Barracuda Reports Third Quarter Fiscal 2018 Results

CAMPBELL, Calif., Jan. 8, 2018 /PRNewswire/ -- Barracuda Networks, Inc. (NYSE: CUDA), a leading provider of cloud-enabled security and data protection solutions, today announced results for its third quarter fiscal 2018, that ended November 30, 2017.

"We delivered a strong third quarter driven by continued momentum in our core focus areas," said BJ Jenkins, president and CEO. "As we announced in November, we entered into a definitive agreement to be acquired by leading private equity investment firm Thoma Bravo, LLC in an all-cash transaction valued at $27.55 per share, or approximately $1.6 billion. The proposed transaction is expected to close before our fiscal year end of February 28, 2018."

Third Quarter Fiscal 2018 Financial Summary

    --  Total revenue increased 7% to $94.7 million, compared with $88.8 million
        in the third quarter of fiscal 2017. Subscription revenue grew to $77.3
        million, up 13% from $68.3 million in the third quarter of fiscal 2017,
        representing 82% of total revenue, and appliance revenue was $17.5
        million, compared with $20.5 million in the third quarter of fiscal
        2017.
    --  Gross billings were $110.6 million, compared with $100.4 million in the
        third quarter of fiscal 2017. Billings for core products increased 24%
        to $76.6 million, compared with $61.6 million in the third quarter of
        fiscal 2017. Excluding Sonian, which Barracuda acquired during the
        quarter, billings for core products increased 22% to $75.5 million. The
        number of active subscribers grew 16% to over 360,000 as of November 30,
        2017. The annualized renewal rate from subscriptions on a dollar basis
        was 101%.
    --  GAAP net income was $7.8 million, or $0.14 per share, based on a diluted
        share count of 55.0 million, compared to a GAAP net income of $1.8
        million, or $0.03 per share, in the third quarter of fiscal 2017.
    --  Non-GAAP net income was $11.6 million, or $0.21 per share, based on a
        diluted share count of 55.0 million. Non-GAAP net income excludes $9.3
        million in stock-based compensation expense, $0.4 million in income tax
        benefits, $1.6 million in amortization of intangibles, $7.7 million in
        other net income that includes a gain of $7.4 million from the sale of
        the SignNow business and $0.9 million in acquisition and other benefits.

The reconciliation between non-GAAP and their most closely comparable GAAP equivalent is contained in the tables below. Barracuda will not hold an earnings conference call or provide financial guidance.

Forward-Looking Statements
This announcement contains forward-looking statements related to our pending acquisition by Thoma Bravo, LLC and the potential timing of the acquisition. The company undertakes no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our filings with the Securities and Exchange Commission, including, without limitation, under the captions: "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk Factors," which are on file with the Securities and Exchange Commission.

Non-GAAP Financial Measures
Barracuda provides all financial information required in accordance with generally accepted accounting principles (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release non-GAAP net income, non-GAAP operating income, non-GAAP gross margins, non-GAAP operating expenses, adjusted EBITDA and free cash flow. In preparing our non-GAAP information, we have excluded certain amounts as set forth in the attached financial tables and footnotes. We believe that excluding these items provides both management and investors with additional insight into our current operations and the trends affecting the company. In particular, management finds it useful to exclude these items in order to more readily correlate the company's operating activities with the company's ability to generate cash from operations. Accordingly, management uses these non-GAAP measures, along with the comparable GAAP information, in evaluating our historical performance and in planning our future business activities. Please note that our non-GAAP measures may be different than those used by other companies. The additional non-GAAP financial information we present should be considered in conjunction with, and not as a substitute for, our financial information presented in accordance with GAAP. We have provided reconciliations of these non-GAAP measures to their comparable GAAP measures for the periods presented in this release, which exclude certain amounts as set forth in the attached financial tables and footnotes for these periods. These measures should only be used to evaluate the company's results of operations in conjunction with the corresponding GAAP measures for comparable financial information and understanding of the company's ongoing performance as a business. Barracuda uses both GAAP and non-GAAP measures to evaluate and manage its operations.

Beginning in the third quarter of fiscal 2017, we modified our reporting practices and our historical presentation of adjusted EBITDA and free cash flow. We no longer adjust for changes in deferred revenue and associated deferred costs in our calculation of adjusted EBITDA, and for free cash flow we will not adjust for the cash payment impact of acquisition and other charges. Prior period information has been recast to conform to the adjusted calculations.

