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Barracuda Reports Third Quarter Fiscal 2018 Results

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- Q3 total revenue grew to $94.7 million

- Q3 GAAP earnings per share of $0.14, and non-GAAP earnings per share of $0.21

- Total active subscribers increased 16% year-over-year to over 360,000

CAMPBELL, Calif., Jan. 8, 2018 /PRNewswire/ -- Barracuda Networks, Inc. (NYSE: CUDA), a leading provider of cloud-enabled security and data protection solutions, today announced results for its third quarter fiscal 2018, that ended November 30, 2017.

Barracuda Logo. (PRNewsFoto/Barracuda Networks, Inc.)

"We delivered a strong third quarter driven by continued momentum in our core focus areas," said BJ Jenkins, president and CEO. "As we announced in November, we entered into a definitive agreement to be acquired by leading private equity investment firm Thoma Bravo, LLC in an all-cash transaction valued at $27.55 per share, or approximately $1.6 billion. The proposed transaction is expected to close before our fiscal year end of February 28, 2018."

Third Quarter Fiscal 2018 Financial Summary

  • Total revenue increased 7% to $94.7 million, compared with $88.8 million in the third quarter of fiscal 2017. Subscription revenue grew to $77.3 million, up 13% from $68.3 million in the third quarter of fiscal 2017, representing 82% of total revenue, and appliance revenue was $17.5 million, compared with $20.5 million in the third quarter of fiscal 2017.
  • Gross billings were $110.6 million, compared with $100.4 million in the third quarter of fiscal 2017. Billings for core products increased 24% to $76.6 million, compared with $61.6 million in the third quarter of fiscal 2017. Excluding Sonian, which Barracuda acquired during the quarter, billings for core products increased 22% to $75.5 million. The number of active subscribers grew 16% to over 360,000 as of November 30, 2017. The annualized renewal rate from subscriptions on a dollar basis was 101%.
  • GAAP net income was $7.8 million, or $0.14 per share, based on a diluted share count of 55.0 million, compared to a GAAP net income of $1.8 million, or $0.03 per share, in the third quarter of fiscal 2017.
  • Non-GAAP net income was $11.6 million, or $0.21 per share, based on a diluted share count of 55.0 million. Non-GAAP net income excludes $9.3 million in stock-based compensation expense, $0.4 million in income tax benefits, $1.6 million in amortization of intangibles, $7.7 million in other net income that includes a gain of $7.4 million from the sale of the SignNow business and $0.9 million in acquisition and other benefits.

The reconciliation between non-GAAP and their most closely comparable GAAP equivalent is contained in the tables below. Barracuda will not hold an earnings conference call or provide financial guidance.

Forward-Looking Statements
This announcement contains forward-looking statements related to our pending acquisition by Thoma Bravo, LLC and the potential timing of the acquisition.  The company undertakes no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our filings with the Securities and Exchange Commission, including, without limitation, under the captions: "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk Factors," which are on file with the Securities and Exchange Commission.

Non-GAAP Financial Measures
Barracuda provides all financial information required in accordance with generally accepted accounting principles (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release non-GAAP net income, non-GAAP operating income, non-GAAP gross margins, non-GAAP operating expenses, adjusted EBITDA and free cash flow. In preparing our non-GAAP information, we have excluded certain amounts as set forth in the attached financial tables and footnotes. We believe that excluding these items provides both management and investors with additional insight into our current operations and the trends affecting the company. In particular, management finds it useful to exclude these items in order to more readily correlate the company's operating activities with the company's ability to generate cash from operations. Accordingly, management uses these non-GAAP measures, along with the comparable GAAP information, in evaluating our historical performance and in planning our future business activities. Please note that our non-GAAP measures may be different than those used by other companies. The additional non-GAAP financial information we present should be considered in conjunction with, and not as a substitute for, our financial information presented in accordance with GAAP. We have provided reconciliations of these non-GAAP measures to their comparable GAAP measures for the periods presented in this release, which exclude certain amounts as set forth in the attached financial tables and footnotes for these periods. These measures should only be used to evaluate the company's results of operations in conjunction with the corresponding GAAP measures for comparable financial information and understanding of the company's ongoing performance as a business. Barracuda uses both GAAP and non-GAAP measures to evaluate and manage its operations.

