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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-35264
 
CARBONITE, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
33-1111329
(State or other jurisdiction of
incorporation)
(I.R.S. Employer
Identification No.)
Two Avenue de Lafayette, Boston, Massachusetts 02111
(Address of principal executive offices, including ZIP code)
(617) 587-1100
(Registrant’s telephone number, including area code)
 
 
Securities Registered Pursuant to Section 12(b) of the Act:
 
 
 
 
 
Common Stock, par value $0.01 per share
 
CARB
 
The NASDAQ Stock Market LLC
(Title of each class)
 
(Trading symbol)
 
(Name of each exchange on which registered)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 

Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes No
As of October 31, 2019, there were 35,005,570 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.
 


Table of Contents

CARBONITE, INC.
Table of Contents

 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2

Table of Contents

PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
Carbonite, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30, 2019
 
December 31, 2018
 
(in thousands, except share data)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
98,537

 
$
198,087

Trade accounts receivable, less allowances for doubtful accounts of $1,713 and $892
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

Commitments and contingencies (Note 14)

 

Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 6,000,000 shares authorized; no shares issued

 

Common stock, $0.01 par value; 45,000,000 shares authorized; 37,401,321 shares issued and 34,732,535 shares outstanding at September 30, 2019; 36,641,317 shares issued and 33,923,135 shares outstanding at December 31, 2018
374

 
366

Additional paid-in capital
466,738

 
451,618

Treasury stock, at cost (2,668,786 and 2,718,182 shares as of September 30, 2019 and December 31, 2018, respectively)
(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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Condensed Consolidated Statements 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 common share:
 
 
 
 
 
 
 
Basic
$
(0.40
)
 
$
0.02

 
$
(0.67
)
 
$
0.23

Diluted
$
(0.40
)
 
$
0.02

 
$
(0.67
)
 
$
0.21

Weighted-average number of common 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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Net (loss) income
$
(13,956
)
 
$
586

 
$
(23,227
)
 
$
6,843

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Unrealized loss on interest rate swap agreement, net of tax benefit of $1.2 million for the three and nine months ended September 30, 2019
(3,804
)
 

 
(3,804
)
 

Foreign currency translation adjustments
(637
)
 
438

 
(99
)
 
948

Total other comprehensive (loss) income
(4,441
)
 
438

 
(3,903
)
 
948

Total comprehensive (loss) income
$
(18,397
)
 
$
1,024

 
$
(27,130
)
 
$
7,791

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
in thousands, except share data
Number of
Shares
 
Amount
 
Balance as of December 31, 2018
36,641,317

 
$
366

 
$
451,618

 
$
(147,902
)
 
$
(48,522
)
 
$
1,650

 
$
257,210

Stock options exercised and vesting of restricted stock units
532,141

 
6

 
130

 
 
 
 
 
 
 
136

Stock-based compensation expense
 
 
 
 
4,223

 
 
 
 
 
 
 
4,223

Payments of withholding taxes in connection with restricted stock unit vesting
 
 
 
 
 
 
 
 
(754
)
 
 
 
(754
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
365

 
365

Net income
 
 
 
 
 
 
2,003

 
 
 
 
 
2,003

Balance as of March 31, 2019
37,173,458

 
372

 
455,971

 
(145,899
)
 
(49,276
)
 
2,015

 
263,183

Stock options exercised and vesting of restricted stock units
187,046

 
2

 
133

 
 
 
 
 
 
 
135

Stock-based compensation expense
 
 
 
 
5,524

 
 
 
 
 
 
 
5,524

Issuance of treasury stock in connection with employee stock purchase plan
 
 
 
 
5

 
 
 
1,577

 
 
 
1,582

Payments of withholding taxes in connection with restricted stock unit vesting
 
 
 
 
 
 
 
 
(151
)
 
 
 
(151
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
173

 
173

Net loss
 
 
 
 
 
 
(11,274
)
 
 
 
 
 
(11,274
)
Balance as of June 30, 2019
37,360,504

 
374

 
461,633

 
(157,173
)
 
(47,850
)
 
2,188

 
259,172

Stock options exercised and vesting of restricted stock units
40,817

 

 
77

 
 
 
 
 
 
 
77

Stock-based compensation expense
 
 
 
 
5,028

 
 
 
257

 
 
 
5,285

Unrealized loss on interest rate swap agreement, net of tax
 
 
 
 
 
 
 
 
 
 
(3,804
)
 
(3,804
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
(637
)
 
(637
)
Net loss
 
 
 
 
 
 
(13,956
)
 
 
 
