Market Overview

MINDBODY Reports Second Quarter 2018 Financial Results

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Total Revenue Increases 40% Year over Year

Subscription and Services Revenue Increases 48% Year over Year

SAN LUIS OBISPO, Calif., July 31, 2018 (GLOBE NEWSWIRE) -- MINDBODY, Inc. (NASDAQ:MB), the leading technology platform for the fitness, beauty and wellness services industries, today announced financial results for the second quarter ended June 30, 2018.

"Q2 marks our first quarter post-Booker acquisition, and we are pleased to report strong operating results and progress on integration of the two companies," said Rick Stollmeyer, co-founder and chief executive officer of MINDBODY. "With more fitness, beauty and wellness businesses on our platform than ever before, and the best go-to-market team in the industry, we have taken a substantial step towards our purpose of helping hundreds of millions of people live healthier, happier lives."

"We delivered strong revenue growth in the second quarter, driven by the continued shift of our subscriber base into higher priced software tiers," said Brett White, chief operating officer and chief financial officer. "These customers drive our business as they deliver the vast majority of GMV and payments volume."

Second Quarter 2018 Financial Results

  • Total revenue for the second quarter of 2018 was $61.6 million, a 40% increase year over year.
  • Subscription and services revenue for the second quarter of 2018 was $38.5 million, a 48% increase year over year.
  • Payments revenue for the second quarter of 2018 was $22.3 million, a 26% increase year over year.
  • GAAP net loss for the second quarter of 2018 was $(16.9) million, or $(0.36) per share, compared to a GAAP net loss for the second quarter of 2017 of $(4.4) million, or $(0.10) per share.
  • Non-GAAP net loss1 for the second quarter of 2018 was $(2.9) million, or $(0.06) per share, compared to a non-GAAP net loss for the second quarter of 2017 of $(0.5) million, or $(0.01) per share.
  • Adjusted EBITDA1 for the second quarter of 2018 was $(0.5) million, compared to Adjusted EBITDA for the second quarter of 2017 of $1.7 million.

Recent Business Highlights

  • Raised net proceeds of approximately $265 million in convertible senior notes, enabling us to invest in growth with flexibility to pursue opportunistic M&A.
  • Partnered with the nonprofit Partnership for a Healthier America (PHA) with their Healthier Campus Initiative, helping young adults more easily engage with fitness and wellness activities.
  • Experienced strong early adoption of FitMetrix and Frederick, which we acquired in the first half of the year.

Second Quarter Key Metrics

We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs.

  As of and for the Quarter Ended June 30,
2018   2017   YoY
Subscribers (end of period)2 68,142     59,345     15 %
Average monthly revenue per subscriber $ 293     $ 244     20 %
Payments volume (in millions) $ 2,716     $ 1,950     39 %
Dollar-based net expansion rate (average for the quarter)3 103 %   108 %    

A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading "Non-GAAP Financial Measures."
We define subscribers as unique physical locations or individual practitioners who have active subscriptions to our services, including MINDBODY, Booker or FitMetrix, as of the end of the period. Subscribers do not include locations or practitioners who only use Frederick (our marketing automation software.)
Starting the first quarter of 2018, we calculate our dollar-based net expansion rate using a quarterly average. We believe that this change in methodology for calculating our dollar-based net expansion rate mitigates some of the volatility that can occur when this key metric is calculated using only the last month in the period. Prior periods have been adjusted to conform with this new methodology.

Outlook

For the third quarter and full year 2018, MINDBODY expects to report:

  • Revenue for the third quarter of 2018 in the range of $63.0 million to $65.0 million, representing 35% to 39% growth over the third quarter of 2017.
  • Revenue for the full year of 2018 in the range of $246.0 million to $250.0 million, representing 35% to 37% growth over the full year of 2017.
  • Non-GAAP net loss for the third quarter of 2018 in the range of $(4.0) million to $(2.5) million and weighted average shares outstanding for the third quarter of approximately 47.9 million shares. 
  • Non-GAAP net loss for the full year of 2018 in the range of $(7.5) million to $(4.5) million and weighted average shares outstanding for the full year of approximately 47.7 million shares.

