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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 December 31, 2019

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 Stock Market LLC

 

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 January 31, 2020, the registrant had 62,515,514 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 December 31, 2019 and March 31, 2019

1

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2019 and 2018

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2019 and 2018

3

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended December 31, 2019 and 2018

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2019 and 2018

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

40

PART II.

OTHER INFORMATION

41

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 6.

Exhibits

58

Signatures

62

 

 

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 December 31,

 

 

As of March 31,

 

 

 

2019

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

189,863

 

 

$

137,576

 

Short-term investments

 

 

 

 

 

35,941

 

Accounts receivable, net

 

 

80,168

 

 

 

80,953

 

Deferred contract costs, net

 

 

10,705

 

 

 

8,140

 

Prepaid expenses and other current assets

 

 

14,119

 

 

 

25,871

 

Total current assets

 

 

294,855

 

 

 

288,481

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

86,053

 

 

 

94,202

 

Operating lease right-of-use assets

 

 

125,076

 

 

 

 

Intangible assets, net

 

 

34,799

 

 

 

30,623

 

Goodwill

 

 

130,677

 

 

 

107,575

 

Deferred contract costs, net of current portion

 

 

35,533

 

 

 

28,250

 

Other assets

 

 

7,638

 

 

 

5,156

 

Total assets

 

$

714,631

 

 

$

554,287

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,750

 

 

$

9,457

 

Accrued expenses and other current liabilities

 

 

40,253

 

 

 

44,309

 

Deferred revenue

 

 

179,535

 

 

 

163,102

 

Current portion of finance lease obligations

 

 

961

 

 

 

844

 

Current portion of operating lease liabilities

 

 

29,873

 

 

 

 

Current portion of long-term debt

 

 

5,947

 

 

 

4,059

 

Total current liabilities

 

 

269,319

 

 

 

221,771

 

 

 

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

12,686

 

 

 

12,472

 

Long-term finance lease obligations

 

 

592

 

 

 

1,381

 

Operating lease liabilities

 

 

115,559

 

 

 

 

Long-term debt

 

 

88,056

 

 

 

92,797

 

Construction financing lease obligations

 

 

 

 

 

36,650

 

Other non-current liabilities

 

 

3,771

 

 

 

15,581

 

Total liabilities

 

 

489,983

 

 

 

380,652

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

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

   62,485,632 and 61,158,051 shares issued and outstanding as of

   December 31, 2019 and March 31, 2019, respectively

 

 

750

 

 

 

734

 

Additional paid-in capital

 

 

311,191

 

 

 

263,388

 

Accumulated deficit

 

 

(86,185

)

 

 

(83,632

)

Accumulated other comprehensive loss

 

 

(1,108

)

 

 

(6,855

)

Total shareholders' equity

 

 

224,648

 

 

 

173,635

 

Total liabilities and shareholders' equity

 

$

714,631

 

 

$

554,287

 

 

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 December 31,

 

 

Nine months ended December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

110,158

 

 

$

87,611

 

 

$

312,746

 

 

$

248,184

 

Cost of revenue

 

 

28,455

 

 

 

23,258

 

 

 

80,056

 

 

 

66,172

 

Gross profit

 

 

81,703

 

 

 

64,353

 

 

 

232,690

 

 

 

182,012

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

20,801

 

 

 

14,693

 

 

 

59,506

 

 

 

41,950

 

Sales and marketing

 

 

42,753

 

 

 

34,463

 

 

 

127,288

 

 

 

103,371

 

General and administrative

 

 

16,520

 

 

 

13,625

 

 

 

48,723

 

 

 

38,287

 

Restructuring

 

 

 

 

 

 

 

 

 

 

 

(170

)

Total operating expenses

 

 

80,074

 

 

 

62,781

 

 

 

235,517

 

 

 

183,438

 

Income (loss) from operations

 

 

1,629

 

 

 

1,572

 

 

 

(2,827

)

 

 

(1,426

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

727

 

 

 

653

 

 

 

2,823

 

 

 

1,640

 

Interest expense

 

 

(1,106

)

 

 

(1,961

)

 

 

(3,581

)

 

 

(4,056

)

Foreign exchange (expense) income and other, net

 

 

(93

)

 

 

705

 

 

 

159

 

 

 

762

 

Total other income (expense), net

 

 

(472

)

 

 

(603

)

 

 

(599

)

 

 

(1,654

)

Income (loss) before income taxes

 

