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MINDBODY Reports First Quarter 2018 Financial Results

Total Revenue Grows 28% Year over Year, ARPS Grows 31%Year over Year

Substantive Acquisitions Set the Company up for Future Growth

SAN LUIS OBISPO, Calif., May 08, 2018 (GLOBE NEWSWIRE) -- MINDBODY, Inc. (NASDAQ:MB), the leading technology platform for the fitness, wellness and beauty services industries, today announced financial results for the first quarter ended March 31, 2018.

“Q1 was a pivotal quarter for MINDBODY,” said Rick Stollmeyer, co-founder and chief executive officer of MINDBODY. “With nearly 45 million consumer bookings on our mobile apps and a more than doubling of promoted offer sales year over year, our consumer marketplace strategy is in full swing. Now, with the acquisitions of FitMetrix, Booker and Frederick we are positioned for an acceleration of consumer adoption and strong growth for years to come.” 

“Our pricing and refined subscriber growth strategy contributed to excellent unit economics and yet another quarter of improving profitability while we continue to invest in our business,” said Brett White, chief operating officer and chief financial officer.

First Quarter 2018 Financial Results

  • Total revenue for the first quarter of 2018 was $53.8 million, a 28% increase year over year.
  • Subscription and services revenue for the first quarter of 2018 was $32.7 million, a 31% increase year over year.
  • Payments revenue for the first quarter of 2018 was $20.2 million, a 21% increase year over year.
  • GAAP net loss for the first quarter of 2018 was $(1.7) million, or $(0.04) per share, compared to a GAAP net loss for the first quarter of 2017 of $(3.9) million, or $(0.10) per share. In the first quarter of 2018 the Company completed the acquisition of FitMetrix, Inc.  In the transaction, the Company acquired the net deferred tax liabilities of FitMetrix. The acquired net deferred tax liabilities will provide a source of income for the Company to realize a portion of its deferred tax assets, for which a valuation allowance is no longer needed, resulting in an income tax benefit of $2.1 million for the first quarter of 2018.
  • Non-GAAP net income1 for the first quarter of 2018 was $2.9 million, or $0.06 per share, compared to a non-GAAP net loss for the first quarter of 2017 of $(1.2) million, or $(0.03) per share.
  • Adjusted EBITDA1  for the first quarter of 2018 was $4.6 million, compared to Adjusted EBITDA for the first quarter of 2017 of $1.1 million.

Recent Business Highlights

  • Released a new and improved version of the MINDBODY app. Combined class lists and easy-to-use filters make it easier for people to explore and book a wide variety of workouts offered at the time, place and price that best fit their lifestyles.
  • Completed the acquisition of Booker Software, Inc. on April 2, 2018.  Booker is a leading cloud-based business management platform for salons and spas, and is the provider of Frederick, a fast-growing, automated marketing software for wellness businesses. The acquisition adds approximately 10,000 salons and spas to the MINDBODY marketplace.
  • Acquired FitMetrix on February 19, 2018, which provides performance tracking integrations with fitness studio equipment and wearables, enabling fitness businesses to deliver a more immersive experience to their clients.

First Quarter Key Metrics

We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs.

   
  As of and for the Quarter Ended March 31, 
2018   2017   YoY
Subscribers (end of period)2 57,909     59,919     (3 )%
Average monthly revenue per subscriber $ 302     $ 230     31 %
Payments volume (in millions) $ 2,245     $ 1,866     20 %
Dollar-based net expansion rate (average for the quarter)3 106 %   108 %    
               

1     A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”
2     Starting the first quarter of 2018, we define subscribers as unique physical locations or individual practitioners who have active subscriptions to services on our platform, as of the end of the period, including subscriptions to FitMetrix services and, beginning in the second quarter of 2018, Booker services.
3     Starting the first quarter of 2018, we calculate our dollar-based net expansion rate using a quarterly average. We believe that this change in methodology for calculating our dollar-based net expansion rate mitigates some of the volatility that can occur when this key metric is calculated using only the last month in the period. Prior periods have been adjusted to conform with this new methodology.

Outlook

For the second quarter and full year 2018, MINDBODY expects to report:

  • Revenue for the second quarter of 2018 in the range of $59.5 million to $61.5 million, representing 35% to 39% growth over the second quarter of 2017.
  • Revenue for the full year of 2018 in the range of $246.0 million to $252.0 million, representing 35% to 38% growth over the full year of 2017.
  • Non-GAAP net loss for the second quarter of 2018 in the range of $(4.5) million to $(3.0) million and weighted average shares outstanding for the second quarter of approximately 47.6 million shares. 
  • Non-GAAP net loss for the full year of 2018 in the range of $(10.0) million to $(6.0) million and weighted average shares outstanding for the full year of approximately 47.8 million shares. 

