Exhibit 99.1
WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
INVESTOR CONTACT: |
| MEDIA CONTACT: |
Kate Patterson |
| Cas Purdy |
Websense, Inc. |
| Websense, Inc. |
(858) 320-8072 |
| (858) 320-9493 |
kpatterson@websense.com |
| cpurdy@websense.com |
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News Release |
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Websense Announces Record Billings and Revenue for Q4’06
Achieves Milestones in Major Business Initiatives with Expanded Distribution and Acquisition of Information Leak Prevention Technology Leader
SAN DIEGO, January 30, 2007—Websense, Inc. (NASDAQ: WBSN) today announced financial results for the fourth quarter ended December 31, 2006.
Revenue in the fourth quarter was a record $47.3 million, but slightly below the company’s previously issued revenue guidance range of $47.5 to $48 million. Revenue in the quarter reflected a change in the company’s revenue recognition policy from monthly to daily revenue recognition, as well as distributor marketing payments and channel rebates, which had the combined net effect of reducing revenue by approximately $1 million.
Net income calculated using generally accepted accounting principles (GAAP) was $7.8 million, or 17 cents per diluted share. Fourth quarter non-GAAP net income, which excludes stock-based compensation expense and the related tax effects was $11.4 million or 25 cents per diluted share, an increase of three percent from net income of $11.1 million in the fourth quarter of 2005.
Gross billings invoiced to customers in the fourth quarter were $69.0 million, an increase of two percent from the fourth quarter of 2005. Net billings, reflecting approximately $578,000 in distributor marketing payments and channel rebates, were $68.4 million. Billings represents the full amount of subscription contracts billed to customers during the quarter. The difference between net billings booked and revenue recognized in the fourth quarter resulted in an increase in deferred revenue of approximately $21.1 million from the end of September, bringing total deferred revenue to $220.3 million at the end of December.
“Our fourth quarter billings performance reflected normal quarterly seasonality, partially offset by a contraction in our average subscription length compared to the fourth quarter of 2005,” said Gene Hodges, Websense chief executive officer. “Other business metrics, including strong growth
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
internationally, continued increases in seats under subscription and gains in the average annual contract value, demonstrate that our business remains healthy and the Web security and Web filtering markets continue to offer opportunity for growth.”
“2006 was a year of transition for Websense as we took steps to support our continued growth and expand our presence in the broader content security market. In the fourth quarter, we began distributing our software through Ingram Micro in North America, which will allow us to substantially expand the number of resellers and extend our reach into the sub-1000 seat market segment for Web security and Web filtering. Although there are significant start-up costs associated with establishing this relationship and marketing to Ingram’s large base of resellers, we expect this partnership to generate increased new business and become additive to revenue and earnings by mid-2007,” added Hodges.
“Additionally, in December we announced the acquisition of PortAuthority Technologies, Inc., a technology leader in information leak prevention. We identified information leak prevention as a significant opportunity for Websense in 2006 and formed a joint development and original equipment manufacturer relationship with PortAuthority. We believe that by acquiring PortAuthority and retaining its engineering talent, we will be able to accelerate our time to market and offer a more comprehensive solution, creating a more significant platform for long-term growth.”
The company ended the fourth quarter of 2006 with $326.9 million in cash and investments, an increase of approximately $26.5 million from the end of the third quarter, and zero debt. Net operating cash flow was approximately $22.1 million for the quarter and approximately $83.7 million for the full year. On January 9, 2007, Websense made a cash payment of approximately $88 million to complete the acquisition of PortAuthority Technologies, Inc. and assumed indebtedness of approximately $4 million. The cash used in the acquisition, including any cash used to retire indebtedness, will be reflected in the cash balances reported at the end of the first quarter of 2007.
For the full year, gross billings were $211.1 million, an increase of 8 percent from 2005. Net billings, after subtracting distributor marketing payments and channel rebates were $210.5 million. Revenue was $178.8 million, net of the approximately $2.2 million combined effect of distributor marketing payments, channel rebates and daily versus monthly revenue recognition. Net income calculated using generally accepted accounting principles (GAAP) was $32.1 million, or 68 cents per diluted share for the year. Non-GAAP net income, which excludes stock-based compensation expense and the related tax effects was $46 million or 98 cents per diluted share, an increase of 19 percent from 2005.