 

1,157

 

 

 

969

 

 

 

(3,426

)

 

 

(3,080

)

Provision for income taxes

 

 

951

 

 

 

511

 

 

 

1,299

 

 

 

1,991

 

Net income (loss)

 

$

206

 

 

$

458

 

 

$

(4,725

)

 

$

(5,071

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per ordinary share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.00

 

 

$

0.01

 

 

$

(0.08

)

 

$

(0.08

)

Diluted

 

$

0.00

 

 

$

0.01

 

 

$

(0.08

)

 

$

(0.08

)

Weighted-average number of ordinary shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,189

 

 

 

60,141

 

 

 

61,822

 

 

 

59,707

 

Diluted

 

 

63,996

 

 

 

62,537

 

 

 

61,822

 

 

 

59,707

 

 

 

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 December 31,

 

 

Nine months ended December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

 

$

206

 

 

$

458

 

 

$

(4,725

)

 

$

(5,071

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized (losses) gains on investments, net of tax

 

 

(21

)

 

 

(10

)

 

 

(28

)

 

 

86

 

Change in foreign currency translation adjustment

 

 

3,220

 

 

 

(3,717

)

 

 

5,775

 

 

 

(5,581

)

Total other comprehensive income (loss)

 

 

3,199

 

 

 

(3,727

)

 

 

5,747

 

 

 

(5,495

)

Comprehensive income (loss)

 

$

3,405

 

 

$

(3,269

)

 

$

1,022

 

 

$

(10,566

)

 

 

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 December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of September 30, 2019

 

 

61,953

 

 

$

743

 

 

$

292,575

 

 

$

(86,391

)

 

$

(4,307

)

 

$

202,620

 

Net income

 

 

 

 

 

 

 

 

 

 

 

206

 

 

 

 

 

 

206

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,220

 

 

 

3,220

 

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(21

)

Issuance of ordinary shares

 

 

533

 

 

 

7

 

 

 

8,906

 

 

 

 

 

 

 

 

 

8,913

 

Share-based compensation

 

 

 

 

 

 

 

 

9,732

 

 

 

 

 

 

 

 

 

9,732

 

Tax withholding on vesting of restricted share units

 

 

 

 

 

 

 

 

(22

)

 

 

 

 

 

 

 

 

(22

)

Balance as of December 31, 2019

 

 

62,486

 

 

$

750

 

 

$

311,191

 

 

$

(86,185

)

 

$

(1,108

)

 

$

224,648

 

 

 

 

 

Nine months ended December 31, 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

 

 

 

 

 

 

 

 

 

 

 

(4,725

)

 

 

 

 

 

(4,725

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,775

 

 

 

5,775

 

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Issuance of ordinary shares

 

 

1,328

 

 

 

16

 

 

 

19,704

 

 

 

 

 

 

 

 

 

19,720

 

Share-based compensation

 

 

 

 

 

 

 

 

29,655

 

 

 

 

 

 

 

 

 

29,655

 

Tax withholding on vesting of restricted share units

 

 

 

 

 

 

 

 

(1,556

)

 

 

 

 

 

 

 

 

(1,556

)

Balance as of December 31, 2019

 

 

62,486

 

 

$

750

 

 

$

311,191

 

 

$

(86,185

)

 

$

(1,108

)

 

$

224,648

 

 

 

 

Three months ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of September 30, 2018

 

 

60,043

 

 

$

721

 

 

$

233,302

 

 

$

(82,160

)

 

$

(7,115

)

 

$

144,748

 

Net income

 

 

 

 

 

 

 

 

 

 

 

458

 

 

 

 

 

 

458

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,717

)

 

 

(3,717

)

Unrealized losses on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

Issuance of ordinary shares

 

 

307

 

 

 

3

 

 

 

4,192

 

 

 

 

 

 

 

 

 

4,195

 

Share-based compensation

 

 

 

 

 

 

 

 

7,183

 

 

 

 

 

 

 

 

 

7,183

 

Balance as of December 31, 2018

 

 

60,350

 

 

$

724

 

 

$

244,677

 

 

$

(81,702

)

 

$

(10,842

)

 

$

152,857

 

 

 

 

Nine months ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance as of March 31, 2018

 

 

58,950

 

 

$

707

 

 

$

212,839

 

 

$

(106,507

)

 

$

(5,347

)

 

$

101,692

 

Cumulative effect of adjustment ASU 2014-09 (2)