The outlook has been updated to reflect the acquisitions of FitMetrix and Booker. Non-GAAP net loss excludes estimates for, among others, stock-based compensation expense and acquisition-related expenses, including transaction expenses. A reconciliation of these non-GAAP financial guidance measures to corresponding GAAP financial guidance measures is not available on a forward-looking basis because we do not provide guidance on GAAP net loss and are not able to present the various reconciling cash and non-cash items between GAAP net loss and non-GAAP net loss without unreasonable effort. In particular, stock-based compensation expense is impacted by MINDBODY’s future hiring and retention needs, as well as the future fair market value of MINDBODY’s Class A common stock, all of which is difficult to predict and is subject to constant change.  The actual amount of these expenses during 2018 will have a significant impact on MINDBODY’s future GAAP financial results.

Quarterly Conference Call and Related Information

MINDBODY will discuss its quarterly results today at 1:30 p.m. PT (4:30 p.m. ET)

  • Dial in: To access the call, please dial (844) 494-0191, or outside the U.S. (508) 637-5581, with Conference ID# 1051179 at least five minutes prior to the 1:30 p.m. PT start time.
  • Webcast and Related Investor Materials: A live webcast and replay of the call, as well as related investor materials, will be available at http://investors.mindbodyonline.com/ under the Events and Presentations menu.
  • Audio replay: An audio replay will be available between 4:30 p.m. PTMay 8, 2018 and 7:30 p.m. PTMay 15, 2018 by calling (855) 859-2056 or (404) 537-3406 with Passcode 1051179 . The replay will also be available at investors.mindbodyonline.com.

About MINDBODY
MINDBODY, Inc. (NASDAQ:MB) is the leading technology platform for the fitness, wellness and beauty services industries. Local entrepreneurs worldwide use MINDBODY’s integrated software and payments platform to run, market and build their businesses. Consumers use MINDBODY to more easily find, engage and transact with providers in their local communities. For more information on how MINDBODY is helping people lead healthier, happier lives by connecting the world to wellness, visit mindbodyonline.com.

© 2018 MINDBODY, Inc. All rights reserved. MINDBODY, FitMetrix, Frederick, the Enso logo, the Booker logo and Connecting the World to Wellness are trademarks or registered trademarks of MINDBODY Inc. in the United States and/or other countries. Other company and product names may be trademarks of the respective companies with which they are associated.

Forward Looking Statements

This press release and the accompanying conference call contain forward-looking statements including, among others, current estimates of second quarter and full year 2018 revenue, non-GAAP net loss and weighted average shares outstanding, and statements relating to our expectations for our recent acquisitions of FitMetrix and Booker (including its Frederick technology), our go-to-market strategy, the timing of the release of a new feature on MINDBODY web, our partnership with Instagram, and integration plans and investments in the combined business.

These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include risks associated with: continued market acceptance of our platform; engagement of our customers and consumers; our ability to continue to successfully introduce new products and enhance our existing products to meet the needs of our customers and consumers; the return on our strategic investments; our ability to successfully integrate Booker and FitMetrix; our ability to achieve expected synergies and efficiencies of operations between MINDBODY and Booker and FitMetrix; our ability to realize the market opportunities provided by our acquisitions of Booker and FitMetrix; our ability to successfully integrate and maintain Booker's and FitMetrix’s respective technology, products and personnel; our ability to timely develop and achieve an effective go-to-market strategy of our combined services; the impact on the business of Booker and FitMetrix as a result of the acquisitions, including any loss of Booker or FitMetrix customers or key employees; execution of our plans and strategies, including with respect to consumer development, pricing, dynamic pricing, mobile products and features and MINDBODY Promote; any failure of our security measures, including the risk that such measures may be insufficient to secure our customer and consumer data adequately or that we may become subject to attacks that degrade or deny the ability of our customers and consumers to access our platform; our ability to grow and develop our payment processing activities; our ability to timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our solutions are accessible at all times with short or no perceptible load times; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; any decrease in customer demand for our software products, features and/or service offerings; changes in privacy or other regulations that could impact our ability to serve our customers and consumers or adversely impact our monetization efforts; increasing competition; our ability to manage our growth, including internationally; our ability to recruit and retain employees; general economic, market and business conditions; and the risks described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the heading “Risk Factors” in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 1, 2018 and the risks described under the heading “Risk Factors” in our subsequent Quarterly Reports on Form 10-Q, which should be read in conjunction with our financial results and forward-looking statements and are available on the SEC Filings section of the Investor Relations page of our website at investors.mindbodyonline.com/.

