Carbonite To Be Acquired by OpenText for $23.00 Per Share

November 11, 2019 at 8:00 AM EST

Transaction Follows Comprehensive Process Run by Board to Maximize Value for Shareholders

Represents 78% Premium to Carbonite’s Unaffected Stock Price on September 5, 2019

Announces Third Quarter 2019 Financial Results

BOSTON--(BUSINESS WIRE)--Nov. 11, 2019-- Carbonite, Inc. (NASDAQ: CARB), a global leader in data protection and cybersecurity, today announced that it has entered into a definitive agreement to be acquired by OpenTextTM (NASDAQ: OTEX, TSX:OTEX), a market leader in Enterprise Information Management software and solutions, for $23.00 per Carbonite share in cash. The transaction values Carbonite at an enterprise value of approximately $1.42 billion and represents a 78% premium to Carbonite’s unaffected closing stock price on September 5, 2019, the last trading day before a media report was published speculating about a potential sale process.

“Following expressions of interest from multiple parties, the Carbonite Board conducted a thorough and comprehensive process, which included contact with a number of strategic and financial parties, to identify the best way to maximize shareholder value,” said Steve Munford, Interim Chief Executive Officer and President/Executive Chairman of the Board of Carbonite. “The Board strongly believes that a transaction with OpenText delivers compelling, immediate and substantial cash value to shareholders.

Munford continued, “Carbonite has expanded its solutions to become a leader in cyber resiliency. We have grown through both organic and inorganic opportunities over the years, enhancing our routes to market, diversifying our customer base, and assembling a talented workforce, while adding meaningful scale. Joining with OpenText is an exciting next step for Carbonite.”

OpenText is a leader in Enterprise Information Management (EIM), both on-premises and for cloud services, offering the only complete solution for EIM with a comprehensive view of all the information within an organization. OpenText operates in 40 countries, providing a tested platform for growth and new sales opportunities.

The transaction is subject to customary closing conditions, including the tender of a majority of the outstanding shares of Carbonite common stock and regulatory approvals.

J.P. Morgan Securities LLC acted as financial advisor to Carbonite, and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor.

Third Quarter 2019 Results:

Carbonite also announced financial results for the third quarter ended September 30, 2019:

  • Revenue of $125.6 million increased 62% year-over-year.
  • Non-GAAP revenue of $135.0 million increased 71% year-over-year.1
  • Net loss was ($14.0) million, compared to net income of $0.6 million in 2018.
  • Net loss per share was ($0.40) (basic and diluted), as compared to net income per share of $0.02 (basic and diluted) in 2018.
  • Non-GAAP net income per share was $0.61 (basic) and $0.60 (diluted), as compared to $0.53 (basic) and $0.48 (diluted) in 2018.2
  • Adjusted EBITDA of $40.2 million, or 30% of non-GAAP revenue, compared to $23.0 million, or 29% of non-GAAP revenue in 2018.3

Conference Call

The public is invited to listen to the OpenText conference call today at 9:00 a.m. ET (6:00 a.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 15 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the conference call will be available on the Investor Relations section of the Company's website at investors.opentext.com.

A replay of the call will be available beginning November 11, 2019 at 10:30 a.m. ET through 11:59 p.m. on November 25, 2019 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3870 followed by the number sign.

In light of the transaction with OpenText announced today, Carbonite has cancelled its third quarter results conference call that had been scheduled for Tuesday, November 12, 2019 at 5:30 pm ET and will not be providing a business outlook for the fourth quarter of 2019.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, this press release contains non-GAAP financial measures, including non-GAAP revenue, non-GAAP net income and non-GAAP net income per share, and adjusted EBITDA.

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.

  1. Non-GAAP revenue excludes the impact of purchase accounting adjustments for acquisitions.
  2. 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 debt interest expense, intangible asset impairment charges, CEO recruitment expense, and the income tax effect of non-GAAP adjustments.
  3. Adjusted EBITDA is calculated by excluding the impact of interest expense, net, income taxes, depreciation, amortization, purchase accounting adjustments on acquired deferred revenue, stock-based compensation expense, litigation-related expense, restructuring-related expense, intangible asset impairment charges, acquisition-related expense, and CEO recruitment expense from net (loss) income.

