Investor Relations

NYSE: ‘CUDA’ $ 22.43 -0.28 -1.23% Volume: 354,582 May 26, 2017

Barracuda Reports First Quarter Fiscal 2016 Results

07/09/2015

- Total revenue grew 18% year-over-year to $78 million
- Q1 non-GAAP earnings per share grew 39% to $0.09
- Total active subscribers exceed 252,000, up 18% year-over-year

CAMPBELL, Calif., July 9, 2015 /PRNewswire/ -- Barracuda Networks, Inc. (NYSE: CUDA), a leading provider of cloud-connected security and storage solutions, today announced results for its first quarter of fiscal 2016, which ended May 31, 2015.

Barracuda Logo.

Billings & Revenue: For the first quarter of fiscal 2016, gross billings grew to $94.3 million, up from $87.6 million in the first quarter of fiscal 2015. Total revenue increased 18% to $78.0 million, up from $66.2 million in the first quarter of fiscal 2015. Appliance revenue in the first quarter of fiscal 2016 grew to $23.7 million, up from $20.8 million in the first quarter of fiscal 2015, and recurring subscription revenue grew to $54.3 million in the first quarter of fiscal 2016, up from $45.4 million in the first quarter of fiscal 2015, representing 70% of total revenue.

Net Income: GAAP net loss in the first quarter of fiscal 2016 was $3.8 million, or $0.07 loss per share, based on a basic share count of 53.0 million. Non-GAAP net income for the first quarter of fiscal 2016 was $5.1 million, or $0.09 earnings per share, based on a diluted share count of 55.0 million. Non-GAAP net income excludes $6.5 million in stock-based compensation expense, $1.1 million in acquisition and other non-recurring charges, $0.6 million in amortization of intangibles, $0.5 million in other expense, net and $0.2 million in income tax provision of non-GAAP exclusions. The reconciliation between GAAP and non-GAAP information is contained in the tables below.

"We delivered revenue and non-GAAP EPS at the top end of our targeted range," said BJ Jenkins, president and CEO. "During the quarter, we grew total active subscribers, increased gross margin and maintained a 92.5% dollar-based renewal rate, speaking to the underlying strength of our business model."

"Total billings grew by 12% year-over-year on a constant currency basis," said David Faugno, CFO. "In the quarter, non-GAAP operating income grew 40% year-over-year to $7.4 million, or 9.5% of total revenue."

Recent Company Highlights

  • Expanded Market Share: Listed once again as number one for total integrated PBBA units sold in IDC's Worldwide Quarterly PBBA Tracker CQ1 2015.
  • Extended Channel Reach: Signed a distribution agreement with Tech Data Corporation to extend the market availability of the company's full product portfolio in the United States through Tech Data's Advanced Infrastructure Solutions (AIS) division. This relationship provides authorized Tech Data resellers access to Barracuda's complete security and storage product suite of appliances, virtual appliances, SaaS and cloud solutions.
  • Increased Public Cloud Momentum: Enhanced networking and application security capabilities to support Microsoft Azure enhancements; and achieved VMware Ready - vCloud Air™ status for Barracuda NG Firewall, Barracuda Message Archiver, Barracuda Spam Firewall and Barracuda Web Application Firewall.
  • Continued Product Innovation: Launched new Barracuda Load Balancer FDC that delivers high 40 Gbps throughput load balancing; updated Barracuda NG Firewall to include SafeSearch, YouTube for Schools, WiFi Policy Enforcement, and Remote Access Management for Mac OS X, Windows and iOS devices; and introduced CudaSign Premium to provide businesses with multiple options to integrate eSignatures into existing business processes such as customer relationship management systems, contract management tools, and productivity tools.
  • Enhanced Mobility Initiatives: Announced product integrations with Aerohive's HiveOS® devices, including access points, switches and routers, offering customers more granular visibility and security for wireless access; and enhanced Barracuda Mobile Device Manager to support both Android and iOS operating systems.

