November 2, 2017

Carbonite Announces Third Quarter 2017 Financial Results

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.
2Bookings 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.
3Non-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.
4Non-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.
5Adjusted 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 Margin74.0% - 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  $153,498 
Cost of revenue17,590  15,459  53,256  46,078 
Gross profit44,047  36,489  124,514  107,420 
Operating expenses:       
Research and development12,781  8,156  34,035  25,272 
General and administrative9,799  9,059  33,745  30,868 
Sales and marketing22,561  18,864  69,354  53,069 
Restructuring charges  29    834 
Total operating expenses45,141  36,108  137,134  110,043 
(Loss) income from operations(1,094) 381  (12,620) (2,623)
Interest (expense) income, net(2,206) (15) (4,647) (110)
Other (expense) income, net(66) 170  1,129  118 
(Loss) income before income taxes(3,366) 536  (16,138) (2,615)
Provision (benefit) for income taxes237  429  (13,750) 814 
Net (loss) income$(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:       
Basic27,795,858  26,973,507  27,714,273  26,976,432 
Diluted27,795,858  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, net23,364  16,639 
Prepaid expenses and other current assets6,745  7,325 
Restricted cash  135 
Total current assets149,534  83,251 
Property and equipment, net29,681  23,872 
Other assets432  157 
Acquired intangible assets, net46,799  13,751 
Goodwill80,756  23,728 
Total assets$307,202  $144,759 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$9,402  $5,819 
Accrued expenses20,373  19,768 
Current portion of deferred revenue103,687  86,311 
Total current liabilities133,462  111,898 
Long-term debt110,294   
Deferred revenue, net of current portion22,018  21,280 
Other long-term liabilities6,034  5,747 
Total liabilities271,808  138,925 
Stockholders' equity   
Common stock299  285 
Additional paid-in capital228,943  177,931 
Treasury stock, at cost(27,124) (10,657)
Accumulated deficit(167,730) (165,042)
Accumulated other comprehensive income1,006  3,317 
Total stockholders' equity35,394  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 amortization16,039  12,227 
(Gain) loss on disposal of equipment(893) 518 
Impairment of capitalized software906   
Stock-based compensation expense9,220  6,628 
Benefit for deferred income taxes(15,054) (253)
Non-cash interest expense related to amortization of debt discount2,943   
Other non-cash items, net(367) 168 
Changes in assets and liabilities, net of acquisition:   
Accounts receivable510  (13,243)
Prepaid expenses and other current assets941  (1,822)
Other assets(209) 69 
Accounts payable346  (5,187)
Accrued expenses(2,153) 6,327 
Other long-term liabilities32  (481)
Deferred revenue7,593  1,842 
Net cash provided by operating activities17,466  3,364 
Investing activities   
Purchases of property and equipment(11,944) (3,715)
Proceeds from sale of property and equipment936  4 
Proceeds from maturities of marketable securities and derivatives370  1,198 
Purchases of derivatives(4,829) (1,476)
Proceeds from sale of businesses295   
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 options4,158  2,020 
Proceeds from long-term borrowings, net of debt issuance costs177,797   
Payments on long-term borrowings(39,200)  
Repurchase of common stock(16,468) (4,753)
Net cash provided by (used in) financing activities126,287  (2,733)
Effect of currency exchange rate changes on cash1,490  154 
Net increase (decrease) in cash and cash equivalents60,273  (14,829)
Cash and cash equivalents, beginning of period59,152  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 revenue61,637  51,948  177,770  153,498 
Add:       
Fair value adjustment of acquired deferred revenue (1)1,465  536  5,498  1,899 
Non-GAAP revenue63,102  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 margin71.5% 70.2% 70.0% 70.0%
Add:       
Fair value adjustment of acquired deferred revenue1,465  536  5,498  1,899 
Amortization of intangibles2,203  642  5,953  1,999 
Stock-based compensation expense287  189  787  600 
Acquisition-related expense176  15  309  251 
Non-GAAP gross profit$48,178  $37,871  $137,061  $112,169 
Non-GAAP gross margin76.3% 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 revenue1,465  536  5,498  1,899 
Amortization of intangibles2,756  950  7,488  2,938 
Stock-based compensation expense3,254  2,130  9,219  6,628 
Litigation-related expense49    193  1 
Restructuring-related expense  29    829 
Acquisition-related expense2,086  41  6,364  4,807 
Non-cash convertible debt interest expense1,477    2,943   
Less:       
Income tax effect of non-GAAP adjustments190  (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:       
Basic27,795,858  26,973,507  27,714,273  26,976,432 
Diluted27,795,828  27,532,509  27,714,273  26,976,432 
Non-GAAP Weighted-average shares outstanding:       
Basic27,795,858  26,973,507  27,714,273  26,976,432 
Diluted29,007,629  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 expense590  276  1,304  790 
Acquisition-related expense1,038  (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 intangibles123  62  346  200 
Stock-based compensation expense1,860  1,388  5,800  4,475 
Litigation-related expense49    193  1 
Acquisition-related expense494  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 intangibles430  246  1,189  739 
Stock-based compensation expense517  277  1,328  763 
Acquisition-related expense378  (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 balance125,705  107,445  125,705  107,445 
Deferred revenue divested    373   
Less:       
Impact of foreign exchange377  106  1,150  164 
Beginning deferred revenue from acquisitions320    9,420  6,830 
Deferred revenue beginning balance126,980  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 equipment1,905  906  11,944  3,715 
Free cash flow4,993  4,131  5,522  (351)
        
Add:       
Acquisition-related payments954  190  4,843  9,981 
Restructuring-related payments      341 
Cash portion of lease exit charge  203    354 
Litigation-related payments68    137  924 
Adjusted free cash flow$6,015  $4,524  $10,502  $11,249 


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