Mimecast: Fiscal 3Q16 Financial Results

(in $ million)	3Q15	3Q16	9 mo. 16	9 mo. 16
Revenues	29.8	37.1	85.4	105.0
*Growth*		24%		*23%*
Net income (loss)	(1.2)	4.1	(1.3)	(3.4)

Highlights

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

Mimecast Limited announced financial results for its third quarter of fiscal 2016 ended December 31, 2015.

Peter Bauer, CEO and co-founder, 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, now protecting 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.

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.

Business Outlook
For the fourth quarter of fiscal 2016, the company 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.

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.