Delaware (state or other jurisdiction of incorporation) | 000-30093 (Commission File Number) | 51-0380839 (I.R.S. Employer Identification No.) |
10240 Sorrento Valley Road San Diego, California 92121 (Address of principal executive offices) (Zip Code) |
(858) 320-8000 (Registrant's telephone number, including area code) |
N/A (Former name or former address, if changed since last report) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
(a) | Not applicable |
(b) | Not applicable |
(c) | Not applicable |
(d) | Exhibits |
Exhibit Number | Description |
99.1 | Press release issued by Websense, Inc. on April 25, 2013 relating to financial results. |
WEBSENSE, INC. | ||||
Date: April 25, 2013 | By: | /s/ Michael A. Newman | ||
Michael A. Newman | ||||
Chief Financial Officer | ||||
(principal financial and accounting officer) |
Exhibit Number | Description |
99.1 | Press release issued by Websense, Inc. on April 25, 2013 relating to financial results. |
INVESTOR CONTACT: Avelina Kauffman Websense, Inc. (858) 320-9364 akauffman@websense.com | MEDIA CONTACT Patricia Hogan Websense, Inc. (858) 320-9393 phogan@websense.com |
• | Record first quarter billings of $81.8 million, up 1.5 percent year-over-year |
• | TRITON solution billings of $54.7 million comprised 67 percent of total billings |
• | Company reiterates its 2013 annual guidance |
• | Revenues of $87.5 million, compared with $89.5 million in the first quarter of 2012. |
• | Software and service revenues of $80.1 million, compared with $82.0 million in the first quarter of 2012. |
• | Appliance revenues of $7.4 million, which consisted of approximately $6.5 million in current-period appliance sales and approximately $0.9 million of deferred appliance revenue primarily from pre-2011 appliance sales, compared with $7.5 million of appliance revenues in the first quarter of 2012, which consisted of approximately $5.8 million in current-period appliance sales and $1.7 million of deferred appliance revenue primarily from pre-2011 appliance sales. |
• | Operating income of $3.5 million, compared with $10.7 million in the first quarter of 2012, as we incurred increased operating expenses primarily related to our sales force expansion, which was substantially completed in the quarter. |
• | Benefit from income taxes of $0.3 million, compared with a provision for income taxes of $11.7 million in the first quarter of 2012. |
• | Net income of $2.8 million, or eight cents per diluted share, compared with a net loss of $1.8 million, or five cents per diluted share, in the first quarter of 2012. |
• | Weighted average diluted shares outstanding of 36.8 million, compared with 37.6 million in the first quarter of 2012. |
• | Cash flow from operations of $29.2 million, compared with $22.4 million in the first quarter of 2012. |
• | Quarter-end accounts receivable of $57.9 million, compared with $61.9 million at the end of the first quarter of 2012. |
• | Days billings outstanding of 64 days, compared with 69 days at the end of the first quarter of 2012. |
• | Deferred revenue of $395.4 million, compared with deferred revenue of $384.1 million at the end of the first quarter of 2012. |
• | Total billings of $81.8 million, an increase of 1.5 percent compared with the first quarter of 2012. Changes in currency exchange rates, compared with exchange rates prevailing in the first quarter of 2012, did not materially impact first quarter 2013 billings performance. |
• | TRITON solution billings of $54.7 million, an increase of 11.6 percent compared with the first quarter of 2012. |
• | Non-GAAP operating income of $10.0 million, compared with non-GAAP operating income of $17.8 million in the first quarter of 2012. Non-GAAP operating margin in the first quarter of 2013, calculated as a percentage of revenues, was 11.4 percent, compared with 19.9 percent in the first quarter of 2012. We incurred increased operating expenses in the first quarter of 2013 primarily related to our sales force expansion which was substantially completed in the quarter. |
• | Billings-based operating margin of 5.6 percent, compared with billings-based operating margin of 11.9 percent in the first quarter of 2012. Billings-based operating margin is calculated similar to revenue-based non-GAAP operating margin, but is computed using billings as the top-line measure and excludes deferred appliance costs to match current period sales activities with current period costs. |