Notice to Investors and Security Holders

The offer referred to in this press release has not yet commenced. The description contained in this press release is neither an offer to purchase nor a solicitation of an offer to sell any securities, nor is it a substitute for the tender offer materials that OpenText and Merger Sub will file with the SEC. The solicitation and offer to buy Shares will only be made pursuant to an offer to purchase and related tender offer materials. At the time the Offer is commenced, OpenText and Merger Sub will file a tender offer statement on Schedule TO and thereafter Carbonite will file a solicitation/recommendation statement on Schedule 14D-9 with the SEC with respect to the Offer. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WILL CONTAIN IMPORTANT INFORMATION. ANY HOLDERS OF SHARES ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES. The offer to purchase, the related letter of transmittal and the solicitation/recommendation statement will be made available for free at the SEC’s website at www.sec.gov. Additional copies may be obtained for free by contacting OpenText or Carbonite. Copies of the documents filed with the SEC by Carbonite will be available free of charge on Carbonite’s internet website at https://investor.carbonite.com or by contacting Carbonite’s Investor Relations Department at (617) 587-1102. Copies of the documents filed with the SEC by OpenText will be available free of charge on OpenText’s internet website at https://investors.opentext.com or by contacting OpenText’s Investor Relations Department at (415) 963-0825.

In addition to the offer to purchase, the related letter of transmittal and certain other tender offer documents, as well as the solicitation/recommendation statement, Carbonite and OpenText will each file annual, quarterly and current reports with the SEC. You may read and copy any reports or other information filed by OpenText or Carbonite at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Carbonite’s and OpenText’s filings with the SEC are also available to the public from commercial document-retrieval services and at the website maintained by the SEC at http://www.sec.gov.

Forward Looking Statements

The information contained in this press release is as of November 11, 2019. Carbonite assumes no obligation to update forward-looking statements contained in this press release as the result of new information or future events or developments.

This press release contains forward-looking information related to Carbonite, OpenText and the proposed acquisition of Carbonite by OpenText that involves substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements in this document and the accompanying exhibits include, among other things, statements about the potential benefits of the proposed acquisition, Carbonite’s and OpenText’s plans, objectives, expectations and intentions, the anticipated timing of closing of the proposed acquisition and expected plans for financing the proposed acquisition. Risks and uncertainties include, among other things, risks related to the satisfaction or waiver of the conditions to closing the proposed acquisition (including the failure to obtain necessary regulatory approvals) in the anticipated timeframe or at all, including uncertainties as to how many of Carbonite’s stockholders will tender their shares in the tender offer and the possibility that the acquisition does not close; the possibility that competing offers may be made; risks related to obtaining the requisite consents to the acquisition, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entities (including any conditions, limitations or restrictions placed on these approvals and the risk that one or more governmental entities may deny approval); risks related to the ability to realize the anticipated benefits of the proposed acquisition, including the possibility that the expected benefits and accretion from the proposed acquisition will not be realized or will not be realized within the expected time period; the risk that the businesses will not be integrated successfully; Carbonite’s ability to integrate the Webroot acquisition and achieve the expected benefits of such acquisition; Carbonite’s ability to profitably attract new customers and retain existing customers; Carbonite’s dependence on the market for cloud backup services, and its ability to manage growth, changes in economic or regulatory conditions or other trends affecting the Internet and the information technology industry; disruption from the transaction making it more difficult to maintain business and operational relationships; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed acquisition; other business effects, including the effects of industry, market, economic, political or regulatory conditions; future exchange and interest rates; and changes in tax and other laws, regulations, rates and policies.

A further description of risks and uncertainties relating to Carbonite can be found in Carbonite Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and available at www.sec.gov and www.carbonite.com.