About Barracuda Networks, Inc. (NYSE: CUDA)
Barracuda (NYSE: CUDA) simplifies IT with cloud-enabled solutions that empower customers to protect their networks, applications and data, regardless of where they reside. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployment configurations. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data protection. For additional information, please visit barracuda.com.

Barracuda Networks, Barracuda, and the Barracuda Networks logo are registered trademarks of Barracuda Networks, Inc. in the US and other countries.

Contacts:
Investor Relations:
Maria Riley; +1 415-217-7722; ir@barracuda.com
Corporate Communications: Mary Catherine Petermann; +1 404-307-6290; mc@barracuda.com


                                               Barracuda Networks, Inc.

                                         Condensed Consolidated Balance Sheets

                                                    (in thousands)

                                                      (Unaudited)


                                                    As of November             As of February
                                                      30, 2017 (1)                     28, 2017
                                                       -----------                     --------

    Assets

    Current assets:

    Cash and cash equivalents                                          $96,894                     $120,194

    Marketable securities                                   80,850                          79,915

    Accounts receivable, net of
     allowance for doubtful
     accounts                                               45,229                          40,560

    Inventories, net                                         8,259                           5,847

    Deferred costs                                          34,352                          32,598

    Other current assets                                    10,208                          16,295
                                                            ------                          ------

    Total current assets                                   275,792                         295,409

    Property and equipment, net                             30,824                          29,979

    Deferred costs, non-current                             30,502                          27,285

    Deferred income taxes, non-
     current                                                   704                           1,554

    Other non-current assets                                21,646                           8,607

    Intangible assets, net                                  52,111                          32,145

    Goodwill                                                98,135                          69,795
                                                            ------                          ------

    Total assets                                                      $509,714                     $464,774
                                                                      ========                     ========

    Liabilities and stockholders' equity

    Current liabilities:

    Accounts payable                                                   $11,243                      $11,439

    Accrued payroll and related
     benefits                                               12,803                          13,593

    Other accrued liabilities                               19,089                          12,942

    Deferred revenue                                       247,330                         239,796

    Note payable                                                 -                          4,115
                                                               ---                          -----

    Total current liabilities                              290,465                         281,885

    Long-term liabilities:

    Deferred revenue, non-current                          170,415                         167,286

    Deferred income taxes, non-
     current                                                 3,293                           2,803

    Other long-term liabilities                              7,394                           6,377

    Stockholders' equity:

    Common stock                                                54                              53

    Additional paid-in capital                             393,048                         370,745

    Accumulated other comprehensive
     loss                                                  (3,199)                        (5,226)

    Accumulated deficit                                  (351,756)                      (359,149)
                                                          --------                        --------

    Total stockholders' equity                              38,147                           6,423
                                                            ------                           -----

    Total liabilities and
     stockholders' equity                                             $509,714                     $464,774
                                                                      ========                     ========

        ______________________


    (1)  As of March 1, 2017, we adopted ASU 2016-09 which allowed for
         an accounting policy election to either estimate the number
         of share-based awards that are expected to vest or account
         for forfeitures when they occur. We elected to account for
         forfeitures when they occur and adopted this change on a
         modified retrospective basis. As a result, we recorded the
         cumulative effect of the change as a $0.4 million increase to
         the March 1, 2017 opening accumulated deficit balance on the
         condensed consolidated balance sheets.


                                                                                   Barracuda Networks, Inc.

                                                                         Condensed Consolidated Statements of Income

                                                                         (in thousands, except per share information)

                                                                                         (Unaudited)


                                                   Three Months Ended November 30,                     Nine Months Ended November 30,

                                                   2017                    2016                    2017                    2016
                                                   ----                    ----                    ----                    ----

    Revenue:

    Appliance                                              $17,459                                        $20,457                      $56,071  $62,824

    Subscription                                 77,288                            68,349                              227,180          200,566
                                                 ------                            ------                              -------          -------

    Total revenue                                94,747                            88,806                              283,251          263,390

    Cost of revenue                              22,098                            21,098                               70,944           61,579
                                                 ------                            ------                               ------           ------

