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Carbonite Announces Fourth Quarter and Full Year 2017 Financial Results
[February 13, 2018]

Carbonite Announces Fourth Quarter and Full Year 2017 Financial Results


FY 2017 Revenue Growth of 16% with Expanding Profitability

Announces Agreement to Acquire Mozy Inc. from Dell Technologies Inc.

BOSTON, Feb. 13, 2018 (GLOBE NEWSWIRE) -- Carbonite, Inc. (NASDAQ:CARB), a leader in data protection, today announced financial results for the quarter and full year ended December 31, 2017. The Company also announced it has entered into a definitive agreement to acquire Mozy, Inc. ("Mozy") from a subsidiary of Dell Technologies Inc. The deal expands Carbonite’s customer base and better positions Carbonite to offer its data protection platform to every segment of the market.

“We are thrilled to announce the acquisition of Mozy,” said Mohamad Ali, President and CEO of Carbonite. “Carbonite’s competitive advantage is our flexible data protection platform, which serves every scenario, from backing up individual laptops to maintaining uptime for hundreds of business servers. This deal provides Mozy customers scalable options for the future and gives Carbonite a broader base to which we offer our solutions.”

The total purchase price for Mozy is $145.8 million in cash.  The Company will fund the transaction with existing cash and newly secured financing commitments in the form of a $120.0 million revolving credit facility. The credit agreement will allow the Company to borrow, as needed, for general corporate purposes, including acquisitions.  The transaction is expected to close during the first quarter of 2018 and is subject to customary closing conditions and regulatory approvals. Barclays acted as financial advisor to the Company for the acquisition of Mozy.  Stifel also acted as an advisor.

Full Year 2017 Highlights:

  • Revenue of $239.5 million increased 16% year-over-year.
  • Non-GAAP revenue of $246.1 million increased 18% year-over-year.1
  • Bookings of $245.9 million increased 17% year-over-year.2
  • Net loss per share was ($0.14), as compared to ($0.15) in 2016 (basic and diluted).
  • Non-GAAP net income per share was $0.82 (basic) and $0.79 (diluted), as compared to $0.61 (basic) and $0.60 (diluted) in 2016.4

“2017 was another successful year for Carbonite. We built and integrated the major elements of our leading data protection platform for businesses. We launched new programs and tools to better enable our partners, and again we were recognized for excellence in customer support. I am confident in our path forward and our ability to continue to execute the long-term strategic transformation we started just a few years ago,” said Mohamad Ali, President and CEO of Carbonite.

“We delivered solid bookings and revenue growth for the year and a meaningful increase in profitability. We remain focused on operational excellence, continuing to streamline the business and efficiently drive results. Our guidance for 2018 calls for balanced organic and inorganic growth with another significant increase in non-GAAP net income per share,” 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.

Fourth Quarter 2017 Results:

  • Revenue for the fourth quarter was $61.7 million, an increase of 15% from $53.5 million in the fourth quarter of 2016. Non-GAAP revenue for the fourth quarter was $62.8 million, an increase of 17% from $53.9 million in the fourth quarter of 2016.1
  • Bookings for the fourth quarter were $60.2 million, an increase of 11% from $54.0 million in the fourth quarter of 2016.2
  • Gross margin for the fourth quarter was 72.8%, compared to 72.2% in the fourth quarter of 2016. Non-GAAP gross margin was 77.6% in the fourth quarter, compared to 74.0% in the fourth quarter of 2016.3
  • Net loss for the fourth quarter was ($1.6) million, compared to net loss of ($0.7) million in the fourth quarter of 2016. Non-GAAP net income for the fourth quarter was $8.8 million, compared to non-GAAP net income of $3.3 million in the fourth quarter of 2016.4
  • Net loss per share for the fourth quarter was ($0.06) (basic and diluted), compared to net loss per share of ($0.02) (basic and diluted) in the fourth quarter of 2016. Non-GAAP net income per share was $0.31 (basic) and $0.30 (diluted) for the fourth quarter, compared to non-GAAP net income per share of $0.12 (basic and diluted) in the fourth quarter of 2016.4
  • Cash flow from operations for the fourth quarter was $13.9 million, compared to $9.8 million in the fourth quarter of 2016. Adjusted free cash flow for the fourth quarter was $9.7 million, compared to $6.9 million in the fourth quarter of 2016.5

