Mimecast: Fiscal 3Q19 Financial Results

Third Quarter Highlights

• Total revenue of $87.6 million grew 30% yoy on a GAAP basis and 33% in constant currency
• Added 1,000 net new customers. Total customers 33,300 globally
• Revenue retention rate of 110%
• Gross profit percentage of 73%GAAP EPS of $0.01 per diluted share, Non-GAAP EPS of $0.09 per diluted shareMimecast Limitedwww.mimecast.com announced financial results for the third quarter ended December 31, 2018.

“The strong execution from our global go to market, product and customer service teams resulted in another strong quarter of new customer acquisitions, increased adoption of our expanded offerings and record customer retention. Customers appreciate our ability to protect their businesses and continue to value the depth of capabilities available on our platform,” stated Peter Bauer, CEO.

CFO Peter Campbell noted: “I am proud of our ability to continue to grow our top line while showing both GAAP and non-GAAP net income. Our third quarter results are showing the future potential of our model to generate free cash flow as we scale our operations.”

Third Quarter 2019 Financial Highlights

• Revenue: GAAP revenue was $87.6 million, an increase of 30% compared to $67.3 million of GAAP revenue in 3FQ18. Revenue on a constant currency basis increased 33% compared to 3FQ188.
• Customers: Added 1,000 net new customers, compared to 1,100 net new customers in 3FQ18. We now serve 33,300 organizations globally.
• Revenue Retention Rate: was 110%, compared to 111% in the 3FQ18.
• Gross Profit percentage: was 73% in the third quarter of 2019, compared to 74% in the third quarter of 2018.
• GAAP Net Income: was $0.5 million, or $0.01 per diluted share, based on 62.5 million diluted shares outstanding.
• Non-GAAP Net Income:  was $5.9 million, or $0.09 per diluted share, based on 62.5 million diluted shares outstanding.
• Adjusted EBITDA: Adjusted EBITDA was $16.0 million, representing an Adjusted EBITDA margin of 18.2% up from 10.0% in 3FQ18.
• Free Cash Flow, Cash and Investments: Mimecast generated $10.8 million of free cash flow, compared to $4.5 million in 3FQ18.  Cash and short-term investments as of December 31, 2018 were $156.6 million.

Business Highlights

• Was named a leader in the 2018 Gartner, Magic Quadrant for Enterprise Information Archiving“.*  Mimecast is positioned highest on the Ability to Execute axis for the fourth year in a row.
• Won Global BC Institute Award for Continuity and Resilience.
• Joined the IBM Security App Exchange Community.  The new Mimecast for IBM QRadar app integrates email security data into IBM’s intelligence technology and is designed to offer joint customers improved visibility into potential vulnerabilities.
• Sales of Targeted Threat Protection grew as 1,600 new and existing customers adopted the service in the third quarter. In total, 21,400 customers now use the service.
• On average, customers used 3.1 services 3FQ19. This represents an increase from the average of 2.9 services used by customers in 3FQ18.
• A total of 41% of customers used Mimecast in conjunction with Microsoft Office 365 during 3FQ19 compared to 29% in 3FQ18. In total more than 13,700 customers of all sizes have selected the company to enhance their security, archive their data, and to provide uptime assurance for their Office 365 investments.

Karen Anderson joined Mimecast as chief human resources officer. She will lead the company’s people and culture strategy. She brings more than 20 years of experience to Mimecast having previously held positions with Alnylam Pharmaceuticals, Pfizer, Beyer Canada, and Baxter.

Robert P. Schechter joined board of directors. He currently serves as COB of directors of PTC Inc., and is on the board of directors of Telaria, Inc. From 1995 to 2008, he served as the CEO of NMS Communications Corporation.

Rafe Brown has accepted the role of CFO. He served as CFO of SevOne and previously as the CFO of Pegasystems and prior to that he served as the SVP of finance for salesforce.com, where he worked for nine years.

Business Outlook
For next quarter of 2019, revenue is expected to be in the range of $90.6 million to $91.5 million and constant currency revenue growth is expected to be in the range of 29% to 30%. This guidance is based on exchange rates as of January 31, 2019 and includes an estimated negative impact of $3.9 million resulting from the strengthening of the U.S. dollar compared to the prior year. Adjusted EBITDA for 4FQ19 is expected to be in the range of $14.7 million to $15.7 million.

FY19 Guidance:
Revenue is expected to be in the range of $338.7 million to $339.7 million and constant currency revenue growth is expected to be in the range of 31% to 32%.  Foreign exchange rate fluctuations are negatively impacting this guidance by an estimated $4.5 million. Adjusted EBITDA is expected to be in the range of $52.9 million to $53.9 million.

FY20 Guidance:
For the full year 2020, revenue is expected to be in the range of $413 to $427 million and constant currency revenue growth is expected to be in the range of 21% to 25%. 

*Gartner, Magic Quadrant for Enterprise Information Archiving, Julian Tirsu, December 3, 2018.