    Gross profit                                 72,649                            67,708                              212,307          201,811

    Operating expenses:

    Research and development                     20,616                            18,627                               59,412           56,280

    Sales and marketing                          34,988                            33,368                              109,769           96,842

    General and administrative                   12,366                            10,217                               33,648           31,958


    Total operating expenses                     67,970                            62,212                              202,829          185,080
                                                 ------                            ------                              -------          -------

    Income from operations                        4,679                             5,496                                9,478           16,731

    Other income, net                             7,714                           (2,374)                               10,022              131
                                                  -----                            ------                               ------              ---

    Income before income taxes                   12,393                             3,122                               19,500           16,862

    Provision for income taxes                  (4,610)                          (1,329)                              (7,491)         (9,848)
                                                 ------                            ------                               ------           ------

    Net income                                              $7,783                                         $1,793                      $12,009   $7,014
                                                            ======                                         ======                      =======   ======

    Net income per share:

    Basic                                                    $0.15                                          $0.03                        $0.23    $0.13

    Diluted                                                  $0.14                                          $0.03                        $0.22    $0.13

    Weighted-average shares used to compute net
     income per share:

    Basic                                        53,378                            52,457                               53,098           52,336

    Diluted                                      54,995                            53,995                               54,645           53,391


                                                                                      Barracuda Networks, Inc.

                                                                          Condensed Consolidated Statements of Cash Flows

                                                                                           (in thousands)

                                                                                            (Unaudited)


                                                     Three Months Ended November 30,                            Nine Months Ended November 30,

                                                     2017                         2016 (2)                     2017                2016 (2)
                                                     ----                          -------                     ----                 -------

    Operating activities

    Net income                                                $7,783                                           $1,793                             $12,009    $7,014

    Adjustments to reconcile net income to net
     cash provided by operating activities:

    Depreciation, amortization
     and impairment expense                         4,171                              3,975                                12,716                  12,442

    Stock-based compensation
     expense                                        9,332                              9,217                                26,343                  25,050

    Excess tax benefits from
     equity compensation plans
     (1)                                               -                           (1,232)                                    -                (2,023)

    Deferred income taxes                             354                               (83)                                1,158                     391

    Gain on sale of business                      (7,382)                                 -                              (7,382)                      -

    Other                                             349                                173                                    88                   (555)

    Changes in operating assets and liabilities:

    Accounts receivable, net                      (1,213)                           (5,786)                              (1,531)                (3,054)

    Inventories, net                              (1,741)                             1,014                               (2,485)                    931

    Income taxes, net                               2,472                              (460)                               10,594                   3,138

    Deferred costs                                  (556)                               227                               (5,294)                    567

    Other assets                                  (1,362)                               106                               (6,389)                  (469)

    Accounts payable                                2,980                              1,790                                  (63)                (4,889)

    Accrued payroll and related
     benefits                                       1,270                              (228)                                  629                     898

    Other liabilities                               2,438                                116                                 1,957                   (646)

    Deferred revenue                                4,810                              4,460                                12,565                   8,916
                                                    -----                              -----                                ------                   -----

    Net cash provided by
     operating activities                          23,705                             15,082                                54,915                  47,711

    Investing activities

    Purchases of marketable
     securities                                  (11,041)                          (37,784)                              (32,810)               (59,561)

    Proceeds from the sale of
     marketable securities                          8,570                              1,236                                20,820                  11,530

    Proceeds from the maturity
     of marketable securities                       2,685                              5,572                                11,027                  13,590

    Purchases of non-marketable
     investments                                     (56)                                 -                              (4,056)                  (636)

    Purchases of property and
     equipment                                    (1,329)                           (1,296)                              (9,145)                (4,265)

    Purchases of intangible
     assets                                             -                             (374)                                    -                (1,374)

    Business combinations, net
     of cash acquired                            (51,162)                                 -                             (51,668)                  (243)

    Sale of business                                2,000                                  -                                2,000                       -

    Payment for the sale of net
     liabilities                                        -                                 -                                (800)                      -
                                                      ---                               ---                                 ----                     ---

    Net cash used in investing
     activities                                  (50,333)                          (32,646)                              (64,632)               (40,959)

    Financing activities

    Proceeds from issuance of
     common stock                                   1,353                              2,556                                 4,362                   7,425

