EX-99.1 2 a06302020exhibit991.htm EXHIBIT 99.1 Exhibit
 
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Exhibit 99.1
Investor Relations Contact:
Media Relations Contact:
Michelle Spolver
Katie Beck
408-721-5884
650-314-8705
michelle.spolver@forescout.com
katie.beck@forescout.com

Forescout Technologies Reports Second Quarter 2020 Financial Results

Total Revenue of $79.9 million, up 40% quarter-over-quarter
On track to close pending transaction with Advent International Corporation

SAN JOSE, Calif., August 5, 2020 – Forescout Technologies, Inc. (NASDAQ: FSCT), the leader in device visibility and control, today announced results for its second quarter ended June 30, 2020.

“I’m proud of our strong execution during the second quarter, despite many uncertainties. We closed strategic deals with both new and existing customers, made continued progress in the market with our eyeSegment product, and improved profitability,” said Michael DeCesare, CEO and President of Forescout Technologies. “We look forward to completing our pending transaction with Advent International, and building upon our strategic cloud transformation and transition to a recurring subscription business model. As we move to our next chapter as a private company, I would like to thank our customers, partners, talented employees, and shareholders for their unwavering support.”

Second Quarter 2020 Financial Highlights
Revenue: Total revenue was $79.9 million, an increase of 2% over the second quarter of 2019
o
License revenue was $37.6 million, a decrease of 3% over the second quarter of 2019
o
Subscription revenue was $37.6 million, an increase of 8% over the second quarter of 2019
o
Professional Services revenue was $4.7 million, an increase of 1% over the second quarter of 2019
Gross Profit: GAAP gross profit was $60.4 million, or 76% of total revenue, compared to $60.8 million in the second quarter of 2019, or 78% of total revenue. Non-GAAP gross profit was $61.8 million, or 77% of total revenue, compared to $62.3 million in the second quarter of 2019, or 80% of total revenue.

Operating Loss: GAAP operating loss was $22.7 million, or 28% of total revenue, compared to a loss of $30.6 million in the second quarter of 2019, or 39% of total revenue. Non-GAAP operating income was $0.3 million, or 0% of total revenue, compared to operating loss of $14.7 million in the second quarter of 2019, or 19% of total revenue.
Net Loss: GAAP net loss was $23.5 million, or $0.48 per share, compared to a loss of $30.8 million in the second quarter of 2019, or $0.68 per share. Non-GAAP net income was $0.2 million, or $0.00 per share, based on 51.5 million weighted average diluted shares outstanding, compared to a net loss of $15.1 million in the second quarter of 2019, or $0.33 per share, based on 45.5 million weighted average diluted shares outstanding.
Cash Flow: Net cash used in operating activities was $30.3 million, or 38% of total revenue, compared to $25.2 million in the second quarter of 2019, or 32% of total revenue. Free cash flow was negative $30.8 million, or 39% of total revenue, compared to negative $27.0 million in the second quarter of 2019, or 34% of total revenue.

A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

Transaction with Advent
On July 15, 2020, Forescout announced that it had entered into an amended and restated merger agreement to be acquired by entities affiliated with Advent International Corporation (Advent). Pursuant to the amended and restated merger agreement, Advent commenced a tender offer on July 20, 2020, to acquire all of Forescout’s outstanding shares of common stock for $29.00 in cash per share. The tender offer is scheduled to expire at the end of the day, one minute after 11:59 p.m., Eastern time, on August 14, 2020, unless the offer is extended or earlier terminated. The closing of the tender offer is subject to certain




 
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limited customary conditions, including the tender by Forescout stockholders of at least one share more than 50% of Forescout’s issued and outstanding shares. Upon completion of the transaction, Forescout will become a private company and its common stock will no longer be listed on any public market.
 
In light of the pending transaction with Advent, Forescout will not hold a conference call or provide forward looking guidance.

About Forescout
Forescout Technologies, Inc. provides security at first sight. Our company delivers device visibility and control to enable enterprises and government agencies to gain complete situational awareness of their environment and orchestrate action. Learn more at www.Forescout.com.

©2020 Forescout Technologies, Inc. All rights reserved. Forescout Technologies, Inc. is a Delaware corporation. A list of our trademarks and patents can be found at https://www.Forescout.com/company/legal/intellectual-property-patents-trademarks. Other brands, products, or service names may be trademarks or service marks of their respective owners.