The outlook has been updated to reflect the acquisitions of FitMetrix and Booker. Non-GAAP net loss excludes estimates for, among other things, stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, including transaction and integration expenses, and the amortization of debt discount and issuance costs from our convertible notes. A reconciliation of these non-GAAP financial guidance measures to corresponding GAAP financial guidance measures is not available on a forward-looking basis because we do not provide guidance on GAAP net loss and are not able to present the various reconciling cash and non-cash items between GAAP net loss and non-GAAP net loss without unreasonable effort. In particular, stock-based compensation expense is impacted by MINDBODY's future hiring and retention needs, as well as the future fair market value of MINDBODY's Class A common stock, all of which is difficult to predict and is subject to constant change.  The actual amount of these expenses during 2018 will have a significant impact on MINDBODY's future GAAP financial results.

Quarterly Conference Call and Related Information

MINDBODY will discuss its quarterly results today at 1:30 p.m. PT (4:30 p.m. ET)

  • Dial in: To access the call, please dial (844) 494-0191, or outside the U.S. (508) 637-5581, with Conference ID# 1861529 at least five minutes prior to the 1:30 p.m. PT start time.
  • Webcast and Related Investor Materials: A live webcast and replay of the call, as well as related investor materials, will be available at http://investors.mindbodyonline.com/ under the Events and Presentations menu.
  • Audio replay: An audio replay will be available between 4:30 p.m. PT July 31, 2018 and 7:30 p.m. PT August 7, 2018 by calling (855) 859-2056 or (404) 537-3406 with Passcode 1861529. The replay will also be available at investors.mindbodyonline.com.

About MINDBODY
MINDBODY, Inc. (NASDAQ:MB) is the leading technology platform for the fitness, beauty and wellness services industries. Local entrepreneurs worldwide use MINDBODY's integrated software and payments platform to run, market and build their businesses. Consumers use MINDBODY to more easily find, engage and transact with fitness, wellness and beauty providers in their local communities. For more information on how MINDBODY is helping people lead healthier, happier lives by connecting the world to fitness, beauty and wellness, visit mindbodyonline.com.

© 2018 MINDBODY, Inc. All rights reserved. MINDBODY, FitMetrix, Frederick, the Enso logo, the Booker logo and Connecting the World to Wellness are trademarks or registered trademarks of MINDBODY Inc. in the United States and/or other countries. Other company and product names may be trademarks of the respective companies with which they are associated.

Forward Looking Statements

This press release and the accompanying conference call contain forward-looking statements including, among others, current estimates of third quarter and full year 2018 revenue, non-GAAP net loss and weighted average shares outstanding, and statements relating to our expectations for our recent acquisitions of FitMetrix and Booker (including its Frederick technology).

These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include risks associated with: continued market acceptance of our platform; engagement of our customers and consumers; our ability to continue to successfully introduce new products and enhance our existing products to meet the needs of our customers and consumers; the return on our strategic investments; our ability to successfully integrate Booker and FitMetrix; our ability to achieve expected synergies and efficiencies of operations between MINDBODY and Booker and FitMetrix; our ability to realize the market opportunities provided by our acquisitions of Booker and FitMetrix; our ability to successfully integrate and maintain Booker's and FitMetrix's respective technology, products and personnel; our ability to timely develop and achieve an effective go-to-market strategy of our combined services; the impact on the business of Booker and FitMetrix as a result of the acquisitions, including any loss of Booker or FitMetrix customers or key employees; execution of our plans and strategies, including with respect to consumer development, pricing, dynamic pricing, mobile products and features and MINDBODY Promote; any failure of our security measures, including the risk that such measures may be insufficient to secure our customer and consumer data adequately or that we may become subject to attacks that degrade or deny the ability of our customers and consumers to access our platform; our ability to grow and develop our payment processing activities; our ability to timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our solutions are accessible at all times with short or no perceptible load times; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; any decrease in customer demand for our software products, features and/or service offerings; changes in privacy or other regulations that could impact our ability to serve our customers and consumers or adversely impact our monetization efforts; increasing competition; our ability to manage our growth, including internationally; our ability to recruit and retain employees; general economic, market and business conditions; and the risks described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the heading "Risk Factors" in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 1, 2018 and the risks described under the heading "Risk Factors" in our subsequent Quarterly Reports on Form 10-Q, which should be read in conjunction with our financial results and forward-looking statements and are available on the SEC Filings section of the Investor Relations page of our website at investors.mindbodyonline.com/.