    Taxes paid related to net
     share settlement of equity
     awards                                       (3,349)                           (3,459)                              (7,823)                (6,003)

    Repurchases of common stock                         -                                 -                              (6,546)                (7,241)

    Excess tax benefits from
     equity compensation plans
     (1)                                               -                             1,232                                     -                  2,023

    Repayment of employee loans,
     net of loans extended                           (53)                             (120)                                 (23)                  (122)

    Repayment of note payable                           -                              (67)                              (4,115)                  (200)

    Payments of acquisition-
     related liabilities                                -                                 -                                (742)                      -
                                                      ---                               ---                                 ----                     ---

    Net cash provided by (used
     in) financing activities                     (2,049)                               142                              (14,887)                (4,118)

    Effect of exchange rate
     changes                                            2                              (638)                                1,337                   (175)
                                                      ---                               ----                                 -----                    ----

    Net increase (decrease) in
     cash, cash equivalents and
     restricted cash                             (28,675)                          (18,060)                              (23,267)                  2,459

    Cash, cash equivalents and
     restricted cash at
     beginning of period                          126,245                            139,173                               120,837                 118,654
                                                  -------                            -------                               -------                 -------

    Cash, cash equivalents and
     restricted cash at end of
     period                                                  $97,570                                         $121,113                             $97,570  $121,113
                                                             =======                                         ========                             =======  ========

        ______________________


    (1) As of March 1, 2017, we adopted ASU 2016-09 which required any
        excess tax benefits to be classified as an operating activity.
        Prior to the new standard, we were required to present excess
        tax benefits as a cash inflow from financing activities with a
        corresponding cash outflow from operating activities. We
        elected to apply the amendment related to the presentation of
        excess tax benefits on the statements of cash flows
        prospectively, while the prior period presented has not been
        adjusted.


    (2) We early adopted ASU 2016-18 which requires that a statement of
        cash flows explain the change during the period for the total
        of cash, cash equivalents and restricted cash. Therefore,
        restricted cash has been included with cash and cash
        equivalents when reconciling the beginning-of-period and end-
        of-period total amounts presented and has been applied
        retrospectively to the prior period presented. Net cash flows
        for the three and nine months ended November 30, 2016 did not
        significantly change as a result.


                                                                  Barracuda Networks, Inc.

                                               Reconciliation of Selected GAAP to Non-GAAP Financial Measures

                                                                       (in thousands)

                                                                        (Unaudited)


                         Three Months Ended November 30,                   Nine Months Ended November 30,

                              2017                    2016                    2017                          2016
                              ----                    ----                    ----                          ----

    GAAP cost of revenue              $22,098                                        $21,098                      $70,944   $61,579

    Amortization of
     intangible assets
     (1)                    1,105                             1,219                              3,546              3,752

    Depreciation expense
     (2)                    1,869                             1,467                              5,375              4,644

    Stock-based
     compensation
     expense (3)               550                               323                              1,472                959

    Acquisition and
     other charges (4)       (865)                                -                              (18)                 -
                              ----                               ---                               ---                ---

    Non-GAAP cost of
     revenue                          $19,439                                        $18,089                      $60,569   $52,224
                                      =======                                        =======                      =======   =======

    GAAP sales and
     marketing expense                $34,988                                        $33,368                     $109,769   $96,842

    Amortization of
     intangible assets
     (1)                      491                               536                              1,503              1,735

    Depreciation expense
     (2)                       91                                74                                250                182

    Stock-based
     compensation
     expense (3)             2,426                             2,211                              7,960              6,002
                             -----

    Non-GAAP sales and
     marketing expense                $31,980                                        $30,547                     $100,056   $88,923
                                      =======                                        =======                     ========   =======

    GAAP research and
     development expense              $20,616                                        $18,627                      $59,412   $56,280

    Depreciation expense
     (2)                      122                               126                                427                417

    Stock-based
     compensation
     expense (3)             4,272                             3,737                             10,081              8,809

    Acquisition and
     other charges (4)           -                                -                             (160)               217
                               ---                              ---                              ----                ---

    Non-GAAP research
     and development
     expense                          $16,222                                        $14,764                      $49,064   $46,837
                                      =======                                        =======                      =======   =======

