News Releases

Mimecast Announces First Quarter 2021 Financial Results

August 3, 2020 at 4:10 PM EDT

First Quarter Highlights

  • Total revenue of $115.2 million grew 16% year-over-year on a GAAP basis and 21% in constant currency

  • Added 600 net new customers. Total customers 38,600 globally

  • Revenue retention rate of 106%

  • GAAP gross profit percentage of 75%, Non-GAAP gross profit percentage of 77%

  • GAAP EPS of $0.05 per diluted share, Non-GAAP EPS of $0.22 per diluted share

LEXINGTON, Mass., Aug. 03, 2020 (GLOBE NEWSWIRE) -- Mimecast Limited (NASDAQ: MIME), a leading email and data security company, today announced financial results for the first quarter ended June 30, 2020.

“Email is seeing increased usage as employees work from home to combat the global COVID-19 pandemic.  Mimecast Email Security 3.0 restores trust in email and enables business to safely rely on this core system while staying connected to customers and employees,” stated Peter Bauer, CEO of Mimecast.

Mimecast’s CFO, Rafe Brown, commented, “We exceeded the high end of our revenue guidance in the first quarter of our fiscal year and are pleased to be able to raise our revenue and cashflow outlook for full year 2021.”

First Quarter 2021 Financial Highlights

  • Revenue: Revenue for the first quarter of 2021 was $115.2 million, an increase of 16% compared to revenue of $99.2 million in the first quarter of 2020. Revenue on a constant currency basis increased 21% compared to the first quarter of 2020.

  • Customers: Added 600 net new customers in the first quarter of 2021, and now serve 38,600 organizations globally.

  • Revenue Retention Rate: Revenue retention rate was 106% in the first quarter of 2021.

  • Gross Profit Percentage: Gross profit percentage was 75% in the first quarter of 2021, compared to 74% in the first quarter of 2020.

  • Non-GAAP Gross Profit Percentage: Non-GAAP gross profit percentage was 77% in the first quarter of 2021, compared to 76% in the first quarter of 2020.

  • Net Income: Net income was $3.1 million, or $0.05 per diluted share, based on 64.7 million diluted shares outstanding, compared to net loss of $4.0 million, or $(0.07) per diluted share, based on 61.4 million diluted shares outstanding in the first quarter of 2020.

  • Non-GAAP Net Income: Non-GAAP net income was $14.2 million, or $0.22 per diluted share, based on 64.7 million diluted shares outstanding, compared to non-GAAP net income of $5.0 million or $0.08 per diluted share, based on 63.9 million diluted shares outstanding in the first quarter of 2020.

  • Adjusted EBITDA: Adjusted EBITDA was $25.7 million, representing an Adjusted EBITDA margin of 22.3%, up from 13.6% in the first quarter of 2020.

  • Operating Cash Flow: Operating cash flow was $29.3 million in the first quarter of 2021, compared to $28.5 million in the first quarter of 2020.

  • Free Cash Flow and Cash: Free cash flow was $18.5 million in the first quarter of 2021, compared to $19.4 million in the first quarter of 2020. Cash and cash equivalents as of June 30, 2020 were $198.5 million.

Reconciliations of the non-GAAP financial measures provided in this press release to their most directly comparable GAAP financial measures are provided in the financial tables included at the end of this press release. An explanation of these measures and how they are calculated is also included under the heading “Non-GAAP Financial Measures.”

Business Highlights

  • Mimecast acquired MessageControl, a ‘human-layer’ email and messaging security company that provides advanced impersonation protection with solutions designed to stop social engineering attacks using artificial intelligence, machine learning, and identity graph technology. MessageControl Founder, Paul Everton, and team will continue with Mimecast expanding our diverse ecosystem of engineering talents. 
  • Klaus Seidl joins Mimecast as Vice President of Sales for Germany, Austria and Switzerland.  Formerly Klaus held senior roles at Loom Systems, Network Appliance, and Riverbed. Klaus brings over 30 years of industry experience to lead our growth in the DACH region. 
  • ICSA labs awarded Mimecast Targeted Threat Protection a perfect score for blocking 100% of threats in their July 2020 Email Advanced Threat Defense Test Report.
  • Mimecast was named a leader in the Info-Tech Data Archiving Data Quadrant published through SoftwareReviews.
  • Mimecast Threat Report, BlackHat Editions provides technical analysis of United States-based attacks launched in attempt to infiltrate the security environment of Mimecast customers.
  • Mimecast Targeted Threat Protection added 800 new subscriptions in the first quarter. In total, 29,100 customers now use the service.
  • Mimecast Web Security added 100 new subscriptions in the first quarter. In total 700 customers now use the service.
  • On average, Mimecast customers used 3.4 services in the first quarter of 2021. This represents an increase from the average of 3.2 services used by customers in the first quarter of 2020.