Change in Revenue Recognition Policy and Adoption of SAB 108
In January 2007, as part of its annual audit and Sarbanes Oxley certification process, the company reviewed its revenue recognition policy with its independent registered public accounting firm, Ernst & Young LLP, and concluded that its policy of recognizing revenue on a monthly straight-line basis over the term of the subscription agreement is not consistent with the interpretations of generally accepted accounting principles (GAAP). As a result, Websense has recalculated revenue as recognized
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
on a daily straight-line basis, commencing on the day rather than the month the subscription begins. While this recalculation, when applied retroactively to prior years, does not result in material adjustments to the company’s income statements, cash balances or operating cash flows in any single year, the cumulative impact on deferred revenue would have been material if not corrected in the company’s financial statements for 2006.
To adjust its historical financial statements for the change in revenue recognition, the company has adopted SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108) and applied the special cumulative effect transition provision to its 2006 financial statements. The cumulative net result is an increase in deferred revenue and a reduction in retained earnings, before tax impact, as of January 1, 2006 by $8.7 million.
For 2006, the impact of daily revenue recognition on subscriptions commencing during the period, combined with recognition of additional revenue related to the cumulative adjustment from prior periods, was to reduce revenue recognized by $1.7 million and net income by $1.1 million, and increase deferred revenue by $10.4 million when compared to what these amounts would have been under the monthly revenue recognition policy.
The adjustments to previously reported quarterly income statements for the first nine months of 2006 are outlined below in the reconciliation of GAAP to non-GAAP financial statements. The company’s balance sheets and income statements prior to 2006 will not be restated by the company, pursuant to the provisions of SAB 108.
“We have always been committed to providing accurate, timely and transparent financial reports to our stockholders,” said Doug Wride, Websense chief financial officer. “By changing to a daily revenue recognition method now, we can ensure that our results are compliant with interpretations of GAAP and that future comparisons to our 2006 financial statements are made on a consistent basis.
Recent Business and Product Development Highlights
In addition to reporting record revenue and billings performance and announcing the acquisition of PortAuthority, highlights from the fourth quarter included:
· Launch of Websense ThreatSeeker™ technology, the company’s patent-pending threat identification and categorization technology that delivers preemptive protection from Web-based security threats.
· Announcement of plans for a new research and development center in Beijing, China, to support the development of Websense® software and establish a direct presence in the Chinese enterprise market.
· Recognition of Websense software with a “Best Buy” rating in SC Magazine’s Best of 2006 product feature. The Best Buy rating is SC Magazine’s top award and goes to products that the magazine rates as outstanding across a range of criteria. The magazine also named Websense a finalist in two categories of the 2007 SC Magazine Awards program for outstanding achievement in information technology security.
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Q4 2006 EARNINGS RELEASE
Additional Quarterly Business Metrics
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| Q4’06 |
| Q3’06 |
| Q4’05 |
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Seats under subscription |
| 25 million |
| 24.5 million |
| 23.9 million |
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Billings of security-related products |
| 49 | % | 49 | % | 28 | % | |||
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New business revenue (% of total) |
| 34 | % | 33 | % | 33 | % | |||
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International revenue (% of total) |
| 38 | % | 37 | % | 34 | % | |||
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Average annual contract value |
| $ | 9,900 |
| $ | 9,200 |
| $ | 9,000 |
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Attach rate for add-on products |
| 63 | % | 63 | % | 60 | % | |||
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Average contract duration (months) |
| 22.7 |
| 22.7 |
| 23.2 |
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Renewal rate (based on # of customers) |
| 75-80 | % | 75-80 | % | 75-80 | % | |||
First Quarter 2007 Outlook
Websense provides guidance on its anticipated financial performance for the coming quarter based on its assessment of the current business environment and historical seasonal trends in its business. In providing quarterly guidance, the company emphasizes that its forward-looking statements are based on current expectations and disclaims any obligation to update the statements as conditions change. For the first quarter of 2007:
· Billings are expected to be in the range of $40 to $43 million and revenue is expected to be in the range of $48.5 to $49.5 million. The ranges for both billings and subscription revenue are net of anticipated channel marketing payments and rebates. For the first quarter, payments of this Nature expected to be between $700,000 and $1 million.
· Stock-based compensation expense, reported in compliance with FAS 123R, is expected to total approximately $5.1 million.
· Both GAAP and non-GAAP gross margin, which excludes stock-based compensation expense, are expected to be approximately 91 to 92 percent of revenue.