Conference Call Information

Barracuda will host a conference call and corresponding live webcast at 1:30 p.m. PT today. To access the conference call, dial 1-855-560-2573 for the U.S. or 1-412-542-4159 for international callers.  The webcast will be available live on the investor relations section of the company's website at https://investors.barracuda.com, and via replay beginning approximately two hours after the completion of the call for a period of one year. An audio replay of the call will be available to investors beginning at approximately 5:00 p.m. PT today through July 17, 2015 by dialing 1-877-344-7529 in the U.S. or 1-412-317-0088 for international callers, and entering conference ID 10067135. Additional information can be found in an accompanying supplemental investor slide presentation located at https://investors.barracuda.com.

Forward-Looking Statements

This announcement contains forward-looking statements related to future product performance and potential results from new initiatives that involve risks and uncertainties, including statements regarding the company's expectations regarding financial performance and the potential impact of our new and updated products. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: fluctuations in demand for the company's products and services; a highly competitive business environment for network security and storage solutions; the company's effectiveness in controlling expenses; the effects of significant developments in IT infrastructure deployments, particularly cloud computing; the impact of foreign currency fluctuations; the possibility that the company might experience delays in the development of new technology and products; customer response to its new technology and products; risks related to pending or future litigation and regulatory matters; and a dependency on third parties for certain components of the company's products. The company undertakes no obligation to update the forward-looking information in this release. More information about potential factors that could affect the company's business and financial results is included in its 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, adjusted EBITDA and adjusted 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 a non-GAAP reconciliation of the Condensed Consolidated Statement of Operations 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.

About Barracuda Networks Inc. (NYSE: CUDA)

Barracuda provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, and cloud and hybrid deployments. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security. For additional information, please visit http://www.barracuda.com.

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

Contacts:

Investor Relations:  Adam Carson; +1-408-342-5480; 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)








May 31, 2015


February 28, 2015

Assets




Current assets:





Cash and cash equivalents

$       156,062


$                 151,373


Marketable securities

44,768


40,754


Accounts receivable, net of allowance for doubtful accounts 

43,154


40,725


Inventories, net

4,717


4,454


Deferred costs

31,146


30,221


Deferred income taxes

97


479


Other current assets

11,752


12,260

Total current assets

291,696


280,266







Property and equipment, net

27,911


27,839


Deferred costs, non-current

28,109


27,715


Deferred income taxes, non-current

423


443


Other non-current assets

4,059


4,123


Intangible assets, net

8,627


9,217


Goodwill

39,598


39,742

Total assets

$       400,423


$                 389,345






Liabilities and stockholders' deficit




Current liabilities:





Accounts payable

$          13,129


$                   16,356


Accrued payroll and related benefits

11,210


11,656


Other accrued liabilities

11,640


12,465


Deferred revenue

218,131


209,904


Deferred income taxes

420


563


Note payable

255


252

Total current liabilities

254,785


251,196






Long-term liabilities:





Deferred revenue, non-current

163,011


163,253


Deferred income taxes, non-current

2,146


2,396


Note payable, non-current

4,317


4,383


Other long-term liabilities

7,504


7,201






Stockholders' deficit:





Common stock

53


53


Additional paid-in capital

325,810


316,035


Accumulated other comprehensive loss

(2,432)


(4,233)


Accumulated deficit

(354,771)


(350,939)

Total stockholders' deficit

(31,340)


(39,084)

Total liabilities and stockholders' deficit

$       400,423


$                 389,345

 


Barracuda Networks, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share information)

(Unaudited)












Three months ended May 31,





2015


2014








Revenue:







Appliance


$                               23,682


$                                   20,836


Subscription


54,292


45,373



Total revenue


77,974


66,209








Cost of revenue


15,966


14,406








Gross profit


62,008


51,803








Operating expenses:






Research and development


18,000


12,952


Sales and marketing


34,132


29,479


General and administrative


10,698


8,564



Total operating expenses


62,830


50,995

Income (loss) from operations


(822)


808








Other expense, net


(568)


(57)








