Carbonite Announces Third Quarter 2016 Financial Results

BOSTON, Nov. 03, 2016 (GLOBE NEWSWIRE) -- Carbonite, Inc. (NASDAQ:CARB), a leading provider of cloud backup and restore solutions for small and midsize businesses (SMBs), today announced financial results for the quarter ended September 30, 2016.

Q3'16 Highlights:
  • Revenue of $51.9 million increased 50% year over year.
  • Net income (loss) per share was $0.00, as compared to ($0.22) in the third quarter of 2015.

"I am very pleased with the continued execution by our team.  We delivered strong results across multiple dimensions, we remain ahead of plan integrating EVault, and I am excited about the path forward," said Mohamad Ali, President and CEO of Carbonite.

"We drove strong bookings and revenue growth, and achieved both GAAP and non-GAAP profitability in the third quarter.  As a result, we are again raising our outlook for 2016," said Anthony Folger, CFO of Carbonite.

Third Quarter 2016 Results:
  • Revenue for the third quarter was $51.9 million, an increase of 50% from $34.6 million in the third quarter of 2015.  Non-GAAP revenue for the third quarter was $52.5 million, an increase of 52% from $34.6 million in the third quarter of 2015. 1
  • Bookings for the third quarter were $49.2 million, an increase of 44% from $34.2 million in the third quarter of 2015. 2
  • Gross margin for the third quarter was 70.2%, compared to 71.7% in the third quarter of 2015. Non-GAAP gross margin was 72.2% in the third quarter, compared to 73.2% in the third quarter of 2015. 3
  • Net income for the third quarter was $0.1 million, compared to a net loss of ($6.0 million) in the third quarter of 2015. Non-GAAP net income for the third quarter was $3.8 million, compared to non-GAAP net income of $2.1 million in the third quarter of 2015. 4
  • Net income per share for the third quarter was $0.00 (basic and diluted), compared to a net loss per share of ($0.22) (basic and diluted) in the third quarter of 2015. Non-GAAP net income per share was $0.14 (basic and diluted) for the third quarter, compared to non-GAAP net income per share of $0.08 (basic and diluted) in the third quarter of 2015. 4
  • Total cash, cash equivalents and marketable securities were $49.1 million as of September 30, 2016, compared to $64.9 million as of December 31, 2015.
  • Cash flow from operations for the third quarter was $5.0 million, compared to $2.0 million in the third quarter of 2015. Adjusted free cash flow for the third quarter was $4.5 million, compared to $1.4 million in the third quarter of 2015. 5

__________________

Non-GAAP revenue excludes the impact of purchase accounting adjustments for the acquisition of EVault. 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, net of foreign exchange during the same period. Non-GAAP gross margin excludes the impact of purchase accounting adjustments, 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, amortization expense on intangible assets, stock-based compensation expense, litigation-related expense, restructuring-related expense, acquisition-related expense, hostile takeover-related expense, CEO transition 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 corporate headquarter relocation, acquisition-related payments, hostile takeover-related payments, CEO transition payments, restructuring-related payments, litigation-related payments and the cash portion of the lease exit charge from net cash provided by operating activities.

An explanation of non-GAAP measures is provided under the heading "Non-GAAP Financial Measures" below, and reconciliations to the most comparable GAAP measures are provided in the tables at the end of this press release.

Business Outlook

Based on the information available as of November 3, 2016, Carbonite is issuing guidance for the fourth quarter and full year of 2016 as follows:

Fourth Quarter 2016: 
  Current Guidance (11/3/2016)
GAAP revenue $46.6 - $51.6 million
Non-GAAP revenue $47.1 - $52.1 million
Non-GAAP net income per share  $0.07 - $0.11

Full Year 2016:
  Prior Guidance (8/2/2016) Current Guidance (11/3/2016)
GAAP revenue $192.7 - $202.7 million $200.1 - $205.1 million
Non-GAAP revenue $195.0 - $205.0 million  $202.5 - $207.5 million
Non-GAAP net income per share  $0.48 - $0.52 $0.56 - $0.60