· GAAP operating margin is expected to be 9 to 10 percent of revenue. Non-GAAP operating margin, which excludes stock-based compensation expense, is expected to be between 23 and 25 percent of revenue. The company’s guidance for gross margin and operating margin reflect the impact of the acquired information leak prevention business.
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
· Fully diluted shares outstanding are expected to be 45 to 46 million shares, depending upon the amount and timing of shares repurchased, if any.
· Based on the above revenue and expense structure, expected fully diluted shares outstanding and the 2006 effective GAAP tax rate of 37 percent, combined with a preliminary assessment of purchase price allocations, GAAP earnings are expected to be approximately 9 to 11 cents per diluted share. Non-GAAP earnings per diluted share, based upon the 2006 effective non-GAAP tax rate of 35 percent excluding stock-based compensation expense and related tax effects, amortization of intangibles related to the PortAuthority acquisition and one-time charges related to in-process research and development, are expected to be approximately 19 to 21 cents.
Conference Call
Websense is hosting a conference call and simultaneous webcast today at 4:30 p.m. EST (1:30 pm PST), to discuss these results. To participate in the call, investors should dial (800) 811-8845 (domestic) or (913) 981-4905 (international) 10 minutes prior to the scheduled start of the call. The webcast may be accessed via the internet at www.websense.com/investors. An audio archive of the webcast will be available on the company’s website through March 31, 2007, and a taped replay of the call will be available for one week at (888) 203-1112 or (719) 457-0820, passcode 4336310.
Non-GAAP Financial Measures
This press release provides financial measures for net income and earnings per diluted share that exclude stock-based compensation expense and the related tax effects, and therefore are not calculated in accordance with generally accepted accounting principles (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 and to compare current operating results with historical operating results prior to the adoption of FAS 123R. A reconciliation of the GAAP and non-GAAP income statements for the fourth quarter and full year 2006 are provided at the end of this press release.
This press release provides financial measures for deferred revenue, revenue, net income and earnings per diluted share that exclude the effects of the company’s adoption of SAB 108 to adjust deferred revenue and retained earnings on the company’s balance sheet as of January 1, 2006 and to recalculate revenue during each of the quarters of 2006 under the company’s new daily revenue recognition policy and reflect the revenue, net income and earnings per diluted share under the company’s prior policy of recognizing revenue on a monthly straight-line basis over the term of the subscription agreement. These non-GAAP financial measures are included to provide meaningful comparison to performance during prior quarters that were reported using the monthly revenue recognition policy and the impact of the change in accounting policy on the results for these periods and in order to provide information on the impact of these changes on future performance. A reconciliation of
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
the GAAP and non-GAAP deferred revenue and income statement items for the fourth quarter and full year 2006 are provided at the end of this press release.
This press release also includes financial measures for billings that are not numerical measures that can be calculated in accordance with generally accepted accounting principles (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. A reconciliation of billings and deferred revenue for the fourth quarter of 2006 is set forth at the end of this press release.
About Websense, Inc.
Websense, Inc. (NASDAQ: WBSN), a global leader in Web security and Web filtering software, is trusted to protect 25 million employees worldwide. Websense proactively discovers and immediately protects customers against Web-based threats such as spyware, phishing attacks, viruses and crimeware with maximum protection and minimal effort. With diverse partnerships and integrations, Websense enhances our customers’ network and security environments. For more information, visit www.websense.com.
# # #
Websense and Websense Enterprise are registered trademarks of Websense, Inc. in the United States and certain international markets. Websense has numerous other unregistered trademarks in the United States and internationally. All other trademarks are the property of their respective owners.
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 the quotations of Gene Hodges and Doug Wride, the First Quarter 2007 Outlook, statements (including implications) relating to the success and future performance of the security content business, 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; any statements regarding proposed new products, services or developments; statements regarding planned investments in our channel strategy and the expected benefits of the investment; any statements regarding future economic conditions or financial or operating performance; statements of belief and any statements of assumptions underlying any of the foregoing. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with integrating acquired businesses and launching new product offerings, risks of changing distribution models and the potential for short term disruptive effects on new customer sales; 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 industry; changes in domestic and international market conditions, including risks of having research and development centers in Israel and China, and the entry into and development of international markets for the company’s products; risks relating to intellectual property ownership; 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 (<http://www.sec.gov>). Websense assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.
Tables to follow
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense, Inc.
