MuleSoft Announces Financial Results for the Third Quarter 2017

Total Revenue of $77.6 million, Up 57% Year–over–Year

Subscription and Support Revenue of $61.7 million, Up 51% Year–over–Year

SAN FRANCISCO – October 26, 2017 – MuleSoft, Inc. (NYSE:MULE), provider of the leading platform for building application networks, today announced financial results for its third quarter of fiscal 2017, ended September 30, 2017.

“We delivered revenue well ahead of expectations in the third quarter, driven by robust market demand, strong sales execution, and healthy large deal activity,” said Greg Schott, chairman and CEO of MuleSoft. “Across industries, disruption is being created by the convergence of major technology forces, such as mobile, cloud, big data, and the Internet of Things. Our Anypoint Platform enables customers to build application networks to adapt to and capitalize on these trends. By making it easy to connect applications, data and devices in a standardized way, Anypoint Platform enables our customers to quickly deliver differentiated customer experiences, new revenue channels, and entirely new business models.”

Third Quarter 2017 Financial Highlights:

• Revenue: Total revenue was $77.6 million, an increase of 57% year-over-year. Subscription and support revenue was $61.7 million, an increase of 51% year-over-year. Professional services and other revenue was $15.9 million, an increase of 89% year-over-year.
• Gross margin: GAAP gross margin was 71.5%, compared to 75.0% in Q3 2016. Non-GAAP gross margin was 73.3% for Q3 2017, compared to 75.7% in the year-ago period. While subscription and professional services gross margin each improved year-over-year, total gross margin decreased because lower-margin professional services represented a larger proportion of total revenue compared to last year.
• Operating loss: GAAP operating loss was $25.4 million, compared to a GAAP operating loss of $15.2 million for Q3 2016. Non-GAAP operating loss for Q3 2017 was $16.9 million, compared to a non-GAAP operating loss of $3.3 million in the year-ago period. Sales and marketing expense as a percentage of revenue was 60% on a non- GAAP basis as compared to 55% a year ago due to higher commissions as a result of strong sales activity in the current quarter.
• Net loss per share: GAAP net loss per share attributable to common stockholders was $0.19 based on 129.0 million weighted-average shares outstanding in Q3 2017, compared to GAAP net loss per share attributable to common stockholders of $1.15 based on 21.7 million weighted-average shares outstanding in Q3 2016.

Non-GAAP net loss per share attributable to common stockholders was $0.13 based on 129.0 million non-GAAP weighted-average shares outstanding in Q3 2017, compared to non-GAAP net loss per share attributable to common stockholders of $0.03 based on 109.9 million non-GAAP weighted-average shares outstanding in Q3 2016.

• Deferred revenue: Total deferred revenue was $171.0 million at the end of Q3 2017, an increase of 63% year- over-year. Short-term deferred revenue was $162.7 million at the end of Q3 2017, an increase of 64% year-over- year.
• Cash: Cash provided by (used in) operating activities was ($4.7) million, compared to $12.3 million for Q3 2016. Free cash flow, which is a non-GAAP measure that reflects cash from operating activities less cash used for capital expenditures, was ($5.9) million for Q3 2017, compared to $11.0 million in the year-ago period.

Cash, cash equivalents, and investments totaled $333.9 million at the end of Q3 2017.

Other Recent Highlights:

• Record number of deals over $1 million: We closed seven deals of greater than $1 million in annual contract value during the quarter, a record performance, including two multi-million dollar expansions with existing customers.
• Availability of Crowd – next major release of Anypoint Platform™: The newest major release of Anypoint Platform became generally available on July 29, 2017. The Crowd release introduced a set of powerful collaboration capabilities to make creating, discovering, and reusing composable IT assets, such as APIs and best practice templates, both easy and natural for platform users. With the Crowd release, MuleSoft has made its Anypoint Platform more accessible to a broader set of users.
• Global Summit schedule saw robust customer engagement: MuleSoft sponsored more than 40 business leader summits and developer workshops around the world during the third quarter, highlighting an active quarter for engagement with customers and prospects. While most of the events were general, some were vertical- specific, covering the automotive, banking, digital health insurance, digital marketing, and public sectors.
• Strategic partnership with Temenos announced: MuleSoft announced a strategic partnership with Temenos (SIX: TEMN), a software specialist for banking and finance. By creating a channel for banks to capitalize on the modern technology in Temenos’ Core Banking platform, MuleSoft enables banks to better connect and serve their customers. As part of the technology partnership, Temenos will develop and support a Temenos Core Banking adapter for MuleSoft’s Anypoint Platform, and deliver a standard, certified interface between MuleSoft and the Temenos Integration Framework.

Financial Outlook:

MuleSoft is providing guidance for its fourth quarter ending December 31, 2017 as follows:

• Total revenue between $82 million and $84 million
• 
Non-GAAP operating loss between $13 million and $15 million
• Non-GAAP net loss per share of approximately $0.12
• Weighted-average shares outstanding of approximately 130 million

The company is also updating guidance for the fiscal year 2017 ending December 31, 2017 as follows:

• Total revenue between $290 million and $292 million
• Non-GAAP operating loss between $49 million and $51 million
• Non-GAAP net loss per share between $0.41 and $0.43
• 
Non-GAAP weighted-average shares outstanding of approximately 126 million

All forward-looking non-GAAP measures exclude estimates for stock-based compensation (“SBC”) expenses. We do not provide reconciliations of our forward-looking non-GAAP financial measures to the corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections with respect to SBC expenses, which are excluded from these non-GAAP measures. SBC expenses are impacted by future hiring and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to change. The actual amounts of the excluded SBC expenses will have a significant impact on our GAAP operating loss and GAAP net income (loss) per share. Accordingly, reconciliations of our forward-looking non-GAAP financial measures to the corresponding GAAP measures are not available.

Conference Call Information:

MuleSoft will host a conference call at 2 p.m. Pacific Time (or 5 p.m. Eastern Time) today, October 26, 2017, to discuss its financial results. A live webcast of the call will be available on the MuleSoft website at investors.mulesoft.com. A live dial-in will be available at (844) 340-9044 for domestic participants and at (412) 858-5204 for international participants.

For more information regarding Outlook and the forward-looking statements contained in the release, please visit our Investor Relations page: https://investors.mulesoft.com/news/2017/10-26-2017-210822917

About MuleSoft

MuleSoft’s mission is to help organizations change and innovate faster by making it easy to connect the world’s applications, data and devices. With its API-led approach to connectivity, MuleSoft’s market-leading Anypoint PlatformTM is enabling over 1,000 organizations in approximately 60 countries to build application networks. For more information, visit mulesoft.com.

About Salesforce

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