FSCT - F
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding demand for our products, and market opportunity; the benefits of our solution to customers; our pending transaction with Advent, including timing for closing, and the Company's prospects. These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include risks associated with: the COVID-19 pandemic and related public health measures on our business, customers, markets and the worldwide economy; our pending transaction with Advent, including the risk that the conditions to the closing of the transaction are not satisfied and uncertainty as to how many of our stockholders will tender their shares in the tender offer; potential litigation relating to the transaction; uncertainties as to the timing of the consummation of the transaction and the ability of each party to consummate the transaction; risks related to the ability to realize the anticipated benefits of the pending transaction, including the possibility that the expected benefits will not be realized or will not be realized within the expected time periods; risks that the proposed transaction disrupts Forescout’s current plans and operations; risks that the proposed transaction will affect Forescout’s ability to retain or recruit employees; the risk that Forescout’s stock price may decline significantly if the proposed transaction is not completed; the evolution of the cyberthreat landscape facing enterprises in the United States and other countries; our plans to attract new customers, retain existing customers and increase our annual revenue; the development and delivery of new products; our plans and expectations regarding software-as-a-service offerings; our ability to execute on, integrate, and realize the benefits of any acquisition; fluctuations in our quarterly results of operations and other operating measures; increasing competition; new integrations to the Forescout platform; general economic, market and business conditions; and the risks described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the headings “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (SEC) on February 28, 2020, as amended by Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K, which was filed the SEC on April 29, 2020, as well as our Quarterly Report on Form 10-Q for the quarter ended March 30, 2020 and which should be read in conjunction with our financial results and forward-looking statements, and is available on the SEC filings section of the Investor Relations page of our website at https://investors.Forescout.com. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed on or about the date hereof. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.





 
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Non-GAAP Financial Measures
Forescout has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Forescout uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Forescout’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Forescout’s condensed consolidated financial statements prepared in accordance with GAAP. A reconciliation of Forescout’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP Gross Profit. Forescout defines non-GAAP gross profit as gross profit plus stock-based compensation expense, acquisition-related expenses relating to our acquisition of SecurityMatters B.V. and Bullguard Israel Ltd., and amortization of acquired intangible assets.

Non-GAAP Operating Expense. Forescout defines non-GAAP operating expense as operating expense excluding stock-based compensation expense, acquisition-related expenses relating to our acquisition of SecurityMatters B.V. and Bullguard Israel Ltd., amortization of acquired intangible assets, merger-related expenses relating to our transaction with Advent, and restructuring expenses.

Non-GAAP Operating Loss. Forescout defines non-GAAP operating loss as operating loss excluding stock-based compensation expense, acquisition-related expenses relating to our acquisition of SecurityMatters B.V. and Bullguard Israel Ltd., amortization of acquired intangible assets, merger-related expenses relating to our transaction with Advent, and restructuring expenses.

Non-GAAP Net Loss. Forescout defines non-GAAP net loss as net loss excluding stock-based compensation expense, acquisition-related expenses relating to our acquisition of SecurityMatters B.V. and Bullguard Israel Ltd., amortization of acquired intangible assets, merger-related expenses relating to our transaction with Advent, restructuring expenses, and tax effect of non-GAAP adjustments.

Non-GAAP Net Loss Per Share. Forescout defines non-GAAP net loss per share as non-GAAP net loss divided by the weighted average diluted shares outstanding.

Free Cash Flow. Forescout defines free cash flow as net cash provided by operating activities less purchases of property and equipment. Forescout defines free cash flow margin as free cash flow as a percentage of total revenue. Forescout considers free cash flow and free cash flow margin to be profitability and liquidity measures that provide useful information to management and investors about the amount of cash generated by the business that, after the purchases of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our balance sheet.





FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited, in thousands)
 
June 30,
2020
 
December 31,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
54,947

 
$
69,030

Marketable securities
2,021

 
29,181

Accounts receivable
63,924

 
84,168

Inventory
1,418

 
372

Deferred commissions - current
13,350

 
12,843

Prepaid expenses and other current assets
11,383

 
17,024

Total current assets
147,043

 
212,618

Deferred commissions - non-current
20,848

 
23,036

Property and equipment, net
20,718

 
23,835

Operating lease right-of-use assets
27,265

 
29,626

Restricted cash - non-current
1,554

 
1,555

Intangible assets, net
17,339

 
19,367

Goodwill
98,018

 
98,018

Other assets
6,946

 
8,172

Total assets
$
339,731

 
$
416,227

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
11,899

 
$
10,692

Accrued compensation
29,770

 
34,007

Accrued expenses
16,381

 
16,279

Deferred revenue - current
104,191

 
112,232

Notes payable - current
4,550

 
8,248

Operating lease liabilities - current
5,812

 
5,840

Total current liabilities
172,603

 
187,298

Deferred revenue - non-current
67,274

 
75,366

Operating lease liabilities - non-current
29,211

 
32,125

Other liabilities
23,638

 
23,893

Total liabilities
292,726

 
318,682

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
50

 
48

Additional paid-in capital
762,187

 
727,922

Accumulated other comprehensive loss
(678
)
 
(633
)
Accumulated deficit
(714,554
)
 
(629,792
)
Total stockholders’ equity
47,005

 
97,545

Total liabilities and stockholders' equity
$
339,731

 
$
416,227







FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
Revenue:
 
 
 
 
 
 
 
License
$
37,577

 
$
38,831

 
$
52,376

 
$
76,511

Subscription
37,612

 
34,822

 
75,138

 
68,621

Professional services
4,687

 
4,627

 
9,515

 
8,716

Total revenue
79,876

 
78,280

 
137,029

 
153,848

Cost of revenue:
 
 
 
 
 
 
 
License
6,282

 
5,622

 
11,701

 
13,229

Subscription
7,041

 
5,599

 
14,054

 
10,806

Professional services
6,148

 
6,235

 
13,313

 
12,421

Total cost of revenue
19,471

 
17,456

 
39,068

 
36,456

Total gross profit
60,405

 
60,824

 
97,961

 
117,392

Operating expenses:
 
 
 
 
 
 
 
Research and development
21,514

 
19,440

 
44,760

 
37,937

Sales and marketing
38,988

 
56,173

 
86,276

 
112,096

General and administrative
21,733

 
15,838

 
46,214

 
32,051

Restructuring
859

 

 
3,371

 

Total operating expenses
83,094

 
91,451

 
180,621

 
182,084

Loss from operations
(22,689
)
 
(30,627
)
 
(82,660
)
 
(64,692
)
Interest expense
(118
)
 
(142
)
 
(353
)
 
(235
)
Other income (expense), net
572

 
505

 
(29
)
 
1,122

Loss before income taxes
(22,235
)
 
(30,264
)
 
(83,042
)
 
(63,805
)
Income tax provision
1,288

 
496

 
1,720

 
1,207

Net loss
$
(23,523
)
 
$
(30,760
)
 
$
(84,762
)
 
$
(65,012
)
Net loss per share, basic and diluted
$
(0.48
)
 
$
(0.68
)
 
$
(1.73
)
 
$
(1.45
)
Weighted-average shares used to compute net loss per share, basic and diluted
49,371

 
45,494

 
48,982

 
44,848







FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Six Months Ended
June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net loss
$
(84,762
)
 
$
(65,012
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
Stock-based compensation
25,625

 
27,893

Depreciation and amortization
6,465

 
5,790

Other
655

 
(8
)
Changes in operating assets and liabilities
 
 
 
Accounts receivable
20,244

 
12,177

Inventory
(1,293
)
 
(593
)
Deferred commissions
1,681

 
1,809

Prepaid expenses and other current assets
5,142

 
318

Other assets
536

 
551

Accounts payable
1,297

 
(2,509
)
Accrued compensation
(4,237
)
 
(905
)
Accrued expenses
152

 
407

Deferred revenue
(16,133
)
 
1,495

Other liabilities
(143
)
 
(160
)
Net cash used in operating activities
(44,771
)
 
(18,747
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(1,355
)
 
(3,402
)
Purchases of marketable securities

 
(63,569
)
Proceeds from maturities of marketable securities
27,000

 
53,354

Net cash provided by (used in) investing activities
25,645

 
(13,617
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving credit facility
16,000

 

Repayment of revolving credit facility
(16,000
)
 

Repayments of notes payable
(3,750
)
 
(3,749
)
Proceeds from sales of shares through employee equity incentive plans
11,583