    GAAP general and
     administrative
     expense                          $12,366                                        $10,217                      $33,648   $31,958

    Depreciation expense
     (2)                      495                               553                              1,615              1,712

    Stock-based
     compensation
     expense (3)             2,083                             2,946                              6,830              9,280

    Acquisition and
     other charges (4)       1,746                               166                              2,833                750
                             -----                               ---                              -----                ---

    Non-GAAP general
     and administrative
     expense                           $8,042                                         $6,552                      $22,370   $20,216
                                       ======                                         ======                      =======   =======

    GAAP total expense                $90,068                                        $83,310                     $273,773  $246,659

    Amortization of
     intangible assets
     (1)                    1,596                             1,755                              5,049              5,487

    Depreciation expense
     (2)                    2,577                             2,220                              7,667              6,955

    Stock-based
     compensation
     expense (3)             9,331                             9,217                             26,343             25,050

    Acquisition and
     other charges (4)         881                               166                              2,655                967
                               ---                               ---                              -----                ---

    Non-GAAP total
     expense                          $75,683                                        $69,952                     $232,059  $208,200
                                      =======                                        =======                     ========  ========

    Depreciation expense
     (2)                    2,577                             2,220                              7,667              6,955
                             -----                             -----                              -----              -----

    Non-GAAP total
     expense including
     depreciation                     $78,260                                        $72,172                     $239,726  $215,155
                                      =======                                        =======                     ========  ========


                                                                Barracuda Networks, Inc.

                                             Reconciliation of Selected GAAP to Non-GAAP Financial Measures

                                                      (in thousands, except per share information)

                                                                      (Unaudited)


                            Three Months Ended November 30,                           Nine Months Ended November 30,

                            2017                    2016                    2017                    2016
                            ----                    ----                    ----                    ----

    GAAP operating
     income                          $4,679                                         $5,496                             $9,478  $16,731

    Amortization of
     intangible assets
     (1)                  1,596                             1,755                                5,049                  5,487

    Stock-based
     compensation
     expense (3)           9,331                             9,217                               26,343                 25,050

    Acquisition and
     other charges (4)       881                               166                                2,655                    967
                             ---                               ---                                -----                    ---

    Non-GAAP operating
     income                         $16,487                                        $16,634                            $43,525  $48,235
                                    =======                                        =======                            =======  =======

    GAAP net income                  $7,783                                         $1,793                            $12,009   $7,014

    Amortization of
     intangible assets
     (1)                  1,596                             1,755                                5,049                  5,487

    Stock-based
     compensation
     expense (3)           9,331                             9,217                               26,343                 25,050

    Acquisition and
     other charges (4)       881                               166                                2,655                    967

    Income tax effect on
     non-GAAP
     exclusions (5)        (353)                          (3,662)                              (5,663)               (4,633)

    Other income
     adjustments (6)     (7,658)                            2,378                              (9,702)                  (96)
                          ------                             -----                               ------                    ---

    Non-GAAP net income             $11,580                                        $11,647                            $30,691  $33,789
                                    =======                                        =======                            =======  =======

    Non-GAAP diluted
     earnings per share
     (7)                             $0.21                                          $0.22                              $0.56    $0.63

    Weighted-average
     shares used to
     compute diluted
     earnings per share   54,995                            53,995                               54,645                 53,391

          ______________________


     (1) Amortization of Intangible Assets. We provide non-GAAP
          information which excludes expenses for the amortization of
          intangible assets, as well as certain losses on disposal and
          impairment of such assets that primarily relate to purchased
          intangible assets associated with our acquisitions. We believe
          that eliminating this expense from our non-GAAP measures is
          useful to investors because the amortization of intangible
          assets can be inconsistent in amount and frequency and is
          significantly impacted by the timing and magnitude of our
          acquisition transactions, which also vary in frequency from
          period to period. Accordingly, we analyze the performance of
          our operations in each period without regard to such expenses.
         ---------------------------------------------------------------


     (2) Depreciation Expense. We provide non-GAAP information which
          excludes depreciation expense related to the amortization of
          property and equipment, as well as certain losses from disposal
          of such assets. We believe that eliminating this expense from
          our non-GAAP measures is useful to investors because the
          acquisition of property and equipment, and the corresponding
          depreciation expense, can be inconsistent in amount and can
          vary from period to period.
         ----------------------------------------------------------------


