Carbonite Announces Third Quarter 2017 Financial Results

November 2, 2017 at 4:05 PM EDT
Delivered better-than-expected revenue growth and expanded profitability

BOSTON, Nov. 02, 2017 (GLOBE NEWSWIRE) -- Carbonite, Inc. (NASDAQ:CARB), a leading provider of cloud, hybrid and onsite data protection solutions, today announced financial results for the quarter ended September 30, 2017.

Third Quarter 2017 Highlights:  

  • Revenue of $61.6 million increased 19% year-over-year.
  • Non-GAAP revenue of $63.1 million increased 20% year-over-year.1
  • Bookings of $59.7 million increased 21% year-over-year.2
  • Net (loss) income per share was ($0.13), as compared to $0.00 in 2016 (basic and diluted).
  • Non-GAAP net income per share was $0.26 (basic) and $0.25 (diluted), as compared to $0.14 in 2016 (basic and diluted).4

“The third quarter was another successful quarter for Carbonite as we delivered strong financial results and we made significant progress on our integration priorities. We are successfully executing our plan to build the leading data protection platform for businesses, and I am incredibly pleased with our progress,” said Mohamad Ali, President and CEO of Carbonite.

“Our disciplined approach to driving growth has produced another quarter of sequential double-digit growth in non-GAAP net income per share.  As we continue to integrate acquired businesses, we expect to realize more synergies in the coming quarters and to continue expanding profitability,” 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.  

Third Quarter 2017 Results:

  • Revenue for the third quarter was $61.6 million, an increase of 19% from $51.9 million in the third quarter of 2016. Non-GAAP revenue for the third quarter was $63.1 million, an increase of 20% from $52.5 million in the third quarter of 2016.1
  • Bookings for the third quarter were $59.7 million, an increase of 21% from $49.2 million in the third quarter of 2016.2
  • Gross margin for the third quarter was 71.5%, compared to 70.2% in the third quarter of 2016. Non-GAAP gross margin was 76.3% in the third quarter, compared to 72.2% in the third quarter of 2016.3
  • Net loss for the third quarter was ($3.6) million, compared to net income of $0.1 million in the third quarter of 2016. Non-GAAP net income for the third quarter was $7.3 million, compared to non-GAAP net income of $3.8 million in the third quarter of 2016.4
  • Net loss per share for the third quarter was ($0.13) (basic and diluted), compared to net income per share of $0.00 (basic and diluted) in the third quarter of 2016. Non-GAAP net income per share was $0.26 (basic) and $0.25 (diluted) for the third quarter, compared to non-GAAP net income per share of $0.14 (basic and diluted) in the third quarter of 2016.4
  • Cash flow from operations for the third quarter was $6.9 million, compared to $5.0 million in the third quarter of 2016. Adjusted free cash flow for the third quarter was $6.0 million, compared to $4.5 million in the third quarter of 2016.5
   
1  Non-GAAP revenue excludes the impact of purchase accounting adjustments for significant acquisitions.
2 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.
3 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.
4 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.
5 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 November 2, 2017, Carbonite expects the following for the fourth quarter and full year of 2017:

 
Fourth Quarter 2017:
   
  Current Guidance
(11/2/2017)
GAAP Revenue $61.5 -$63.5 million
Non-GAAP Revenue $63.0 -$65.0 million
Non-GAAP Net Income Per Share $0.27 - $0.31
   


Full Year 2017:
 
  Prior Guidance
(8/3/2017)
Current Guidance
(11/2/2017)
Business Bookings $160.6 - $170.2 million $163.8 -$168.8 million
Consumer Bookings Y/Y Growth (10%) - 0% growth (10%) - 0% growth
GAAP Revenue $232.0 - $244.0 million $239.2 -$241.2 million
Non-GAAP Revenue $238.5 - $250.5 million $246.3 -$248.3 million
Non-GAAP Net Income Per Share $0.74 - $0.80 $0.76 - $0.80
Non-GAAP Gross Margin 74.0% - 75.0% ~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 fourth quarter and full year of 2017 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 13% for the full year of 2017. Non-GAAP net income per share assumes fully-diluted weighted average shares outstanding of approximately 29.3 million for the fourth quarter and 29.1 million for the full year of 2017.

Conference Call and Webcast Information

In conjunction with this announcement, Carbonite will host a conference call on Thursday, November 2, 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 96198014.  

