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SAN DIEGO, Jan. 29, 2013 /PRNewswire/ -- Websense, Inc. (NASDAQ: WBSN) today announced financial results for the fourth quarter and fiscal year 2012 consistent with preliminary results for billings, non-GAAP revenue, non-GAAP earnings per diluted share, and cash flow from operations released on January 13, 2013.
"Our record fourth quarter billings demonstrate the success of our strategic initiatives and the Websense® TRITON™ platform," said John McCormack, Websense CEO. "The strength in the quarter was driven by a 23 percent year-over-year increase in TRITON solution billings and double-digit year-over-year growth in new customer sales. These results confirm the traction we have established in the content security market as we evolve our web, email, mobile and data security solutions. Looking to the future, we are focused on continued growth, consistent execution, and extension of the TRITON platform ecosystem through strategic partnerships."
Fourth Quarter 2012 GAAP Financial Highlights
Fourth Quarter 2012 Non-GAAP1 Financial Highlights
Fiscal Year 2012 GAAP Financial Highlights
Fiscal Year 2012 Non-GAAP1 Financial Highlights
Millions, except percentages, number of transactions,
duration, and days billings outstanding
TRITON solution billings2
Number of transactions >$100K
Average contract duration (months)
Days billings outstanding (DSOs)
Cash and cash equivalents
Balance on revolving credit facility
Share repurchases ($)
A detailed description of the company's non-GAAP financial measures appears under "Non-GAAP Financial Measures" and a full reconciliation of GAAP to non-GAAP results is included at the end of this news release in the tables "Reconciliation of GAAP to Non-GAAP Financial Measures."
TRITON solutions include the TRITON family of security gateways for web, email, mobile, and data security (including related appliances and technical support subscriptions), Websense Data Security Suite and cloud-based security solutions. Non-TRITON solutions include web filtering products, including Websense Web Filtering, Websense Web Security Suite and related appliances, plus SurfControl email security products.
Outlook for the First Quarter and Fiscal Year 2013Websense provides guidance on anticipated financial performance for the first quarter and the year based on an assessment of the current business environment, historical seasonal business trends, and prevailing exchange rates between the U.S. dollar and other major currencies. Annual guidance is updated each quarter with the release of quarterly results. In providing guidance, the company emphasizes that all forward-looking statements are based on current expectations, including average contract duration between 24 and 26 months and prevailing currency exchange rates of $1.32 for the Euro and $1.62 for the Pound Sterling. The company disclaims any obligation to update the statements as circumstances change.
Millions, except percentages and per share amounts
$82 – 86
$374 – 394
Appliance billings (% of total billings)
7 – 8%
7 – 8%
$84 – 87
$351 – 361
Non-GAAP gross profit margin
Non-GAAP operating margin
8 – 11%
11 – 13%
Billings-based non-GAAP operating margin
17 – 20%
Non-GAAP earnings per diluted share
$0.15 – 0.19
$0.78 – 0.93
Non-GAAP effective tax rate
Average diluted shares outstanding
Cash flow from operations
$27 – 30
$66 – 76
$15 – 17
Management further indicates:
2012 Summary of Amounts Related to pre-2011 Appliance Sales
as of 12/31/11
2012 Recognition Schedule (actual)
Remaining deferred balances
as of 12/31/12
2013 Summary of Amounts Related to pre-2011 Appliance Sales
2013 Recognition Schedule
as of 12/31/13 (expected)
Strategic Partnership with F5 NetworksDuring the fourth quarter of 2012, Websense entered into an agreement with F5 Networks (NASDAQ: FFIV), the global leader in Application Delivery Networking (ADN). The companies have agreed to integrate their technologies to deliver bi-directional context-based security leveraging user, device, and location, as well as application, data, and destination information. Further details will be announced at the RSA Security Conference starting on February 25.
Conference Call DetailsManagement will host a conference call and simultaneous webcast to discuss the financial results and outlook today, January 29, at 2 p.m. Pacific Standard Time. To participate in the conference call, investors should dial (866) 757-5630 (domestic) or 707-287-9356 (international) 10 minutes prior to the scheduled start of the call. A simultaneous audio-only webcast of the call may be accessed on the internet at www.websense.com/investors. An archive of the webcast will be available on the company's website through March 31, 2013, and a recorded replay of the call will be available for one week at 855-859-2056 or 404-537-3406, pass code 83989045.
Non-GAAP Financial Measures This news release provides financial measures for non-GAAP gross profit, operating expenses, operating margin, income from operations, provision for income taxes, net income, and diluted earnings per share that are not calculated in accordance with GAAP. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding performance that enhances management's and investors' ability to evaluate the company's operating results, trends, and prospects and to compare current operating results with historical operating results. Reconciliations of the GAAP and non-GAAP financial measures for 2012, 2011 and the fourth quarters of both years are provided at the end of this news release.