All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Disclosure Information

MINDBODY uses the investor relations section on its website as the means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor MINDBODY's investor relations website in addition to following MINDBODY's press releases, SEC filings, and public conference calls and webcasts.

Non-GAAP Financial Measures

In this press release, MINDBODY has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). We disclose the following historical non-GAAP financial measures in this press release: Adjusted EBITDA, non-GAAP net income (loss), and non-GAAP net income (loss) per share. We use these non-GAAP financial measures internally in analyzing our financial results and evaluating our ongoing operational performance. We believe that these non-GAAP financial measures provide an additional tool for investors to use in understanding and evaluating ongoing operating results and trends in the same manner as our management and board of directors.  Our use of these non-GAAP financial measures has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP.  Because of these and other limitations, you should consider these non-GAAP financial measures along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results. We have provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Adjusted EBITDA

We define Adjusted EBITDA as our GAAP net loss before (1) stock-based compensation expense, (2) depreciation and amortization, (3) acquisition-related expenses, including, transaction and integration expenses, (4) income tax provision (benefit), and (5) other expense, net, which consisted of interest income, interest expense, and other income (expense), net.   Prior period acquisition-related expenses were insignificant.  Accordingly, prior periods have not been adjusted to exclude these expenses.

We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.  We have presented Adjusted EBITDA in this press release because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Adjusted EBITDA has a number of limitations, including the following: (1) Adjusted EBITDA excludes stock-based compensation expense, which has been and will continue to be for the foreseeable future a significant recurring expense in MINDBODY's business; (2) although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (3) Adjusted EBITDA does not reflect the cash requirements for acquisition-related expenses or tax payments; and (4) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Non-GAAP net income (loss) and non-GAAP net income (loss) per share

We define non-GAAP net income (loss) as GAAP net income (loss) attributable to common stockholders before: (1) stock-based compensation expense, (2) amortization of acquired intangible assets, (3) acquisition-related expenses, including transaction and integration expenses, (4) partial releases of valuation allowances due to acquisition, and (5) the amortization of debt discount and issuance costs from our convertible notes. Non-GAAP net income per share is calculated as non-GAAP net income divided by the diluted weighted-average shares outstanding. Non-GAAP net loss per share, is calculated as non-GAAP net loss divided by the weighted-average shares outstanding. Prior period acquisition-related expenses were insignificant. Accordingly, prior periods have not been adjusted to exclude these expenses.

These non-GAAP financial measures have a number of limitations, including the following: (1) these non-GAAP financial measures exclude stock-based compensation expense and the amortization of debt discount and issuance costs from our convertible notes, which has been and will continue to be for the foreseeable future a significant recurring expense in MINDBODY's business; and (2) other companies, including companies in our industry, may exclude different items in their calculation of these non-GAAP financial measures, which reduces their usefulness as a comparative measure.