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 November 2, 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 (loss) income 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 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 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, 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 solution suite provides a full complement of backup, disaster recovery, high availability and migration solutions for any size business in locations around the world, all supported by secure and scalable 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:

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

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

 
 
Carbonite, Inc.
Condensed Consolidated Statement of Operations (unaudited)
(In thousands, except share and per share amounts)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Revenue $ 61,637     $ 51,948     $ 177,770     $ 153,498  
Cost of revenue 17,590     15,459     53,256     46,078  
Gross profit 44,047     36,489     124,514     107,420  
Operating expenses:              
Research and development 12,781     8,156     34,035     25,272  
General and administrative 9,799     9,059     33,745     30,868  
Sales and marketing 22,561     18,864     69,354     53,069  
Restructuring charges     29         834  
Total operating expenses 45,141     36,108     137,134     110,043  
(Loss) income from operations (1,094 )   381     (12,620 )   (2,623 )
Interest (expense) income, net (2,206 )   (15 )   (4,647 )   (110 )
Other (expense) income, net (66 )   170     1,129     118  
(Loss) income before income taxes (3,366 )   536     (16,138 )   (2,615 )
Provision (benefit) for income taxes 237     429     (13,750 )   814  
Net (loss) income $ (3,603 )   $ 107     $ (2,388 )   $ (3,429 )
Net (loss) income per share:              
Basic $ (0.13 )   $     $ (0.09 )   $ (0.13 )
Diluted $ (0.13 )   $     $ (0.09 )   $ (0.13 )
Weighted-average shares outstanding:              
Basic 27,795,858     26,973,507     27,714,273     26,976,432  
Diluted 27,795,858     27,532,509     27,714,273     26,976,432  
                       
                       


Carbonite, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
 
  September 30,
2017
  December 31,
2016
Assets      
Current assets      
Cash and cash equivalents $ 119,425     $ 59,152  
Trade accounts receivable, net 23,364     16,639  
Prepaid expenses and other current assets 6,745     7,325  
Restricted cash     135  
Total current assets 149,534     83,251  
Property and equipment, net 29,681     23,872  
Other assets 432     157  
Acquired intangible assets, net 46,799     13,751  
Goodwill 80,756     23,728  
Total assets $ 307,202     $ 144,759  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 9,402     $ 5,819  
Accrued expenses 20,373     19,768  
Current portion of deferred revenue 103,687     86,311  
Total current liabilities 133,462     111,898  
Long-term debt 110,294      
Deferred revenue, net of current portion 22,018     21,280  
Other long-term liabilities 6,034     5,747  
Total liabilities 271,808     138,925  
Stockholders’ equity      
Common stock 299     285  
Additional paid-in capital 228,943     177,931  
Treasury stock, at cost (27,124 )   (10,657 )
Accumulated deficit (167,730 )   (165,042 )
Accumulated other comprehensive income 1,006     3,317  
Total stockholders’ equity 35,394     5,834  
Total liabilities and stockholders’ equity $ 307,202     $ 144,759  
 
 


Carbonite, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
 
 
  Nine Months Ended
September 30,
  2017   2016
Operating activities      
Net loss $ (2,388 )   $ (3,429 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 16,039     12,227  
(Gain) loss on disposal of equipment (893 )   518  
Impairment of capitalized software 906      
Stock-based compensation expense 9,220     6,628  
Benefit for deferred income taxes (15,054 )   (253 )
Non-cash interest expense related to amortization of debt discount 2,943      
Other non-cash items, net (367 )   168  
Changes in assets and liabilities, net of acquisition:      
Accounts receivable 510     (13,243 )
Prepaid expenses and other current assets 941     (1,822 )
Other assets (209 )   69  
Accounts payable 346     (5,187 )
Accrued expenses (2,153 )   6,327  
Other long-term liabilities 32     (481 )
Deferred revenue 7,593     1,842  
Net cash provided by operating activities 17,466     3,364  
Investing activities      
Purchases of property and equipment (11,944 )   (3,715 )
Proceeds from sale of property and equipment 936     4  
Proceeds from maturities of marketable securities and derivatives 370     1,198  
Purchases of derivatives (4,829 )   (1,476 )
Proceeds from sale of businesses 295      
Payment for acquisition, net of cash acquired (69,798 )   (11,625 )
Net cash used in investing activities (84,970 )   (15,614 )
Financing activities      
Proceeds from exercise of stock options 4,158     2,020  
Proceeds from long-term borrowings, net of debt issuance costs 177,797      
Payments on long-term borrowings (39,200 )    
Repurchase of common stock (16,468 )   (4,753 )
Net cash provided by (used in) financing activities 126,287     (2,733 )
Effect of currency exchange rate changes on cash 1,490     154  
Net increase (decrease) in cash and cash equivalents 60,273     (14,829 )
Cash and cash equivalents, beginning of period 59,152     63,936  
Cash and cash equivalents, end of period $ 119,425     $ 49,107  
 
 


 
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
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
GAAP revenue 61,637     51,948     177,770     153,498  
Add:              
Fair value adjustment of acquired deferred revenue (1) 1,465     536     5,498     1,899  
Non-GAAP revenue 63,102     52,484     183,268     155,397  
(1)  Excludes the impact of purchase accounting adjustments for significant acquisitions.
 
