PresseBox
Pressemitteilung BoxID: 234001 (Websense Deutschland GmbH)
  • Websense Deutschland GmbH
  • Feringastrasse 6
  • 85774 München Unterföhring
  • http://www.websense.com
  • Ansprechpartner
  • Sandra Hofer
  • +49 (89) 59997-800

Websense Delivers Strong Finish to Record Revenue Year

(PresseBox) (SAN DIEGO, CA, ) Billings Total $105.9 Million for Q4 and $343.4 Million for 2008; GAAP Revenue at Record Levels of $79.3 Million for Q4 and $295.9 Million for 2008; Cash Flow From Operations of $24.1 Million for Q4 and $67.4 Million for 2008, Including Non-Recurring Cash Expenses

Websense, Inc. (NASDAQ: WBSN) today announced financial results for the fourth quarter and year ended December 31, 2008.

Fourth Quarter 2008: Fourth quarter revenue, calculated in accordance with GAAP, increased to $79.3 million from $61.0 million in the fourth quarter of 2007. The increase was a result of the addition of new, renewed and upgraded subscriptions, including the addition of approximately $16.2 million from new or renewal subscriptions from SurfControl products.

The company posted a GAAP net loss of $11.9 million, or 27 cents per share, for the fourth quarter of 2008. This compares to a GAAP net loss of $27.0 million, or 59 cents per share, for the fourth quarter of 2007.

Fourth quarter 2008 GAAP operating results reflected the write-down of the majority of SurfControl's deferred revenue to fair value as of the acquisition close date of October 3, 2007, which had the effect of reducing revenue that would have otherwise been recognizable in the quarter by approximately $6.8 million. Quarterly GAAP operating income also included certain cash and non-cash operating expenses totaling $18.2 million that were excluded from the company's non-GAAP results.

For the fourth quarter 2008, operating cash flow for the quarter was approximately $24.1 million, including approximately $3.0 million in cash payments for acquisition-related costs, compared to $16.0 million in the fourth quarter of 2007.

Fiscal Year 2008: For the fiscal year, GAAP revenue was $295.9 million, including approximately $74.4 million from new or renewal subscriptions from SurfControl products, compared with $211.7 million in 2007, including $8.7 million from SurfControl products. For 2008, the write-down of the majority of SurfControl's deferred revenue to fair value as of the acquisition close had the effect of reducing revenue that would have otherwise been recognizable by approximately $51.7 million.

The company posted a GAAP net loss of $29.9 million, or 66 cents per share, for the year. This compares to a GAAP net loss of $14.6 million, or 32 cents per share, for the 2007 fiscal year.

For the fiscal year 2008, GAAP cash flow from operations was approximately $67.4 million, and included approximately $18 million in cash payments for acquisition related costs, compared to $53.6 million in the fiscal year 2007.

"Our performance this quarter demonstrates that our strategy is working. When we announced the close of the SurfControl acquisition, we made significant commitments for earnings growth, cash flow and customer retention. I am proud to say that we exceeded every one of these commitments," said Gene Hodges, Websense CEO. "Our 2008 non-GAAP earnings were up 45 percent from 2007, and our cash flow from operations, excluding cash payments for acquisition related costs, was significantly higher than our most recent guidance of $75 million. This performance reflects broad and sustained execution across multiple functional areas, and few companies have been able to deliver this level of performance in the quarters immediately following an acquisition. Our success was due to the strength and discipline of our management team and the unwavering commitment of our employees."

Non-GAAP Operating Results

Fourth Quarter 2008: Billings for the fourth quarter, which represent the full amount of subscription contracts billed to customers during the period, were $105.9 million, compared to fourth quarter 2007 billings of $108.6 million.

Compared to the fourth quarter of 2007, billings during the fourth quarter of 2008 were negatively affected by shorter contract duration and changes in the currency exchange rate between the US dollar and the local currencies in which the subscription contracts were billed. The shorter average contract duration decreased billings by approximately $4 million compared to a year ago. Under our revenue recognition policy, deferred revenue for subscriptions that are denominated in currencies other than US currencies is booked in US dollars based upon the exchange rate at the end of the previous month in which the subscription is booked. The strengthening of the US dollar relative to the British pound, Euro, Australian dollar, Canadian dollar and Japanese yen compared to the average exchange rates during the fourth quarter of 2007 reduced billings by approximately $6 million, compared to the billings that would have been booked for the same subscriptions if entered into in the fourth quarter of 2007.

Fourth quarter 2008 non-GAAP revenue was $86.1 million and included approximately $6.8 million in subscription revenue from past billings to SurfControl customers that would have been recognized during this period had SurfControl remained an independent company reporting under GAAP. This subscription revenue was included in SurfControl's deferred revenue as of the acquisition date, but is not recognized as subscription revenue on a post-acquisition basis under GAAP due to the impact of the write-down of the majority of SurfControl's deferred revenue to fair value as of the acquisition date.