Business Outlook

Mimecast is providing guidance for the second quarter and fiscal year 2021.

Second Quarter 2021 Guidance:

For the second quarter of 2021, revenue is expected to be in the range of $120.8 million to $121.8 million and constant currency revenue growth is expected to be in the range of 17% to 18%. Adjusted EBITDA for the second quarter is expected to be in the range of $26.8 million to $27.8 million. Operating cash flow for the second quarter is expected to be approximately $20.0 million. Free Cash flow for the second quarter is expected to be approximately $13.0 million.  Our revenue guidance for the second quarter is based on exchange rates as of July 23, 2020 and includes an estimated negative impact of $0.1 million resulting from the strengthening of the U.S. dollar compared to the prior year.

Fiscal Year 2021 Guidance:

For the full year 2021, revenue is expected to be in the range of $488.1 million to $493.1 million and constant currency revenue growth is expected to be in the range of 16% to 17%. Foreign exchange rate fluctuations are negatively impacting this guidance by an estimated $6.7 million compared to the rates in effect in the prior year.

Full year 2021 Adjusted EBITDA is expected to be in the range of $97.3 million to $99.3 million. Operating cash flow for the full year 2021 is expected to be in the range of $110.0 million to $113.0 million. Free Cash Flow for the full year 2021 is expected to be in the range of $77.0 million to $79.0 million.

GAAP net income (loss) is the most comparable GAAP measure to Adjusted EBITDA. Adjusted EBITDA differs from GAAP net income (loss) in that it excludes depreciation, amortization, disposals and impairment of long-lived assets, acquisition-related gains and expenses, litigation-related expenses, share-based compensation expense, restructuring expense, interest income and interest expense, the provision for income taxes and foreign exchange income. Mimecast is unable to predict with reasonable certainty the ultimate outcome of these exclusions without unreasonable effort. Therefore, Mimecast has not provided guidance for GAAP net income (loss) or a reconciliation of forward-looking Adjusted EBITDA guidance to GAAP net income (loss).

The financial guidance provided above includes forward-looking statements within the meaning of U.S. securities laws. While the financial guidance considers the anticipated impact of the global COVID-19 pandemic, the societal and economic impact of the pandemic is unprecedented and the future effect of the pandemic on the global economy and Mimecast’s financial results is highly uncertain. Mimecast’s actual results may differ materially. See “Safe Harbor for Forward-Looking Statements” below.

Conference Call and Webcast Information

Mimecast will host a conference call to discuss these financial results for investors and analysts at 4:30 pm EDT (UTC-05:00) on August 3, 2020. To access the conference call, dial (844) 402-0879 for the U.S. and Canada and (478) 219-0767 for international callers and enter conference ID# 6549588. The call will also be webcast live on the investor relations section of the Company’s website https://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 and (404) 537-3406 for international callers and entering conference ID# 6549588. In addition, an archive of the webcast will be available on the investor relations section of the Company’s website https://investors.mimecast.com.

About Mimecast

Mimecast (NASDAQ: MIME) was born in 2003 with a focus on delivering relentless protection. Each day, we take on cyber disruption for our tens of thousands of customers around the globe; always putting them first, and never giving up on tackling their biggest security challenges together. We are the company that built an intentional and scalable design ideology that solves the number one cyberattack vector – email. We continuously invest to thoughtfully integrate brand protection, security awareness training, web security, compliance and other essential capabilities. Mimecast is here to help protect large and small organizations from malicious activity, human error and technology failure; and to lead the movement toward building a more resilient world. www.mimecast.com

Mimecast and the Mimecast logo are registered trademarks of Mimecast. All other third-party trademarks and logos contained in this press release are the property of their respective owners.

Non-GAAP Financial Measures

We have provided in this press 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 and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

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 the second quarter and full year 2021, expected revenue from entities reporting in foreign currencies is translated into U.S. dollars using the comparable prior year period’s monthly average foreign currency exchange rates.