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 on a global scale with secure cloud infrastructure. To learn more, visit www.carbonite.com and follow us on Twitter at @Carbonite.

Carbonite, Inc. serves customers through three brands: Carbonite data protection, Webroot cybersecurity, and MailStore email archiving.

 

Carbonite, Inc.

Consolidated Statement of Operations

(Unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except share and per share amounts)

Revenue:

 

 

 

 

 

 

 

Services

$

118,824

 

 

$

70,290

 

 

$

304,758

 

 

$

193,678

 

Product

6,772

 

 

7,392

 

 

23,563

 

 

25,764

 

Total revenue

125,596

 

 

77,682

 

 

328,321

 

 

219,442

 

Cost of revenue:

 

 

 

 

 

 

 

Services

30,355

 

 

17,094

 

 

71,413

 

 

50,782

 

Product

540

 

 

417

 

 

1,363

 

 

1,348

 

Amortization of intangible assets

9,072

 

 

4,317

 

 

21,447

 

 

11,067

 

Total cost of revenue

39,967

 

 

21,828

 

 

94,223

 

 

63,197

 

Gross profit

85,629

 

 

55,854

 

 

234,098

 

 

156,245

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

28,753

 

 

14,914

 

 

72,439

 

 

43,152

 

General and administrative

16,226

 

 

11,159

 

 

54,782

 

 

39,079

 

Sales and marketing

37,417

 

 

21,184

 

 

96,127

 

 

63,130

 

Amortization of intangible assets

10,134

 

 

3,924

 

 

24,199

 

 

8,515

 

Restructuring charges

 

 

357

 

 

702

 

 

1,260

 

Total operating expenses

92,530

 

 

51,538

 

 

248,249

 

 

155,136

 

(Loss) income from operations

(6,901

)

 

4,316

 

 

(14,151

)

 

1,109

 

Interest expense

(10,795

)

 

(2,873

)

 

(26,650

)

 

(8,894

)

Interest income

212

 

 

390

 

 

1,595

 

 

803

 

Other income (expense), net

587

 

 

(147

)

 

974

 

 

48

 

(Loss) income before income taxes

(16,897

)

 

1,686

 

 

(38,232

)

 

(6,934

)

(Benefit) provision for income taxes

(2,941

)

 

1,100

 

 

(15,005

)

 

(13,777

)

Net (loss) income

$

(13,956

)

 

$

586

 

 

$

(23,227

)

 

$

6,843

 

Net (loss) income per share:

 

 

 

 

 

 

 

Basic

$

(0.40

)

 

$

0.02

 

 

$

(0.67

)

 

$

0.23

 

Diluted

$

(0.40

)

 

$

0.02

 

 

$

(0.67

)

 

$

0.21

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

34,639,762

 

 

32,876,529

 

 

34,423,099

 

 

29,965,390

 

Diluted

34,639,762

 

 

36,454,443

 

 

34,423,099

 

 

32,762,302

 

Carbonite, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

September 30,
2019

 

December 31,
2018

 

(in thousands)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

98,537

 

 

$

198,087

 

Trade accounts receivable, net

43,407

 

 

31,569

 

Prepaid expenses and other current assets

22,854

 

 

10,409

 

Total current assets

164,798

 

 

240,065

 

Property and equipment, net

44,199

 

 

34,101

 

Right-of-use lease assets

44,826

 

 

 

Other assets

24,519

 

 

13,876

 

Acquired intangible assets, net

391,786

 

 

117,963

 

Goodwill

543,957

 

 

155,086

 

Total assets

$

1,214,085

 

 

$

561,091

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

7,355

 

 

$

2,114

 

Accrued compensation

20,388

 

 

11,620

 

Accrued expenses and other current liabilities

32,499

 

 

15,844

 

Current portion of deferred revenue

183,361

 

 

121,553

 

Total current liabilities

243,603

 

 

151,131

 

Long-term debt

590,789

 

 

118,305

 

Long-term lease liabilities

43,404

 

 

 

Deferred revenue, net of current portion

41,638

 

 

29,151

 