The average duration of fourth quarter 2008 contracts was 22.5 months, compared to 23.4 months in the fourth quarter of 2007. This change reflected an increase in the mix of one-year contracts to 52 percent of total billings, compared to 49 percent of total billings in the fourth quarter of 2007.

Fourth quarter 2008 non-GAAP operating income was $23.4 million, or 27.2 percent of non-GAAP revenue. Fourth quarter non-GAAP operating expenses of $62.7 million excluded cash and non-cash acquisition related expenses of approximately $12.6 million and stock based compensation expense of approximately $5.6 million.

Fourth quarter 2008 non-GAAP net income was $14.2 million, or 31 cents per share, an increase of 11 percent from the $12.8 million, or 28 cents per diluted share, in non-GAAP net income posted in the fourth quarter of 2007.

Fiscal Year 2008: For the full year 2008, billings were $343.4 million compared to $257.9 million in 2007. The increase in billings for the year reflected a full year of combined Websense and SurfControl operations, compared with a single quarter of combined results in 2007. Pro forma combined billings for Websense and SurfControl for 2007 were approximately $356 million and included approximately $8.9 million in billings of products that have been discontinued or product lines that were sold.

For the year, the average duration of subscriptions was approximately 21.9 months, compared to 23.4 months in 2007 for Websense as a stand-alone entity for the first three quarters of 2007. The shorter contract duration together with the strengthening of the US dollar against major currencies reduced billings during 2008.

Fiscal year 2008 non-GAAP revenue was $347.6 million and included approximately $51.7 million in subscription revenue from pre-acquisition billings to SurfControl customers that would have been recognized had SurfControl remained an independent company reporting under GAAP.

In April 2007, when Websense announced plans to acquire SurfControl, Websense expected the combination to be accretive to non-GAAP earnings by at least 20 percent. For the year, non-GAAP net income increased 45 percent, from $43.2 million, or 95 cents per diluted share, in 2007 to $63.0 million, or $1.38 per diluted share in 2008. The costs excluded from non-GAAP earnings are fully detailed in the footnotes to the table "Reconciliation of GAAP to Non-GAAP Financial Measures" at the end of this news release.

Balance Sheet and Cash Flow Metrics

The company's balance sheet remains strong, with cash and cash equivalents of approximately $67 million, accounts receivable of approximately $82 million and total GAAP deferred revenue of approximately $333 million as of the end of the year. Changes to the balance sheet compared to the prior quarter included:

- An increase in GAAP deferred revenue by approximately $25.4 million, which reflected higher fourth quarter billings compared to revenue recognized.

- An increase in GAAP accounts receivable by approximately $17.4 million, which reflected the $23.2 million sequential increase in fourth quarter billings. Days sales outstanding increased to 70 days from 67 days in the prior quarter, but remained consistent with the target range of 65 to 70 days.

During the quarter, the company repaid an additional $15 million in long term debt, bringing total principal payments to date to $85 million and reducing long term debt to $125 million as of December 31, 2008, from $210 million at the close of the SurfControl acquisition in October 2007. The company also repurchased a total of approximately 289,000 shares for approximately $5 million under a 10b5-1 plan.

"We target our cash balances at approximately $60 million on a global basis, and we believe this level will be appropriate for 2009 as well," said Dudley Mendenhall, Websense chief financial officer. "As we generate excess cash above this amount in 2009, we plan to reduce the balance outstanding on our credit facility and increase repurchases of our common stock to further support our commitment to building shareholder value."

Additionally, the company introduced two new billings metrics related to renewals which are more closely aligned with the company's management practices. The first metric is the percentage of the company's billings in a period that are obtained from renewals, which historically has averaged between 75 and 80 percent. The second metric is renewal yield and is calculated as the total billings from renewals in a period divided by the original total contract value of expiring subscriptions in that period. Fourth quarter billings from renewals were in the 75 to 80 percent target range and renewal yield was greater than 100 percent, consistent with historical performance.

Outlook for Fiscal Year 2009 and 2010

Websense provides annual guidance on anticipated financial performance for the year based on its assessment of the current business environment, including average subscription contract duration, historical seasonal trends in its business, and prevailing exchange rates between the U.S. dollar and other major currencies. Additionally, the company provides directional commentary on anticipated quarterly financial results to enhance investors' ability to understand quarterly seasonal patterns and the effect of timing differences between billings and revenue recognition. In providing fiscal year 2009 guidance, directional quarterly guidance and 2010 outlook, the company emphasizes that its forward-looking statements are based on current expectations and prevailing currency exchange rates on the date the guidance is provided and disclaims any obligation to update the statements as circumstances change.

For the first quarter of 2009, the company expects billings growth in the low single digits, compared to the first quarter of 2008. Subsequent quarterly billings are expected to follow historical seasonal patterns. Additionally, the company expects the trend of modest sequential declines in revenue to continue in the first half of the year, with revenue growth resuming in the second half of the year, reflecting the growth pattern of quarterly billings in 2008.