Income (loss) before income taxes


(1,390)


751

Provision for income taxes


(2,442)


(600)

Net income (loss)


$                                  (3,832)


$                                         151








Net income (loss) per share:






Basic



$                                    (0.07)


$                                             -


Diluted


$                                    (0.07)


$                                             -








Weighted-average shares used to compute net income (loss) per share:






Basic



52,996


51,156


Diluted


52,996


53,605

 



Barracuda Networks, Inc.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(in thousands)

(Unaudited)










Three months ended May 31,




2015


2014







GAAP cost of revenue


$                           15,966


$                           14,406


Amortization of intangible assets (1)


404


673


Depreciation expense (2)


1,032


672


Stock-based compensation expense (3)


211


52

Non-GAAP cost of revenue


$                            14,319


$                            13,009







GAAP sales and marketing expense


$                            34,132


$                            29,479


Amortization of intangible assets (1)


174


303


Depreciation expense (2)


26


39


Stock-based compensation expense (3)


1,550


582


Acquisition and other non-recurring charges (4)


(325)


-

Non-GAAP sales and marketing expense


$                            32,707


$                            28,555







GAAP research and development expense


$                            18,000


$                            12,952


Depreciation expense (2)


169


151


Stock-based compensation expense (3)


1,835


748


Acquisition and other non-recurring charges (4)


1,105


372

Non-GAAP research and development expense


$                            14,891


$                            11,681







GAAP general and administrative expense


$                            10,698


$                              8,564


Depreciation expense (2)


369


249


Stock-based compensation expense (3)


2,948


1,700


Acquisition and other non-recurring charges (4)


293


17

Non-GAAP general and administrative expense


$                              7,088


$                              6,598







GAAP total expense


$                            78,796


$                            65,401


Amortization of intangible assets (1)


578


976


Depreciation expense (2)


1,596


1,111


Stock-based compensation expense (3)


6,544


3,082


Acquisition and other non-recurring charges (4)


1,073


389

Non-GAAP total expense


$                            69,005


$                            59,843


Depreciation expense (2)


1,596


1,111

Non-GAAP total expense including depreciation


$                            70,601


$                            60,954













Barracuda Networks, Inc.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(in thousands, except per share information)

(Unaudited)










Three months ended May 31,




2015


2014







GAAP operating income (loss)


$                               (822)


$                                 808


Amortization of intangible assets (1)


578


976


Stock-based compensation expense (3)


6,544


3,082


Acquisition and other non-recurring charges (4)


1,073


389

Non-GAAP operating income


$                              7,373


$                              5,255







GAAP net income (loss) 


$                            (3,832)


$                                 151


Amortization of intangible assets (1)


578


976


Stock-based compensation expense (3)


6,544


3,082


Acquisition and other non-recurring charges (4)


1,073


389


Income tax effect of non-GAAP exclusions (5)


240


(943)


Other expense (income) adjustments (6)


534


(53)

Non-GAAP net income


$                              5,137


$                              3,602







Non-GAAP diluted earnings per share (7)


$                                0.09


$                                0.07

Weighted-average shares used to compute diluted earnings per share


55,034


53,605


(1)

Amortization of Intangible Assets. We provide non-GAAP information which excludes expenses for the amortization of intangible assets, as well as certain losses from disposal of such assets, that primarily relate to purchased intangible assets associated with our acquisitions. We believe that eliminating this expense from our non-GAAP measures is useful to investors, because the amortization of intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.



(2)

Depreciation Expense. We provide non-GAAP information which excludes depreciation expense related to the amortization of property and equipment, as well as certain losses from disposal of such assets. We believe that eliminating this expense from our non-GAAP measures is useful to investors, because the acquisition of property and equipment, and the corresponding depreciation expense, can be inconsistent in amount and can vary from period to period.



(3)

Stock-Based Compensation Expense. We provide non-GAAP information which excludes expenses for stock-based compensation. We believe the exclusion of this item allows for financial results that are more indicative of our continuing operations. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types.