Carbonite's expectations of non-GAAP net income per share for the fourth quarter and full year of 2016 excludes the impact of purchase accounting adjustments, stock-based compensation expense, litigation-related expense, acquisition-related expense, amortization expense on intangible assets and the income tax effect of non-GAAP adjustments.  Non-GAAP net income per share assumes an effective tax rate of 11% for the full year of 2016.  Non-GAAP net income per share assumes fully-diluted weighted average shares outstanding of approximately 27.6 million for the fourth quarter and 27.3 million for the full year of 2016.

Conference Call and Webcast Information

In conjunction with this announcement, Carbonite will host a conference call on Thursday, November 3, 2016 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 93537371.

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 3, 2017.

Non-GAAP Financial Measures

Carbonite provides all financial information required in accordance with generally accepted accounting principles (GAAP).  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. In preparing our non-GAAP information, we have excluded certain amounts as set forth in the attached financial tables.

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. In order to compensate for these limitations, management presents its non-GAAP financial measures in connection with its GAAP results. Exclusion of certain amounts in the calculation of non-GAAP financial measures should not be construed as an inference that these exclusions are unusual or infrequent.  We anticipate that these exclusions will continue to be made in the future presentation of the Company's non-GAAP financial measures.  The Company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing financial results, including 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 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

This Press Release contains "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company's views as of the date they were first made based on the current intent, belief or expectations, estimates, forecasts, assumptions and projections of the Company and members of our management team. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Those statements include, but are not limited to, statements regarding guidance on our future financial results and other projections or measures of 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, 2015 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, Inc. (NASDAQ:CARB) is a leading provider of cloud backup and restore solutions for small and mid-sized businesses. Together with our partners we protect millions of devices and their valuable data for businesses and individuals around the world who rely on us to ensure their important data is secure, available and useful. To learn more visit  Carbonite.com

Carbonite, Inc.
Condensed Consolidated Statement of Operations (unaudited)
(In thousands, except share and per share amounts)
 
  Three Months EndedSeptember 30,   Nine Months EndedSeptember 30,
  2016   2015   2016   2015
Revenue $ 51,948     $ 34,553     $ 153,498     $ 101,551  
Cost of revenue 15,459     9,774     46,078     29,588  
Gross profit 36,489     24,779     107,420     71,963  
Operating expenses:              
Research and development 8,156     7,123     25,272     21,500  
General and administrative 9,059     10,273     30,868     25,473  
Sales and marketing 18,864     12,860     53,069     40,811  
Restructuring charges 29     224     834     349  
Total operating expenses 36,108     30,480     110,043     88,133  
Income (loss) from operations 381     (5,701 )   (2,623 )   (16,170 )
Interest and other income (expense), net 155     139     8     165  
Income (loss) before income taxes 536     (5,562 )   (2,615 )   (16,005 )
Provision for income taxes 429     404     814     1,011  
Net income (loss) $ 107     $ (5,966 )   $ (3,429 )   $ (17,016 )
Net income (loss) per share:              
Basic $ 0.00     $ (0.22 )   $ (0.13 )   $ (0.63 )
Diluted $ 0.00     $ (0.22 )   $ (0.13 )   $ (0.63 )
Weighted-average shares outstanding:              
Basic 26,973,507     27,173,360     26,976,432     27,212,038  
Diluted 27,532,509     27,173,360     26,976,432     27,212,038  