MINDBODY, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
         
    June 30,   December 31,
    2018   2017
ASSETS        
Current assets:        
Cash and cash equivalents   $ 325,795     $ 232,019  
Accounts receivable   13,545     10,753  
Deferred commissions, current portion   1,702      
Prepaid expenses and other current assets   9,617     5,776  
Total current assets   350,659     248,548  
Property and equipment, net   33,514     32,871  
Deferred commissions, non-current portion   4,640      
Intangible assets, net   72,598     7,377  
Goodwill   111,511     11,583  
Other non-current assets   1,528     934  
TOTAL ASSETS   $ 574,450     $ 301,313  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 10,993     $ 7,448  
Accrued expenses and other liabilities   17,443     13,099  
Deferred revenue, current portion   7,241     6,318  
Other current liabilities   832     1,828  
Total current liabilities   36,509     28,693  
Convertible senior notes, net   231,549      
Deferred revenue, non-current portion   1,451     3,201  
Deferred rent, non-current portion   2,256     1,966  
Financing obligation on leases, non-current portion   14,634     14,932  
Other non-current liabilities   667     585  
Total liabilities   287,066     49,377  
Stockholders' equity:        
Class A common stock, par value of $0.000004 per share; 1,000,000,000 shares authorized, 44,033,244 shares issued and outstanding as of June 30, 2018; 1,000,000,000 shares authorized, 43,041,405 shares issued and outstanding as of December 31, 2017   1     1  
Class B common stock, par value of $0.000004 per share; 100,000,000 shares authorized, 3,664,536 shares issued and outstanding as of June 30, 2018; 100,000,000 shares authorized, 3,901,966 shares issued and outstanding as of December 31, 2017        
Additional paid-in capital   504,506     454,196  
Accumulated other comprehensive loss   (230 )   (108 )
Accumulated deficit   (216,893 )   (202,153 )
Total stockholders' equity   287,384     251,936  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 574,450     $ 301,313  


MINDBODY, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Revenue(1) $ 61,611     $ 44,107     $ 115,434     $ 86,321  
Cost of revenue(2) 19,417     12,738     34,838     24,757  
Gross profit 42,194     31,369     80,596     61,564  
Operating expenses:              
Sales and marketing(2) 24,781     17,362     42,886     33,696  
Research and development(2) 17,547     8,802     29,335     17,450  
General and administrative(2) 16,075     9,358     28,738     18,044  
Total operating expenses 58,403     35,522     100,959     69,190  
Loss from operations (16,209 )   (4,153 )   (20,363 )   (7,626 )
Interest income 436     227     1,099     324  
Interest expense (1,037 )   (310 )   (1,334 )   (621 )
Other income (expense), net (3 )   (21 )   36     (101 )
Loss before provision for income taxes (16,813 )   (4,257 )   (20,562 )   (8,024 )
Income tax provision (benefit) 78     118     (1,980 )   260  
Net loss $ (16,891 )   $ (4,375 )   $ (18,582 )   $ (8,284 )
Net loss per share, basic and diluted $ (0.36 )   $ (0.10 )   $ (0.39 )   $ (0.20 )
Weighted-average shares used to compute net loss per share, basic and diluted   47,552       43,147       47,330       41,958  
               
(1) Total revenue by category is presented below: Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Revenue:              
Subscription and services $ 38,540     $ 25,992     $ 71,283     $ 50,945  
Payments 22,266     17,619     42,495     34,369  
Product and other 805     496     1,656     1,007  
Total revenue $ 61,611     $ 44,107     $ 115,434     $ 86,321  
               
(2) Stock-based compensation expense included above was as follows:
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Cost of revenue $ 658     $ 366     $ 1,082     $ 627  
Sales and marketing 2,241     671     3,385     1,177  
Research and development 2,048     980     3,360     1,507  
General and administrative 2,455     1,496     4,391     2,699  
Total stock-based compensation expense $ 7,402     $ 3,513     $ 12,218     $ 6,010  