(4)

Acquisition and Other Non-Recurring Charges. We exclude certain expense items resulting from acquisitions and other non-recurring charges, which we do not expect to recur in our continuing operating results. We believe that adjusting for these charges allows us to better compare results from period to period in order to assess the ongoing operating results of our business. The charges include: (i) costs associated with an internal investigation of export control compliance and (ii) legal, valuation consulting and other expenses incurred in connection with acquisitions, the fair value remeasurements of contingent considerations, the payments made under the terms of certain acquisition agreements and other non-recurring expenses.



(5)

Income Tax Effect of Non-GAAP Exclusions. We believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the ongoing performance and future liquidity of our business. Excluded items include, but are not limited to: (i) amortization expense of intangible assets, (ii) stock-based compensation expense, (iii) acquisition and other non-recurring charges, and (iv) quarterly changes to the valuation allowance previously established.



(6)

Other Expense (Income) Adjustments. We provide non-GAAP information that excludes the effect of certain other income and losses. These adjustments most significantly consist of foreign currency remeasurement gains and losses. For all non-functional currency account balances, the remeasurement of such balances to the functional currency will result in either a foreign exchange gain or a loss which is recorded in other expense, net. We believe that eliminating these items from our non-GAAP measures is useful to investors, because foreign currency remeasurement adjustments can be inconsistent in amount and can vary from period to period.



(7)

Non-GAAP Diluted Earnings Per Share. We provide non-GAAP diluted earnings per share. The non-GAAP diluted earnings per share amount is calculated based on our non-GAAP net income divided by the weighted-average diluted shares outstanding for the period.

 



Barracuda Networks, Inc.

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

(in thousands)

(Unaudited)










Three months ended May 31,




2015


2014







GAAP net income (loss)


$   (3,832)


$         151


Deferred revenue, end of period


381,003


328,488


Less: Deferred revenue, beginning of period


(372,862)


(313,157)


Less: Deferred costs, end of period


(59,255)


(52,549)


Deferred costs, beginning of period


57,936


50,279


Other expense, net


568


57


Provision for income taxes


2,442


600


Acquisition and other non-recurring charges


1,073


389


Stock-based compensation expense


6,544


3,082


Amortization of intangible assets


578


976


Depreciation expense


1,596


1,111

Adjusted EBITDA (1)


$   15,791


$   19,427



(1)

Adjusted EBITDA. We define adjusted EBITDA as net income (loss) plus increases in deferred revenue and increases in the associated deferred costs, plus non-cash and non-operating charges which include: (i) other expense, net, (ii) provision for income taxes, (iii) acquisition and other non-recurring charges, (iv) stock-based compensation expense, (v) amortization of intangible assets, including certain losses on disposal of intangible assets, and (vi) depreciation expense, including certain losses on disposal of fixed assets. The deferred revenue balances as of May 31, 2015 and February 28, 2015 exclude the remaining acquisition date deferred revenue amounts assumed in connection with our acquisition of C2C Systems Limited. We believe adjusted EBITDA provides an indication of profitability from our operations, and provides a consistent measure of our performance from period to period.

 



Barracuda Networks, Inc.

Reconciliation of GAAP Cash Flows from Operating Activities to Adjusted Free Cash Flow

(in thousands)

(Unaudited)










Three months ended May 31,




2015


2014







GAAP cash flows from operating activities


$  6,302


$  5,407

Purchase of property and equipment


(1,876)


(1,589)

Acquisition and other non-recurring charges (1)


886


385

Adjusted free cash flow (2)


$  5,312


$  4,203



(1)

Acquisition and Other Non-Recurring Charges. We exclude the cash flow impact resulting from acquisitions and other non-recurring charges, which we do not expect to recur in our continuing operating results. We believe that adjusting for these cash outflows allows us to better compare results from period to period in order to assess the ongoing operating results of our business. The cash flows include: (i) payments associated with an internal investigation of export control compliance and (ii) payments related to legal, valuation consulting and other expenses incurred in connection with acquisitions, as well as the payments under the terms of certain acquisition agreements and other non-recurring expenses.