 
 
(13,956
)
Balance as of September 30, 2019
37,401,321

 
$
374

 
$
466,738

 
$
(171,129
)
 
$
(47,593
)
 
$
(2,253
)
 
$
246,137


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
in thousands, except share data
Number of
Shares
 
Amount
 
Balance as of December 31, 2017
30,130,856

 
$
301

 
$
233,343

 
$
(169,344
)
 
$
(26,616
)
 
$
581

 
$
38,265

Stock options exercised and vesting of restricted stock units
408,764

 
4

 
722

 
 
 
 
 
 
 
726

Stock-based compensation expense
 
 
 
 
3,818

 
 
 
 
 
 
 
3,818

Payments of withholding taxes in connection with restricted stock unit vesting
 
 
 
 
 
 
 
 
(550
)
 
 
 
(550
)
Adjustment resulting from the adoption of Topic 606
 
 
 
 
 
 
13,880

 
 
 
 
 
13,880

Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
(639
)
 
(639
)
Net income
 
 
 
 
 
 
11,944

 
 
 
 
 
11,944

Balance as of March 31, 2018
30,539,620

 
305

 
237,883

 
(143,520
)
 
(27,166
)
 
(58
)
 
67,444

Stock options exercised and vesting of restricted stock units
230,794

 
3

 
213

 
 
 
 
 
 
 
216

Stock-based compensation expense
 
 
 
 
4,699

 
 
 
 
 
 
 
4,699

Issuance of treasury stock in connection with employee stock purchase plan
 
 
 
 
282

 
 
 
933

 
 
 
1,215

Payments of withholding taxes in connection with restricted stock unit vesting
 
 
 
 
 
 
 
 
(634
)
 
 
 
(634
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
1,149

 
1,149

Net loss
 
 
 
 
 
 
(5,687
)
 
 
 
 
 
(5,687
)
Balance as of June 30, 2018
30,770,414

 
308

 
243,077

 
(149,207
)
 
(26,867
)
 
1,091

 
68,402

Stock options exercised and vesting of restricted stock units
149,838

 
1

 
196

 
 
 
 
 
 
 
197

Issuance of common stock associated with secondary offering
5,584,642

 
56

 
199,223

 
 
 
 
 
 
 
199,279

Temporary equity reclassification
 
 
 
 
(27,110
)
 
 
 
 
 
 
 
(27,110
)
Stock-based compensation expense
 
 
 
 
4,997

 
 
 
 
 
 
 
4,997

Payments of withholding taxes in connection with restricted stock unit vesting
 
 
 
 
 
 
 
 
(970
)
 
 
 
(970
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
 
 
438

 
438

Net income
 
 
 
 
 
 
586

 
 
 
 
 
586

Balance as of September 30, 2018
36,504,894

 
$
365

 
$
420,383

 
$
(148,621
)
 
$
(27,837
)
 
$
1,529

 
$
245,819


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Condensed Consolidated Statements 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 (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
57,685

 
29,622

Amortization of right-of-use assets
5,776

 

Amortization of deferred costs
2,224

 
1,521

Gain on disposal of equipment
(114
)
 
(245
)
Impairment of intangible assets
6,000

 

Impairment of other long-lived assets
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:
 
 
 
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) increase 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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
Supplemental disclosure of cash flow information
 
 
 
Cash paid for income taxes, net
$
3,370

 
$
292

Cash paid for interest
$
13,292

 
$
2,965

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Capitalization of stock-based compensation
$
27

 
$
53

Acquisition of property and equipment included in accounts payable and accrued expenses
$
323

 
$
360


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

Carbonite, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business
Carbonite, Inc. ("we" or the “Company”) 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. The Company was incorporated in the State of Delaware on February 10, 2005.
In March 2019, Carbonite acquired Webroot Inc. ("Webroot"), a next-generation cloud-based security and threat intelligence provider for consumers and businesses. Webroot is a leading security provider for managed service providers to protect small businesses, who rely on Webroot for endpoint protection, network protection, and security awareness training.
On November 10, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Open Text Corporation (“OpenText”) and Coral Merger Sub Inc., a subsidiary of OpenText (“Merger Sub”). See Note - 17 Subsequent Events for a description of the transaction contemplated by the Merger Agreement.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q, and the provisions of Regulation S-X pertaining to interim financial statements. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on February 28, 2019.
In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position for the periods presented. The results for the periods presented are not necessarily indicative of future results.
Restricted Cash
Restricted cash is defined as cash and cash equivalents subject to contractual restrictions and not readily available for use. As of September 30, 2019, the Company's restricted cash balance related to deposits maintained for a lease of office space and corporate credit card accounts. As of December 31, 2018, the Company did not have a restricted cash balance.
The following tables summarizes the Company's cash, cash equivalents and restricted cash for the period presented:
 