Long-term deferred tax liabilities

40,343

 

 

1,456

 

Other long-term liabilities

8,171

 

 

3,838

 

Total liabilities

967,948

 

 

303,881

 

Stockholders’ equity:

 

 

 

Common stock

374

 

 

366

 

Additional paid-in capital

466,738

 

 

451,618

 

Treasury stock, at cost

(47,593

)

 

(48,522

)

Accumulated other comprehensive (loss) income

(2,253

)

 

1,650

 

Accumulated deficit

(171,129

)

 

(147,902

)

Total stockholders’ equity

246,137

 

 

257,210

 

Total liabilities and stockholders’ equity

$

1,214,085

$

561,091

Carbonite, Inc.

Consolidated Statement of Cash Flows (Unaudited)

 

 

Nine Months Ended
September 30,

 

2019

 

2018

 

(in thousands)

Operating activities

 

 

 

Net (loss) income

$

(23,227

)

 

$

6,843

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

57,685

 

 

29,622

 

Amortization of right-of-use lease assets

5,776

 

 

 

Amortization of deferred costs

2,224

 

 

1,521

 

Gain on disposal of equipment

(114

)

 

(245

)

Impairment of other long-lived assets

6,000

 

 

 

Impairment of capitalized software

126

 

 

653

 

Stock-based compensation expense

15,005

 

 

13,461

 

Benefit for deferred income taxes

(15,131

)

 

(16,228

)

Non-cash interest expense related to amortization of debt discount

6,260

 

 

4,712

 

Other non-cash items, net

(618

)

 

136

 

Changes in assets and liabilities, net of acquisition:

 

 

 

Accounts receivable

6,586

 

 

(7,001

)

Prepaid expenses and other current assets

(1,004

)

 

(2,281

)

Other assets

(2,125

)

 

(4,655

)

Accounts payable

4,665

 

 

(5,811

)

Accrued expenses and other current liabilities

(1,745

)

 

3,341

 

Other long-term liabilities

(9,129

)

 

(38

)

Deferred revenue

17,054

 

 

9,784

 

Net cash provided by operating activities

68,288

 

 

33,814

 

Investing activities

 

 

 

Purchases of property and equipment

(9,510

)

 

(9,927

)

Proceeds from sale of property and equipment and businesses

138

 

 

657

 

Proceeds from maturities of derivatives

1,809

 

 

2,596

 

Purchases of derivatives

(6

)

 

(1,403

)

Payment for intangibles

 

 

(5,750

)

Payment for acquisition, net of cash acquired

(621,703

)

 

(144,597

)

Net cash used in investing activities

(629,272

)

 

(158,424

)

Financing activities

 

 

 

Proceeds from exercise of stock options

340

 

 

1,139

 

Proceeds from issuance of common stock for secondary offering

 

 

199,302

 

Proceeds from issuance of treasury stock under employee stock purchase plan

1,582

 

 

1,215

 

Payments of withholding taxes in connection with restricted stock unit vesting

(905

)

 

(2,154

)

Proceeds from long-term borrowings, net of debt issuance costs

528,980

 

 

88,068

 

Payments on long-term borrowings

(65,000

)

 

(90,000

)

Net cash provided by financing activities

464,997

 

 

197,570

 

Effect of currency exchange rate changes on cash

(1,124

)

 

(210

)

Net decrease in cash, cash equivalents and restricted cash

(97,111

)

 

72,750

 

Cash, cash equivalents and restricted cash, beginning of period

198,087

 

 

128,231

 

Cash, cash equivalents and restricted cash, end of period

$

100,976

$

200,981

 

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,

 

2019

 

2018

 

2019

 

2018

GAAP revenue

$

125,596

 

 

$

77,682

 

 

$

328,321

 

 

$

219,442

 

Add:

 

 

 

 

 

 

 

Fair value adjustment of acquired deferred revenue

9,448

 

 

1,427

 

 

24,738

 

 

4,425

 

Non-GAAP revenue

$

135,044

 

 

$

79,109

 