Consolidated Income Statements
(Unaudited and in thousands, except per share amounts)
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| Three Months Ended |
| Twelve Months Ended |
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| December 31, |
| December 31, |
| December 31, |
| December 31, |
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| 2006 |
| 2005 |
| 2006 |
| 2005 |
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Revenue |
| $ | 47,325 |
| $ | 40,128 |
| $ | 178,814 |
| $ | 148,636 |
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Cost of revenue |
| 4,319 |
| 2,812 |
| 15,274 |
| 10,642 |
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Gross margin |
| 43,006 |
| 37,316 |
| 163,540 |
| 137,994 |
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Operating expenses: |
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Selling and marketing |
| 21,890 |
| 15,318 |
| 80,135 |
| 55,288 |
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Research and development |
| 5,731 |
| 4,155 |
| 22,663 |
| 16,277 |
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General and administrative |
| 5,311 |
| 2,775 |
| 21,279 |
| 11,729 |
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Total operating expenses |
| 32,932 |
| 22,248 |
| 124,077 |
| 83,294 |
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Income from operations |
| 10,074 |
| 15,068 |
| 39,463 |
| 54,700 |
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Other income, net |
| 3,047 |
| 1,721 |
| 11,287 |
| 5,411 |
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Income before income taxes |
| 13,121 |
| 16,789 |
| 50,750 |
| 60,111 |
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Provision for income taxes |
| 5,344 |
| 5,678 |
| 18,657 |
| 21,343 |
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Net income |
| $ | 7,777 |
| $ | 11,111 |
| $ | 32,093 |
| $ | 38,768 |
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Basic net income per share |
| $ | 0.17 |
| $ | 0.23 |
| $ | 0.69 |
| $ | 0.82 |
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Diluted net income per share |
| $ | 0.17 |
| $ | 0.23 |
| $ | 0.68 |
| $ | 0.79 |
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Basic common shares |
| 44,688 |
| 47,624 |
| 46,494 |
| 47,491 |
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Diluted common shares |
| 45,272 |
| 49,195 |
| 47,116 |
| 49,196 |
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Financial Data: |
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Total deferred revenue |
| $ | 220,343 |
| $ | 179,925 |
| $ | 220,343 |
| $ | 179,925 |
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense, Inc.
Consolidated Balance Sheets
(Unaudited and in thousands)
|
| December 31, |
| December 31, |
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| 2006 |
| 2005 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 83,523 |
| $ | 61,629 |
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Marketable securities |
| 243,382 |
| 258,760 |
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Accounts receivable, net |
| 52,740 |
| 50,570 |
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Prepaid income taxes |
| — |
| 1,962 |
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Current portion of deferred income taxes |
| 18,179 |
| 15,772 |
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Other current assets |
| 3,943 |
| 3,467 |
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Total current assets |
| 401,767 |
| 392,160 |
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Property and equipment, net |
| 5,793 |
| 4,923 |
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Deferred income taxes, less current portion |
| 13,806 |
| 6,043 |
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Deposits and other assets |
| 2,891 |
| 549 |
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Total assets |
| $ | 424,257 |
| $ | 403,675 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
| $ | 2,712 |
| $ | 2,073 |
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Accrued payroll and related benefits |
| 9,164 |
| 8,476 |
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Other accrued expenses |
| 7,084 |
| 5,085 |
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Income taxes payable |