2009 Outlook

(as of 01/27/09)

--------------------------
Billings $365 - 375 million
Billings from renewals (% of total) 75 - 80%
GAAP revenue $326 - 334 million
Non-GAAP revenue $342 - 350 million
Non-GAAP operating margin 25 - 28%
Stock-based compensation expense $26 - 28 million
Amortization of intangible assets
(non-cash) approximately $ 39 million
Net cash interest expense $5 - 6 million
Non-GAAP earnings per diluted share $1.20 - 1.30
Estimated Non-GAAP tax rate 34 - 35%
Average diluted shares outstanding 44 - 46 million

Billings guidance for 2009 assumes an average contract duration in the 20 to 22 month range. Additionally, based on the current business outlook and collections trends, the company expects GAAP cash flow from operations for 2009 to exceed $80 million, compared to $67.4 million in GAAP cash flow from operations in 2008. The company does not expect any additional material non-recurring cash expenses from the SurfControl acquisition in 2009.

Non-GAAP guidance for fiscal year 2009 revenue and diluted earnings per share includes approximately $16.1 million in subscription revenue from SurfControl that would have been recognized under subscriptions that were included in deferred revenue as of the date of the acquisition that will not be recognized as revenue during the applicable period as revenue on a post acquisition basis under GAAP due to the impact of the write-down of the majority of SurfControl's deferred revenue to fair value as of the acquisition date.

For 2010, the company believes it has the potential to generate substantial growth in non-GAAP earnings per diluted share of more than $1.50 per share, assuming that the company generates 2009 billings within the guidance range, and assuming expenses grow as planned in the range of 6 to 7 percent annually in 2009 and 2010.

Non-GAAP Financial Measures

This press release provides financial measures for the fourth quarter and fiscal year 2008, including measures for revenue, income from operations, net income and earnings per diluted share, that include revenue from SurfControl that would have been recognized during the fourth quarter and full year 2008 under subscriptions that were included in deferred revenue as of the date of the acquisition but will not be recognized as revenue on a post-acquisition basis under GAAP due to the impact of the write-down of a majority of SurfControl's deferred revenue to fair value as of the acquisition date. In addition, fourth quarter and full year non-GAAP operating results exclude certain cash and non-cash expenses relating to the PortAuthority and SurfControl acquisitions, including restructuring costs relating to headcount reduction and facility closures, integration travel, retention bonuses, amortization of intangible assets and deferred financing fees, and professional fees, as well as stock based compensation expense and related tax effects. Full year results also exclude the benefit of the reversal of a tax provision based upon a favorable tax ruling. Based on the foregoing, the company's presentation of non-GAAP revenue, gross margin, operating expenses, income from operations, net income and earnings per diluted share are not calculated in accordance with GAAP. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our 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 historic operating results. A reconciliation of the GAAP and non-GAAP financial measures for the quarter and the year and a more detailed explanation of each non-GAAP financial measure and its uses are provided at the end of this press release.

This press release also provides guidance for the fiscal years 2009 and 2010, including guidance for revenue, income from operations, net income and earnings per diluted share, that include revenue from SurfControl that would have been recognized during the full year 2009 under subscriptions that were included in deferred revenue as of the date of the acquisition but will not be recognized as revenue on a post-acquisition basis under GAAP due to the impact of the write-down of a majority of SurfControl's deferred revenue to fair value as of the acquisition date.

This press release also includes financial measures for billings for the fourth quarter and fiscal year 2008 and for guidance for fiscal years 2009 and 2010 that are not numerical measures that can be calculated in accordance with GAAP. Websense provides this measurement in press releases reporting financial performance because this measurement provides a consistent basis for understanding the company's sales activities in the current period. The company believes the billings measurement is useful to investors because the GAAP measurements of revenue and deferred revenue in the current period include subscription contracts commenced in prior periods. The roll-forward of deferred revenue for the fourth quarter of 2008 is set forth at the end of this press release.

This press 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, our guidance and financial outlook for the company's 2009 and 2010 fiscal years, and statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates" and similar words. These statements may include, among others, plans, strategies and objectives of management for future operations. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with launching new product offerings, customer acceptance of the company's services, 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, risks relating to currency exchange rates and impacts of macro-economic conditions on our customers, risks relating to the required use of cash for debt servicing, the risks of ongoing compliance with the covenants in the senior secured credit facility, risks related to 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.

Websense Deutschland GmbH

Websense, Inc. (NASDAQ: WBSN), a global leader in integrated Web security, messaging security and data protection technologies, provides Essential Information Protection(TM) for more than 43 million employees at more than 50,000 organizations worldwide. Distributed through its global network of channel partners, Websense software and hosted security solutions help organizations block malicious code, prevent the loss of confidential information and enforce Internet use and security policies. For more information, visit www.websense.com.

Websense is a registered trademark of Websense, Inc. in the United States and certain international markets. Websense has numerous other registered and unregistered trademarks in the United States and internationally. All other trademarks are the property of their respective owner.