Non-GAAP gross profit and Non-GAAP gross profit percentage. We define non-GAAP gross profit as gross profit, adjusted to exclude: share-based compensation expense and amortization of acquired intangible assets. We define non-GAAP gross profit percentage as non-GAAP gross profit divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of non-cash charges for share-based compensation expense and amortization of acquired intangible assets 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 gross profit and non-GAAP gross profit percentage versus gross profit and gross profit percentage calculated in accordance with GAAP. For example, as noted above, non-GAAP gross profit and gross profit percentage excludes share-based compensation expense and amortization of acquired intangible assets. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP gross profit and non-GAAP gross profit percentage and evaluates non-GAAP gross profit and non-GAAP gross profit percentage together with gross profit and gross profit percentage calculated in accordance with GAAP.

Non-GAAP operating expenses and Non-GAAP income from operations. We provide investors with certain non-GAAP financial measures, including non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP general and administrative expense and non-GAAP income from operations (collectively the “non-GAAP operating financial measures”). These non-GAAP operating financial measures exclude the following, as applicable (as reflected in the reconciliation tables that follow):  share-based compensation expense; amortization of acquired intangible assets; impairment of long-lived assets; restructuring expense; acquisition-related gains and expenses; and litigation-related expenses. We consider these non-GAAP operating financial measures to be useful metrics for management and investors because it excludes the effect of share-based compensation expense and certain “one-time” charges 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 these non-GAAP operating financial measures versus the applicable financial measures calculated in accordance with GAAP. For example, as noted above, the non-GAAP operating financial measures exclude share-based compensation expense and certain “one-time” charges. In addition, the components of the costs that we exclude in our calculation of non-GAAP operating financial measures 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 operating financial measures and evaluates non-GAAP operating financial measures together with the applicable financial measures calculated in accordance with GAAP.

Non-GAAP net income. We define non-GAAP net income as net income (loss), adjusted to exclude: share-based compensation expense; amortization of acquired intangible assets; impairment of long-lived assets; restructuring expense; acquisition-related gains and expenses; litigation-related expenses; and the income tax effect of non-GAAP adjustments. 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, certain “one-time” charges and related income tax effects 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 (loss) calculated in accordance with GAAP. For example, as noted above, non-GAAP net income excludes share-based compensation expense, certain “one-time” charges and related income tax effects. 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 (loss) calculated in accordance with GAAP.

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; amortization; disposals and impairment of long-lived assets; acquisition-related gains and expenses; litigation-related expenses; share-based compensation expense; restructuring expense; interest income and interest expense; the provision for income taxes; and foreign exchange income. We define Adjusted EBITDA margin as Adjusted EBITDA over GAAP revenue in the period. We use Adjusted EBITDA as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies, to communicate with our board of directors concerning our financial performance and for establishing incentive compensation metrics for executives and other senior employees.

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, equipment and capitalized software, 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 liquidity and capital resources discussion included in our annual and quarterly reports filed with the Securities and Exchange Commission.

Safe Harbor for Forward-Looking Statements

Statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including, without limitation, the impact of the global COVID-19 pandemic on Mimecast’s operations and financial performance, the impact of foreign exchange rates, the impact of the acquisition of MessageControl, the increased reliance on remote work during the global COVID-19 pandemic and the impact that Mimecast’s Email Security 3.0 offerings can have on security in that context, and Mimecast’s future financial performance on both a GAAP and non-GAAP basis under the heading “Business Outlook” above, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. 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 Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including, but not limited to, uncertainties and risks relating to the impact of global COVID-19 pandemic on the Company’s business, operations, employees and financial results, the ability to attract new customers and retain existing customers, particularly during challenging economic times, competitive conditions, data breaches, compliance with data privacy and data transfer laws and regulations, service disruptions, the effect of the withdrawal of the United Kingdom from the European Union, risks associated with failure to protect the Company’s intellectual property or claims that the Company infringes the intellectual property of others, the successful integration of the Company’s acquisitions, including DMARC Analyzer B.V., Segasec Labs Limited and MessageControl and other acquisitions the Company may complete, the global nature of the Company’s business, including foreign currency exchange rate fluctuations and the potential disparate economic impact of the global COVID-19 pandemic on the jurisdictions in which the Company operates, and the other risks, uncertainties and factors detailed in Mimecast’s filings with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, Mimecast’s actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. Mimecast is providing the information in this press release as of this date and assumes no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



