Barracuda Reports Record First Quarter Fiscal 2015 Results - NEWS10 ABC: Albany, New York News, Weather, Sports

Barracuda Reports Record First Quarter Fiscal 2015 Results

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SOURCE Barracuda Networks, Inc.

- Q1 gross billings up 17% year-over-year and 7% sequentially to a record $88 million

- Total revenue growth of 18% year-over-year and 10% sequentially to $66 million in Q1

- Adjusted EBITDA growth of 61% year-over-year to over $19 million, or 29% of revenue

- Trailing 12-month adjusted free cash flow of $42 million, or 28% growth year-over-year

- Total active subscribers exceed 214,000

CAMPBELL, Calif., July 10, 2014 /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 2015, which ended May 31, 2014.

Barracuda Logo

Billings & Revenue: For the first quarter of fiscal 2015, gross billings grew 17% to $87.6 million, up from $74.9 million in the first quarter of fiscal 2014, and up 7% on a sequential basis. Total revenue increased 18% to $66.2 million, up from $56.3 million in the first quarter of fiscal 2014. Appliance revenue in the first quarter of fiscal 2015 grew to $20.8 million and recurring subscription revenue grew to $45.4 million, representing 69% of total revenue.

Net Income: GAAP net income in the first quarter of fiscal 2015 was $0.2 million, or $0.00 earnings per share, based on a diluted share count of 53.6 million. Non-GAAP net income for the first quarter of 2015 was $3.6 million, or $0.07 earnings per share. Non-GAAP net income excludes $3.1 million in stock-based compensation expense, $0.9 million in income tax benefit of non-GAAP exclusions, $1.0 million in amortization of intangibles, and $0.4 million in acquisition and other non-recurring charges. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"We are pleased with our results across all of our markets and product categories in the first quarter, and we believe we strengthened our position as a go-to provider of security and storage solutions that simplify the lives of IT professionals," said BJ Jenkins, president and CEO. "Our recent product announcements demonstrate the strong engine of innovation at Barracuda. We've continued to invest in new functionality and strategic technology alliances to attract new customers and expand with existing ones. We added over 8,900 new active subscribers, bringing our total active subscribers to over 214,000, while continuing to focus on our cross-selling initiatives. Barracuda offers a broad product portfolio in a variety of delivery models designed to meet the needs of our highly diverse customers who look for IT solutions that are easy to buy, install, manage and use. We believe all of these elements combine to underpin the strength and resilience of our business model."

"We had strong financial performance in the first quarter, posting solid billings growth and strong cash flow metrics, as we continued to balance growth with profitability," said David Faugno, CFO. "Adjusted EBITDA in the quarter was $19.4 million, or 29% of total revenue. On a trailing 12-month basis, adjusted free cash flow was $42.0 million, growing 28% year-over-year. Non-GAAP operating income was $5.3 million."

Recent Company Highlights

  • Continued Product Innovation – Announced a number of new product launches and updates including Barracuda NG Firewall version 5.4.3 to support Microsoft centric environments; advanced application security availability on some of the Barracuda Load Balancer ADC models at no additional cost; Barracuda Firewall version 6.5 next-generation firewall with enterprise-grade application control for the mid-market; Barracuda Mobile Device Manager, a free cloud-based MDM service for Barracuda customers in the K-12 education space; Barracuda Web Filter version 8.0 with wireless access point integration and 1-to-1 Chromebook support; and SSL VPN version 2.5 private cloud access extended to mobile devices. 
  • Industry Recognition1 Received a number of industry accolades and achievements including Gartner Magic Quadrant for Enterprise Backup Software and Integrated Appliances; Gartner Magic Quadrant for Enterprise Network Firewalls; Gartner Magic Quadrant for Web Application Firewalls; Gartner Magic Quadrant for Secure Email Gateway; Gartner Magic Quadrant for Secure Web Gateway; Champion in Info-Tech Vendor Landscape: Email Security Gateway; Volume leader in Content Security appliances for Q1 CY2014 by IDC; Number one in integrated PBBA by IDC for Q1 CY2014; Barracuda Backup highly acclaimed by Storage Review; and Best Web Application Firewall from Network World Asia Information Management Awards 2014.
  • Growing Technology Partner Ecosystem – Began integrating Lastline into our security product portfolio to bring APT and zero-day attack protection to the mid-market in a simplified way; signed technology alliance with Ruckus Wireless to bring the powerful functionality of the Barracuda Web Filter to wireless users; expanded international capabilities within Barracuda Central for content categorization, reputation data, and malicious and compromised website analysis through the integration of NetSTAR; and earned VMware Ready status for Barracuda Backup as part of the VMware Technology Alliance Partner (TAP) certification program. 