 


Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Gross profit $ 44,047     $ 36,489     $ 124,514     $ 107,420  
Gross margin 71.5 %   70.2 %   70.0 %   70.0 %
Add:              
Fair value adjustment of acquired deferred revenue 1,465     536     5,498     1,899  
Amortization of intangibles 2,203     642     5,953     1,999  
Stock-based compensation expense 287     189     787     600  
Acquisition-related expense 176     15     309     251  
Non-GAAP gross profit $ 48,178     $ 37,871     $ 137,061     $ 112,169  
Non-GAAP gross margin 76.3 %   72.2 %   74.8 %   72.2 %
                       
                       


Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Net (loss) income $ (3,603 )   $ 107     $ (2,388 )   $ (3,429 )
Add:              
Fair value adjustment of acquired deferred revenue 1,465     536     5,498     1,899  
Amortization of intangibles 2,756     950     7,488     2,938  
Stock-based compensation expense 3,254     2,130     9,219     6,628  
Litigation-related expense 49         193     1  
Restructuring-related expense     29         829  
Acquisition-related expense 2,086     41     6,364     4,807  
Non-cash convertible debt interest expense 1,477         2,943      
Less:              
Income tax effect of non-GAAP adjustments 190     (33 )   15,241     558  
Non-GAAP net income $ 7,294     $ 3,826     $ 14,076     $ 13,115  
GAAP net (loss) income per share:              
Basic $ (0.13 )   $     $ (0.09 )   $ (0.13 )
Diluted $ (0.13 )   $     $ (0.09 )   $ (0.13 )
Non-GAAP net income per share:              
Basic $ 0.26     $ 0.14     $ 0.51     $ 0.49  
Diluted $ 0.25     $ 0.14     $ 0.47     $ 0.48  
GAAP Weighted-average shares outstanding:              
Basic 27,795,858     26,973,507     27,714,273     26,976,432  
Diluted 27,795,828     27,532,509     27,714,273     26,976,432  
Non-GAAP Weighted-average shares outstanding:              
Basic 27,795,858     26,973,507     27,714,273     26,976,432  
Diluted 29,007,629     27,532,509     29,649,353     27,221,328  
                       
                       


Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Research and development $ 12,781     $ 8,156     $ 34,035     $ 25,272  
Less:              
Stock-based compensation expense 590     276     1,304     790  
Acquisition-related expense 1,038     (1 )   1,172     309  
Non-GAAP research and development $ 11,153     $ 7,881     $ 31,559     $ 24,173  
               
General and administrative $ 9,799     $ 9,059     $ 33,745     $ 30,868  
Less:              
Amortization of intangibles 123     62     346     200  
Stock-based compensation expense 1,860     1,388     5,800     4,475  
Litigation-related expense 49         193     1  
Acquisition-related expense 494     28     4,303     4,131  
Non-GAAP general and administrative $ 7,273     $ 7,581     $ 23,103     $ 22,061  
               
Sales and marketing $ 22,561     $ 18,864     $ 69,354     $ 53,069  
Less:              
Amortization of intangibles 430     246     1,189     739  
Stock-based compensation expense 517     277     1,328     763  
Acquisition-related expense 378     (1 )   580     116  
Non-GAAP sales and marketing $ 21,236     $ 18,342     $ 66,257     $ 51,451  
               
Restructuring charges $     $ 29     $     $ 834  
Less:              
Restructuring-related expense     29         829  
Non-GAAP restructuring charges $     $     $     $ 5  
 
 


Reconciliation of Revenue to Bookings
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Revenue $ 61,637     $ 51,948     $ 177,770     $ 153,498  
Add:              
Deferred revenue ending balance 125,705     107,445     125,705     107,445  
Deferred revenue divested         373      
Less:              
Impact of foreign exchange 377     106     1,150     164  
Beginning deferred revenue from acquisitions 320         9,420     6,830  
Deferred revenue beginning balance 126,980     110,049     107,591     98,703  
Change in deferred revenue balance (1,972 )   (2,710 )   7,917     1,748  
Bookings $ 59,665     $ 49,238     $ 185,687     $ 155,246  
 
 


Calculation of Adjusted Free Cash Flow
       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2017   2016   2017   2016
Net cash provided by operating activities $ 6,898     $ 5,037     $ 17,466     $ 3,364  
Subtract:              
Purchases of property and equipment 1,905     906     11,944     3,715  
Free cash flow 4,993     4,131     5,522     (351 )
               
Add:              
Acquisition-related payments 954     190     4,843     9,981  
Restructuring-related payments             341  
Cash portion of lease exit charge     203         354  
Litigation-related payments 68         137     924  
Adjusted free cash flow $ 6,015     $ 4,524     $ 10,502     $ 11,249  

Source: Carbonite, Inc.


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