 million
Non-GAAP Revenue $60.5 - $62.5 million
Non-GAAP Net Income Per Share $0.19 - $0.21

Full Year 2017:

    Prior Guidance
(5/4/2017)
  Current Guidance
(8/3/2017)
Business Bookings   $158.6 - $170.2 million   $160.6 - $170.2 million
Consumer Bookings Y/Y Growth   (10%) - 0% growth   (10%) - 0% growth
GAAP Revenue   $229.0 - $246.0 million   $232.0 - $244.0 million
Non-GAAP Revenue   $234.5 - $252.5 million   $238.5 - $250.5 million
Non-GAAP Net Income Per Share   $0.74 - $0.80   $0.74 - $0.80
Non-GAAP Gross Margin   74.0% - 75.0%   74.0% - 75.0%
Adjusted Free Cash Flow   $16.0 - $20.0 million   $16.0 - $20.0 million

Carbonite's expectations of non-GAAP net income per share for the third quarter and full year of 2017 excludes the impact of purchase accounting adjustments, stock-based compensation expense, litigation-related expense, acquisition-related expense, amortization expense on intangible assets, non-cash convertible debt interest expense, and the income tax effect of non-GAAP adjustments. Non-GAAP net income per share assumes an effective tax rate of 13% for the full year of 2017. Non-GAAP net income per share assumes fully-diluted weighted average shares outstanding of approximately 29.1 million for the third quarter and full year of 2017.

Conference Call and Webcast Information

In conjunction with this announcement, Carbonite will host a conference call on Thursday, August 3, 2017 at 5:30 p.m. ET to review the results. This call will be webcast live and can be found in the investor relations section of the Company's website at http://investor.carbonite.com. The conference call can also be accessed by dialing (877) 303-1393 in the United States or (315) 625-3228 internationally with the passcode 48381962.

Following the completion of the call, a recorded replay will be available on the Company's website, http://investor.carbonite.com, under "Events & Presentations" through August 3, 2018.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, this press release contains non-GAAP financial measures, including bookings, non-GAAP revenue, non-GAAP gross margin, non-GAAP net income and non-GAAP net income per share, non-GAAP operating expense and adjusted free cash flow.

The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company's financial condition and ordinary results of operations. The Company's management uses these non-GAAP measures to compare the Company's performance to that of prior periods and uses these measures in financial reports prepared for management and the Company's board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other software-as-a-service companies, many of which present similar non-GAAP financial measures to investors.

The Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant items that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management. The Company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures provided in the tables at the end of this press release, and not to rely on any single financial measure to evaluate the Company's business.

With respect to our expectations under "Business Outlook" above, the Company has not reconciled non-GAAP net income per share to net income (loss) per share in this press release because we do not provide guidance for stock-based compensation expense, litigation-related expense, acquisition-related expense, amortization expense on intangible assets, non-cash convertible debt interest expense, and the income tax effect of non-GAAP adjustments as we are unable to quantify certain of these amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the Company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Cautionary Language Concerning Forward-Looking Statements

Certain matters discussed in this press release, including under "Business Outlook," have "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements.  Such statements include, but are not limited to, statements regarding guidance on our future financial results and other projections or measures of future performance; the expected future results of the acquisition of Double-Take Software, including revenues, non-GAAP EPS and growth rates; the Company's ability to successfully integrate Double-Take Software's business; and the Company's expectations regarding its future performance. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the Company's control. The Company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, but not limited to, the Company's ability to profitably attract new customers and retain existing customers, the Company's dependence on the market for cloud backup services, the Company's ability to manage growth, and changes in economic or regulatory conditions or other trends affecting the Internet and the information technology industry. These and other important risk factors are discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission (the "SEC"), which is available on www.sec.gov, and elsewhere in any subsequent periodic or current reports filed by us with the SEC. Except as required by applicable law, we do not undertake any obligation to update our forward-looking statements to reflect future events, new information or circumstances.

About Carbonite

Carbonite provides data protection solutions for businesses and the IT professionals who serve them. Our product suite, including EVault and DoubleTake, provides a full complement of backup, disaster recovery and high availability solutions for any size business in locations around the world, all supported by secure global infrastructure. To learn more visit www.Carbonite.com