• | A non-GAAP tax provision of $1.7 million, compared with a non-GAAP tax provision of $3.2 million in the first quarter of 2012, both based on an effective non-GAAP tax rate of 19.0 percent. |
• | Non-GAAP net income of $7.3 million, or 20 cents per diluted share, compared with $13.7 million, or 36 cents per diluted share, in the first quarter of 2012, as we incurred increased operating expenses primarily related to our sales force expansion, which was substantially completed in the quarter. |
Millions, except percentages, number of transactions, duration, and days billings outstanding | Q1'13 | Q1'12 | Y/Y Chg | |||||||
Total billings | $ | 81.8 | $ | 80.6 | 1.5% | |||||
U.S. billings | $ | 39.0 | $ | 37.5 | 4.0% | |||||
International billings | $ | 42.8 | $ | 43.1 | -0.7% | |||||
TRITON solution billings2 | $ | 54.7 | $ | 49.0 | 11.6% | |||||
Appliance billings | $ | 6.9 | $ | 6.0 | 15.0% | |||||
Number of transactions > $100K | 144 | 121 | 19.0% | |||||||
Average contract duration (months) | 23.3 | 25.5 | -8.6% | |||||||
Days billings outstanding (DSOs) | 64 | 69 | -5 days | |||||||
Cash and cash equivalents | $ | 83.7 | $ | 70.3 | 19.1% | |||||
Balance on revolving credit facility | $ | 68.0 | $ | 68.0 | — | |||||
Share repurchases ($) | $ | 5.0 | $ | 20.0 | -75.0% |
1. | 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." | ||||
2. | 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. |
Millions, except percentages and per share amounts | Q2'13 Outlook | 2013 Outlook | ||
Total billings | $86.5 – 91.5 | $374 – 394 | ||
Appliance billings (% of total billings) | 7 – 8% | 7 – 8% | ||
Revenues | $86 – 89 | $351 – 361 | ||
Non-GAAP gross profit margin | Approximately 83% | Approximately 83% | ||
Non-GAAP operating margin | 9 – 12% | 11 – 13% | ||
Billings-based non-GAAP operating margin | 9 – 14% | 17 – 20% | ||
Non-GAAP earnings per diluted share | $0.17 – 0.21 | $0.78 – 0.93 | ||
Non-GAAP effective tax rate | 19% | 19% | ||
Average diluted shares outstanding | Approximately 37 | Approximately 37 | ||
Cash flow from operations | $9 – 11 | $66 – 76 | ||
Capital expenditures | Approximately $4 | $15 – 17 |
• | Expected stock repurchases of approximately $5.0 million per quarter in 2013. |
• | Non-cash items related to the recognition of revenue and costs associated with pre-2011 appliance billings: |
◦ | Remaining deferred revenue of $1.9 million from pre-2011 appliance billings (as of March 31, 2013) that will continue to be recognized ratably according to the original subscription periods, including $0.6 million to be recognized in the second quarter of 2013 (compared with $1.6 million in the second quarter of 2012). |
◦ | Remaining deferred costs of $1.0 million from pre-2011 appliance billings (as of March 31, 2013) that will continue to be recognized ratably according to the original subscription periods, including $0.3 million to be recognized in the second quarter of 2013 (compared with $0.7 million in the second quarter of 2012). |
◦ | On January 1, 2011, Websense adopted Accounting Standards Update (ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU 2009-14 (Certain Revenue Arrangements That Include Software Elements), which requires the immediate recognition of appliance revenues upon sale. Prior to January 1, 2011, the company recognized revenue and costs from appliance sales ratably according to the original related software subscription terms. The schedules below summarize the actual and expected recognition of remaining deferred appliance revenues and costs by quarter for 2012 and 2013: |
2012 Recognition Schedule (actual) | ||||||||||||||
Millions | Deferred balances as of 12/31/11 (actual) | Q1'12 | Q2'12 | Q3'12 | Q4'12 | 2012 | Remaining deferred balances as of 12/31/12 (actual) | |||||||
Revenue | $8.6 | $1.7 | $1.6 | $1.4 | $1.2 | $5.9 | $2.7 | |||||||
Costs | $4.0 | $0.8 | $0.7 | $0.6 | $0.5 | $2.6 | $1.4 |
2013 Recognition Schedule | ||||||||||||||
Millions | Deferred balances as of 12/31/12 (actual) | Q1'13 (actual) | Q2'13 (expected) | Q3'13 (expected) | Q4'13 (expected) | 2013 (expected) | Remaining deferred balances as of 12/31/13 (expected) | |||||||
Revenue | $2.7 | $0.8 | $0.6 | $0.5 | $0.3 | $2.2 | $0.5 | |||||||