| 4,229 |
| 2,305 |
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Current portion of deferred revenue |
| 148,539 |
| 119,118 |
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Total current liabilities |
| 171,728 |
| 137,057 |
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Deferred revenue, less current portion |
| 71,804 |
| 60,807 |
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Stockholders’ equity: |
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Common stock |
| 509 |
| 500 |
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Additional paid-in capital |
| 237,302 |
| 197,826 |
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Treasury stock |
| (139,744 | ) | (48,340 | ) | ||
Retained earnings |
| 82,748 |
| 56,449 |
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Accumulated other comprehensive loss |
| (90 | ) | (624 | ) | ||
Total stockholders’ equity |
| 180,725 |
| 205,811 |
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Total liabilities and stockholders’ equity |
| $ | 424,257 |
| $ | 403,675 |
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures As Corrected
Reconciliation of Billings to Deferred Revenue
(Unaudited and in thousands)
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| As previously |
| Impact of Daily |
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| reported |
| Revenue Recognition |
| As restated |
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Deferred revenue balance December 31, 2005 |
| $ | 179,925 |
| $ | — |
| $ | 179,925 |
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Cumulative adjustment on January 1, 2006 |
| — |
| (8,712 | ) | 8,712 |
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Billings first quarter 2006 |
| 39,034 |
| — |
| 39,034 |
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Revenue recognized first quarter 2006 |
| (42,434 | ) | (374 | ) | (42,060 | ) | |||
Deferred revenue balance March 31, 2006 |
| $ | 176,525 |
| $ | (9,086 | ) | $ | 185,611 |
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Billings second quarter 2006 |
| 49,777 |
| — |
| 49,777 |
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Revenue recognized second quarter 2006 |
| (44,149 | ) | (462 | ) | (43,687 | ) | |||
Deferred revenue balance June 30, 2006 |
| $ | 182,153 |
| $ | (9,548 | ) | $ | 191,701 |
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Billings third quarter 2006 |
| 53,314 |
| — |
| 53,314 |
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Revenue recognized third quarter 2006 |
| (46,068 | ) | (326 | ) | (45,742 | ) | |||
Deferred revenue balance September 30, 2006 |
| $ | 189,399 |
| $ | (9,874 | ) | $ | 199,273 |
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| Non-GAAP |
| Impact of Daily |
| Q4 2006 |
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Deferred revenue balance September 30, 2006 |
| $ | 189,399 |
| $ | (9,874 | ) | $ | 199,273 |
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Billings fourth quarter 2006 |
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Invoiced to customers |
| 68,973 |
| — |
| 68,973 |
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Payments and rebates to customers |
| (578 | ) | — |
| (578 | ) | |||
Net billings |
| 68,395 |
| — |
| 68,395 |
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Revenue recognized fourth quarter 2006 |
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Gross revenue |
| (48,326 | ) | (546 | ) | (47,780 | ) | |||
Payments and rebates to customers |
| 455 |
| — |
| 455 |
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Net revenue |
| (47,871 | ) | $ | (546 | ) | (47,325 | ) | ||
Deferred revenue balance December 31, 2006 |
| $ | 209,923 |
| $ | (10,420 | ) | $ | 220,343 |
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WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures As Corrected (continued)
Summary of Revenue Recognition and Adjustments to Quarterly Income
Reconciliation of Consolidated Income Statements GAAP to Non-GAAP
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| Three Months Ended |
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| March 31, 2006 |
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| Previously |
| Impact of |
