Mimecast Announces Financial Results for the Third Quarter of Fiscal 2016
- Constant currency revenue growth of 32% year-over-year
- Added 1,000 new customers for total customers of 16,200 globally
- Revenue retention rate increased to 109%
- Gross profit percentage of 71%
- Generated positive Adjusted EBITDA of $4.5 million
WATERTOWN, Mass., (GLOBE NEWSWIRE) -- Mimecast Limited (NASDAQ:MIME), a leading provider of next generation cloud security and risk management services for corporate information and email, today announced financial results for its third quarter of fiscal 2016 ended December 31, 2015.
Peter Bauer, chief executive officer and co-founder of Mimecast said, “I’m pleased to share our results from our first quarter as a public company. Our strong growth was driven by demand for our next-generation cloud-based security, archiving and continuity services. The adoption of cloud-based email hosting services, like Microsoft® Office 365™, is acting as catalyst for Mimecast with our pure cloud only architecture as companies move away from legacy on-premises hardware. Revenue also benefited from the adoption of our Targeted Threat Protection service which protects customers from advanced threats such as spear phishing and weaponized attachments.“
Fiscal Third Quarter 2016 Financial Highlights
- Revenue: Revenue increased 32% compared to the third quarter of 2015 on a constant currency basis. Revenue for the third quarter of fiscal 2016 was $37.1 million, an increase of 24% compared to the $29.8 million of revenue recognized in the third quarter of fiscal 2015.
- Customers:Mimecast added 1,000 new customers in the third quarter of fiscal 2016. We now protect over 16,200 organizations globally.
- Revenue Retention Rate: Revenue retention rate grew to 109% in the third quarter of fiscal 2016, up from 108% in the prior quarter and 106% in the third quarter of fiscal 2015.
- Gross Profit Percentage: GAAP Gross profit percentage was 71% for the third quarter of fiscal 2016, compared to 68% in the third quarter of fiscal 2015.
- Adjusted EBITDA: Adjusted EBITDA for the third quarter of fiscal 2016 was $4.5 million, representing an Adjusted EBITDA margin of 12%.
- GAAP Net Loss: GAAP net loss was $1.2 million, or ($0.03) per ordinary share based on 42.5 million weighted average shares outstanding.
- Non-GAAP Net Income: Non-GAAP net income was $2.8 million, or $0.06 per ordinary share.
- Cash and Free Cash Flow:Mimecast generated $3.9 million of free cash flow in the fiscal third quarter of 2016. Cash and cash equivalents as of December 31, 2015 were $106 million.
In our earnings release and the related conference call or webcast, we may use or discuss such items as: revenue growth on a constant currency basis, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP net income and free cash flow, which are defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission, or SEC. Please refer to “Non-GAAP Financial Measures” section for definitions of these non-GAAP financial measures as well as the financial schedules attached to this press release for reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure. We calculate our revenue retention rate by annualizing revenue on a constant currency basis recorded on the last day of the measurement period for only those customers in place throughout the entire measurement period. We include add-on, or upsell, revenue from additional employees and services purchased by existing customers.
Recent Company Highlights
- Mimecast has been positioned by independent industry analyst firm Gartner in the ‘Leaders’ section of the October 2015 Magic Quadrant for Enterprise Information Archiving. Mimecast has been positioned as highest on ‘ability to execute’ in the Leaders Quadrant.
- Mimecast became one of the first independently verified cloud service providers to receive the ISO 27018:2014 certification for the protection of personally identifiable information in the cloud.
- 12% of customers are using Mimecast services in conjunction with Office 365.
- 13% of customers are using Targeted Threat Protection compared to 4% in the third quarter of 2015.
- Mimecast commissioned two datacenters in Australia in the third quarter and won a cornerstone public sector client representing over eighty thousand seats in that region.
Mimecast is providing guidance for the fourth quarter of fiscal 2016 and the full fiscal year 2016 as follows:
Fourth Quarter Fiscal 2016 Guidance:
For the fourth quarter of fiscal 2016, we expect constant currency revenue growth to be between 24% and 26% and revenue to be between $35.2 million to $35.8 million. Exchange rates in certain currencies we operate in have weakened in the period due to the strengthening of the US dollar compared to the same period in the prior year. Fluctuations in these rates over the last three months have impacted our revenue guidance by $2.0 million. Approximately 75% of this impact relates to the translation of South African Rand based revenue and the remainder relates to British Pound based revenue. We believe that constant currency revenue growth is a useful way to measure the underlying strength of our business as it excludes these short term fluctuations. Adjusted EBITDA is expected to be in the range of $0.1 million to $1.0 million.
Full Year Fiscal 2016 Guidance:
For the full year fiscal 2016, we expect constant currency revenue growth to be between 28.5% and 29.5% and revenue to be between $140.2 million to $140.8 million. Adjusted EBITDA is expected to be in the range of $15.3 million to $16.2 million.