Costs | $1.4 | $0.4 | $0.3 | $0.2 | $0.1 | $1.0 | $0.4 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Revenues: | |||||||
Software and service | $ | 80,146 | $ | 82,008 | |||
Appliance | 7,349 | 7,516 | |||||
Total revenues | 87,495 | 89,524 | |||||
Cost of revenues: | |||||||
Software and service | 11,433 | 10,975 | |||||
Appliance | 2,939 | 3,187 | |||||
Total cost of revenues | 14,372 | 14,162 | |||||
Gross profit | 73,123 | 75,362 | |||||
Operating expenses: | |||||||
Selling and marketing | 43,657 | 39,027 | |||||
Research and development | 16,716 | 15,290 | |||||
General and administrative | 9,263 | 10,318 | |||||
Total operating expenses | 69,636 | 64,635 | |||||
Income from operations | 3,487 | 10,727 | |||||
Interest expense | (634 | ) | (656 | ) | |||
Other income (expense), net | (379 | ) | (252 | ) | |||
Income before income taxes | 2,474 | 9,819 | |||||
Provision (benefit) for income taxes | (298 | ) | 11,652 | ||||
Net income (loss) | $ | 2,772 | $ | (1,833 | ) | ||
Basic net income (loss) per share | $ | 0.08 | $ | (0.05 | ) | ||
Diluted net income (loss) per share | $ | 0.08 | $ | (0.05 | ) | ||
Weighted average shares — basic | 36,461 | 37,630 | |||||
Weighted average shares — diluted | 36,823 | 37,630 | |||||
Financial Data: | |||||||
Total deferred revenue | $ | 395,353 | $ | 384,076 |
March 31, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 83,687 | $ | 64,584 | |||
Accounts receivable, net | 57,925 | 89,071 | |||||
Income tax receivable / prepaid income tax | 3,900 | 3,989 | |||||
Current portion of deferred income taxes | 27,914 | 28,933 | |||||
Other current assets | 14,748 | 13,249 | |||||
Total current assets | 188,174 | 199,826 | |||||
Cash and cash equivalents – restricted | 674 | 662 | |||||
Property and equipment, net | 20,405 | 18,901 | |||||
Intangible assets, net | 16,510 | 17,940 | |||||
Goodwill | 372,445 | 372,445 | |||||
Deferred income taxes, less current portion | 8,154 | 7,335 | |||||
Deposits and other assets | 6,459 | 7,352 | |||||
Total assets | $ | 612,821 | $ | 624,461 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,157 | $ | 7,941 | |||
Accrued compensation and related benefits | 23,370 | 24,981 | |||||
Other accrued expenses | 11,779 | 12,413 | |||||
Current portion of income taxes payable | 3,577 | 694 | |||||
Current portion of deferred tax liability | 42 | 42 | |||||
Current portion of deferred revenue | 241,960 | 243,945 | |||||
Total current liabilities | 284,885 | 290,016 | |||||
Other long term liabilities | 2,987 | 2,044 | |||||
Income taxes payable, less current portion | 9,644 | 10,514 | |||||
Secured loan | 68,000 | 68,000 | |||||
Deferred tax liability, less current portion | 2,021 | 2,026 | |||||
Deferred revenue, less current portion | 153,393 | 157,112 | |||||
Total liabilities | 520,930 | 529,712 | |||||
Stockholders’ equity: | |||||||
Common stock | 584 | 580 | |||||
Additional paid-in capital | 444,101 | 443,100 | |||||
Treasury stock, at cost | (443,145 | ) | (436,426 | ) | |||
Retained earnings | 93,368 | 90,596 | |||||
Accumulated other comprehensive loss | (3,017 | ) | (3,101 | ) | |||
Total stockholders’ equity | 91,891 | 94,749 | |||||
Total liabilities and stockholders’ equity | $ | 612,821 | $ | 624,461 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Operating activities: | |||||||
Net income (loss) | $ | 2,772 | $ | (1,833 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 4,655 | 4,906 | |||||
Share-based compensation | 5,133 | 5,014 | |||||
Unrealized loss on foreign exchange | 628 | 144 | |||||
Excess tax benefit from share-based compensation | (49 | ) | (130 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 30,507 | 18,968 | |||||
Other assets | (481 | ) | 321 | ||||
Accounts payable | (5,502 | ) | (3,206 | ) | |||
Accrued compensation and related benefits | (1,491 | ) | (680 | ) | |||
Other liabilities | 929 | (483 | ) | ||||
Deferred revenue | (5,710 | ) | (8,962 | ) | |||
Income taxes payable and receivable/prepaid | (2,192 | ) | 8,297 | ||||
Net cash provided by operating activities | 29,199 | 22,356 | |||||
Investing activities: | |||||||
Change in restricted cash and cash equivalents | (1 | ) | (17 | ) | |||
Purchase of property and equipment | (2,851 | ) | (2,784 | ) | |||
Net cash used in investing activities | (2,852 | ) | (2,801 | ) | |||
Financing activities: | |||||||
