Put simply, the company did miss on fourth quarter earnings by posting a $0.05 loss per share based on 58.3 mln diluted shares outstanding.
Management highlighted that capital expenditures were higher than normal at $12.9 mln, the result of the build-out of Mimecast’s Lexington facilities and its German data centers. The company does not expect these expenses to recur in 2019.
Gross profit percentage dipped slightly on a sequential basis, down 100 basis points, to 73% in the fourth quarter of 2018, and Mimecast reported adjusted EBITDA of $7.2 mln, representing an adjusted EBITDA margin of 9.8% up from 6.8% a year ago.
Revenues beat market expectations with growth of 40% to $73.4 mln. Aiding revenue growth was Mimecast’s ability to continue to add new customers. The company added 1,200 new customers in the quarter, bringing its total customer count to 30,400 globally.
The company’s Targeted Threat Protection also aided the solid Q4 result as the business saw 1,800 customers purchasing the service. In total, 56% of Mimecast’s customers are now using Targeted Threat Protection. Also, a total of 31% of customers used Mimecast in conjunction with Microsoft Office 365 during Q4 compared to 21% this time last year.
The good time didn’t stop there, though, as Mimecast gave better than expected guidance. As a caveat, Mimecast’s first quarter report will be the first report which follows the ASC 606 reporting method. Many on the Street are suggesting this new accounting method may adversely impact revenues at the expense of operating margins.
To that end, Mimecast sees a favorable impact from ASC 606 to commission expense in the current year in the realm of about $15 mln. Management also suggested on the conference call that it would be reasonable to take into account that the company’s adjusted EBITDA could be higher than expected off the back of the ASC 606 accounting change. Speaking to the revenue impact, management stated that ASC 606 may have a “minimally negative effect on our fiscal 2019 revenue.”
Mimecast’s first quarter outlook came in ahead of market expectations with guidance for constant currency revenue growth in the range of 26-28% with revenues between $76.3-77.1 mln. Also, adjusted EBITDA for the first quarter is expected between $9.0-10.0 mln.
For the fiscal year 2019 Mimecast also sees revenues coming in ahead of market views. Revenue is expected to be in the range of $327.0-338.0 mln or 23-27% revenue growth in constant currency. Foreign exchange rate fluctuations are positively impacting this guidance by an estimated $6.3 mln. The company see adjusted EBITDA in the range of $49.0-51.0 mln.
All around strength propelled MIME stock to all-time highs this morning. Investors have since then come back down to earth a bit, trimming 6.2% opening gains to just 1.5% at this juncture. Even with the slight intraday pullback off highs Mimecast still boasts gains better than 40% YTD.
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