Full Year 2017 Results:

  • Revenue for the full year was $239.5 million, an increase of 16% from $207.0 million in 2016. Non-GAAP revenue for the full year was $246.1 million, an increase of 18% from $209.3 million in 2016.1
  • Bookings for the full year were $245.9 million, an increase of 17% from $209.3 million in 2016.2
  • Gross margin for the full year was 70.7%, compared to 70.6% in 2016. Non-GAAP gross margin was 75.5% in the full year, compared to 72.6% in 2016.3
  • Net loss for the full year was ($4.0 million), compared to a net loss of ($4.1 million) in 2016. Non-GAAP net income for the full year was $22.8 million, compared to non-GAAP net income of $16.4 million in 2016.4
  • Net loss per share for the full year was ($0.14) (basic and diluted), compared to a net loss per share of ($0.15) (basic and diluted) in 2016. Non-GAAP net income per share was $0.82 (basic) and $0.79 (diluted) for the full year, compared to non-GAAP net income per share of $0.61 (basic) and $0.60 (diluted) in 2016.4
  • Total cash and cash equivalents were $128.2 million as of December 31, 2017, compared to $59.2 million as of December 31, 2016.
  • Cash flow from operations for the full year was $31.3 million, compared to $13.2 million in 2016. Adjusted free cash flow for the full year was $20.2 million, compared to $18.2 million in 2016.5
 

Non-GAAP revenue excludes the impact of purchase accounting adjustments for significant acquisitions.
2  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, acquisition-related expense and intangible asset impairment charges.
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, intangible asset impairment charges, 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 acquisitions, restructuring, litigation 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 February 13, 2018, Carbonite expects the following for the first quarter and full year of 2018:

First Quarter 2018:

 Current Guidance
(2/13/2018)
GAAP Revenue$61.7 - $63.7 million
Non-GAAP Revenue$63.0 - $65.0 million
Non-GAAP Net Income Per Share$0.20 - $0.24

Full Year 2018:

 Current Guidance
(2/13/2018)
Business Bookings$223.8 - $234.8 million
Consumer Bookings Y/Y Growth5% - 15% growth
GAAP Revenue$294.0 - $304.0 million
Non-GAAP Revenue$302.5 - $312.5 million
Non-GAAP Net Income Per Share (Diluted)$1.45 - $1.55
Non-GAAP Gross Margin76.0% - 77.0%
Adjusted Free Cash Flow$32.0 - $38.0 million

The guidance provided above reflects the estimated impact of ASC 606, which Carbonite is adopting in the first quarter of 2018. Carbonite’s expectations of non-GAAP net income per share for the first quarter and full year of 2018 excludes the impact of purchase accounting adjustments on acquired deferred revenue, amortization expense on intangible assets, stock-based compensation expense, litigation-related expense, restructuring-related expense, non-cash convertible debt interest expense, and the income tax effect of non-GAAP adjustments. Non-GAAP net income per share assumes an effective tax rate of 11% for the full year of 2018. Non-GAAP net income per share assumes fully-diluted weighted average shares outstanding of approximately 29.7 million for the first quarter and 29.9 million for the full year of 2018.

Conference Call and Webcast Information

In conjunction with this announcement, Carbonite will host a conference call on Tuesday, February 13, 2018 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 1669107.