Beginning in the third quarter of fiscal 2017, we modified our reporting practices and our historical presentation of adjusted EBITDA and free cash flow. We no longer adjust for changes in deferred revenue and associated deferred costs in our calculation of adjusted EBITDA, and for free cash flow we will not adjust for the cash payment impact of acquisition and other charges. Prior period information has been recast to conform to the adjusted calculations.

About Barracuda Networks, Inc. (NYSE: CUDA)
Barracuda (NYSE: CUDA) simplifies IT with cloud-enabled solutions that empower customers to protect their networks, applications and data, regardless of where they reside. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployment configurations. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data protection. For additional information, please visit barracuda.com.

Barracuda Networks, Barracuda, and the Barracuda Networks logo are registered trademarks of Barracuda Networks, Inc. in the US and other countries.

Contacts:
Investor Relations: Maria Riley; +1 415-217-7722; ir@barracuda.com
Corporate Communications: Mary Catherine Petermann; +1 404-307-6290; mc@barracuda.com

Barracuda Networks, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)



As of November
30, 2017 (1)


As of February
28, 2017

Assets




Current assets:




Cash and cash equivalents

$

96,894



$

120,194


Marketable securities

80,850



79,915


Accounts receivable, net of allowance for doubtful accounts

45,229



40,560


Inventories, net

8,259



5,847


Deferred costs

34,352



32,598


Other current assets

10,208



16,295


Total current assets

275,792



295,409


Property and equipment, net

30,824



29,979


Deferred costs, non-current

30,502



27,285


Deferred income taxes, non-current

704



1,554


Other non-current assets

21,646



8,607


Intangible assets, net

52,111



32,145


Goodwill

98,135



69,795


Total assets

$

509,714



$

464,774


Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

11,243



$

11,439


Accrued payroll and related benefits

12,803



13,593


Other accrued liabilities

19,089



12,942


Deferred revenue

247,330



239,796


Note payable



4,115


Total current liabilities

290,465



281,885


Long-term liabilities:




Deferred revenue, non-current

170,415



167,286


Deferred income taxes, non-current

3,293



2,803


Other long-term liabilities

7,394



6,377


Stockholders' equity:




Common stock

54



53


Additional paid-in capital

393,048



370,745


Accumulated other comprehensive loss

(3,199)



(5,226)


Accumulated deficit

(351,756)



(359,149)


Total stockholders' equity

38,147



6,423


Total liabilities and stockholders' equity

$

509,714



$

464,774



______________________



(1)

As of March 1, 2017, we adopted ASU 2016-09 which allowed for an accounting policy election to either estimate the number of share-based awards that are expected to vest or account for forfeitures when they occur. We elected to account for forfeitures when they occur and adopted this change on a modified retrospective basis. As a result, we recorded the cumulative effect of the change as a $0.4 million increase to the March 1, 2017 opening accumulated deficit balance on the condensed consolidated balance sheets.

 

Barracuda Networks, Inc.

Condensed Consolidated Statements of Income

(in thousands, except per share information)

(Unaudited)



Three Months Ended November 30,


Nine Months Ended November 30,


2017


2016


2017


2016

Revenue:








Appliance

$

17,459



$

20,457



$

56,071



$

62,824


Subscription

77,288



68,349



227,180



200,566


Total revenue

94,747



88,806



283,251



263,390


Cost of revenue

22,098



21,098



70,944



61,579


Gross profit

72,649



67,708



212,307



201,811


Operating expenses:








Research and development

20,616



18,627



59,412



56,280


Sales and marketing

34,988



33,368



109,769


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