| Corrected |
| SFAS 123R |
| Non-GAAP |
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Revenue |
| $ | 42,434 |
| $ | 374 |
| $ | 42,060 |
| $ | — |
| $ | 42,060 |
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Cost of revenue |
| 3,378 |
| — |
| 3,378 |
| 326 |
| 3,052 |
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Gross margin |
| 39,056 |
| 374 |
| 38,682 |
| 326 |
| 39,008 |
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Operating expenses: |
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Selling and marketing |
| 18,014 |
| — |
| 18,014 |
| 1,951 |
| 16,063 |
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Research and development |
| 5,443 |
| — |
| 5,443 |
| 841 |
| 4,602 |
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General and administrative |
| 5,208 |
| — |
| 5,208 |
| 1,622 |
| 3,586 |
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Total operating expenses |
| 28,665 |
| — |
| 28,665 |
| 4,414 |
| 24,251 |
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Income from operations |
| 10,391 |
| 374 |
| 10,017 |
| 4,740 |
| 14,757 |
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Other income, net |
| 2,635 |
| — |
| 2,635 |
| — |
| 2,635 |
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Income before income taxes |
| 13,026 |
| 374 |
| 12,652 |
| 4,740 |
| 17,392 |
| �� | ||||||||||||||
Provision for income taxes |
| 4,827 |
| 119 |
| 4,708 |
| 1,160 |
| 5,868 |
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Net income |
| $ | 8,199 |
| $ | 255 |
| $ | 7,944 |
| $ | 3,580 |
| $ | 11,524 |
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Diluted net income per share |
| $ | 0.17 |
| $ | 0.01 |
| $ | 0.16 |
| $ | 0.07 |
| $ | 0.23 |
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Diluted common shares |
| 49,047 |
| 49,047 |
| 49,047 |
| 49,047 |
| 49,047 |
|
| ||||||||||||||
10
WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures As Corrected (continued)
Summary of Revenue Recognition and Adjustments to Quarterly Income
Reconciliation of Consolidated Income Statements GAAP to Non-GAAP
|
| Three Months Ended |
| |||||||||||||
|
| June 30, 2006 |
| |||||||||||||
|
| Previously |
| Impact of |
| Corrected |
| SFAS 123R |
| Non-GAAP |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
| $ | 44,149 |
| $ | 462 |
| $ | 43,687 |
| $ | — |
| $ | 43,687 |
|
Cost of revenue |
| 3,704 |
| — |
| 3,704 |
| 368 |
| 3,336 |
| |||||
Gross margin |
| 40,445 |
| 462 |
| 39,983 |
| 368 |
| 40,351 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling and marketing |
| 18,922 |
| — |
| 18,922 |
| 2,054 |
| 16,868 |
| |||||
Research and development |
| 5,535 |
| — |
| 5,535 |
| 890 |
| 4,645 |
| |||||
General and administrative |
| 5,225 |
| — |
| 5,225 |
| 1,658 |
| 3,567 |
| |||||
Total operating expenses |
| 29,682 |
| — |
| 29,682 |
| 4,602 |
| 25,080 |
| |||||
Income from operations |
| 10,763 |
| 462 |
| 10,301 |
| 4,970 |
| 15,271 |
| |||||
Other income, net |
| 2,821 |
| — |
| 2,821 |
| — |
| 2,821 |
| |||||
Income before income taxes |
| 13,584 |
| 462 |
| 13,122 |
| 4,970 |
| 18,092 |
| |||||
Provision for income taxes |
| 5,216 |
| 161 |
| 5,055 |
| 1,286 |
| 6,341 |
| |||||
Net income |
| $ | 8,368 |
| $ | 301 |
| $ | 8,067 |
| $ | 3,684 |
| $ | 11,751 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted net income per share |
| $ | 0.17 |
| $ | 0.00 |
| $ | 0.17 |
| $ | 0.07 |
| $ | 0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted common shares |
| 48,368 |
| 48,368 |
| 48,368 |
| 48,368 |
| 48,368 |
|
11
WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures As Corrected (continued)
Summary of Revenue Recognition and Adjustments to Quarterly Income
Reconciliation of Consolidated Income Statements GAAP to Non-GAAP
|
| Three Months Ended |
| |||||||||||||
|
| Previously |
| Impact of |
| Corrected |
| SFAS 123R |
| Non-GAAP |
| |||||
Revenue |
| $ | 46,068 |
| $ | 326 |
| $ | 45,742 |
| $ | — |
| $ | 45,742 |
|
Cost of revenue |
| 3,873 |
| — |
| 3,873 |
| 394 |
| 3,479 |
| |||||
Gross margin |
| 42,195 |
| 326 |
| 41,869 |
| 394 |
| 42,263 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling and marketing |
| 21,309 |
| — |
| 21,309 |
| 2,203 |
| 19,106 |
| |||||
Research and development |
| 5,954 |
| — |
| 5,954 |
| 928 |