Conference Call Information
Barracuda will host a conference call and corresponding live webcast at 2:00 p.m. PT today. To access the conference call, dial 1-877-201-0168 for the U.S. and Canada or +1-647-788-4901 for international callers, and enter conference ID 58575538#. 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 15, 2014 by dialing 1-855-859-2056 in the U.S. and Canada, or +1-404-537-3406 for international callers, and entering conference ID 58575538#. 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, the potential impact of our new and updated products and expectations regarding the expanded partner ecosystem. 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 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 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 and non-GAAP operating income. In preparing our non-GAAP information, we have excluded, where applicable, the impact of non-recurring charges, stock-based compensation, amortization of intangibles and depreciation. 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 are adjusted to exclude non-recurring charges, stock-based compensation, amortization of intangibles and depreciation 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, 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

[1]Disclaimer: 
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. 

Gartner Magic Quadrant for Enterprise Backup Software and Integrated Appliances by Dave Russell and Rushan Rinnen, June 2014

Gartner Magic Quadrant for Enterprise Network Firewalls by Greg Young, Adam Hils, Jeremy D'Hoinne, April 2014

Gartner Magic Quadrant for Web Application Firewalls by Jeremy D'Hoinne, Adam Hils, Greg Young, Joseph Feiman, June 2014 

Gartner Magic Quadrant for Secure Email Gateway by Peter Firstbrook, Brian Lowans, July 2014

Gartner Magic Quadrant for Secure Web Gateway by Lawrence Orans, Peter Firstbrook June 2014 

 

 


Barracuda Networks, Inc.


Condensed Consolidated Balance Sheets


(in thousands)


(Unaudited)








May 31, 2014


February 28, 2014

Assets




Current assets:





Cash and cash equivalents

$              141,558


$                  135,879


Accounts receivable, net of allowance for doubtful accounts 

32,965


27,836


Inventories

4,918


5,648


Deferred costs

27,003


25,707


Deferred income taxes

31,940


30,156


Other current assets

5,075


4,900

Total current assets

243,459


230,126







Property and equipment, net

21,317


20,558


Deferred costs, non-current

25,546


24,572


Deferred income taxes, non-current

29,985


28,515


Other non-current assets

2,461


1,851


Intangible assets, net

7,440


8,420


Goodwill

35,969


36,014

Total assets

$              366,177


$                  350,056






Liabilities and stockholders' equity (deficit)




Current liabilities:





Accounts payable

$                  9,502


$                    13,743


Accrued payroll and related benefits

7,797


8,494


Other accrued liabilities

8,646


9,374


Deferred revenue

177,472


167,562


Deferred income taxes

260


260


Note payable

240


237

Total current liabilities

203,917


199,670






Long-term liabilities:





Deferred revenue, non-current

151,016


145,595


Deferred income taxes, non-current

83


84


Note payable, non-current

4,572


4,635


Other long-term liabilities

5,748


5,727






Stockholders' equity (deficit):





Common stock

52


52


Additional paid-in capital

284,865


278,551


Accumulated other comprehensive loss

(786)


(817)


Accumulated deficit

(283,290)


(283,441)

Total stockholders' equity (deficit)

841


(5,655)

Total liabilities and stockholders' equity (deficit)

$              366,177


$                  350,056






 

Barracuda Networks, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share information)

(Unaudited)










Three months ended May 31,




2014


2013







Revenue:






Appliance

$                 20,836


$                 17,503


Subscription

45,373


38,774


          Total revenue

66,209


56,277







Cost of revenue

14,406


13,074







Gross profit

51,803


43,203







Operating expenses:





Research and development

12,952


10,842


Sales and marketing

29,479


28,836


General and administrative

8,564


6,678


            Total operating expenses


50,995


46,356

Income (loss) from operations

808


(3,153)







Other expense, net

(57)


(457)







Income (loss) before income taxes and non-controlling interest

751


(3,610)

Benefit (provision) for income taxes

(600)


1,047

Consolidated net income (loss)

151


(2,563)







Net loss attributable to non-controlling interest

-


159

Net income (loss) attributable to Barracuda Networks, Inc.

