Quick Take

Carbonite ( CARB) announced it has agreed to acquire Webroot for about $618.5 million.

Webroot provides cybersecurity software and services.

With the acquisition, CARB is expanding its focus from increasingly commoditized storage and backup services into cybersecurity offerings.

Target Company

Broomfield, Colorado-based Webroot was founded in 1997 to provide endpoint and networks security as well as security awareness education and threat intelligence services.

Management is headed by President & CEO Mike Potts, who has been with the firm since 2017 and was previously managing partner at Tenacity Partners and President and CEO at Lancope.

Below is an overview video of the Webroot WiFi Security VPN:

Source: Webroot

Webroot’s primary offerings include:

Internet Security Plus
Internet Security Complete
WiFi Security
Endpoint Protection
DNS Protection
Security Awareness Training

Company partners or major customers include:

Investors have invested at least $108.9 million in the company and include Accel, Mayfield Fund, and TCV. Source: Crunchbase

Market & Competition

According to a market research report by Global Market Insights, the global endpoint security market was valued at $4.0 billion in 2016 and is projected to grow at a CAGR of 7% between 2017 and 2024.

The main drivers for this expected growth are the rising awareness and adoption of security measures due to increased cybersecurity threats.

Major competitive vendors that provide endpoint security solutions include:

Source: Sentieo

Acquisition Terms and Rationale

Carbonite disclosed the acquisition price as $618.5 million in an all-cash transaction that it will fund from available cash on hand and funds from a new credit facility that has been ‘fully committed.’

Management said the deal will be ‘immediately accretive on an earnings and cash flow basis… based on Webroot’s current operating plan and existing customer contract.’

With Webroot’s FYE 2018 revenues of $215.0 million, it appears CARB paid price/sale multiple of approximately 2.88x, which appears to be a reasonably low price on a revenue multiple basis, considering many security companies have sold for multiples in the 5-7x range.

A review of the firm’s most recent 10-Q filing indicates that as of September 30, 2018, it had $201 million in cash and equivalents and $301 million in total liabilities, of which $267.3 million were current liabilities and $28 million was deferred revenue.

Free cash flow during the nine months ended September 30, 2018, was $24.5 million.

CARB is acquiring Webroot to combine its existing data protection solutions with Webroot’s machine learning-optimized endpoint security software to provide customers with a more comprehensive solution.

As Carbonite President and CEO Mohamad Ali stated in the deal announcement:

The acquisition of Webroot dramatically accelerates our progress towards becoming the leading data protection company. With threats like ransomware evolving daily, our customers and partners are increasingly seeking a more comprehensive solution that is both powerful and easy to use. Backup and recovery, combined with endpoint security and threat intelligence, is a differentiated solution that provides one, comprehensive data protection platform.

In the past 12 months, CARB’s stock price has dropped 14% vs. the S&P 500 Index rise of 0.42%, as the chart below indicates:

Source: Sentieo

CARB has a recent history of positive earnings surprises between 5% to 30% above analyst estimates:

Source: Seeking Alpha

Analyst ratings continue to remain either …read more

Source:: Daily times


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Carbonite To Acquire Webroot For Endpoint Security Tech

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