Following the completion of the call, a recorded replay will be available on the Company’s website, http://investor.carbonite.com, under “Events & Presentations”.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, this press release contains non-GAAP financial measures, including bookings, non-GAAP revenue, non-GAAP gross margin, non-GAAP net income and non-GAAP net income per share, non-GAAP operating expense and adjusted free cash flow.

The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and ordinary results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods and uses these measures in financial reports prepared for management and the Company’s board of directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software-as-a-service companies, many of which present similar non-GAAP financial measures to investors.

The Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant items that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management. The Company urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures provided in the tables at the end of this press release, and not to rely on any single financial measure to evaluate the Company’s business.

With respect to our expectations under "Business Outlook" above, the Company has not reconciled non-GAAP net income per share to net (loss) income per share in this press release because we do not provide guidance for stock-based compensation expense, litigation-related expense, acquisition-related expense, amortization expense on intangible assets, non-cash convertible debt interest expense, and the income tax effect of non-GAAP adjustments as we are unable to quantify certain of these amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the Company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Cautionary Language Concerning Forward-Looking Statements

Certain matters discussed in this press release, including under “Business Outlook,” have "forward-looking statements"  intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, our ability to complete the acquisition of Mozy, our ability to integrate Mozy into our operations and achieve the expected benefits of the acquisition, our ability to profitably attract new customers and retain existing customers, our dependence on the market for cloud backup services, our ability to manage growth, changes in economic or regulatory conditions or other trends affecting the Internet and the information technology industry, and those discussed in the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission (the "SEC"), which is available on www.sec.gov, and elsewhere in any subsequent periodic or current reports filed by us with the SEC. Except as required by applicable law, we do not undertake any obligation  to update our forward-looking statements to reflect future events, new information or circumstances.

About Carbonite

Carbonite provides a robust Data Protection Platform for businesses, including backup, disaster recovery, high availability and workload migration technology. The Carbonite Data Protection Platform supports any size business, in locations around the world with secure and scalable global cloud infrastructure. To learn more visit www.Carbonite.com.

Investor Relations Contact:

Jeremiah Sisitsky
Carbonite
781-928-0713
investor.relations@carbonite.com

Media Contacts:

Sarah King
Carbonite
617-421-5601
media@carbonite.com

 

    
Carbonite, Inc.
Consolidated Statement of Operations (unaudited)
(In thousands, except share and per share amounts)
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Revenue$61,692  $53,488  $239,462  $206,986 
Cost of revenue16,811  14,859  70,067  60,937 
Gross profit44,881  38,629  169,395  146,049 
Operating expenses:       
Research and development12,125  8,026  46,160  33,298 
General and administrative9,586  10,464  43,331  41,332 
Sales and marketing21,568  20,278  90,922  73,347 
Restructuring charges1,047  22  1,047  856 
Total operating expenses44,326  38,790  181,460  148,833 
Income (loss) from operations555  (161) (12,065) (2,784)
Interest (expense) income, net(2,219) (12) (6,866) (122)
Other income (expense), net123  72  1,252  190 
Loss before income taxes(1,541) (101) (17,679) (2,716)
Provision (benefit) for income taxes73  569  (13,677) 1,383 
Net loss$(1,614) $(670) $(4,002) $(4,099)
Net loss per share:       
Basic$(0.06) $(0.02) $(0.14) $(0.15)
Diluted$(0.06) $(0.02) $(0.14) $(0.15)
Weighted-average shares outstanding:       
Basic27,971,459  27,183,545  27,779,098  27,028,636 
Diluted27,971,459  27,183,545  27,779,098  27,028,636 
            


    
Carbonite, Inc.
Consolidated Balance Sheets (unaudited)
(In thousands)
    