All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Non-GAAP Financial Measures

In this press release, MINDBODY has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). We disclose the following historical non-GAAP financial measures in this press release: Adjusted EBITDA, non-GAAP net income (loss), and non-GAAP net income (loss) per share. We use these non-GAAP financial measures internally in analyzing our financial results and evaluating our ongoing operational performance. We believe that these non-GAAP financial measures provide an additional tool for investors to use in understanding and evaluating ongoing operating results and trends in the same manner as our management and board of directors.  Our use of these non-GAAP financial measures has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP.  Because of these and other limitations, you should consider these non-GAAP financial measures along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results. We have provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Adjusted EBITDA

We define Adjusted EBITDA as our net loss before (1) stock-based compensation expense, (2) depreciation and amortization, (3) acquisition-related expenses, including, transaction expenses, (4) income tax provision (benefit), and (5) other expense, net, which consisted of interest income (expense), net, and other income (expense), net.   Prior period acquisition-related expenses were insignificant.  Accordingly, prior periods have not been adjusted to reflect these expenses.

We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.  We have presented Adjusted EBITDA in this press release because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Adjusted EBITDA has a number of limitations, including the following: (1) Adjusted EBITDA excludes stock-based compensation expense, which has been and will continue to be for the foreseeable future a significant recurring expense in MINDBODY’s business; (2) although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (3) Adjusted EBITDA does not reflect the cash requirements for acquisition-related expenses or tax payments; and (4) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Non-GAAP net income (loss) and non-GAAP net income (loss) per share

We define non-GAAP net income (loss) as the respective GAAP balance attributable to common stockholders adjusted for: (1) stock-based compensation expense, (2) amortization of acquired intangible assets, (3) acquisition-related expenses, including, transaction expenses, and (4) partial releases of valuation allowances due to acquisition. Non-GAAP net income per share is calculated as non-GAAP net income divided by the diluted weighted-average shares outstanding. Non-GAAP net loss per share, is calculated as non-GAAP net loss divided by the weighted-average shares outstanding. Prior period acquisition-related expenses were insignificant. Accordingly, prior periods have not been adjusted to reflect these expenses.

These non-GAAP financial measures have a number of limitations, including the following: (1) these non-GAAP financial measures exclude stock-based compensation expense, which has been and will continue to be for the foreseeable future a significant recurring expense in MINDBODY’s business; and (2) other companies, including companies in our industry, may exclude different items in their calculation of these non-GAAP financial measures, which reduces their usefulness as a comparative measure.

 
MINDBODY, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
         
    March 31,   December 31,
    2018   2017
         
ASSETS
Current assets:        
Cash and cash equivalents   $ 217,708     $ 232,019  
Accounts receivable   12,196     10,917  
Deferred commissions, current portion   938      
Prepaid expenses and other current assets   6,393     5,612  
Total current assets   237,235     248,548  
Property and equipment, net   33,185     32,871  
Deferred commissions, non-current portion   2,668      
Intangible assets, net   17,484     7,377  
Goodwill   20,248     11,583  
Other non-current assets   1,246     934  
TOTAL ASSETS   $ 312,066     $ 301,313  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 9,376     $ 7,448  
Accrued expenses and other liabilities   12,827     13,099  
Deferred revenue, current portion   5,949     6,318  
Other current liabilities   1,135     1,828  
Total current liabilities   29,287     28,693  
Deferred revenue, non-current portion   1,499     3,201  
Deferred rent, non-current portion   2,096     1,966  
Financing obligation on leases, non-current portion   14,789     14,932  
Other non-current liabilities   607     585  
Total liabilities   48,278     49,377  
Stockholders' equity:        
Class A common stock, par value of $0.000004 per share; 1,000,000,000 shares authorized,
43,672,907 shares issued and outstanding as of March 31, 2018; 1,000,000,000 shares
authorized, 43,041,405 shares issued and outstanding as of December 31, 2017
  1     1  
Class B common stock, par value of $0.000004 per share; 100,000,000 shares authorized,
3,747,030 shares issued and outstanding as of March 31, 2018; 100,000,000 shares
authorized, 3,901,966 shares issued and outstanding as of December 31, 2017
       
Additional paid-in capital   463,905     454,196  
Accumulated other comprehensive loss   (116 )   (108 )
Accumulated deficit   (200,002 )   (202,153 )
Total stockholders' equity   263,788     251,936  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 312,066     $ 301,313  
                 

 

