Carbonite Announces Second Quarter 2018 Financial Results

August 2, 2018 at 4:05 PM EDT
Delivered Strong Bookings Growth and Better-than-Expected Profitability

BOSTON, Aug. 02, 2018 (GLOBE NEWSWIRE) -- Carbonite, Inc. (NASDAQ: CARB), a global leader in data protection, today announced financial results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights:

  • Revenue of $77.7 million increased 32% year-over-year.
  • Non-GAAP revenue of $79.9 million increased 31% year-over-year.1
  • Bookings of $81.8 million increased 28% year-over-year.2
  • Net loss per share was ($0.20) (basic and diluted), as compared to ($0.23) in 2017 (basic and diluted).
  • Non-GAAP net income per share was $0.50 (basic) and $0.45 (diluted), as compared to $0.15 (basic and diluted) in 2017.4

“I am very pleased with our financial and operating results in the second quarter,” said Mohamad Ali, CEO of Carbonite. “We closed our acquisition of Mozy in March and the integration continues to progress well. We completed a successful equity offering in July strengthening our balance sheet and positioning us to become the premier data protection company.”

“In the second quarter we again delivered financial results that were at or above the top of our guidance range. Business subscription bookings increased approximately 50% year-over-year, and we drove a meaningful expansion in profitability. Our focus on delivering growth and our disciplined approach to investing in the business and integrating acquisitions yielded another quarter of strong financial results,” 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 2018 Results:

  • Revenue for the second quarter was $77.7 million, an increase of 32% from $59.0 million in the second quarter of 2017. Non-GAAP revenue for the second quarter was $79.9 million, an increase of 31% from $61.1 million in the second quarter of 2017.1
  • Bookings for the second quarter were $81.8 million, an increase of 28% from $63.9 million in the second quarter of 2017.2
  • Gross margin for the second quarter was 70.3%, compared to 69.0% in the second quarter of 2017. Non-GAAP gross margin was 77.1% in the second quarter, compared to 74.1% in the second quarter of 2017.3
  • Net loss for the second quarter was $(5.7) million, compared to net loss of ($6.4) million in the second quarter of 2017. Non-GAAP net income for the second quarter was $14.2 million, compared to non-GAAP net income of $4.3 million in the second quarter of 2017.4
  • Net loss per share for the second quarter was ($0.20) (basic and diluted), compared to net loss per share of ($0.23) (basic and diluted) in the second quarter of 2017. Non-GAAP net income per share was $0.50 (basic) and $0.45 (diluted) for the second quarter, compared to non-GAAP net income per share of $0.15 (basic and diluted) in the second quarter of 2017.4
  • Cash flow from operations for the second quarter was $13.6 million, compared to $2.9 million in the second quarter of 2017. Adjusted free cash flow for the second quarter was $13.3 million, compared to $2.1 million in the second quarter of 2017.5
 

Non-GAAP revenue excludes the impact of purchase accounting adjustments for 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, divestitures and the adoption impact of Topic 606, net of foreign exchange and the change in unbilled revenue 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 acquisitions, restructuring, and litigation from net cash provided by operating activities.

Business Outlook

Based on the information available as of August 2, 2018, Carbonite expects the following for the third quarter and full year of 2018:

Third Quarter 2018:

  Current Guidance
(8/2/2018)
GAAP Revenue $77.6 - $79.6 million
Non-GAAP Revenue $79.0 - $81.0 million
Non-GAAP Net Income Per Share (Diluted) $0.40 - $0.42

Full Year 2018:

  Prior Guidance
(5/7/2018)
Prior Guidance
(7/16/2018)
Current Guidance
(8/2/2018)
Business Bookings $223.8 - $234.8 million Not provided $223.8 - $234.8 million
Consumer Bookings Y/Y Growth 5% - 15% growth Not provided 10% - 15% growth
GAAP Revenue $296.9 - $306.9 million $296.9 - $306.9 million $296.9 - $306.9 million
Non-GAAP Revenue $302.5 - $312.5 million $302.5 - $312.5 million $302.5 - $312.5 million
Non-GAAP Net Income Per Share (Diluted) $1.51 - $1.59 $1.62 - $1.68 $1.51 - $1.59
Non-GAAP Gross Margin 76.0% - 77.0% Not provided 76.5% - 77.5%
Adjusted Free Cash Flow $32.0 - $38.0 million Not provided $40.0 - $45.0 million

Carbonite’s expectations of non-GAAP net income per share for the third quarter and full year of 2018 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, 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 8% for the full year of 2018. Non-GAAP net income per share assumes fully-diluted weighted average shares outstanding of approximately 36.3 million for the third quarter and 34.0 million for the full year of 2018.