MINDBODY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
   
  Six Months Ended June 30,
2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss $ (18,582 )   $ (8,284 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Stock-based compensation expense 12,218     6,010  
Depreciation and amortization 7,955     4,399  
Amortization of deferred sales commission costs 464      
Amortization of debt discount and issuance costs 682      
Partial release of valuation allowance due to acquisition (2,133 )    
Other (6 )   (6 )
Changes in operating assets and liabilities net of effects of acquisitions:      
Accounts receivable (586 )   (100 )
Deferred commissions (5,943 )    
Prepaid expenses and other assets (1,733 )   (1,073 )
Accounts payable (2,447 )   695  
Accrued expenses and other liabilities 3,903     1,270  
Deferred revenue 754     1,009  
Deferred rent 334     247  
Net cash provided by (used in) operating activities (5,120 )   4,167  
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchase of property and equipment (3,980 )   (3,707 )
Additions to internally developed software (1,339 )   (237 )
Acquisition of business, net of cash acquired (151,765 )   (1,450 )
Net cash used in investing activities (157,084 )   (5,394 )
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from issuance of convertible senior notes, net of issuance costs 300,902      
Purchase of capped calls related to issuance of convertible senior notes (36,422 )    
Net proceeds from follow-on public offering     134,528  
Proceeds from exercise of equity awards 4,839     4,637  
Proceeds from employee stock purchase plan 2,006     1,510  
Payment related to shares withheld for taxes (3,753 )   (1,461 )
Repayment of Booker long term debt (10,008 )    
Repayment on financing and capital lease obligations (253 )   (211 )
Payment of financing obligation related to Lymber and HealCode acquisitions (1,250 )    
Other     (33 )
Net cash provided by financing activities 256,061     138,970  
Effect of exchange rate changes on cash and cash equivalents (81 )   185  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 93,776     137,928  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 232,019     85,864  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 325,795     $ 223,792  


Reconciliation of Adjusted EBITDA:              
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
  (in thousands)
Net loss $ (16,891 )   $ (4,375 )   $ (18,582 )   $ (8,284 )
Stock-based compensation expense 7,402     3,513     12,218     6,010  
Depreciation and amortization 5,308     2,309     7,955     4,399  
Acquisition-related expenses 2,976         4,288      
Income tax provision (benefit) 78     118     (1,980 )   260  
Other (income) expense, net 604     104     199     398  
Adjusted EBITDA $ (523 )   $ 1,669     $ 4,098     $ 2,783  
               
Reconciliation of non-GAAP net loss:              
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
  (in thousands)
GAAP net loss attributable to common stockholders $ (16,891 )   $ (4,375 )   $ (18,582 )   $ (8,284 )
Stock-based compensation expense 7,402     3,513     12,218     6,010  
Amortization of acquired intangible assets 2,970     407     3,516     581  
Acquisition-related expenses 2,976         4,288      
Amortization of debt discount and issuance costs 682         682      
Partial release of valuation allowance due to acquisition         (2,133 )    
Non-GAAP net loss $ (2,861 )   $ (455 )   $ (11 )   $ (1,693 )
               
Reconciliation of non-GAAP net loss per share:
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
GAAP net loss per share, basic and diluted: $ (0.36 )   $ (0.10 )   $ (0.39 )   $ (0.20 )
Non-GAAP adjustments to net loss per share 0.30     0.09     0.39     0.16  
Non-GAAP adjustments to weighted-average shares used to compute net income (loss) per share              
Non-GAAP net loss per share $ (0.06 )   $ (0.01 )   $     $ (0.04 )
               
Reconciliation of non-GAAP diluted weighted-average shares:
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
  (in thousands)
GAAP weighted-average shares used to compute net loss per share, basic and diluted 47,552     43,147     47,330     41,958  
Potentially dilutive shares              
Non-GAAP diluted weighted-average shares used to compute non-GAAP net loss per share 47,552     43,147     47,330     41,958  

Contact:

Investor Relations:
Nicole Gunderson
IR@mindbodyonline.com 
888-782-7155

Media Contact:
Jennifer Saxon
jennifer.saxon@mindbodyonline.com
805-419-2839 

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