MIMECAST LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

    Three months ended June 30,  
    2020     2019  
Revenue   $ 115,176     $ 99,231  
Cost of revenue     28,469       25,467  
Gross profit     86,707       73,764  
Operating expenses                
Research and development     22,802       19,385  
Sales and marketing     44,043       43,370  
General and administrative     17,168       15,447  
Total operating expenses     84,013       78,202  
Income (loss) from operations     2,694       (4,438 )
Other income (expense)                
Interest income     177       982  
Interest expense     (883 )     (1,280 )
Foreign exchange income and other, net     1,763       956  
Total other income (expense), net     1,057       658  
Income (loss) before income taxes     3,751       (3,780 )
Provision for income taxes     613       230  
Net income (loss)   $ 3,138     $ (4,010 )
                 
Net income (loss) per ordinary share                
Basic   $ 0.05     $ (0.07 )
Diluted   $ 0.05     $ (0.07 )
                 
Weighted-average number of ordinary shares outstanding                
Basic     63,019       61,444  
Diluted     64,676       61,444  
                 
                 


MIMECAST LIMITED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)

    As of June 30,     As of March 31,  
    2020     2020  
Assets                
Current assets                
Cash and cash equivalents   $ 198,541     $ 173,958  
Accounts receivable, net     86,128       97,659  
Deferred contract costs, net     12,002       11,133  
Prepaid expenses and other current assets     16,658       16,145  
Total current assets     313,329       298,895  
                 
Property and equipment, net     85,980       85,178  
Operating lease right-of-use assets     111,176       116,564  
Intangible assets, net     39,852       38,394  
Goodwill     154,201       150,525  
Deferred contract costs, net of current portion     38,624       36,664  
Other assets     3,437       3,614  
Total assets   $ 746,599     $ 729,834  
                 
Liabilities and shareholders' equity                
Current liabilities                
Accounts payable   $ 12,113     $ 14,907  
Accrued expenses and other current liabilities     44,217       41,607  
Deferred revenue     190,519       194,151  
Current portion of finance lease obligations     984       1,058  
Current portion of operating lease liabilities     30,318       30,379  
Current portion of long-term debt     7,202       6,573  
Total current liabilities     285,353       288,675  
                 
Deferred revenue, net of current portion     12,472       12,816  
Long-term finance lease obligations     50       323  
Operating lease liabilities     98,926       105,321  
Long-term debt     84,456       86,258  
Other non-current liabilities     7,023       4,386  
Total liabilities     488,280       497,779  
                 
Commitments and contingencies                
                 
Shareholders' equity                
Ordinary shares, $0.012 par value, 300,000,000 shares authorized; 63,269,191 and 62,791,691 shares issued and outstanding as of June 30, 2020 and March 31, 2020, respectively     759       754  
Additional paid-in capital     345,029       325,808  
Accumulated deficit     (80,522 )     (83,660 )
Accumulated other comprehensive loss     (6,947 )     (10,847 )
Total shareholders' equity     258,319       232,055  
    Total liabilities and shareholders' equity   $ 746,599     $ 729,834  
                 
                 


MIMECAST LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

    Three months ended June 30,  
    2020     2019  
Operating activities                
Net income (loss)   $ 3,138     $ (4,010 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     8,852       7,442  
Share-based compensation expense     13,653       10,034  
Amortization of deferred contract costs     2,869       2,116  
Amortization of debt issuance costs     114       157  
Amortization of operating lease right-of-use assets     7,111       7,677  
Other non-cash items           (42 )
Unrealized currency gains on foreign denominated transactions     (2,733 )     (856 )
Changes in assets and liabilities:                
Accounts receivable     12,405       11,927  
Prepaid expenses and other current assets     (497 )     8,856  
Deferred contract costs     (5,203 )     (4,806 )
Other assets     156       (638 )
Accounts payable     (2,037 )     (808 )
Deferred revenue     (5,645 )     1,295  
Operating lease liabilities     (8,221 )     (5,145 )
Accrued expenses and other liabilities     5,343       (4,675 )
Net cash provided by operating activities     29,305       28,524  
Investing activities                
Purchases of property, equipment and capitalized software     (10,771 )     (9,161 )
Purchases of strategic investments           (3,025 )
Maturities of investments           14,000  
Net cash (used in) provided by investing activities     (10,771 )     1,814  
Financing activities                
Proceeds from issuance of ordinary shares     8,135       9,164  
Withholding taxes related to net share settlement of ESPP purchases and vesting of RSUs     (2,575 )     (1,431 )
Payments on debt     (1,250 )     (625 )
Payments on finance lease obligations     (347 )     (166 )
Net cash provided by financing activities     3,963       6,942  
Effect of foreign exchange rates on cash     2,086       (44 )
Net increase in cash and cash equivalents     24,583       37,236  
                 