September 30, 2019
Cash and cash equivalents
$
98,537

Restricted cash, included in other assets
2,439

Total cash, cash equivalents and restricted cash
$
100,976


Reclassification
The Company has reclassified certain prior period amounts in its condensed consolidated balance sheets to conform to the current period presentation. The reclassification relates to separately presenting long-term deferred tax liabilities previously included within other long-term liabilities. For the year ended December 31, 2018, the Company reclassified $1.5 million from other long-term liabilities into long-term deferred tax liabilities.
Summary of Significant Accounting Policies
Refer to Note 2 - Summary of Significant Accounting Policies, in the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2018 filed with the SEC on February 28, 2019. There have been no significant changes to the

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Table of Contents

Company's significant accounting policies since December 31, 2018, with the exception of the lease accounting policy as a result of the adoption of ASU 2016-02, Leases ("ASU 2016-02") and updates to the Company's hedging policy, as described in Note 13 - Leases and Note 5 - Derivative Financial Instruments, respectively.
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by leases and continue to recognize expenses on their income statements over the lease term. It also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this standard effective January 1, 2019 using the modified retrospective transition method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of transition practical expedients for existing contracts. Adoption of the new standard resulted in the recording of right-of-use assets of $22.6 million and lease liabilities of $28.8 million, as of January 1, 2019. The difference between the right-of-use assets and lease liabilities relates to deferred and prepaid rent balances, the net impact of which reduced the right-of-use assets. The adoption of the standard did not impact the Company's consolidated net earnings and had no impact on cash flows. Refer to Note 13 - Leases for additional information related to the Company’s lease obligations.
Recently Issued Accounting Standards
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326). The standard amends the guidance on the impairment of financial instruments that are not measured at fair value. ASU 2016-13 adds an impairment model based on expected losses rather than incurred losses, requiring entities to recognize an allowance for their estimated lifetime expected credit losses and more timely recognition of such losses. The standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.
3. Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company primarily sells services in the form of “Software-as-a-Service” ("SaaS") and "Hardware-as-a-Service" ("HaaS") offerings as well as maintenance and support ("M&S") and professional services consisting of implementation, training, migration, protection and consulting. The Company also sells products in the form of on-premise data protection and migration software and hardware on a standalone basis. Revenues related to services are recorded over the performance period of the service. Revenues from product licenses and hardware sales are recorded when control of the product has been transferred to the customer.










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Table of Contents

Disaggregation of Revenue
The following tables depict disaggregated revenue for the three and nine months ended September 30, 2019 and 2018, by type, customer type, sales channel, timing of revenue recognition, and geography (in thousands):
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
Products
 
Services
 
Total
 
Products
 
Services
 
Total
Customer type
 
 
 
 
 
 
 
 
 
 
 
Consumer
$

 
$
54,160

 
$
54,160

 
$

 
$
24,917

 
$
24,917

Business
6,772

 
64,664

 
71,436

 
7,392

 
45,373

 
52,765

Total
$
6,772

 
$
118,824

 
$
125,596

 
$
7,392

 
$
70,290

 
$
77,682

 
 
 
 
 
 
 
 
 
 
 
 
Sales channel
 
 
 
 
 
 
 
 
 
 
 
Direct
$
924

 
$
61,512

 
$
62,436

 
$
811

 
$
48,841

 
$
49,652

Indirect
5,848

 
57,312

 
63,160

 
6,581

 
21,449

 
28,030

Total
$
6,772

 
$
118,824

 
$
125,596

 
$
7,392

 
$
70,290

 
$
77,682

 
 
 
 
 
 
 
 
 
 
 
 
Timing of revenue recognition
 
 
 
 
 
 
 
 
 
 
 
Transferred at a point in time
$
6,772

 
$

 
$
6,772

 
$
7,392

 
$

 
$
7,392

Transferred over time

 
118,824

 
118,824

 

 
70,290

 
70,290

Total
$
6,772

 
$
118,824

 
$
125,596

 
$
7,392

 
$
70,290

 
$
77,682

 
 
 
 
 
 
 
 
 
 
 
 
Geography
 
 
 
 
 
 
 
 
 
 
 