Conference Call and Webcast Information
Mimecast will host a conference call to discuss these financial results for investors and analysts at 5:00 p.m. Eastern Time (UTC-05:00) on February 8, 2016. To access the conference call, dial (844) 815-2878 for the U.S. and Canada and (615) 800-6885 for international callers and enter conference ID #29979833. The call will also be webcast live on the investor relations section of the Company’s website at http://investors.mimecast.com. An audio replay of the call will be available two hours after the live call ends by dialing (855) 859-2056 for U.S. and Canada or (404) 537-3406 for international callers, and entering passcode #29979833. In addition, an archive of the webcast will be available on the investor relations section of the company’s website at http://investors.mimecast.com.
Mimecast Limited (NASDAQ:MIME) makes business email and data safer for more than 16,200 customers and millions of employees worldwide. Founded in 2003, the Company's next-generation cloud-based security, archiving and continuity services protect email, and deliver comprehensive email risk management in a single, fully-integrated subscription service. Mimecast reduces email risk and the complexity and cost of managing the array of point solutions traditionally used to protect email and its data. For customers that have migrated to cloud services like Microsoft® Office 365™, Mimecast mitigates single vendor exposure by strengthening security coverage, combating downtime and improving archiving.
Mimecast Email Security protects against malware, spam, advanced phishing and other emerging attacks, while preventing data leaks. Mimecast Mailbox Continuity enables employees to continue using email during planned and unplanned outages. Mimecast Enterprise Information Archiving unifies email, file and instant messaging data to support e-discovery and give employees fast access to their personal archive via PC, Mac and mobile apps. More information is available at www.mimecast.com.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, the guidance provided under the heading "Business Outlook" above, statements regarding the value and effectiveness of Mimecast’s products, the introduction of product enhancements or additional products and Mimecast’s growth, expansion and market leadership, that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause Mimecast’s results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements containing the words "predicts," "plan," "expects," "anticipates," "believes," "goal," "target," "estimate," "potential," "may," "might," "could," "see," "seek," "forecast," and similar words. Mimecast intends all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: risks and uncertainties inherent in Mimecast’s business; Mimecast’s ability to attract new customers and retain existing customers; Mimecast’s ability to effectively sell, service and support its products; Mimecast’s ability to adapt to changing licensing and go to market business models; Mimecast’s ability to manage its international operations; Mimecast’s ability to compete effectively; Mimecast’s ability to develop and introduce new products and add-ons or enhancements to existing products; Mimecast’s ability to continue to promote and maintain its brand in a cost-effective manner; Mimecast’s ability to manage growth; Mimecast’s ability to attract and retain key personnel; currency fluctuations that affect Mimecast’s revenues and costs; the scope and validity of intellectual property rights applicable to Mimecast’s products; adverse economic conditions in general and adverse economic conditions specifically affecting the markets in which Mimecast’s operates; and other risks more fully described in Mimecast’s publicly available filings with the Securities and Exchange Commission. Any statements regarding Mimecast’s products are intended to outline its general product direction and should not be relied on in making a purchase decision, as the development, release, and timing of any features and functionality remains at Mimecast’s sole discretion. Mimecast’s anticipates that subsequent events and developments will cause its views to change. Mimecast’s undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Mimecast’s views as of the date of this press release.
Non-GAAP Financial Measures
We have provided in this release financial information that has not been prepared in accordance with GAAP. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investor.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables included below in this press release
Revenue Constant Currency Growth Rate. We believe revenue constant currency growth rate is a key indicator of our operating results. We calculate revenue constant currency growth rate by translating revenue from entities reporting in foreign currencies into U.S. dollars using the comparable foreign currency exchange rates from the prior fiscal period. To determine projected revenue growth rates on a constant currency basis for fourth quarter and full year 2016, expected revenue from entities reporting in foreign currencies was translated into U.S. dollars using the comparable prior year period's monthly average foreign currency exchange rates.
Adjusted EBITDA and Adjusted EBITDA margin. We believe that Adjusted EBITDA and Adjusted EBITDA margin are key indicators of our operating results. We define Adjusted EBITDA as net income (loss), adjusted to exclude: depreciation and amortization, share-based compensation expense, restructuring expense, interest income and interest expense, the provision for income taxes and foreign currency exchange (expense) income predominantly related to the elimination of intercompany balances. We define Adjusted EBITDA margin as Adjusted EBITDA over revenue in the period.
Non-GAAP net income. We define non-GAAP net income as net income (loss) less share-based compensation expense. We consider this non-GAAP financial measure to be a useful metric for management and investors because it excludes the effect of share-based compensation expense so that our management and investors can compare our recurring core business net results over multiple periods. There are a number of limitations related to the use of non-GAAP net income versus net income calculated in accordance with GAAP. For example, as noted above, non-GAAP net income excludes share-based compensation expense. In addition, the components of the costs that we exclude in our calculation of non-GAAP net income may differ from the components that our peer companies exclude when they report their non-GAAP results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and evaluating non-GAAP net income together with net income calculated in accordance with GAAP.
Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparisons of our operating results to competitors' operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating our company is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and in the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" section of our reports filed with the SEC.
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