Principal payments on secured loan | — | (5,000 | ) | ||||
Principal payments on capital lease obligation | — | (587 | ) | ||||
Proceeds from exercise of stock options | 88 | 1,383 | |||||
Excess tax benefit from share-based compensation | 49 | 130 | |||||
Tax payments related to restricted stock unit issuances | (1,715 | ) | (1,475 | ) | |||
Purchase of treasury stock | (5,099 | ) | (20,490 | ) | |||
Net cash used in financing activities | (6,677 | ) | (26,039 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (567 | ) | 629 | ||||
Increase (decrease) in cash and cash equivalents | 19,103 | (5,855 | ) | ||||
Cash and cash equivalents at beginning of period | 64,584 | 76,201 | |||||
Cash and cash equivalents at end of period | $ | 83,687 | $ | 70,346 | |||
Cash paid during the period for: | |||||||
Income taxes including interest and penalties, net of refunds | $ | 1,146 | $ | 2,997 | |||
Interest | $ | 543 | $ | 607 | |||
Non-cash financing activities: | |||||||
Change in operating assets and liabilities for unsettled purchase of treasury stock and exercise of stock options | $ | (99 | ) | $ | 313 | ||
Capital lease obligation incurred for a software license arrangement | $ | 1,747 | $ | — |
Deferred revenue balance at December 31, 2012 | $ | 401,057 | |||
Net billings during first quarter 2013 | 81,786 | ||||
Less revenue recognized during first quarter 2013 | (87,495 | ) | |||
Translation adjustment | 5 | ||||
Deferred revenue balance at March 31, 2013 | $ | 395,353 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
GAAP gross profit | $ | 73,123 | $ | 75,362 | |||
Amortization of acquired technology (1) | 10 | 539 | |||||
Share-based compensation (2) | 258 | 338 | |||||
Gross profit adjustment | 268 | 877 | |||||
Non-GAAP gross profit | $ | 73,391 | $ | 76,239 | |||
GAAP operating expenses | $ | 69,636 | $ | 64,635 | |||
Amortization of other intangible assets (1) | (1,353 | ) | (1,512 | ) | |||
Share-based compensation (2) | (4,875 | ) | (4,675 | ) | |||
Operating expense adjustment | (6,228 | ) | (6,187 | ) | |||
Non-GAAP operating expenses | $ | 63,408 | $ | 58,448 | |||
GAAP income from operations | $ | 3,487 | $ | 10,727 | |||
Gross profit adjustment | 268 | 877 | |||||
Operating expense adjustment | 6,228 | 6,187 | |||||
Non-GAAP income from operations | $ | 9,983 | $ | 17,791 | |||
GAAP provision (benefit) for income taxes | $ | (298 | ) | $ | 11,652 | ||
Provision (benefit) for income taxes adjustment (3) | 2,014 | (8,433 | ) | ||||
Non-GAAP provision for income taxes | $ | 1,716 | $ | 3,219 | |||
GAAP net income (loss) | $ | 2,772 | $ | (1,833 | ) | ||
Gross profit adjustment | 268 | 877 | |||||
Operating expense adjustment | 6,228 | 6,187 | |||||
Amortization of deferred financing fees (4) | 59 | 59 | |||||
Provision (benefit) for income tax adjustment | (2,014 | ) | 8,433 | ||||
Non-GAAP net income | $ | 7,313 | $ | 13,723 | |||
GAAP net income (loss) per diluted share | $ | 0.08 | $ | (0.05 | ) | ||
Non-GAAP adjustments as described above per share, net of tax (1-4) | 0.12 | 0.41 | |||||
Non-GAAP net income per diluted share | $ | 0.20 | $ | 0.36 |
Three Months Ended March 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Billings: | |||||||||||||
Software and service | $ | 74,935 | 91.6 | % | $ | 74,615 | 92.6 | % | |||||
Appliance | 6,851 | 8.4 | % | 5,952 | 7.4 | % | |||||||
Total billings | 81,786 | 100.0 | % | 80,567 | 100.0 | % | |||||||
Non-GAAP cost of billings: | |||||||||||||
Software and service | 11,165 | 14.9 | % | 10,098 | 13.5 | % | |||||||
Appliance (1) | 2,594 | 37.9 | % | 2,429 | 40.8 | % | |||||||
Total non-GAAP cost of billings | 13,759 | 16.8 | % | 12,527 | 15.5 | % | |||||||
Non-GAAP gross margin: | |||||||||||||
Software and service | 63,770 | 85.1 | % | 64,517 | 86.5 | % | |||||||
Appliance | 4,257 | 62.1 | % | 3,523 | 59.2 | % | |||||||
Total non-GAAP gross margin | 68,027 | 83.2 | % | 68,040 | 84.5 | % | |||||||
Non-GAAP operating expenses: | |||||||||||||
Selling and marketing | 40,482 | 49.5 | % | 35,734 | 44.4 | % | |||||||
Research and development | 15,502 | 19.0 | % | 14,019 | 17.4 | % | |||||||
General and administrative | 7,424 | 9.1 | % | 8,695 | 10.8 | % | |||||||
Total non-GAAP operating expenses | 63,408 | 77.6 | % | 58,448 | 72.6 | % | |||||||
Non-GAAP billings operating margin | $ | 4,619 | 5.6 | % | $ | 9,592 | 11.9 | % |