Cash and cash equivalents at beginning of period     173,958       137,576  
Cash and cash equivalents at end of period   $ 198,541     $ 174,812  
                 
                 


Key Performance Indicators

In addition to traditional financial metrics, such as revenue and revenue growth trends, we monitor several other non-GAAP financial measures and non-financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies. The key performance indicators that we monitor are as follows:

    Three months ended June 30,  
    2020     2019  
       
    (dollars in thousands)  
Revenue constant currency growth rate (1)     21 %     32 %
Revenue retention rate (2)     106 %     111 %
Total customers (3)     38,600       35,300  
Gross profit percentage     75 %     74 %
Adjusted EBITDA (1)   $ 25,665     $ 13,503  

____________

(1 ) Adjusted EBITDA and revenue constant currency growth rates are non-GAAP measures. For a reconciliation of Adjusted EBITDA and revenue constant currency growth rates to the nearest comparable GAAP measures, see “Reconciliation of Non-GAAP Financial Measures” below.
(2 ) We calculate our revenue retention rate by annualizing constant currency revenue recorded on the last day of the measurement period for only those customers in place throughout the entire measurement period. This revenue includes renewed revenue contracts as well as additional revenue derived from the sale of additional seat licenses as well as additional services sold to these existing customers. We divide the result by revenue on a constant currency basis on the first day of the measurement period for all customers in place at the beginning of the measurement period. The measurement period is the trailing twelve months. The revenue on a constant currency basis is based on the average exchange rates in effect during the respective period.
(3 ) Reflects the customer count on the last day of the period rounded to the nearest hundred customers. We define a customer as an entity with an active subscription contract as of the measurement date. A customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. In determining the number of customers, we do not include customers we acquired from DMARC Analyzer that transact with us on a credit card basis.
     

Reconciliation of Non-GAAP Financial Measures

The following table presents a reconciliation of revenue growth rate, as reported, to revenue constant currency growth rate:

    Three months ended June 30,  
    2020     2019  
       
    (dollars in thousands)  
Reconciliation of Revenue Constant Currency Growth Rate:                
Revenue, as reported   $ 115,176     $ 99,231  
Revenue year-over-year growth rate, as reported     16 %     27 %
Estimated impact of foreign currency fluctuations     5 %     5 %
Revenue constant currency growth rate     21 %     32 %
                 
Exchange rate for period                
USD     1.000       1.000  
ZAR     0.056       0.070  
GBP     1.241       1.286  
AUD     0.656       0.700  
                 


The following tables present a reconciliation of selected GAAP results to Non-GAAP results (dollars in thousands):

    Three months ended June 30,  
    2020     2019  
Reconciliation of Non-GAAP Gross Profit:                
GAAP gross profit   $ 86,707     $ 73,764  
GAAP gross profit percentage     75 %     74 %
                 
Plus:                
Share-based compensation expense     1,125       787  
Amortization of acquired intangible assets     940       625  
Non-GAAP gross profit   $ 88,772     $ 75,176  
Non-GAAP gross profit percentage     77 %     76 %


    Three months ended June 30,  
    2020     2019  
GAAP research and development   $ 22,802     $ 19,385  
Less:                
Share-based compensation expense     3,884       2,549  
Amortization of acquired intangible assets            
Acquisition-related expenses            
Litigation-related expenses            
Non-GAAP research and development   $ 18,918     $ 16,836  


    Three months ended June 30,  
    2020     2019  
GAAP sales and marketing   $ 44,043     $ 43,370  
Less:                
Share-based compensation expense     4,437       3,782  
Amortization of acquired intangible assets     27       30  
Acquisition-related expenses            
Litigation-related expenses            
Non-GAAP sales and marketing   $ 39,579     $ 39,558  


    Three months ended June 30,  
    2020     2019  
GAAP general and administrative   $ 17,168     $ 15,447  
Less:                
Share-based compensation expense     4,207       2,916  
Amortization of acquired intangible assets            
Acquisition-related expenses     365        
Litigation-related expenses           350  
Non-GAAP general and administrative   $ 12,596     $ 12,181  