| 5,026 |
| |||||
General and administrative |
| 5,535 |
| — |
| 5,535 |
| 1,797 |
| 3,738 |
| |||||
Total operating expenses |
| 32,798 |
| — |
| 32,798 |
| 4,928 |
| 27,870 |
| |||||
Income from operations |
| 9,397 |
| 326 |
| 9,071 |
| 5,322 |
| 14,393 |
| |||||
Other income, net |
| 2,784 |
| — |
| 2,784 |
| — |
| 2,784 |
| |||||
Income before income taxes |
| 12,181 |
| 326 |
| 11,855 |
| 5,322 |
| 17,177 |
| |||||
Provision for income taxes |
| 3,647 |
| 97 |
| 3,550 |
| 2,368 |
| 5,918 |
| |||||
Net income |
| $ | 8,534 |
| $ | 229 |
| $ | 8,305 |
| $ | 2,954 |
| $ | 11,259 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted net income per share |
| $ | 0.18 |
| $ | 0.00 |
| $ | 0.18 |
| $ | 0.06 |
| $ | 0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted common shares |
| 46,401 |
| 46,401 |
| 46,401 |
| 46,401 |
| 46,401 |
|
12
WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures (continued)
Summary of Revenue Recognition and Adjustments to Quarterly Income
Reconciliation of Consolidated Income Statements GAAP to Non-GAAP
|
| Twelve Months Ended |
| |||||||||||||
|
| December 31, 2006 |
| |||||||||||||
|
| Non-GAAP |
| Impact of |
| GAAP |
| SFAS 123R |
| Non-GAAP |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
| $ | 47,871 |
| $ | 546 |
| $ | 47,325 |
| $ | — |
| $ | 47,325 |
|
Cost of revenue |
| 4,319 |
| — |
| 4,319 |
| 388 |
| 3,931 |
| |||||
Gross margin |
| 43,552 |
| 546 |
| 43,006 |
| 388 |
| 43,394 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling and marketing |
| 21,890 |
| — |
| 21,890 |
| 2,056 |
| 19,834 |
| |||||
Research and development |
| 5,731 |
| — |
| 5,731 |
| 914 |
| 4,817 |
| |||||
General and administrative |
| 5,311 |
| — |
| 5,311 |
| 1,968 |
| 3,343 |
| |||||
Total operating expenses |
| 32,932 |
| — |
| 32,932 |
| 4,938 |
| 27,994 |
| |||||
Income from operations |
| 10,620 |
| 546 |
| 10,074 |
| 5,326 |
| 15,400 |
| |||||
Other income, net |
| 3,047 |
| — |
| 3,047 |
| — |
| 3,047 |
| |||||
Income before income taxes |
| 13,667 |
| 546 |
| 13,121 |
| 5,326 |
| 18,447 |
| |||||
Provision for income taxes |
| 5,544 |
| 200 |
| 5,344 |
| 1,665 |
| 7,009 |
| |||||
Net income |
| $ | 8,123 |
| $ | 346 |
| $ | 7,777 |
| $ | 3,661 |
| $ | 11,438 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted net income per share |
| $ | 0.18 |
| $ | 0.01 |
| $ | 0.17 |
| $ | 0.08 |
| $ | 0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted common shares |
| 45,272 |
| 45,272 |
| 45,272 |
| 45,272 |
| 45,272 |
|
13
WEBSENSE, INC.
Q4 2006 EARNINGS RELEASE
Websense Inc.
Reconciliation of GAAP to non-GAAP Measures As Corrected (continued)
Summary of Revenue Recognition and Adjustments to Annual Income
Reconciliation of Consolidated Income Statements GAAP to Non-GAAP
|
| Twelve Months Ended |
| |||||||||||||
|
| December 31, 2006 |
| |||||||||||||
|
| 9 Months |
| Q4’06 |
| 12 Months |
| SFAS 123R |
| Non-GAAP |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
| $ | 131,489 |
| $ | 47,325 |
| $ | 178,814 |
| $ | — |
| $ | 178,814 |
|
Cost of revenue |
| 10,955 |
| 4,319 |
| 15,274 |
| 1,476 |
| 13,798 |
| |||||
Gross margin |
| 120,534 |
| 43,006 |
| 163,540 |
| 1,476 |
| 165,016 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling and marketing |
| 58,245 |
| 21,890 |
| 80,135 |
| 8,264 |
| 71,871 |
| |||||
Research and development |
| 16,932 |
| 5,731 |
| 22,663 |
| 3,573 |
| 19,090 |
| |||||
General and administrative |
| 15,968 |
| 5,311 |
| 21,279 |
| 7,045 |
| 14,234 |
| |||||
Total operating expenses |
| 91,145 |
| 32,932 |
| 124,077 |
| 18,882 |
| 105,195 |
| |||||
Income from operations |
| 29,389 |
| 10,074 |
| 39,463 |
| 20,358 |
| 59,821 |
| |||||
Other income, net |
| 8,240 |
| 3,047 |
| 11,287 |
| — |
| 11,287 |
| |||||
Income before income taxes |
| 37,629 |
| 13,121 |
| 50,750 |
| 20,358 |
| 71,108 |
| |||||
Provision for income taxes |
| 13,313 |
| 5,344 |
| 18,657 |
| 6,479 |
| 25,136 |
| |||||
Net income |
| $ | 24,316 |
| $ | 7,777 |
| $ | 32,093 |
| $ | 13,879 |
| $ | 45,972 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted net income per share |
| $ | 0.51 |
| $ | 0.17 |
| $ | 0.68 |
| $ | 0.30 |
| $ | 0.98 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted common shares |
| 47,926 |
| 45,272 |
| 47,116 |
| 47,116 |
| 47,116 |
|
14