This news release also includes financial measures for various categories of billings, billings operating margin and other billings-related measures that are numerical measures that cannot be calculated in accordance with GAAP. Billings-based non-GAAP operating margin is calculated like revenue-based non-GAAP operating margin, but uses billings as the top-line measure and excludes deferred appliance costs to match current period sales activities with current period costs. Websense provides these measurements in reporting financial performance because these measurements provide a consistent basis for understanding the company's sales activities in the current period. The company believes that these measurements are useful to investors because the GAAP measurements of revenues and deferred revenue in the current period include subscription contracts commenced in prior periods. The roll forward of deferred revenue (which includes billings and revenues) for the fourth quarter of 2012 is set forth at the end of this news release.
About Websense, Inc.Websense, Inc. (NASDAQ: WBSN), a global leader in unified web security, email security, mobile security, and data loss prevention (DLP), delivers the best content security for modern threats at the lowest total cost of ownership to tens of thousands of enterprise, mid-market and small organizations around the world. Distributed through a global network of channel partners and delivered as appliance-based software or SaaS-based cloud services, Websense TRITON content security solutions help organizations leverage social media and cloud-based communication, while protecting from advanced persistent threats and modern malware, preventing the loss of confidential information, and enforcing internet use and security policies. Websense is headquartered in San Diego, California with offices around the world. For more information, visit www.websense.com.
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This news release contains forward-looking statements that involve risks, uncertainties, assumptions, and other factors which, if they do not materialize or prove correct, could cause Websense's results to differ materially from historical results or those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including financial estimates; the statements of John McCormack; statements about our expected success of our strategic initiatives and selling products; statements regarding market share gains and trends; statements about the effectiveness of our products; billings, revenues, and growth trends; statements regarding expected repurchases of our common stock; and statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates," and similar words. The potential risks and uncertainties that contribute to the uncertain nature of these statements include, among others, risks associated with customer acceptance of the company's products and services, product performance, launching new product offerings, products and fee structures in a changing market, the success of Websense's brand development efforts, the volatile and competitive nature of the internet and security industries, changes in domestic and international market conditions, fluctuations in currency exchange rates and impacts of macro-economic conditions on our customers, ongoing compliance with the covenants in the company's credit facility, changes in accounting interpretations, and the other risks and uncertainties described in Websense's public filings with the Securities and Exchange Commission, available at www.websense.com/investors. Websense assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.
The following financial information should be read in conjunction with the audited financial statements and notes thereto, included in Websense Inc.'s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission as well as the interim financial statements and notes thereto included in Websense's Quarterly Reports on Form 10-Q. Certain reclassifications have been made for consistent presentation.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended December 31,
Years Ended December 31,
Software and service
Cost of revenues:
Total cost of revenues
Selling and marketing
Research and development
General and administrative
Total operating expenses
Income from operations
Other income (expense), net
Income before income taxes
Provision for income taxes
Basic net income per share
Diluted net income per share
Weighted average shares - basic
Weighted average shares - diluted
Total deferred revenue
Consolidated Balance Sheets
December 31, 2012
December 31, 2011
Cash and cash equivalents
Accounts receivable, net
Income tax receivable/prepaid income tax
Current portion of deferred income taxes
Other current assets
Total current assets
Cash and cash equivalents - restricted
Property and equipment, net
Intangible assets, net
Deferred income taxes, less current portion
Deposits and other assets
Liabilities and stockholders' equity
Accrued compensation and related benefits
Other accrued expenses
Current portion of income taxes payable
Current portion of deferred tax liability
Current portion of deferred revenue
Total current liabilities
Other long term liabilities
Income taxes payable, less current portion
Deferred tax liability, less current portion
Deferred revenue, less current portion
Additional paid-in capital
Treasury stock, at cost
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
Consolidated Statements of Cash Flows
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Deferred income taxes
Unrealized loss (gain) on foreign exchange
Excess tax benefit from share-based compensation
Changes in operating assets and liabilities:
Accrued compensation and related benefits
Income taxes payable and receivable/prepaid
Net cash provided by operating activities
Change in restricted cash and cash equivalents
Purchase of property and equipment
Purchase of intangible assets
Net cash used in investing activities
Proceeds from secured loan
Principal payments on secured loan
Principal payments on capital lease obligation
Cash paid for deferred financing fees under secured loan
Proceeds from exercise of stock options
Proceeds from issuance of common stock for stock purchase plan
Tax payments related to restricted stock unit issuances
Purchase of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash paid during the period for:
Income taxes including interest and penalties, net of refunds
Non-cash financing activities:
Change in operating assets and liabilities for unsettled purchase of treasury
stock and exercise of stock options
Rollforward of Deferred Revenue
(Unaudited and in thousands)
Deferred revenue balance at September 30, 2012
Net billings during fourth quarter 2012
Less revenue recognized during fourth quarter 2012
Deferred revenue balance at December 31, 2012
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited and in thousands, except per share amounts)
Three Months EndedDecember 31,
Years EndedDecember 31,
GAAP gross profit
Amortization of acquired technology (2)
Share-based compensation (1)
Gross profit adjustment
Non-GAAP gross profit
GAAP operating expenses
Amortization of other intangible assets (2)
Operating expense adjustment
Non-GAAP operating expenses
GAAP income from operations
Non-GAAP income from operations
GAAP provision for income taxes
Provision for income taxes adjustment (3, 5)
Non-GAAP provision for income taxes
GAAP net income
Amortization of deferred financing fees (4)
Provision for income tax adjustment
Non-GAAP net income
GAAP net income per diluted share
Non-GAAP adjustments as described above per share, net of tax (1-5)
Non-GAAP net income per diluted share
(1) Share-based compensation. Consists of non-cash expenses for employee stock options, restricted stock units and our employee stock purchase plan determined in accordance with the fair value method of accounting for share-based compensation. When evaluating the performance of our business and developing short and long-term plans, we do not consider share-based compensation charges. Although share-based compensation is necessary to attract and retain quality employees, our consideration of share-based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, we believe that the exclusion of share-based compensation allows for more accurate comparison of our financial results to previous periods. In addition, we believe it is useful to investors to understand the specific impact of the application of the fair value method of accounting for share-based compensation on our operating results.