 

$

353,059

 

 

$

223,867

 

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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP net (loss) income

$

(13,956

)

 

$

586

 

 

$

(23,227

)

 

$

6,843

 

Add:

 

 

 

 

 

 

 

Fair value adjustment of acquired deferred revenue

9,448

 

 

1,427

 

 

24,738

 

 

4,425

 

Amortization of intangibles

19,206

 

 

8,241

 

 

45,646

 

 

19,582

 

Stock-based compensation expense

5,288

 

 

4,983

 

 

15,005

 

 

13,461

 

Litigation-related expense

88

 

 

22

 

 

259

 

 

85

 

Restructuring-related expense

 

 

357

 

 

702

 

 

1,260

 

Acquisition-related expense

1,572

 

 

219

 

 

12,307

 

 

6,196

 

Intangible asset impairment charges

6,000

 

 

 

 

6,000

 

 

 

CEO recruitment expense

604

 

 

 

 

604

 

 

 

Non-cash debt interest expense

2,305

 

 

1,611

 

 

6,260

 

 

4,712

 

Less:

 

 

 

 

 

 

 

Income tax effect of non-GAAP adjustments

9,367

 

 

126

 

 

31,822

 

 

16,944

 

Non-GAAP net income

$

21,188

 

 

$

17,320

 

 

$

56,472

 

 

$

39,620

 

GAAP net (loss) income per share:

 

 

 

 

 

 

 

Basic

$

(0.40

)

 

$

0.02

 

 

$

(0.67

)

 

$

0.23

 

Diluted

$

(0.40

)

 

$

0.02

 

 

$

(0.67

)

 

$

0.21

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

Basic

$

0.61

 

 

$

0.53

 

 

$

1.64

 

 

$

1.32

 

Diluted

$

0.60

 

 

$

0.48

 

 

$

1.60

 

 

$

1.21

 

GAAP weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

34,639,762

 

 

32,876,529

 

 

34,423,099

 

 

29,965,390

 

Diluted

34,639,762

 

 

36,454,443

 

 

34,423,099

 

 

32,762,302

 

Non-GAAP weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

34,639,762

 

 

32,876,529

 

 

34,423,099

 

 

29,965,390

 

Diluted

35,176,186

36,454,443

35,248,853

32,762,302

Reconciliation of EBITDA and Adjusted EBITDA to Net (Loss) Income

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net (loss) income

$

(13,956

)

 

$

586

 

 

$

(23,227

)

 

$

6,843

 

Adjustments:

 

 

 

 

 

 

 

Interest expense, net

10,583

 

 

2,483

 

 

25,055

 

 

8,091

 

Income tax (benefit) provision

(2,941

)

 

1,100

 

 

(15,005

)

 

(13,777

)

Depreciation and amortization

23,471

 

 

11,859

 

 

57,685

 

 

29,622

 

EBITDA

17,157

 

 

16,028

 

 

44,508

 

 

30,779

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA:

 

 

 

 

 

 

 

Fair value adjustment of acquired deferred revenue

9,448

 

 

1,427

 

 

24,738

 

 

4,425

 

Stock-based compensation expense

5,288

 

 

4,983

 

 

15,005

 

 

13,461

 

Litigation-related expense

88

 

 

22

 

 

259

 

 

85

 

Restructuring-related expense

 

 

357

 

 

702

 

 

1,260

 

Intangible asset impairment charges

6,000

 

 

 

 

6,000

 

 

 

Acquisition-related expense

1,572

 

 

219

 

 

12,307

 

 

6,196

 

CEO recruitment expense

604

 

 

 

 

604

 

 

 

Adjusted EBITDA

$

40,157

 

 

$

23,036

 

 

$

104,123

 

 

$

56,206

 

 

Source: Carbonite, Inc.

Investor Relations Contact:
Jeremiah Sisitsky
Carbonite
781-928-0713
investor.relations@carbonite.com

Media Contact:
Kristin Miller
Carbonite
720-842-3481
media@carbonite.com


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