    Three months ended June 30,  
    2020     2019  
GAAP income (loss) from operations   $ 2,694     $ (4,438 )
Plus:                
Share-based compensation expense     13,653       10,034  
Amortization of acquired intangible assets     967       655  
Acquisition-related expenses     365        
Litigation-related expenses           350  
Non-GAAP income from operations   $ 17,679     $ 6,601  
                 


The following table presents a reconciliation of Net income (loss) to Non-GAAP net income (in thousands, except per share amounts):

    Three months ended June 30,  
    2020     2019  
Reconciliation of Non-GAAP Net Income (Loss):                
Net income (loss)   $ 3,138     $ (4,010 )
Share-based compensation expense     13,653       10,034  
Amortization of acquired intangible assets     967       655  
Acquisition-related expenses (1)     365        
Litigation-related expenses (2)           350  
Income tax effect of Non-GAAP adjustments     (3,969 )     (2,066 )
Non-GAAP net income   $ 14,154     $ 4,963  
Non-GAAP net income per ordinary share - basic   $ 0.22     $ 0.08  
Non-GAAP net income per ordinary share - diluted   $ 0.22     $ 0.08  
Weighted-average number of ordinary shares used in
  computing Non-GAAP net income per ordinary share:
               
Basic     63,019       61,444  
Diluted     64,676       63,871  

____________

(1 ) Acquisition-related expenses relate to costs incurred for acquisition activity. See Note 10 and Note 16 of the notes to our unaudited condensed consolidated financial statements, included in the Company’s Quarterly Report on Form 10-Q for further information.
(2 ) Litigation-related expenses relate to amounts incurred for litigation settlement. See Note 13 of the notes to our unaudited condensed consolidated financial statements, included in the Company’s Quarterly Report on Form 10-Q for further information.
     


The following table presents a reconciliation of Net income (loss) to Adjusted EBITDA (in thousands):

    Three months ended June 30,  
    2020     2019  
Reconciliation of Adjusted EBITDA:                
Net income (loss)   $ 3,138     $ (4,010 )
Depreciation, amortization and disposals of long-lived assets     8,852       7,455  
Interest expense, net     706       298  
Provision for income taxes     613       230  
Share-based compensation expense     13,653       10,034  
Foreign exchange income     (1,662 )     (854 )
Acquisition-related expenses (1)     365        
Litigation-related expenses (2)           350  
Adjusted EBITDA   $ 25,665     $ 13,503  

____________

(1 ) Acquisition-related expenses relate to costs incurred for acquisition activity. See Note 10 and Note 16 of the notes to our unaudited condensed consolidated financial statements, included in the Company’s Quarterly Report on Form 10-Q for further information.
(2 ) Litigation-related expenses relate to amounts incurred for litigation settlement. See Note 13 of the notes to our unaudited condensed consolidated financial statements, included in the Company’s Quarterly Report on Form 10-Q for further information.
     


The following table presents a reconciliation of Net cash provided by operating activities to Free Cash Flow (in thousands):

    Three months ended June 30,  
    2020     2019  
Reconciliation of Free Cash Flow:                
Net cash provided by operating activities   $ 29,305     $ 28,524  
Purchases of property, equipment and capitalized software     (10,771 )     (9,161 )
Free Cash Flow   $ 18,534     $ 19,363  

Share-based compensation expense for the three months ended June 30, 2020 and 2019 (in thousands):

    Three months ended June 30,  
    2020     2019  
Cost of revenue   $ 1,125     $ 787  
Research and development     3,884       2,549  
Sales and marketing     4,437       3,782  
General and administrative     4,207       2,916  
Total share-based compensation expense   $ 13,653     $ 10,034  

Amortization of acquired intangible assets for the three months ended June 30, 2020 and 2019 (in thousands):

    Three months ended June 30,  
    2020     2019  
Cost of revenue   $ 940     $ 625  
Sales and marketing     27       30  
Total amortization of acquired intangible assets   $ 967     $ 655  

The following table presents a reconciliation of Net cash provided by operating activities to guided Free Cash Flow (in millions):

    Three months ending
September 30,
    Year ending March 31,  
    2020     2021  
Reconciliation of Free Cash Flow:              
Net cash provided by operating activities   $ 20     $  110 - 113  
Purchases of property, equipment and capitalized software     (7 )   (33 - 34)  
Free Cash Flow   $ 13     $   77-79  
               


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Alison Raymond Walsh
Press@Mimecast.com
617-393-7126

Investor Contact
Robert Sanders
Investors@Mimecast.com
617-393-7074


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