     (3) Stock-Based Compensation Expense. We provide non-GAAP
          information which excludes expenses for stock-based
          compensation. We believe the exclusion of stock-based
          compensation expense allows for financial results that are more
          indicative of our continuing operations. We also believe that
          the exclusion of stock-based compensation expense provides for
          a better comparison of our operating results to prior periods
          and to our peer companies as the calculations of stock-based
          compensation vary from period to period and company to company
          due to different valuation methodologies, subjective
          assumptions and the variety of award types.
         ----------------------------------------------------------------


     (4) Acquisition and Other Charges. We exclude certain expense items
          resulting from acquisitions and other charges, which we believe
          are non-recurring, infrequent, and/or unusual in nature, can
          vary significantly in amount and frequency, and are unrelated
          to our ongoing operating performance. We believe that adjusting
          for these charges allows us to better compare results from
          period to period in order to assess the ongoing operating
          results of our business. The charges include: (i) acquisition-
          related expenses for legal, accounting, and other professional
          fees, integration costs, fair value remeasurements of
          contingent consideration obligations and contingent
          consideration payments made under the terms of acquisition
          agreements, and (ii) other costs, losses and gains that are
          non-recurring, infrequent, and/or unusual in nature, such as
          expenses incurred in connection with litigation, export
          compliance, intellectual property settlement, indirect tax
          costs, and other matters, as well as a gain resulting from the
          disposition of net liabilities related to our CudaCam product
          offerings.
         ----------------------------------------------------------------


     (5) Income Tax Effect of Non-GAAP Exclusions. We believe providing
          financial information with and without the income tax effect of
          excluding items related to our non-GAAP financial measures
          provide our management and users of the financial statements
          with better clarity regarding the ongoing performance and
          future liquidity of our business. Excluded items include, but
          are not limited to: (i) amortization expense of intangible
          assets, (ii) stock-based compensation expense, (iii)
          acquisition and other charges, and (iv) quarterly changes to
          the valuation allowance previously established.
         ---------------------------------------------------------------


     (6) Other Income Adjustments. We provide non-GAAP information that
          excludes the effect of certain other income and losses. These
          adjustments may consist of realized gains and losses from the
          sale of marketable securities, foreign currency remeasurement
          gains and losses, impairment charges related to non-marketable
          investments and gains or losses from divestiture of our
          business unit; specifically, a gain of $7.4 million that
          resulted from the sale of our SignNow business during the third
          quarter of fiscal 2018. For all non-functional currency
          account balances, the remeasurement of such balances to the
          functional currency will result in either a foreign exchange
          gain or a loss which is recorded in other income, net. We
          believe that eliminating these items from our non-GAAP
          measures is useful to investors, because these items can be
          inconsistent in amount and can vary from period to period.
         ---------------------------------------------------------------


     (7) Non-GAAP Diluted Earnings Per Share. We provide non-GAAP
          diluted earnings per share. Non-GAAP diluted earnings per
          share is calculated based on our non-GAAP net income divided
          by the weighted-average diluted shares outstanding for the
          period.
         -------------------------------------------------------------


                                                                   Barracuda Networks, Inc.

                                                     Reconciliation of GAAP Net Income to Adjusted EBITDA

                                                                        (in thousands)

                                                                         (Unaudited)


                               Three Months Ended November 30,                   Nine Months Ended November 30,

                                    2017                    2016                    2017                        2016
                                    ----                    ----                    ----                        ----

    GAAP net income                          $7,783                                         $1,793                   $12,009   $7,014

    Other income, net            (7,714)                            2,374                            (10,022)          (131)

    Provision for income taxes     4,610                             1,329                               7,491          9,848

    Acquisition and other
     charges                         881                               166                               2,655            967

    Stock-based compensation
     expense                       9,331                             9,217                              26,343         25,050

    Amortization of intangible
     assets                        1,596                             1,755                               5,049          5,487

    Depreciation expense           2,577                             2,220                               7,667          6,955
                                   -----                             -----                               -----          -----

    Adjusted EBITDA (1)                     $19,064                                        $18,854                   $51,192  $55,190
                                            =======                                        =======                   =======  =======