Carbonite, Inc.
Condensed Consolidated Statement of Operations (unaudited)
(In thousands, except share and per share amounts)
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017     2016     2017     2016  
Revenue $ 59,034     $ 53,435     $ 116,133     $ 101,550  
Cost of revenue 18,311     15,864     35,666     30,619  
Gross profit 40,723     37,571     80,467     70,931  
Operating expenses:              
Research and development 10,927     8,380     21,254     17,116  
General and administrative 11,076     10,389     23,946     21,809  
Sales and marketing 23,373     17,323     46,793     34,205  
Restructuring charges     32         805  
Total operating expenses 45,376     36,124     91,993     73,935  
(Loss) income from operations (4,653 )   1,447     (11,526 )   (3,004 )
Interest (expense) income, net (2,239 )   (97 )   (2,441 )   (95 )
Other income (expense), net 915     100     1,195     (52 )
(Loss) income before income taxes (5,977 )   1,450     (12,772 )   (3,151 )
Provision (benefit) for income taxes 403     290     (13,987 )   385  
Net (loss) income $ (6,380 )   $ 1,160     $ 1,215     $ (3,536 )
Net (loss) income per share:              
Basic $ (0.23 )   $ 0.04     $ 0.04     $ (0.13 )
Diluted $ (0.23 )   $ 0.04     $ 0.04     $ (0.13 )
Weighted-average shares outstanding:              
Basic 27,525,647     26,901,419     27,672,804     26,977,919  
Diluted 27,525,647     27,012,361     28,354,616     26,977,919  

 

Carbonite, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
 
  June 30,
2017
  December 31,
2016
Assets    
Current assets      
Cash and cash equivalents $ 125,099     $ 59,152  
Trade accounts receivable, net 23,505     16,639  
Prepaid expenses and other current assets 7,850     7,325  
Restricted cash     135  
Total current assets 156,454     83,251  
Property and equipment, net 27,798     23,872  
Other assets 348     157  
Acquired intangible assets, net 45,924     13,751  
Goodwill 74,082     23,728  
Total assets $ 304,606     $ 144,759  
Liabilities and Stockholders' Equity      
Current liabilities      
Accounts payable $ 6,021     $ 5,819  
Accrued expenses 20,631     19,768  
Current portion of deferred revenue 102,224     86,311  
Total current liabilities 128,876     111,898  
Long-term debt, net of debt issuance costs 108,782      
Deferred revenue, net of current portion 24,756     21,280  
Other long-term liabilities 6,186     5,747  
Total liabilities 268,600     138,925  
Stockholders' equity      
Common stock 298     285  
Additional paid-in capital 224,815     177,931  
Treasury stock, at cost (26,630 )   (10,657 )
Accumulated deficit (164,127 )   (165,042 )
Accumulated other comprehensive income 1,650     3,317  
Total stockholders' equity 36,006     5,834  
Total liabilities and stockholders' equity $ 304,606     $ 144,759  

 

Carbonite, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
 
    Six Months Ended
June 30,
    2017   2016
Operating activities  
Net income (loss)   $ 1,215     $ (3,536 )
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation and amortization   10,392     8,378  
(Gain) loss on disposal of equipment   (928 )   468  
Stock-based compensation expense   5,965     4,498  
Benefit for deferred income taxes   (14,964 )   (169 )
Non-cash interest expense related to amortization of debt discount   1,466      
Other non-cash items, net   (249 )   280  
Changes in assets and liabilities, net of acquisition:        
Accounts receivable   (89 )   (13,458 )
Prepaid expenses and other current assets   (58 )   (2,026 )
Other assets   (137 )   1  
Accounts payable   627     (4,113 )
Accrued expenses   (2,340 )   3,841  
Other long-term liabilities   120     (353 )
Deferred revenue   9,548     4,516  
Net cash provided by (used in) operating activities   10,568     (1,673 )
Investing activities        
Purchases of property and equipment   (10,039 )   (2,809 )
Proceeds from sale of property and equipment   560      
Proceeds from maturities of marketable securities and derivatives   370     1,000  
Purchases of marketable securities and derivatives   (2,433 )   (1,476 )
Proceeds from sale of businesses   295      
Payment for acquisition, net of cash acquired   (60,198 )   (11,625 )
Net cash used in investing activities   (71,445 )   (14,910 )
Financing activities        
Proceeds from exercise of stock options   3,337     381  
Proceeds from long-term borrowings, net of debt issuance costs   177,797      
Payments on long-term borrowings   (39,200 )    
Repurchase of common stock   (15,973 )   (4,626 )
Net cash provided by (used in) financing activities   125,961     (4,245 )
Effect of currency exchange rate changes on cash   863     95  
Net increase (decrease) in cash and cash equivalents   65,947     (20,733 )
Cash and cash equivalents, beginning of period   59,152     63,936  
Cash and cash equivalents, end of period   $ 125,099     $ 43,203  

 

Carbonite, Inc.
Reconciliation of GAAP to Non-GAAP Measures (unaudited)
(In thousands, except share and per share amounts)

Reconciliation of GAAP Revenue to Non-GAAP Revenue
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
GAAP revenue $ 59,034     $ 53,435     $ 116,133     $ 101,550  
Add:              
Fair value adjustment of acquired deferred revenue (1) 2,045     800     4,033     1,363  
Non-GAAP revenue $ 61,079     $ 54,235     $ 120,166     $ 102,913  
(1)  Excludes the impact of purchase accounting adjustments for significant acquisitions.