$                       151


$                 (2,404)







Net income (loss) per share attributable to Barracuda Networks, Inc.:





Basic


$                      0.00


$                    (0.09)


Diluted

$                      0.00


$                    (0.09)







Weighted-average shares used to compute net income (loss) per share attributable to Barracuda Networks, Inc.:





Basic


51,156


28,100


Diluted

53,605


28,100

 


Barracuda Networks, Inc.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(in thousands)

(Unaudited)








Three months ended May 31,



2014


2013






GAAP cost of revenue

$                   14,406


$                 13,074


Amortization of intangible assets (1)

673


990


Depreciation expense (2)

672


478


Stock-based compensation expense (3)

52


45

Non-GAAP cost of revenue

$                   13,009


$                 11,561






GAAP sales and marketing expense

$                   29,479


$                 28,836


Amortization of intangible assets (1)

303


448


Depreciation expense (2)

39


57


Stock-based compensation expense (3)

582


334

Non-GAAP sales and marketing expense

$                   28,555


$                 27,997






GAAP research and development expense

$                   12,952


$                 10,842


Depreciation expense (2)

151


127


Stock-based compensation expense (3)

748


630


Acquisition and other non-recurring charges (4)

372


125

Non-GAAP research and development expense

$                   11,681


$                    9,960






GAAP general and administrative expense

$                      8,564


$                    6,678


Amortization of intangible assets (1)

-


7


Depreciation expense (2)

249


138


Stock-based compensation expense (3)

1,700


1,488


Acquisition and other non-recurring charges (4)

17


65

Non-GAAP general and administrative expense

$                      6,598


$                    4,980






GAAP total expense

$                   65,401


$                 59,430


Amortization of intangible assets (1)

976


1,445


Depreciation expense (2)

1,111


800


Stock-based compensation expense (3)

3,082


2,497


Acquisition and other non-recurring charges (4)

389


190

Non-GAAP total expense

$                   59,843


$                 54,498


Depreciation expense (2)

1,111


800

Non-GAAP total expense including depreciation

$                   60,954


$                 55,298







Barracuda Networks, Inc.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(in thousands, except per share information)

(Unaudited)








Three months ended May 31,



2014


2013






GAAP operating income (loss)

$                         808


$                 (3,153)


Amortization of intangible assets (1)

976


1,445


Stock-based compensation expense (3)

3,082


2,497


Acquisition and other non-recurring charges (4)

389


190

Non-GAAP operating income

$                      5,255


$                       979






GAAP net income (loss) attributable to Barracuda Networks, Inc.

$                         151


$                 (2,404)


Amortization of intangible assets (1)

976


1,445


Stock-based compensation expense (3)

3,082


2,497


Acquisition and other non-recurring charges (4)

389


190


Income tax effect of non-GAAP exclusions (5)

(943)


(1,224)


Other income adjustments (6)

(53)


363


Non-controlling interest (7)

-


(159)

Non-GAAP net income

$                      3,602


$                       708






Non-GAAP diluted earnings per share (8)

$                        0.07


$                      0.02

Weighted-average shares used to compute diluted earnings per share

53,605


46,342

 

(1) Amortization of Intangible Assets. We provide non-GAAP information which excludes expenses for the amortization of intangible assets which 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, accounting and advisory fees, to the extent associated with acquisitions, as well as contingent consideration payments under the terms of certain acquisition agreements.

 

(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, and (iii) acquisition and other non-recurring charges. 

 

(6) Other 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 re-measurement gains and losses. For all non-functional currency account balances, the re-measurement 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 re-measurement adjustments can be inconsistent in amount and can vary from period to period.

