August 3, 2017

Carbonite Announces Second Quarter 2017 Financial Results

Bookings Growth and Operational Efficiencies 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  $101,550 
Cost of revenue18,311  15,864  35,666  30,619 
Gross profit40,723  37,571  80,467  70,931 
Operating expenses:       
Research and development10,927  8,380  21,254  17,116 
General and administrative11,076  10,389  23,946  21,809 
Sales and marketing23,373  17,323  46,793  34,205 
Restructuring charges  32    805 
Total operating expenses45,376  36,124  91,993  73,935 
(Loss) income from operations(4,653) 1,447  (11,526) (3,004)
Interest (expense) income, net(2,239) (97) (2,441) (95)
Other income (expense), net915  100  1,195  (52)
(Loss) income before income taxes(5,977) 1,450  (12,772) (3,151)
Provision (benefit) for income taxes403  290  (13,987) 385 
Net (loss) income$(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:       
Basic27,525,647  26,901,419  27,672,804  26,977,919 
Diluted27,525,647  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, net23,505  16,639 
Prepaid expenses and other current assets7,850  7,325 
Restricted cash  135 
Total current assets156,454  83,251 
Property and equipment, net27,798  23,872 
Other assets348  157 
Acquired intangible assets, net45,924  13,751 
Goodwill74,082  23,728 
Total assets$304,606  $144,759 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$6,021  $5,819 
Accrued expenses20,631  19,768 
Current portion of deferred revenue102,224  86,311 
Total current liabilities128,876  111,898 
Long-term debt, net of debt issuance costs108,782   
Deferred revenue, net of current portion24,756  21,280 
Other long-term liabilities6,186  5,747 
Total liabilities268,600  138,925 
Stockholders' equity   
Common stock298  285 
Additional paid-in capital224,815  177,931 
Treasury stock, at cost(26,630) (10,657)
Accumulated deficit(164,127) (165,042)
Accumulated other comprehensive income1,650  3,317 
Total stockholders' equity36,006  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 margin69.0% 70.3% 69.3% 69.8%
Add:    
Fair value adjustment of acquired deferred revenue2,045  800  4,033  1,363 
Amortization of intangibles2,124  675  3,750  1,357 
Stock-based compensation expense269  197  500  411 
Acquisition-related expense115  54  133  236 
Non-GAAP gross profit$45,276  $39,297  $88,883  $74,298 
Non-GAAP gross margin74.1% 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 revenue2,045  800  4,033  1,363 
Amortization of intangibles2,656  991  4,732  1,988 
Stock-based compensation expense3,188  2,155  5,965  4,498 
Litigation-related expense89    144  1 
Restructuring-related expense  32    800 
Acquisition-related expense1,255  618  4,278  4,766 
Non-cash convertible debt interest expense1,466    1,466   
Less:       
Income tax effect of non-GAAP adjustments66  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:       
Basic27,525,647  26,901,419  27,672,804  26,977,919 
Diluted27,525,647  27,012,361  28,354,616  26,977,919 
Non-GAAP Weighted-average shares outstanding:       
Basic27,525,647  26,901,419  27,672,804  26,977,919 
Diluted28,793,346  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 expense405  229  714  514 
Acquisition-related expense65  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 intangibles122  68  223  138 
Stock-based compensation expense1,983  1,454  3,940  3,087 
Litigation-related expense89    144  1 
Acquisition-related expense908  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 intangibles410  248  759  493 
Stock-based compensation expense531  275  811  486 
Acquisition-related expense167  (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 balance126,980  110,049  126,980  110,049 
Deferred revenue divested373    373   
Impact of foreign exchange  87     
Less:       
Impact of foreign exchange620    773  58 
Beginning deferred revenue from acquisitions    9,100  6,830 
Deferred revenue beginning balance121,867  109,878  107,591  98,703 
Change in deferred revenue balance4,866  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 equipment3,471  885  10,039  2,809 
Free cash flow(599) 4,199  529  (4,482)
        
Add:       
Acquisition-related payments2,659  2,735  3,889  9,791 
Restructuring-related payments  239    341 
Cash portion of lease exit charge  85    151 
Litigation-related payments37    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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