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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to __________________

 

Commission File Number: 001-37637

 

MIMECAST LIMITED

(Exact Name of Registrant as Specified in its Charter)

 

 

Bailiwick of Jersey

Not applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Finsbury Avenue

London EC2M 2PF

United Kingdom

EC2M 2PF

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (781) 996-5340

Securities registered pursuant to Section 12(b) of the Act:

 

(Title of each class)

(Trading Symbol)

(Name of each exchange on which registered)

Ordinary Shares, nominal value $0.012 per share

MIME

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 27, 2020, the registrant had 63,892,288 shares of ordinary shares, $0.012 par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020

1

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2020 and 2019

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2020 and 2019

3

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended September 30, 2020 and 2019

4

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2020 and 2019

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

38

Item 6.

Exhibits

56

Signatures

60

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MIMECAST LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

As of September 30,

 

 

As of March 31,

 

 

 

2020

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

230,708

 

 

$

173,958

 

Accounts receivable, net

 

 

81,143

 

 

 

97,659

 

Deferred contract costs, net

 

 

12,988

 

 

 

11,133

 

Prepaid expenses and other current assets

 

 

19,799

 

 

 

16,145

 

Total current assets

 

 

344,638

 

 

 

298,895

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

86,885

 

 

 

85,178

 

Operating lease right-of-use assets

 

 

134,201

 

 

 

116,564

 

Intangible assets, net

 

 

45,130

 

 

 

38,394

 

Goodwill

 

 

169,812

 

 

 

150,525

 

Deferred contract costs, net of current portion

 

 

40,775

 

 

 

36,664

 

Other assets

 

 

3,363

 

 

 

3,614

 

Total assets

 

$

824,804

 

 

$

729,834

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,169

 

 

$

14,907

 

Accrued expenses and other current liabilities

 

 

47,598

 

 

 

41,607

 

Deferred revenue

 

 

189,956

 

 

 

194,151

 

Current portion of finance lease obligations

 

 

755

 

 

 

1,058

 

Current portion of operating lease liabilities

 

 

34,515

 

 

 

30,379

 

Current portion of long-term debt

 

 

7,828

 

 

 

6,573

 

Total current liabilities

 

 

290,821

 

 

 

288,675

 

 

 

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

11,356

 

 

 

12,816

 

Long-term finance lease obligations

 

 

15

 

 

 

323

 

Operating lease liabilities

 

 

118,773

 

 

 

105,321

 

Long-term debt

 

 

99,532

 

 

 

86,258

 

Other non-current liabilities

 

 

10,056

 

 

 

4,386

 

Total liabilities

 

 

530,553

 

 

 

497,779

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

Ordinary shares, $0.012 par value, 300,000,000 shares authorized;

   63,842,964 and 62,791,691 shares issued and outstanding as of

   September 30, 2020 and March 31, 2020, respectively

 

 

766

 

 

 

754

 

Additional paid-in capital

 

 

368,813

 

 

 

325,808

 

Accumulated deficit

 

 

(70,472

)

 

 

(83,660

)

Accumulated other comprehensive loss

 

 

(4,856

)

 

 

(10,847

)

Total shareholders' equity

 

 

294,251

 

 

 

232,055

 

Total liabilities and shareholders' equity

 

$

824,804

 

 

$

729,834

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 


1


 

MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Six months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

122,693

 

 

$

103,357

 

 

$

237,869

 

 

$

202,588

 

Cost of revenue

 

 

29,742

 

 

 

26,134

 

 

 

58,211

 

 

 

51,601

 

Gross profit

 

 

92,951

 

 

 

77,223

 

 

 

179,658

 

 

 

150,987

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,287

 

 

 

19,320

 

 

 

45,089

 

 

 

38,705

 

Sales and marketing

 

 

43,994

 

 

 

41,165

 

 

 

88,037

 

 

 

84,535

 

General and administrative

 

 

16,583

 

 

 

16,756

 

 

 

33,751

 

 

 

32,203

 

Total operating expenses

 

 

82,864

 

 

 

77,241

 

 

 

166,877

 

 

 

155,443

 

Income (loss) from operations

 

 

10,087

 

 

 

(18

)

 

 

12,781

 

 

 

(4,456

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

174

 

 

 

1,114

 

 

 

351

 

 

 

2,096

 

Interest expense

 

 

(790

)

 

 

(1,195

)

 

 

(1,673

)

 

 

(2,475

)

Foreign exchange income (expense) and other, net

 

 

1,161

 

 

 

(704

)

 

 

2,924

 

 

 

252

 

Total other income (expense), net

 

 

545

 

 

 

(785

)

 

 

1,602

 

 

 

(127

)

Income (loss) before income taxes

 

 

10,632

 

 

 

(803

)

 

 