 

Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
 
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2017   2016   2017   2016
Gross profit $ 40,723     $ 37,571     $ 80,467     $ 70,931  
Gross margin 69.0 %   70.3 %   69.3 %   69.8 %
Add:        
Fair value adjustment of acquired deferred revenue 2,045     800     4,033     1,363  
Amortization of intangibles 2,124     675     3,750     1,357  
Stock-based compensation expense 269     197     500     411  
Acquisition-related expense 115     54     133     236  
Non-GAAP gross profit $ 45,276     $ 39,297     $ 88,883     $ 74,298  
Non-GAAP gross margin 74.1 %   72.5 %   74.0 %   72.2 %

 

 Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
Net (loss) income $ (6,380 )   $ 1,160     $ 1,215     $ (3,536 )
Add:              
Fair value adjustment of acquired deferred revenue 2,045     800     4,033     1,363  
Amortization of intangibles 2,656     991     4,732     1,988  
Stock-based compensation expense 3,188     2,155     5,965     4,498  
Litigation-related expense 89         144     1  
Restructuring-related expense     32         800  
Acquisition-related expense 1,255     618     4,278     4,766  
Non-cash convertible debt interest expense 1,466         1,466      
Less:              
Income tax effect of non-GAAP adjustments 66     548     15,051     591  
Non-GAAP net income $ 4,253     $ 5,208     $ 6,782     $ 9,289  
GAAP net (loss) income per share:              
Basic $ (0.23 )   $ 0.04     $ 0.04     $ (0.13 )
Diluted $ (0.23 )   $ 0.04     $ 0.04     $ (0.13 )
Non-GAAP net income per share:              
Basic $ 0.15     $ 0.19     $ 0.25     $ 0.34  
Diluted $ 0.15     $ 0.19     $ 0.23     $ 0.34  
GAAP Weighted-average shares outstanding:              
Basic 27,525,647     26,901,419     27,672,804     26,977,919  
Diluted 27,525,647     27,012,361     28,354,616     26,977,919  
Non-GAAP Weighted-average shares outstanding:              
Basic 27,525,647     26,901,419     27,672,804     26,977,919  
Diluted 28,793,346     27,012,361     28,991,968     27,063,158  

 

Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
Research and development $ 10,927     $ 8,380     $ 21,254     $ 17,116  
Less:              
Stock-based compensation expense 405     229     714     514  
Acquisition-related expense 65     72     134     310  
Non-GAAP research and development $ 10,457     $ 8,079     $ 20,406     $ 16,292  
               
General and administrative $ 11,076     $ 10,389     $ 23,946     $ 21,809  
Less:              
Amortization of intangibles 122     68     223     138  
Stock-based compensation expense 1,983     1,454     3,940     3,087  
Litigation-related expense 89         144     1  
Acquisition-related expense 908     494     3,809     4,103  
Non-GAAP general and administrative $ 7,974     $ 8,373     $ 15,830     $ 14,480  
               
Sales and marketing $ 23,373     $ 17,323     $ 46,793     $ 34,205  
Less:              
Amortization of intangibles 410     248     759     493  
Stock-based compensation expense 531     275     811     486  
Acquisition-related expense 167     (2 )   202     117  
Non-GAAP sales and marketing $ 22,265     $ 16,802     $ 45,021     $ 33,109  
               
Restructuring charges $     $ 32     $     $ 805  
Less:              
Restructuring-related expense     32         800  
Non-GAAP restructuring charges $     $     $     $ 5  

 

Reconciliation of Revenue to Bookings
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
Revenue $ 59,034     $ 53,435     $ 116,133     $ 101,550  
Add:              
Deferred revenue ending balance 126,980     110,049     126,980     110,049  
Deferred revenue divested 373         373      
Impact of foreign exchange     87          
Less:              
Impact of foreign exchange 620         773     58  
Beginning deferred revenue from acquisitions         9,100     6,830  
Deferred revenue beginning balance 121,867     109,878     107,591     98,703  
Change in deferred revenue balance 4,866     258     9,889     4,458  
Bookings $ 63,900     $ 53,693     $ 126,022     $ 106,008  

 

Calculation of Adjusted Free Cash Flow
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2017   2016   2017   2016
Net cash provided by (used in) operating activities $ 2,872     $ 5,084     $ 10,568     $ (1,673 )
Subtract:              
Purchases of property and equipment 3,471     885     10,039     2,809  
Free cash flow (599 )   4,199     529     (4,482 )
               
Add:              
Acquisition-related payments 2,659     2,735     3,889     9,791  
Restructuring-related payments     239         341  
Cash portion of lease exit charge     85         151  
Litigation-related payments 37         69     924  
Adjusted free cash flow $ 2,097     $ 7,258     $ 4,487     $ 6,725  
Investor Relations Contact:

Jeremiah Sisitsky
Carbonite
781-928-0713
investor.relations@carbonite.com

Media Contacts:

Sarah King
Carbonite
617-421-5601
media@carbonite.com

Kelsey Shively
Weber Shandwick (for Carbonite)
425-306-2090
wswnacarbonite@webershandwick.com

 


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