Conference Call and Webcast Information

Carbonite will host a conference call on Thursday, August 2, 2018 at 5:30 p.m. ET to review these 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 3577539.

Following the completion of the call, a recorded replay will be available on the Company’s website, http://investor.carbonite.com, under “Events & Presentations”.

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 per share in this press release because we do not provide guidance for 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 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 forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, our ability to integrate recent acquisitions into our operations and achieve the expected benefits of the acquisition, our ability to profitably attract new customers and retain existing customers, our dependence on the market for cloud backup services, our ability to manage growth, changes in economic or regulatory conditions or other trends affecting the Internet and the information technology industry, and those discussed in the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 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 a robust Data Protection Platform for businesses, including backup, disaster recovery, high availability and workload migration technology. The Carbonite Data Protection Platform supports businesses in locations around the world with secure global cloud infrastructure. To learn more visit www.Carbonite.com.

Investor Relations Contact:

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

Media Contacts:

Caitlin O'Malley
Carbonite
781-928-0762
media@carbonite.com


 
Carbonite, Inc.
Consolidated Statement of Operations (unaudited)
(In thousands, except share and per share amounts)
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
Revenue $ 77,734     $ 59,034     $ 141,760     $ 116,133  
Cost of revenue 23,057     18,311     41,369     35,666  
Gross profit 54,677     40,723     100,391     80,467  
Operating expenses:              
Research and development 15,719     10,927     28,238     21,254  
General and administrative 13,460     10,954     27,920     23,723  
Sales and marketing 22,086     22,963     41,946     46,034  
Amortization of intangible assets 3,652     532     4,591     982  
Restructuring charges 41         903      
Total operating expenses 54,958     45,376     103,598     91,993  
Loss from operations (281 )   (4,653 )   (3,207 )   (11,526 )
Interest expense (3,420 )   (2,373 )   (6,021 )   (2,595 )
Interest income 169     134     413     154  
Other income (expense), net 183     915     195     1,195  
Loss before income taxes (3,349 )   (5,977 )   (8,620 )   (12,772 )
Provision (benefit) for income taxes 2,338     403     (14,877 )   (13,987 )
Net (loss) income $ (5,687 )   $ (6,380 )   $ 6,257     $ 1,215  
Net (loss) income per share:              
Basic $ (0.20 )   $ (0.23 )   $ 0.22     $ 0.04  
Diluted $ (0.20 )   $ (0.23 )   $ 0.20     $ 0.04  
Weighted-average shares outstanding:              
Basic 28,628,173     27,525,647     28,485,695     27,672,804  
Diluted 28,628,173     27,525,647     30,885,633     28,354,616  
                       



 
Carbonite, Inc.
Consolidated Balance Sheets (unaudited)
(In thousands)
 
  June 30,
2018
  December 31,
2017
Assets      
Current assets      
Cash and cash equivalents $ 70,982     $ 128,231  
Trade accounts receivable, net 32,078     22,219  
Prepaid expenses and other current assets 10,620     6,823  
Total current assets 113,680     157,273  
Property and equipment, net 36,587     28,790  
Other assets 12,337     804  
Acquired intangible assets, net 134,770     44,994  
Goodwill 155,341     80,958  
Total assets $ 452,715     $ 312,819  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 5,820     $ 10,842  
Accrued compensation 9,989     9,892  
Accrued expenses and other current liabilities 18,922     11,783  
Current portion of deferred revenue 121,032     100,241  
Total current liabilities 155,763     132,758  
Long-term debt 194,992     111,819  
Deferred revenue, net of current portion 27,682     24,273  
Other long-term liabilities 5,876     5,704  
Total liabilities 384,313     274,554  
Stockholders’ equity      
Common stock 308     301  
Additional paid-in capital 243,077     233,343  
Treasury stock, at cost (26,867 )   (26,616 )
Accumulated deficit (149,207 )   (169,344 )
Accumulated other comprehensive income 1,091     581  
Total stockholders’ equity 68,402     38,265  
Total liabilities and stockholders’ equity $ 452,715     $ 312,819  
 