 December 31,
2017
 December 31,
2016
Assets   
Current assets   
Cash and cash equivalents$128,231  $59,152 
Trade accounts receivable, net22,219  16,639 
Prepaid expenses and other current assets6,823  7,325 
Restricted cash  135 
Total current assets157,273  83,251 
Property and equipment, net28,790  23,872 
Other assets804  157 
Acquired intangible assets, net44,994  13,751 
Goodwill80,958  23,728 
Total assets$312,819  $144,759 
Liabilities and Stockholders’ Equity   
Current liabilities   
Accounts payable$10,842  $5,819 
Accrued expenses21,675  19,768 
Current portion of deferred revenue100,241  86,311 
Total current liabilities132,758  111,898 
Long-term debt111,819   
Deferred revenue, net of current portion24,273  21,280 
Other long-term liabilities5,704  5,747 
Total liabilities274,554  138,925 
Stockholders’ equity   
Common stock301  285 
Additional paid-in capital233,343  177,931 
Treasury stock, at cost(26,616) (10,657)
Accumulated deficit(169,344) (165,042)
Accumulated other comprehensive income581  3,317 
Total stockholders’ equity38,265  5,834 
Total liabilities and stockholders’ equity$312,819  $144,759 
        

 

  
Carbonite, Inc.
Consolidated Statement of Cash Flows (unaudited)
(In thousands)
  
 Twelve Months Ended
December 31,
 2017 2016
Operating activities   
Net loss$(4,002) $(4,099)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization21,731  15,869 
(Gain) loss on disposal of equipment(907) 748 
Intangible asset impairment charges352   
Impairment of capitalized software1,048   
Stock-based compensation expense12,742  8,900 
Benefit for deferred income taxes(15,392) (15)
Non-cash interest expense related to amortization of debt discount4,434   
Other non-cash items, net(533) 68 
Changes in assets and liabilities, net of acquisition:   
Accounts receivable1,786  (13,412)
Prepaid expenses and other current assets389  (1,547)
Other assets(580) 17 
Accounts payable5,035  (3,345)
Accrued expenses(995) 8,183 
Other long-term liabilities53  (586)
Deferred revenue6,169  2,384 
Net cash provided by operating activities31,330  13,165 
Investing activities   
Purchases of property and equipment(17,351) (6,582)
Proceeds from sale of property and equipment955  13 
Proceeds from maturities of marketable securities and derivatives534  3,395 
Purchases of derivatives(5,040) (1,476)
Proceeds from sale of businesses295   
Payment for intangibles(1,250)  
Payment for acquisition, net of cash acquired(69,798) (11,625)
Net cash used in investing activities(91,655) (16,275)
Financing activities   
Proceeds from exercise of stock options4,987  3,560 
Proceeds from issuance of treasury stock under employee stock purchase plan1,052   
Proceeds from long-term borrowings, net of debt issuance costs177,797   
Payments on long-term borrowings(39,200)  
Repurchase of common stock(17,014) (4,964)
Net cash provided by (used in) financing activities127,622  (1,404)
Effect of currency exchange rate changes on cash1,782  (270)
Net increase (decrease) in cash and cash equivalents69,079  (4,784)
Cash and cash equivalents, beginning of period59,152  63,936 
Cash and cash equivalents, end of period$128,231  $59,152 
        


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
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
GAAP revenue$61,692  $53,488  $239,462  $206,986 
Add:       
Fair value adjustment of acquired deferred revenue (1)1,130  415  6,628  2,314 
Non-GAAP revenue$62,822  $53,903  $246,090  $209,300 
(1)  Excludes the impact of purchase accounting adjustments for significant acquisitions.
 