United States
$
3,356

 
$
102,828

 
$
106,184

 
$
3,431

 
$
62,663

 
$
66,094

Other
3,416

 
15,996

 
19,412

 
3,961

 
7,627

 
11,588

Total
$
6,772

 
$
118,824

 
$
125,596

 
$
7,392

 
$
70,290

 
$
77,682

 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
 
Products
 
Services
 
Total
 
Products
 
Services
 
Total
Customer type
 
 
 
 
 
 
 
 
 
 

Consumer
$

 
$
133,150

 
$
133,150

 
$

 
$
69,857

 
$
69,857

Business
23,563

 
171,608

 
195,171

 
25,764

 
123,821

 
149,585

Total
$
23,563

 
$
304,758

 
$
328,321

 
$
25,764

 
$
193,678

 
$
219,442

 
 
 
 
 
 
 
 
 
 
 

Sales channel
 
 
 
 
 
 
 
 
 
 

Direct
$
3,828

 
$
170,498

 
$
174,326

 
$
2,891

 
$
132,717

 
$
135,608

Indirect
19,735

 
134,260

 
153,995

 
22,873

 
60,961

 
83,834

Total
$
23,563

 
$
304,758

 
$
328,321

 
$
25,764

 
$
193,678

 
$
219,442

 
 
 
 
 
 
 
 
 
 
 
 
Timing of revenue recognition
 
 
 
 
 
 
 
 
 
 
 
Transferred at a point in time
$
23,563

 
$

 
$
23,563

 
$
25,764

 
$

 
$
25,764

Transferred over time

 
304,758

 
304,758

 

 
193,678

 
193,678

Total
$
23,563

 
$
304,758

 
$
328,321

 
$
25,764

 
$
193,678

 
$
219,442

 
 
 
 
 
 
 
 
 
 
 
 
Geography
 
 
 
 
 
 
 
 
 
 
 
United States
$
9,435

 
$
265,408

 
$
274,843

 
$
11,725

 
$
172,673

 
$
184,398

Other
14,128

 
39,350

 
53,478

 
14,039

 
21,005

 
35,044

Total
$
23,563

 
$
304,758

 
$
328,321

 
$
25,764

 
$
193,678

 
$
219,442


Contract Assets and Liabilities
Contract assets are rights to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditional on something other than the passage of time. Contract assets are transferred to accounts receivable once the rights become unconditional. As of September 30, 2019 and December 31, 2018, the Company did not have contract assets.

12

Table of Contents

Contract liabilities (deferred revenue) primarily consist of billings and payments received in advance of revenue recognition. The Company primarily bills and collects payments from customers for its services in advance on a monthly and annual basis. The Company initially records fees associated with performance obligations delivered over time as deferred revenue and then recognizes revenue as performance obligations are satisfied. The Company classifies deferred revenue as current or noncurrent based on the timing of revenue recognition.
Changes in contract liabilities for the nine months ended September 30, 2019 are as follows (in thousands):
 
Deferred Revenue (Current)
 
Deferred Revenue (Noncurrent)
Balance as of December 31, 2018
$
121,553

 
$
29,151

Increase, net
61,808

 
12,487

Balance as of September 30, 2019
$
183,361

 
$
41,638


For the three and nine months ended September 30, 2019, revenue recognized related to deferred revenue at December 31, 2018 was approximately $25.2 million and $107.5 million, respectively. In addition, for the three and nine months ended September 30, 2019, the Company recognized $13.8 million and $32.5 million of revenue from deferred revenue related to the acquisition of Webroot, respectively.
On September 30, 2019, the Company had $280.1 million of remaining performance obligations. This amount does not include any variable consideration for sales or usage-based royalties. The Company expects to recognize 32.2% of its remaining performance obligations as revenue during the year ended December 31, 2019, an additional 54.3% during the year ended December 31, 2020 and the remaining balance thereafter.
Accounts Receivable, Net 
Accounts receivable, net, are amounts due from customers where there is an unconditional right to consideration. Unbilled receivables of $8.8 million and $3.9 million are included in this balance at September 30, 2019 and December 31, 2018, respectively. The payment of consideration related to these unbilled receivables is conditioned only on the passage of time.
4. Net (Loss) Income Per Share
Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is calculated by dividing net (loss) income by the sum of the weighted average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method. For the periods in which the Company incurs a net loss, the effect of the Company's outstanding common stock equivalents is not included in the calculation of diluted net loss per share as they would be anti-dilutive.
The following table sets forth the computation of basic and diluted net (loss) income per share:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands, except per share data)
Numerator:
 
 
 
 
 
 
 
      Net (loss) income
$
(13,956
)
 
$
586

 
$
(23,227