Barracuda: Fiscal 3Q17 Financial Results

309,000 active subscribers, up 15% Y/Y
This is a Press Release edited by on 2017.01.11

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(in $ million) 3Q16 3Q17 9 mo. 16 9 mo. 17
Revenues 80.1 88.8 236.4 263.4
Growth   11%   11%
Net income (loss) (1.6) 1.8 (7.7) 7.0

Barracuda Networks, Inc. announced results for its third quarter fiscal 2017 that ended November 30, 2016.

"Barracuda delivered a strong third quarter with core product billings outpacing our expectations, driven in part by increasing customer adoption of our cloud-based security and data protection solutions. We continue to execute on our strategy to capitalize on market trends as more customers utilize our solutions as they move applications and workloads to the cloud," said BJ Jenkins, president and CEO. "The threat landscape is complex and constantly evolving. As threats become more sophisticated, security remains a top priority for customers. We continue to drive innovation and deliver easy-to-use products that address our customers' most pressing security needs across multiple threat vectors, including email, networks, web applications and mobile devices."

Third Quarter Fiscal 2017 Financial Summary

  • Total revenue increased 11% to $88.8 million, compared with $80.1 million in the third quarter of fiscal 2016. Subscription revenue grew to $68.3 million, up 17% from $58.4 million in the third quarter of fiscal 2016, representing 77% of total revenue, and appliance revenue was $20.5 million, compared with $21.7 million in the third quarter of fiscal 2016.
  • Gross billings were $100.4 million, compared with $89.0 million in the third quarter of fiscal 2016. Billings for core products increased 30% to $61.6 million, compared with $47.2 million in the third quarter of fiscal 2016. The number of active subscribers grew approximately 15% to over 309,000 and the dollar-based renewal rate was 90% for the quarter.
  • GAAP net income was $1.8 million, or $0.03 per share, based on a diluted share count of 54.0 million, compared to a GAAP net loss of $1.6 million, or $0.03 per share, in the third quarter of fiscal 2016.
  • Non-GAAP net income was $11.6 million, or $0.22 per share, based on a diluted share count of 54.0 million. Non-GAAP net income excludes $9.2 million in stock-based compensation expense, $2.4 million in other expense, $1.8 million in amortization of intangibles, $0.2 million in acquisition and other charges, partially offset by an income tax effect of $3.7 million.

Recent company highlights

  • Continued Public Cloud Momentum: Announced availability of NextGen Firewall on Google Cloud Platform, marking the first next-generation firewall available on Google Cloud Platform. NextGen Firewall - which is available directly on AWS Marketplace, Microsoft Azure, and now Google Cloud Platform - is designed for the cloud era, with features that enable direct access to cloud applications in dispersed networks where QoS, network reliability, and secure connectivity are required at every location. Google Cloud Platform customers can purchase NextGen Firewall with Bring Your Own License options from Barracuda.
  • Enhanced Web Application Firewall Product Line: Launched a new metered billing option for Barracuda Web Application Firewall on Amazon Web Services (AWS). Web Application Firewall is the first third-party web application security solution available on the AWS Marketplace where customer usage is aggregated and charged as part of an existing AWS bill, regardless of the number of the Web Application Firewalls deployed. Barracuda also announced an API integration between Web Application Firewall and NextGen Firewall solutions, helping customers simplify the way application security is deployed and managed.
  • Updated Web Security Gateway Product Line: Announced Web Security Gateway version 11.0, which offers customers security protection and improved SSL scanning performance, as well as the ability to enforce policy configuration on Chromebooks. Web Security Gateway customers now have access to Barracuda Advanced Threat Detection, a cloud-based microservice that protects organizations against ransomware and other targeted attacks. With version 11.0, Web Security Gateway combines web security functionality with next-generation firewall capabilities allowing for more robust, complementary security protection managed from a single pane of glass.
  • Recognized Network Security Leadership: Received Approved Business Security Award for network security leadership for NextGen Firewall based on a public comparative test report conducted by MRG Effitas and AV-Comparatives. The company was the only vendor tested that received 100% effectiveness scores across the board for both the malware protection tests performed by AV-Comparatives and the exploit tests performed by MRG Effitas.
  • Achieved Industry Recognition: Honored as 2016 ChannelPro SMB All-Star for continued channel leadership and product innovation with Barracuda Essentials for Office 365, Barracuda Backup - MSP Edition, and Barracuda NextGen Firewall - MSP Edition; Awarded Tech & Learning's Awards of Excellence for Barracuda Essentials for Office 365, Barracuda Backup, Barracuda Web Security Gateway, and Barracuda NextGen Firewall; and Named Finalist for CRN products of the Year for Barracuda Backup - MSP Edition and Barracuda Essentials for Office 365, as well as Finalist for multiple 2017 SC Awards including Best Vulnerability Management Solution, Best Web Application Security Solution, and Best Customer Service.

Our Comments

Abstracts of the earnings call transcript:

BJ Jenkins, president and CEO:
"New Billings for On-Premise and Cloud delivered solutions combined grew sequentially for the third consecutive quarter. In Q3, we added over 1,000 new customers to Barracuda Essentials for Office 365 bringing the total number of customers to over 2000. Additionally, 50% of these customers are net new to Barracuda up from 30% last quarter."

Dustin Driggs, CFO:
"Our total subscription revenue grew 17% over the third quarter of last year to reach $68.3 million. Subscription revenue accounted for 77% of total revenue up from 73% in our prior fiscal third quarter.
"On a geographic basis, we drive 76% of total third quarter revenue from the Americas. Revenue from EMEA was 18% of total revenue and AsiaPac was 6% of total revenue. I would like note that the AsiaPac region delivered their largest quarter for new business in the regions history.
"Our number of active subscribers in the third quarter exceed 309,000 which was an increase of 15% year-over-year. Renewal rates which we calculate on a dollar basis were 90% in Q3 or 92% in constant currency and 98% on an annualized basis.
"Cash flow from operations for the third quarter was $15.1 million, which compares to $5.3 million generated in the third quarter of last year. Capital expenditures in the third quarter were $1.3 million.
"Now turning to guidance, for Q4 FY17, we expect billings to be in the range of $100 million to $103 million. We expect revenue to be in the range of $87 million to $89 million."