(2)

Adjusted Free Cash Flow. We define adjusted free cash flow as cash flows from operating activities less the purchases of property and equipment plus the cash flow effect of acquisition and other non-recurring charges. We believe that adjusting free cash flow to exclude these charges allows us to better compare results from period to period in order to assess the ongoing free cash flow of our business. We believe adjusted free cash flow is an important liquidity measure that reflects the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions, investments in the business and funding ongoing operations.

 



Barracuda Networks, Inc.

Reconciliation of GAAP Revenue to Gross Billings

(in thousands)

(Unaudited)










Three months ended May 31,




2015


2014







GAAP Revenue


$   77,974


$   66,209


Total deferred revenue, end of period


381,003


328,488


Less:  total deferred revenue, beginning of period


(372,862)


(313,157)


Deferred revenue adjustments


8,159


6,060


Total change in deferred revenue and adjustments


16,300


21,391

Gross billings (1)(2)


$   94,274


$   87,600



(1)

Gross Billings. We define gross billings as total revenue plus the change in deferred revenue and other adjustments, which primarily consist of returns and reserves with respect to the 30-day right of return we provide to customers, as well as rebates for certain channel partner activities. The deferred revenue balances as of May 31, 2015 and February 28, 2015 exclude the remaining acquisition date deferred revenue amounts assumed in connection with our acquisition of C2C Systems Limited. We believe that gross billings provide insight into the sales of our solutions and performance of our business.

(2)

In order to determine how our business performed exclusive of the effect of foreign currency fluctuations, we compare the percentage change in our gross billings from one period to another using a constant currency. To present this gross billings information, the current and comparative prior period results for entities that operate in other than U.S. dollars are converted into U.S. dollars at constant exchange rates. For example, the rates in effect at May 31, 2014, which was the last day of our prior fiscal year's comparable quarter, were used to convert current and comparable prior period gross billings rather than the actual exchange rates in effect during the respective period.

 

Barracuda Networks, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)










Three months ended May 31,




2015


2014







Operating activities





Net income (loss)


$     (3,832)


$           151

Adjustments to reconcile net income (loss) to net cash provided by operating activities:






Depreciation and amortization expense


2,174


2,087


Stock-based compensation expense


6,544


3,082


Excess tax benefits from equity compensation plans


(2,144)


(1,772)


Deferred income taxes


145


(3,254)


Other


337


12

Changes in operating assets and liabilities:






Accounts receivable, net


(2,339)


(5,094)


Inventories, net


(263)


730


Income taxes, net


2,289


1,024


Deferred costs


(1,379)


(2,282)


Other assets


283


(30)


Accounts payable 


(3,113)


(4,579)


Accrued payroll and related benefits


(61)


23


Other liabilities


(352)


(31)


Deferred revenue


8,013


15,340

Net cash provided by operating activities


6,302


5,407







Investing activities






Proceeds from the sale of marketable securities


3,203


-


Proceeds from the maturity of marketable securities


3,026


-


Purchase of marketable securities


(8,493)


-


Purchase of property and equipment


(1,876)


(1,589)


Purchase of investments in non-marketable equity and debt securities


-


(600)

Net cash used in investing activities


(4,140)


(2,189)







Financing activities






Proceeds from issuance of common stock


3,248


2,340


Taxes paid related to net share settlement of equity awards


(2,176)


(1,125)


Employee loans extended, net of repayment


(276)


(463)


Excess tax benefits from equity compensation plans


2,144


1,772


Repayment of note payable


(63)


(60)


Other


(156)


-

Net cash provided by financing activities


2,721


2,464







Effect of exchange rate changes on cash and cash equivalents


(194)


(3)

Net increase in cash and cash equivalents


4,689


5,679







Cash and cash equivalents at beginning of period


151,373


135,879

Cash and cash equivalents at end of period


$   156,062


$   141,558

 

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SOURCE Barracuda Networks, Inc.

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