 
Carbonite, Inc.
Consolidated Statement of Cash Flows (unaudited)
(In thousands)
 
  Six Months Ended
June 30,
  2018   2017
Operating activities      
Net income $ 6,257     $ 1,215  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 17,763     10,392  
Amortization of deferred costs 931      
Gain on disposal of equipment (141 )   (928 )
Impairment of capitalized software 653      
Stock-based compensation expense 8,478     5,965  
Benefit for deferred income taxes (16,317 )   (14,964 )
Non-cash interest expense related to amortization of debt discount 3,101     1,466  
Other non-cash items, net 64     (249 )
Changes in assets and liabilities, net of acquisition:      
Accounts receivable (6,437 )   (89 )
Prepaid expenses and other current assets (1,541 )   (193 )
Other assets (3,771 )   (137 )
Accounts payable (3,895 )   627  
Accrued expenses and other current liabilities 2,549     (2,340 )
Other long-term liabilities 53     120  
Deferred revenue 9,099     9,548  
Net cash provided by operating activities 16,846     10,433  
Investing activities      
Purchases of property and equipment (7,795 )   (10,039 )
Proceeds from sale of property and equipment and businesses 534     855  
Proceeds from maturities of derivatives 1,680     370  
Purchases of derivatives (1,403 )   (2,433 )
Payment for intangibles (1,250 )    
Payment for acquisition, net of cash acquired (144,597 )   (60,198 )
Net cash used in investing activities (152,831 )   (71,445 )
Financing activities      
Proceeds from exercise of stock options 942     3,337  
Proceeds from issuance of treasury stock under employee stock purchase plan 1,215      
Payments of withholding taxes in connection with restricted stock unit vesting (1,184 )   (1,009 )
Proceeds from long-term borrowings, net of debt issuance costs 88,068     177,797  
Payments on long-term borrowings (10,000 )   (39,200 )
Repurchase of common stock     (14,964 )
Net cash provided by financing activities 79,041     125,961  
Effect of currency exchange rate changes on cash (305 )   863  
Net (decrease) increase in cash, cash equivalents and restricted cash (57,249 )   65,812  
Cash, cash equivalents and restricted cash, beginning of period 128,231     59,287  
Cash, cash equivalents and restricted cash, end of period $ 70,982     $ 125,099  
 



 
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,
  2018   2017   2018   2017
GAAP revenue $ 77,734     $ 59,034     $ 141,760     $ 116,133  
Add:              
Fair value adjustment of acquired deferred revenue 2,116     2,045     2,998     4,033  
Non-GAAP revenue $ 79,850     $ 61,079     $ 144,758     $ 120,166  
 


 
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
Gross profit $ 54,677     $ 40,723     $ 100,391     $ 80,467  
Gross margin 70.3 %   69.0 %   70.8 %   69.3 %
Add:              
Fair value adjustment of acquired deferred revenue 2,116     2,045     2,998     4,033  
Amortization of intangibles 4,325     2,124     6,750     3,750  
Stock-based compensation expense 413     269     738     500  
Acquisition-related expense 3     115     57     133  
Non-GAAP gross profit $ 61,534     $ 45,276     $ 110,934     $ 88,883  
Non-GAAP gross margin 77.1 %   74.1 %   76.6 %   74.0 %
                       