 
MINDBODY, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
   
  Three Months Ended March 31,
  2018   2017
Revenue(1) $ 53,823     $ 42,214  
Cost of revenue(2) 15,421     12,019  
Gross profit 38,402     30,195  
Operating expenses:      
Sales and marketing(2) 18,105     16,334  
Research and development(2) 11,788     8,648  
General and administrative(2) 12,663     8,686  
Total operating expenses 42,556     33,668  
Loss from operations (4,154 )   (3,473 )
Interest income (expense), net 366     (214 )
Other income (expense), net 39     (80 )
Loss before provision for income taxes (3,749 )   (3,767 )
Income tax provision (benefit) (2,058 )   142  
Net loss $ (1,691 )   $ (3,909 )
Net loss per share, basic and diluted $ (0.04 )   $ (0.10 )
Weighted-average shares used to compute net loss per share, basic and diluted 47,106     40,757  
 
   
(1) Total revenue by category is presented below: Three Months Ended March 31,
Revenue: 2018   2017
Subscription and services $ 32,743     $ 24,953  
Payments 20,229     16,750  
Product and other 851     511  
Total revenue $ 53,823     $ 42,214  
       
(2) Stock-based compensation expense included above was as follows:
  Three Months Ended March 31,
  2018
  2017
Cost of revenue $ 424     $  261  
Sales and marketing 1,144     506  
Research and development 1,312     527  
General and administrative 1,936     1,203  
Total stock-based compensation expense $ 4,816     $ 2,497  
               


 
MINDBODY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
   
  Three Months Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2018   2017
Net loss $ (1,691 )   $ (3,909 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Stock-based compensation expense 4,816     2,090  
Depreciation and amortization 2,648     2,497  
Partial release of valuation allowance due to acquisition (2,133 )    
Other 30     (9 )
Changes in operating assets and liabilities net of effects of acquisitions:      
Accounts receivable (1,012 )   (721 )
Deferred commissions (2,674 )    
Prepaid expenses and other assets (1,036 )   (364 )
Accounts payable 1,089     294  
Accrued expenses and other liabilities (463 )   327  
Deferred revenue 321     652  
Deferred rent 160     176  
Net cash provided by operating activities 55     1,033  
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchase of property and equipment (1,969 )   (1,406 )
Additions to internally developed software (1,043 )    
Acquisition of business, net of cash acquired (15,196 )   (1,450 )
Net cash used in investing activities (18,208 )   (2,856 )
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from exercise of equity awards 3,499     2,408  
Proceeds from employee stock purchase plan 2,006     1,510  
Payment related to shares withheld for taxes (790 )    
Repayment on financing and capital lease obligations (121 )   (100 )
Payment of financing obligation related to HealCode acquisition (750 )    
Other     (33 )
Net cash provided by financing activities 3,844     3,785  
Effect of exchange rate changes on cash and cash equivalents (2 )   115  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,311 )   2,077  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 232,019     85,864  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 217,708     $ 87,941  
               


   
Reconciliation of Adjusted EBITDA:  
  Three Months Ended March 31, 
  2018   2017 
                                 
  (in thousands)
Net loss $ (1,691 )   $ (3,909 )
Stock-based compensation expense               4,816             2,497  
Depreciation and amortization               2,648             2,090  
Acquisition-related expenses               1,311              
Income tax provision (benefit)               (2,058 )           142  
Other (income) expense, net               (405 )           294  
Adjusted EBITDA $ 4,621     $ 1,114  
                                 
Reconciliation of non-GAAP net income (loss):  
  Three Months Ended March 31,
  2018   2017
       
  (in thousands)
GAAP net loss attributable to common stockholders $ (1,691 )   $ (3,909 )
Stock-based compensation expense 4,816     2,497  
Amortization of acquired intangible assets 547     174  
Acquisition-related expenses 1,311      
Partial release of valuation allowance due to acquisition (2,133 )    
Non-GAAP net income (loss) $ 2,850     $   (1,238 )
       
Reconciliation of non-GAAP net income (loss) per share:
  Three Months Ended March 31,
  2018   2017
       
   
GAAP net loss per share, basic and diluted: $ (0.04 )   $ (0.10 )
Non-GAAP adjustments to net loss per share 0.10     0.07  
Non-GAAP adjustments to weighted-average shares used to compute net loss per share      
Non-GAAP net income (loss) per share $ 0.06     $ (0.03 )
       
Reconciliation of non-GAAP diluted weighted-average shares:
  Three Months Ended March 31,
  2018   2017
                               
  (in thousands)
GAAP weighted-average shares used to compute net loss per share, basic and diluted 47,106     40,757  
Potentially dilutive shares 2,454      
Non-GAAP diluted weighted-average shares used to compute non-GAAP net income (loss) per share 49,560     40,757  
         

Contact:

Investor Relations:
Nicole Gunderson
IR@mindbodyonline.com 
888-782-7155

Media Contact:
Jennifer Saxon
jennifer.saxon@mindbodyonline.com 
805-419-2839

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Source: MINDBODY, Inc.