        ______________________


    (1) Adjusted EBITDA. Beginning in the third quarter of fiscal 2017,
        we modified our reporting practices and our historical
        presentation of adjusted EBITDA by no longer adjusting for
        changes in deferred revenue and associated deferred costs.
        These changes do not impact our current and historical
        presentation of GAAP results. Prior period information has been
        recast to conform to the adjusted calculation. We define
        adjusted EBITDA as net income plus non-cash and non-operating
        charges which include: (i) other income, net, (ii) provision
        for income taxes, (iii) acquisition and other charges, (iv)
        stock-based compensation expense, (v) amortization of
        intangible assets, including certain losses on disposal and
        impairment of intangible assets, and (vi) depreciation expense,
        including certain losses on disposal of fixed assets. We
        believe adjusted EBITDA provides an indication of profitability
        from our operations, and provides a consistent measure of our
        performance from period to period. The other income, net
        includes a gain of $7.4 million that resulted from the sale of
        our SignNow business during the third quarter of fiscal 2018
        ---------------------------------------------------------------


                                                                Barracuda Networks, Inc.

                                      Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow

                                                                     (in thousands)

                                                                       (Unaudited)


                             Three Months Ended November 30,                           Nine Months Ended November 30,

                             2017                    2016                    2017                    2016
                             ----                    ----                    ----                    ----

    GAAP cash flows from
     operating activities            $23,705                                        $15,082                            $54,915 $47,711

    Purchases of property
     and equipment        (1,329)                          (1,296)                              (9,145)               (4,265)

    Free cash flow (1)               $22,376                                        $13,786                            $45,770 $43,446
                                     =======                                        =======                            ======= =======

         ______________________


    (1)  Free Cash Flow. Beginning in the third quarter of fiscal 2017,
         we modified our reporting practices and our historical
         presentation of adjusted free cash flow by no longer adjusting
         free cash flow for the cash payment impact of acquisition and
         other charges. These changes do not impact our current and
         historical presentation of GAAP results. Prior period
         information has been recast to conform to the adjusted
         calculation. We define free cash flow as cash flows from
         operating activities less the purchases of property and
         equipment. We believe free cash flow is an important liquidity
         measure that reflects the cash generated by the business after
         the purchase of property and equipment that can then be used
         for, among other things, strategic acquisitions, investments in
         the business, and funding ongoing operations.
        ---------------------------------------------------------------


                                                                      Barracuda Networks, Inc.

                                                          Reconciliation of GAAP Revenue to Gross Billings

                                                                           (in thousands)

                                                                            (Unaudited)


                                  Three Months Ended November 30,                             Nine Months Ended November 30,

                                  2017                               2016                      2017                   2016
                                  ----                               ----                      ----                   ----

    GAAP Revenue                           $94,747                                           $88,806                          $283,251  $263,390

    Total deferred revenue,
     end of period             417,745                              401,300                               417,745               401,300

    Less: total deferred
     revenue, beginning of
     period                  (413,665)                           (398,878)                             (407,082)             (392,774)

    Deferred revenue
     adjustments                11,806                                9,171                                30,441                26,982
                                ------                                -----                                ------                ------

    Total change in deferred
     revenue and adjustments    15,886                               11,593                                41,104                35,508
                                ------                               ------                                ------                ------

    Gross billings (1)(2)                 $110,633                                          $100,399                          $324,355  $298,898
                                          ========                                          ========                          ========  ========

         ______________________


    (1)  Gross Billings. We define gross billings as total revenue plus
         the change in deferred revenue and other adjustments, which
         primarily consist of returns and reserves with respect to the
         30-day right of return we provide to customers, as well as
         rebates for certain channel partner activities. We believe that
         gross billings provide insight into the sales of our solutions
         and performance of our business.
        ---------------------------------------------------------------


    (2)  In order to determine how our business performed exclusive of
         the effect of foreign currency fluctuations, we compare the
         percentage change in our gross billings from one period to
         another using a constant currency. To present this gross
         billings information, the current and comparative prior period
         results for entities that operate in other than U.S. dollars
         are converted into U.S. dollars at constant exchange rates. For
         example, the average exchange rates for the second quarter of
         fiscal 2018 were used to convert current and comparable prior
         period gross billings rather than the actual exchange rates in
         effect during the respective period.

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SOURCE Barracuda Networks, Inc.