Carbonite, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
 
  September 30, 2016   December 31, 2015
Assets      
Current assets      
Cash and cash equivalents $ 49,107     $ 63,936  
Marketable securities     1,000  
Trade accounts receivable, net 17,007     3,736  
Prepaid expenses and other current assets 6,946     3,188  
Restricted cash 135     135  
Total current assets 73,195     71,995  
Property and equipment, net 22,591     22,083  
Other assets 107     167  
Acquired intangible assets, net 15,087     8,640  
Goodwill 24,455     23,105  
Total assets $ 135,435     $ 125,990  
Liabilities and Stockholders' Equity      
Current liabilities      
Accounts payable $ 2,866     $ 8,384  
Accrued expenses 18,096     11,559  
Current portion of deferred revenue 86,860     80,269  
Total current liabilities 107,822     100,212  
Deferred revenue, net of current portion 20,585     18,434  
Other long-term liabilities 5,594     6,271  
Total liabilities 134,001     124,917  
Stockholders' equity      
Common stock 283     278  
Additional paid-in capital 174,085     165,391  
Treasury stock, at cost (10,446 )   (5,693 )
Accumulated deficit (164,371 )   (160,943 )
Accumulated other comprehensive income 1,883     2,040  
Total stockholders' equity 1,434     1,073  
Total liabilities and stockholders' equity $ 135,435     $ 125,990  

Carbonite, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
 
  Nine Months EndedSeptember 30,
  2016   2015
Operating activities      
Net loss $ (3,429 )   $ (17,016 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 12,227     10,296  
Loss (gain) on disposal of equipment 518     (25 )
Accretion of discount on marketable securities     (9 )
Stock-based compensation expense 6,628     7,418  
Other non-cash items, net 168     (80 )
Changes in assets and liabilities, net of acquisition:      
Accounts receivable (13,243 )   (1,181 )
Prepaid expenses and other current assets (1,822 )   1,063  
Other assets 69     539  
Accounts payable (5,187 )   1,312  
Accrued expenses 6,327     1,398  
Other long-term liabilities (734 )   (368 )
Deferred revenue 1,842     5,193  
Net cash provided by operating activities 3,364     8,540  
Investing activities      
Purchases of property and equipment (3,715 )   (8,273 )
Proceeds from sale of property and equipment 4     113  
Proceeds from maturities of marketable securities and derivatives 1,198     17,524  
Purchases of marketable securities and derivatives (1,476 )   (750 )
Decrease in restricted cash     693  
Payment for acquisition, net of cash acquired (11,625 )   (992 )
Net cash (used in) provided by investing activities (15,614 )   8,315  
Financing activities      
Proceeds from exercise of stock options 2,020     1,853  
Repurchase of common stock (4,753 )   (3,023 )
Net cash used in financing activities (2,733 )   (1,170 )
Effect of currency exchange rate changes on cash 154     (146 )
Net (decrease) increase in cash and cash equivalents (14,829 )   15,539  
Cash and cash equivalents, beginning of period 63,936     46,084  
Cash and cash equivalents, end of period $ 49,107     $ 61,623  

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 EndedSeptember 30,   Nine Months EndedSeptember 30,
  2016   2015   2016   2015
GAAP revenue $ 51,948     $ 34,553     $ 153,498     $ 101,551  
Add:              
Fair value adjustment of acquired deferred revenue (1) 536         1,899      
Non-GAAP revenue $ 52,484     $ 34,553     $ 155,397     $ 101,551  
(1)  Excludes the impact of purchase accounting adjustments for the acquisition of EVault.

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Gross profit $ 36,489     $ 24,779     $ 107,420     $ 71,963  
Gross margin 70.2 %   71.7 %   70.0 %   70.9 %
Add:              
Fair value adjustment of acquired deferred revenue 536         1,899      
Amortization of intangibles 642     325     1,999     954  
Stock-based compensation expense 189     195     600     524  
Acquisition-related expense 15         251      
Non-GAAP gross profit $ 37,871     $ 25,299     $ 112,169     $ 73,441  
Non-GAAP gross margin 72.2 %   73.2 %   72.2 %   72.3 %