    
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Gross profit$44,881  $38,629  $169,395  $146,049 
Gross margin72.8% 72.2% 70.7% 70.6%
Add:       
Fair value adjustment of acquired deferred revenue1,130  415  6,628  2,314 
Amortization of intangibles2,226  633  8,179  2,632 
Stock-based compensation expense274  206  1,061  806 
Acquisition-related expense92    401  251 
Intangible asset impairment charges127    127   
Non-GAAP gross profit$48,730  $39,883  $185,791  $152,052 
Non-GAAP gross margin77.6% 74.0% 75.5% 72.6%
            


    
Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Net loss$(1,614) $(670) $(4,002) $(4,099)
Add:       
Fair value adjustment of acquired deferred revenue1,130  415  6,628  2,314 
Amortization of intangibles2,783  932  10,271  3,870 
Stock-based compensation expense3,523  2,272  12,742  8,900 
Litigation-related expense181    374  1 
Restructuring-related expense1,047  22  1,047  852 
Acquisition-related expense430  657  6,794  5,464 
Intangible asset impairment charges352    352   
Non-cash convertible debt interest expense1,491    4,434   
Less:       
Income tax effect of non-GAAP adjustments566  318  15,807  876 
Non-GAAP net income$8,757  $3,310  $22,833  $16,426 
GAAP net loss per share:       
Basic$(0.06) $(0.02) $(0.14) $(0.15)
Diluted$(0.06) $(0.02) $(0.14) $(0.15)
Non-GAAP net income per share:       
Basic$0.31  $0.12  $0.82  $0.61 
Diluted$0.30  $0.12  $0.79  $0.60 
GAAP weighted-average shares outstanding:       
Basic27,971,459  27,183,545  27,779,098  27,028,636 
Diluted27,971,459  27,183,545  27,779,098  27,028,636 
Non-GAAP weighted-average shares outstanding:       
Basic27,971,459  27,183,545  27,779,098  27,028,636 
Diluted29,322,013  28,286,618  29,079,105  27,491,064 
            


    
Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Research and development$12,125  $8,026  $46,160  $33,298 
Less:       
Stock-based compensation expense665  79  1,969  869 
Acquisition-related expense77  40  1,249  349 
Non-GAAP research and development$11,383  $7,907  $42,942  $32,080 
        
General and administrative$9,586  $10,464  $43,331  $41,332 
Less:       
Amortization of intangibles123  62  469  262 
Stock-based compensation expense2,027  1,685  7,827  6,160 
Litigation-related expense181    374  1 
Acquisition-related expense145  617  4,448  4,748 
Non-GAAP general and administrative$7,110  $8,100  $30,213  $30,161 
        
Sales and marketing$21,568  $20,278  $90,922  $73,347 
Less:       
Amortization of intangibles434  237  1,623  976 
Stock-based compensation expense557  302  1,885  1,065 
Acquisition-related expense116    696  116 
Intangible asset impairment charges225    225   
Non-GAAP sales and marketing$20,236  $19,739  $86,493  $71,190 
        
Restructuring charges$1,047  $22  $1,047  $856 
Less:       
Restructuring-related expense1,047  22  1,047  851 
Non-GAAP restructuring charges$  $  $  $5 
                


    
Reconciliation of Revenue to Bookings
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Revenue$61,692  $53,488  $239,462  $206,986 
Add:       
Deferred revenue ending balance124,514  107,591  124,514  107,591 
Deferred revenue divested    373   
Impact of foreign exchange  404    240 
Less:       
Impact of foreign exchange324    1,474   
Beginning deferred revenue from acquisitions    9,420  6,830 
Deferred revenue beginning balance125,705  107,445  107,591  98,703 
Change in deferred revenue balance(1,515) 550  6,402  2,298 
Bookings$60,177  $54,038  $245,864  $209,284 
                


    
Calculation of Adjusted Free Cash Flow
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2017 2016 2017 2016
Net cash provided by operating activities$13,864  $9,801  $31,330  $13,165 
Subtract:       
Purchases of property and equipment5,407  2,867  17,351  6,582 
Free cash flow8,457  6,934  13,979  6,583 
        
Add:       
Acquisition-related payments864  8  5,707  9,989 
Restructuring-related payments359    359  341 
Cash portion of lease exit charge  (11)   343 
Litigation-related payments51    188  924 
Adjusted free cash flow$9,731  $6,931  $20,233  $18,180 
                

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