 

(7) Non-Controlling Interest. We provide non-GAAP information that includes the results related to entities in which we hold a minority interest. We believe that adjusting for these amounts allows us to better compare results from period to period in order to assess the ongoing operating results of our business, including entities for which we own a minority interest.

 

(8) 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,



2014


2013






GAAP net income (loss) attributable to Barracuda Networks, Inc.

$                       151


$                 (2,404)


Deferred revenue, end of period

328,488


274,444


Less: Deferred revenue, beginning of period

(313,157)


(261,243)


Less: Deferred costs, end of period

(52,549)


(42,556)


Deferred costs, beginning of period

50,279


39,470


Other expense, net

57


457


Provision (benefit) for income taxes

600


(1,047)


Acquisition and other non-recurring charges

389


190


Stock-based compensation expense

3,082


2,497


Amortization of intangible assets

976


1,445


Depreciation expense

1,111


800

Adjusted EBITDA (1)

$                 19,427


$                 12,053

 

(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 (benefit) for income taxes, (iii) acquisition and other non-recurring charges, (iv) stock-based compensation expense, (v) amortization of intangible assets, and (vi) depreciation expense, including certain losses on disposal of fixed assets. 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,



2014


2013






GAAP cash flows from operating activities

$                                   5,407


$                                         194

Purchase of property and equipment

(1,589)


(1,663)

Acquisition and other non-recurring charges (1)

385


3,076

Adjusted free cash flow (2)

$                                  4,203


$                                      1,607

 

(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 our CEO transition, (ii) payments associated with an internal investigation of export control compliance, and (iii) legal, accounting and advisory fee payments, to the extent associated with acquisitions, as well as contingent consideration payments under the terms of certain acquisition agreements.

 

(2) Adjusted Free Cash Flow. We define 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 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,



2014


2013






GAAP Revenue

$                 66,209


$                 56,277


Total deferred revenue, end of period

328,488


274,444


Less:  total deferred revenue, beginning of period

(313,157)


(261,243)


Deferred revenue adjustments

6,060


5,387


Total change in deferred revenue and adjustments

21,391


18,588

Gross billings (1)

$                 87,600


$                 74,865

 

(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. We believe that gross billings provides insight into the sales of our solutions and performance of our business.

 

Barracuda Networks, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)








Three months ended May 31,



2014


2013






Operating activities




Consolidated net income (loss)

$                                151


$                          (2,563)

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





Depreciation and amortization

2,087


2,245


Stock-based compensation

3,082


2,497


Excess tax benefits from equity incentive plan

(1,772)


(11)


Loss on disposal of property and equipment

12


14


Deferred income taxes

(3,254)


47

Changes in operating assets and liabilities:





Accounts receivable, net

(5,094)


(1,200)


Inventories, net

730


(363)


Income taxes, net

1,024


(4,746)


Deferred costs

(2,282)


(3,086)


Other current assets

(29)


(513)


Other non-current assets

(1)


(207)


Accounts payable 

(4,579)


(3,490)


Accrued payroll and related benefits

23


(1,119)


Other accrued liabilities

(52)


(554)


Other long-term liabilities

21


21


Deferred revenue

15,340


13,222

Net cash provided by operating activities

5,407


194






Investing activities





Purchase of property and equipment

(1,589)


(1,663)


Purchase of investment in non-marketable equity and debt securities

(600)


-


Business combinations, net of cash acquired

-


(6,176)

Net cash used in investing activities

(2,189)


(7,839)






Financing activities





Proceeds from issuance of common stock

2,340


7


Taxes paid related to net share settlement of equity awards

(1,125)


(465)


Repurchase of common stock

-


(138)


Dividends paid

-


(1,419)


Extended (repayment of) employee loans 

(463)


246


Excess tax benefits from equity incentive plan

1,772


11


Repayment of note payable

(60)


(56)

Net cash provided by (used in) financing activities

2,464


(1,814)






Effect of exchange rate changes on cash and cash equivalents

(3)


(105)

Net increase (decrease) in cash and cash equivalents

5,679


(9,564)






Cash and cash equivalents at beginning of period

135,879


30,095

Cash and cash equivalents at end of period

$                        141,558


$                          20,531

 

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