 
Reconciliation of GAAP Net (Loss) Income and Net (Loss) Income per Share to Non-GAAP Net Income and Net Income per Share
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
GAAP net (loss) income $ (5,687 )   $ (6,380 )   $ 6,257     $ 1,215  
Add:              
Fair value adjustment of acquired deferred revenue 2,116     2,045     2,998     4,033  
Amortization of intangibles 7,977     2,656     11,341     4,732  
Stock-based compensation expense 4,741     3,188     8,478     5,965  
Litigation-related expense 46     89     63     144  
Restructuring-related expense 41         903      
Acquisition-related expense 2,357     1,255     5,977     4,278  
Non-cash convertible debt interest expense 1,558     1,466     3,101     1,466  
Less:              
Income tax effect of non-GAAP adjustments (1,027 )   66     16,818     15,051  
Non-GAAP net income $ 14,176     $ 4,253     $ 22,300     $ 6,782  
GAAP net (loss) income per share:              
Basic $ (0.20 )   $ (0.23 )   $ 0.22     $ 0.04  
Diluted $ (0.20 )   $ (0.23 )   $ 0.20     $ 0.04  
Non-GAAP net income per share:              
Basic $ 0.50     $ 0.15     $ 0.78     $ 0.25  
Diluted $ 0.45     $ 0.15     $ 0.72     $ 0.23  
GAAP weighted-average shares outstanding:              
Basic 28,628,173     27,525,647     28,485,695     27,672,804  
Diluted 28,628,173     27,525,647     30,885,633     28,354,616  
Non-GAAP weighted-average shares outstanding:              
Basic 28,628,173     27,525,647     28,485,695     27,672,804  
Diluted 31,718,232     28,793,346     30,885,633     28,991,968  
                       


 
Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
Research and development $ 15,719     $ 10,927     $ 28,238     $ 21,254  
Less:              
Stock-based compensation expense 1,047     405     1,734     714  
Acquisition-related expense 2     65     37     134  
Non-GAAP research and development $ 14,670     $ 10,457     $ 26,467     $ 20,406  
               
General and administrative $ 13,460     $ 10,954     $ 27,920     $ 23,723  
Less:              
Stock-based compensation expense 2,494     1,983     4,618     3,940  
Litigation-related expense 46     89     63     144  
Acquisition-related expense 2,321     908     5,811     3,809  
Non-GAAP general and administrative $ 8,599     $ 7,974     $ 17,428     $ 15,830  
               
Sales and marketing $ 22,086     $ 22,963     $ 41,946     $ 46,034  
Less:              
Stock-based compensation expense 787     531     1,388     811  
Acquisition-related expense 31     167     72     202  
Non-GAAP sales and marketing $ 21,268     $ 22,265     $ 40,486     $ 45,021  
               
Amortization of intangible assets $ 3,652     $ 532     $ 4,591     $ 982  
Less:              
Amortization of intangible assets 3,652     532     4,591     982  
Non-GAAP amortization of intangible assets $     $     $     $  
               
Restructuring charges $ 41     $     $ 903     $  
Less:              
Restructuring-related expense 41         903      
Non-GAAP restructuring charges $     $     $     $  
 


 
Reconciliation of Revenue to Bookings
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
GAAP revenue $ 77,734     $ 59,034     $ 141,760     $ 116,133  
Add:              
Change in deferred revenue 4,388     5,113     24,200     19,389  
Deferred revenue divested     373     288     373  
Impact of Topic 606 adoption         3,998      
Impact of foreign exchange 543         122      
Less:              
Impact of foreign exchange     620         773  
Beginning deferred revenue from acquisitions 130         19,740     9,100  
Change in unbilled revenue 749         1,254      
Change in deferred revenue and adjustments 4,052     4,866     7,614     9,889  
Bookings $ 81,786     $ 63,900     $ 149,374     $ 126,022  
 


Calculation of Adjusted Free Cash Flow
 
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2018   2017   2018   2017
Net cash provided by operating activities $ 13,555     $ 2,872     $ 16,846     $ 10,433  
Subtract:              
Purchases of property and equipment 4,507     3,471     7,795     10,039  
Free cash flow 9,048     (599 )   9,051     394  
               
Add:              
Acquisition-related payments 3,681     2,659     5,328     3,889  
Restructuring-related payments 461         1,125      
Litigation-related payments 85     37     212     69  
Adjusted free cash flow $ 13,275     $ 2,097     $ 15,716     $ 4,352  

 

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