(2) Amortization of acquired technology and other intangible assets. When conducting internal development of intangible assets (including developed technology, customer relationships, trademarks, etc.), GAAP accounting rules require that we expense the costs as incurred. In the case of acquired businesses, however, we are required to allocate a portion of the purchase price to the accounting value assigned to intangible assets acquired and amortize this amount over the estimated useful lives of the acquired intangibles. The acquired company, in most cases, has itself previously expensed the costs incurred to develop the acquired intangible assets, and the purchase price allocated to these assets is not necessarily reflective of the cost we would incur in developing the intangible asset. We eliminate these amortization charges from our non-GAAP operating results to provide better comparability of pre- and post-acquisition operating results and comparability to results of businesses utilizing internally developed intangible assets.
(3) Non-GAAP effective tax rate. The company's annual non-GAAP effective tax rate is calculated by dividing the company's estimated annual non-GAAP tax expense by its estimated annual non-GAAP taxable income. The company's estimated non-GAAP taxable income is determined by adjusting its estimated GAAP taxable income for its non-GAAP adjustments on a country-by-country basis. The company determines its annual estimated non-GAAP tax expense by adding together the estimated non-GAAP tax expense for each country based on each country's applicable tax rate. The company determines its interim non-GAAP effective tax expense in accordance with the general principles of ASC 740, Accounting for Income Taxes. In 2012, the company's non-GAAP effective tax rate is based on the company's anticipated long term annual non-GAAP tax expense divided by the company's long term annual non-GAAP taxable income on a country by country basis.
(4) Amortization of deferred financing fees. This is a non-cash charge that is disregarded by the company's management when evaluating our ongoing performance and/or predicting our earnings trends, and is excluded by us when presenting our non-GAAP financial measures. Further, we believe it is useful to investors to understand the specific impact of this charge on our operating results.
(5) Tax-related adjustments from other discrete items. This amount represents the non-recurring tax effect from the transfer of customer relationship intangible assets and the related deferred tax liabilities from a higher tax rate jurisdiction to a lower tax rate jurisdiction. The tax benefit is reflected in the first quarter of 2011 upon the completion of our global distribution restructuring and is not expected to recur.
Non-GAAP Billings Operating Margin Reconciliation
(Unaudited and in thousands, except percentages)
Software and service
Non-GAAP cost of billings:
Total non-GAAP cost of billings
Non-GAAP gross margin:
Total non-GAAP gross margin
Non-GAAP operating expenses:
Selling and marketing
Research and development
General and administrative
Total non-GAAP operating expenses
Non-GAAP billings operating margin
(1) Excluding deferred appliance expenses associated with pre-2011 appliance sales.
The non-GAAP financial measures included in the tables above and in the tables on the preceding page are non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP net income per diluted share, billings, non-GAAP cost of billings, non-GAAP gross margin and non-GAAP billings operating margin which adjust for the following items: acquisition related adjustments, share-based compensation expense, amortization of intangible assets, deferred expenses and certain other items. We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding the company's operating performance for the reasons discussed below. Our management uses these non-GAAP financial measures in assessing the company's operating results, as well as when planning, forecasting and analyzing future periods. The annual operating plan approved by our Board of Directors is based upon non-GAAP financial measures and our management incentive plans also use non-GAAP financial measures as performance objectives. We believe that these non-GAAP financial measures also facilitate comparisons of the company's performance to prior periods and to our peers and that investors benefit from an understanding of these non-financial measures.
SOURCE Websense, Inc.