 
20,726

Payment related to shares withheld for taxes on vesting of restricted stock units
(3,316
)
 
(4,302
)
Others
25

 

Net cash provided by financing activities
4,542

 
12,675

Effect of exchange rate changes on cash and cash equivalents

 
(4
)
Net change in cash, cash equivalents, and restricted cash for period
(14,584
)
 
(19,693
)
Cash, cash equivalents, and restricted cash at beginning of period
71,591

 
69,012

Cash, cash equivalents, and restricted cash at end of period
$
57,007

 
$
49,319







FORESCOUT TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited, in thousands, except per share amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019












GAAP gross profit
$
60,405


$
60,824


$
97,961


$
117,392

Add:











     Stock-based compensation expense
897


980


2,059


1,907

Acquisition-related expenses

 
15

 

 
29

Amortization of acquired intangible assets
470

 
467

 
941

 
934

Non-GAAP gross profit
$
61,772


$
62,286


$
100,961


$
120,262













GAAP operating expense
$
83,094

 
$
91,451

 
$
180,621

 
$
182,084

Less:
 
 
 
 
 
 
 
     Stock-based compensation expense
10,870

 
13,085

 
23,566

 
25,986

     Acquisition-related expenses
775

 
1,043

 
1,550

 
2,667

Amortization of acquired intangible assets
543

 
304

 
1,087

 
608

Merger-related expenses
8,588

 

 
19,009

 

Restructuring expenses
859

 

 
3,371

 

Non-GAAP operating expense
$
61,459

 
$
77,019

 
$
132,038

 
$
152,823

 
 
 
 
 
 
 
 
GAAP operating loss
$
(22,689
)
 
$
(30,627
)
 
$
(82,660
)
 
$
(64,692
)
Add:
 
 
 
 
 
 
 
     Stock-based compensation expense
11,767

 
14,065

 
25,625

 
27,893

     Acquisition-related expenses
775

 
1,058

 
1,550

 
2,696

Amortization of acquired intangible assets
1,013

 
771

 
2,028

 
1,542

Merger-related expenses
8,588

 

 
19,009

 

Restructuring expenses
859

 

 
3,371

 

Non-GAAP operating income (loss)
$
313

 
$
(14,733
)
 
$
(31,077
)
 
$
(32,561
)
 
 
 
 
 
 
 
 
GAAP net loss
$
(23,523
)
 
$
(30,760
)
 
$
(84,762
)
 
$
(65,012
)
Add:
 
 
 
 
 
 
 
     Stock-based compensation expense
11,767

 
14,065

 
25,625

 
27,893

     Acquisition-related expenses
775

 
1,058

 
1,550

 
2,696

Amortization of acquired intangible assets
1,013

 
771

 
2,028

 
1,542

Merger-related expenses
8,588

 

 
19,009

 

Restructuring expenses
859

 

 
3,371

 

     Tax effect of non-GAAP adjustments
753

 
(211
)
 
907

 
(356
)
Non-GAAP net income (loss)
$
232

 
$
(15,077
)
 
$
(32,272
)
 
$
(33,237
)
Non-GAAP net income (loss) per share, diluted
$

 
$
(0.33
)
 
$
(0.66
)
 
$
(0.74
)
 
 
 
 
 
 
 
 
Weighted-average shares used in per share calculation for GAAP, diluted
49,371

 
45,494

 
48,982

 
44,848

Add:
 
 
 
 
 
 
 
Weighted-average effect of potentially dilutive securities
2,082

 

 

 






Weighted-average shares used in per share calculation for non-GAAP, diluted
51,453

 
45,494

 
48,982

 
44,848

 
 
 
 
 
 
 
 
Net cash used in operating activities
$
(30,308
)
 
$
(25,186
)

$
(44,771
)

$
(18,747
)
Less:











Net purchases of property and equipment
532

 
1,813


1,355


3,402

Free cash flow (non-GAAP)
$
(30,840
)

$
(26,999
)

$
(46,126
)

$
(22,149
)
Net cash provided by (used in) investing activities
$
13,468

 
$
(3,500
)
 
$
25,645

 
$
(13,617
)
Net cash (used in) provided by financing activities
$
(12,484
)
 
$
5,141

 
$
4,542

 
$
12,675

Free cash flow margin (non-GAAP)
(39
)%

(34
)%

(34
)%

(14
)%