14,383

 

 

 

(4,583

)

Provision for income taxes

 

 

582

 

 

 

118

 

 

 

1,195

 

 

 

348

 

Net income (loss)

 

$

10,050

 

 

$

(921

)

 

$

13,188

 

 

$

(4,931

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per ordinary share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

(0.01

)

 

$

0.21

 

 

$

(0.08

)

Diluted

 

$

0.15

 

 

$

(0.01

)

 

$

0.20

 

 

$

(0.08

)

Weighted-average number of ordinary shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

63,517

 

 

 

61,829

 

 

 

63,268

 

 

 

61,638

 

Diluted

 

 

65,581

 

 

 

61,829

 

 

 

65,114

 

 

 

61,638

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Six months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

 

$

10,050

 

 

$

(921

)

 

$

13,188

 

 

$

(4,931

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses on investments, net of tax

 

 

 

 

 

(37

)

 

 

 

 

 

(7

)

Change in foreign currency translation adjustment

 

 

2,091

 

 

 

1,022

 

 

 

5,991

 

 

 

2,555

 

Total other comprehensive income

 

 

2,091

 

 

 

985

 

 

 

5,991

 

 

 

2,548

 

Comprehensive income (loss)

 

$

12,141

 

 

$

64

 

 

$

19,179

 

 

$

(2,383

)

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


3


 

MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

Three months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of June 30, 2020

 

 

63,269

 

 

$

759

 

 

$

345,029

 

 

$

(80,522

)

 

$

(6,947

)

 

$

258,319

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,050

 

 

 

 

 

 

10,050

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,091

 

 

 

2,091

 

Issuance of ordinary shares upon exercise of share options

 

 

533

 

 

 

6

 

 

 

10,834

 

 

 

 

 

 

 

 

 

10,840

 

Share-based compensation

 

 

 

 

 

 

 

 

13,684

 

 

 

 

 

 

 

 

 

13,684

 

Tax withholding on vesting of RSUs

 

 

 

 

 

 

 

 

(733

)

 

 

 

 

 

 

 

 

(733

)

Vesting of RSUs

 

 

41

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2020

 

 

63,843

 

 

$

766

 

 

$

368,813

 

 

$

(70,472

)

 

$

(4,856

)

 

$

294,251

 

 

 

 

Six months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of March 31, 2020

 

 

62,792

 

 

$

754

 

 

$

325,808

 

 

$

(83,660

)

 

$

(10,847

)

 

$

232,055

 

Net income

 

 

 

 

 

 

 

 

 

 

 

13,188

 

 

 

 

 

 

13,188

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,991

 

 

 

5,991

 

Issuance of ordinary shares upon exercise of share options

 

 

782

 

 

 

9

 

 

 

15,871

 

 

 

 

 

 

 

 

 

15,880

 

Share-based compensation

 

 

 

 

 

 

 

 

27,350

 

 

 

 

 

 

 

 

 

27,350

 

ESPP Purchase

 

 

87

 

 

 

1

 

 

 

3,094

 

 

 

 

 

 

 

 

 

3,095

 

Tax withholding on ESPP purchases and vesting of RSUs

 

 

(3

)

 

 

 

 

 

(3,308

)

 

 

 

 

 

 

 

 

(3,308

)

Vesting of RSUs

 

 

185

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2020

 

 

63,843

 

 

$

766

 

 

$

368,813

 

 

$

(70,472

)

 

$

(4,856

)

 

$

294,251

 

 

 

 

Three months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of June 30, 2019

 

 

61,729

 

 

$

740

 

 

$

281,130

 

 

$

(85,470

)

 

$

(5,292

)

 

$

191,108

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(921

)

 

 

 

 

 

(921

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,022

 

 

 

1,022

 

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(37

)

Issuance of ordinary shares upon exercise of share options

 

 

197

 

 

 

3

 

 

 

1,934

 

 

 

 

 

 

 

 

 

1,937

 

Share-based compensation

 

 

 

 

 

 

 

 

9,908

 

 

 

 

 

 

 

 

 

9,908

 

Tax withholding on vesting of RSUs

 

 

 

 

 

 

 

 

(397

)

 

 

 

 

 

 

 

 

(397

)

Vesting of RSUs

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2019

 

 

61,953

 

 

$

743

 

 

$

292,575

 

 

$

(86,391

)

 

$

(4,307

)

 

$

202,620

 

 

 

 

Six months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of March 31, 2019

 

 

61,158

 

 

$

734

 

 

$

263,388

 

 

$

(83,632

)

 

$

(6,855

)

 

$

173,635

 

Cumulative effect adjustment ASU 2016-02 (1)

 

 

 

 

 

 

 

 

 

 

 

2,172

 

 

 

 

 

 

2,172

 

Net loss