 
Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Net income (loss) $ 107     $ (5,966 )   $ (3,429 )   $ (17,016 )
Add:              
Fair value adjustment of acquired deferred revenue 536         1,899      
Amortization of intangibles 950     522     2,938     1,475  
Stock-based compensation expense 2,130     2,545     6,628     7,418  
Litigation-related expense     4,249     1     5,440  
Restructuring-related expense 29     219     829     334  
Acquisition-related expense 41     414     4,807     1,139  
Hostile takeover-related expense     145         1,657  
CEO transition expense             54  
Less:              
Income tax-effect of non-GAAP adjustments (33 )       558      
Non-GAAP net income $ 3,826     $ 2,128     $ 13,115     $ 501  
Non-GAAP net income per share:              
Basic $ 0.14     $ 0.08     $ 0.49     $ 0.02  
Diluted $ 0.14     $ 0.08     $ 0.48     $ 0.02  
Weighted-average shares outstanding:              
Basic 26,973,507     27,173,360     26,976,432     27,212,038  
Diluted 27,532,509     27,408,388     27,221,328     27,291,242  

Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Research and development $ 8,156     $ 7,123     $ 25,272     $ 21,500  
Less:              
Stock-based compensation expense 276     273     790     911  
Acquisition-related expense (1 )   84     309     251  
Non-GAAP research and development $ 7,881     $ 6,766     $ 24,173     $ 20,338  
               
General and administrative $ 9,059     $ 10,273     $ 30,868     $ 25,473  
Less:              
Amortization of intangibles 62     53     200     160  
Stock-based compensation expense 1,388     1,745     4,475     5,074  
Litigation-related expense     4,249     1     5,440  
Acquisition-related expense 28     330     4,131     892  
Hostile takeover-related expense     145         1,657  
CEO transition expense             54  
Non-GAAP general and administrative $ 7,581     $ 3,751     $ 22,061     $ 12,196  
               
Sales and marketing $ 18,864     $ 12,860     $ 53,069     $ 40,811  
Less:              
Amortization of intangibles 246     144     739     361  
Stock-based compensation expense 277     332     763     909  
Acquisition-related expense (1 )       116     (4 )
Non-GAAP sales and marketing $ 18,342     $ 12,384     $ 51,451     $ 39,545  
               
Restructuring charges $ 29     $ 224     $ 834     $ 349  
Less:              
Restructuring-related expense 29     219     829     334  
Non-GAAP restructuring charges $     $ 5     $ 5     $ 15  

Calculation of Bookings
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Revenue $ 51,948     $ 34,553     $ 153,498     $ 101,551  
Add:              
Deferred revenue ending balance 107,445     96,452     107,445     96,452  
Impact of foreign exchange             153  
Less:              
Beginning deferred revenue from acquisitions         6,830      
Impact of foreign exchange 106     12     164      
Deferred revenue beginning balance 110,049     96,815     98,703     91,424  
Change in deferred revenue balance (2,710 )   (375 )   1,748     5,181  
Bookings $ 49,238     $ 34,178     $ 155,246     $ 106,732  

Calculation of Adjusted Free Cash Flow
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Net cash provided by operating activities $ 5,037     $ 1,993     $ 3,364     $ 8,540  
Subtract:              
Purchases of property and equipment 906     3,367     3,715     8,273  
Free cash flow 4,131     (1,374 )   (351 )   267  
               
Add:              
Payments related to corporate headquarter relocation             1,309  
Acquisition-related payments 190     516     9,981     897  
Hostile takeover-related payments     128         1,791  
CEO transition payments             29  
Restructuring-related payments         341      
Cash portion of lease exit charge 203     75     354     786  
Litigation-related payments     2,030     924     2,039  
Adjusted free cash flow $ 4,524     $ 1,375     $ 11,249     $ 7,118  

 
Investor Relations Contact:Jeremiah SisitskyCarbonite781-928-0713investor.relations@carbonite.comMedia Contact:Sarah KingCarbonite617-421-5601media@carbonite.comKelsey ShivelyWeber Shandwick206-576-5589wswnacarbonite@webershandwick.com

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