EXHIBIT 99
[WEBSENSE INC. LOGO]
IR CONTACT: Kate Patterson MEDIA CONTACT: Katy Tanghe
Websense Inc. Websense Inc.
(858) 320-8072 (858) 320-9263
kpatterson@websense.com ktanghe@websense.com
N E W S R E L E A S E
WEBSENSE CONFIRMS FINANCIAL RESULTS FOR FIRST QUARTER 2003
Revenue Rises 42 Percent From First Quarter 2002 to $18.5 Million
SAN DIEGO, April 22, 2003 - Websense Inc. (NASDAQ: WBSN), the world's
leading provider of employee Internet management (EIM) software, today announced
final results for the first quarter ended March 31, 2003.
Revenue for the first quarter was a record $18.5 million, an increase of 42
percent from the $13.0 million reported in the first quarter a year ago. First
quarter net income was $3.9 million, or 17 cents per diluted share, compared to
net income in the first quarter of 2002 of $2.7 million, or 11 cents per diluted
share. First quarter 2003 results reflected an effective tax rate of 40 percent,
compared to an effective tax rate of approximately 3 percent in the first
quarter of 2002.
"Our results this quarter reflect the strength and predictability of our
subscription-based business model," said John Carrington, chairman and CEO of
Websense. "Although our billings were adversely impacted by worldwide economic
and geo-political factors, we posted record revenue, strong earnings and
significant positive cash flow for the quarter."
"Even more importantly, we continued to improve our competitive position
with the launch of Websense Enterprise v5, Client Application Manager, Bandwidth
Optimizer, and Websense Enterprise SMB (small and medium businesses), as well as
the upcoming introduction of Websense Explorer. These new products leverage our
core technologies to deliver solutions that address the emerging security and
productivity problems posed by new Internet and desktop-based applications,"
Carrington added. "Instant messaging, peer-to-peer networks, spyware and hacking
tools create additional management challenges for IT administrators. Our
research indicates that IT administrators want to extend their control from the
server to the desktop and onto the network, and Websense is the only EIM vendor
delivering this capability in a cost-effective subscription-based solution. As
customers become educated about the benefits of these new solutions, we believe
they will serve as a catalyst for additional growth."
Websense sells subscriptions to its products primarily on a one-, two- or
three-year basis, billing the entire amount to the customer up-front. The
company then recognizes pro-rata portions of the total billings as subscription
revenue on a monthly straight-line basis over the life of the subscriptions.
Total billings in the first quarter were $18.7 million, compared with $15.8
million in the first quarter of 2002.
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Q1 2003 EARNINGS RELEASE (PAGE 2)
Deferred revenue - which represents amounts billed to customers but not yet
recognized as subscription revenue - was $64.9 million at the end of the first
quarter, and increased by approximately $184,000 from the fourth quarter of
2002. The increase in deferred revenue reflects the amount that total billings
during the quarter exceeded total subscription revenue recognized in the
quarter. Deferred revenue has increased every quarter since the company's
initial public offering in March 2000.
Operating margin was a record 31 percent for the quarter, reflecting both
revenue growth and tight financial controls in the uncertain economic
environment. Operating expenses were 62 percent of revenue, compared with 77
percent in the first quarter of 2002. While the company's investment in research
and development remained above 17 percent of revenue in both quarters, the sales
and marketing and general and administrative expense categories declined
significantly as a percentage of revenue in the first quarter of 2003.
Strong positive operating cash flow resulted in an increase in cash and
investments by $10.8 million during the quarter, further strengthening a balance
sheet that now has more than $151 million in total cash and investments and no
debt.
As previously announced, the company's board of directors has authorized
the repurchase of up to 2 million shares of the company's common stock. The
share repurchases will be made from time to time on the open market at
prevailing market prices, or in privately negotiated transactions, and no
specific timeframe for purchase has been mandated.
BUSINESS HIGHLIGHTS
Business highlights since the end of 2002 included:
- The company delivered on its product roadmap with the launch of
Websense Enterprise v5, Client Application Manager and Bandwidth
Optimizer. More than 5,000 customers downloaded the new Websense
Enterprise v5 platform in the first two weeks of availability.
- Websense increased the number of customers to approximately 18,500
worldwide. The number of customer seats remained relatively unchanged
at approximately 13.8 million.
- The company added important domestic and international customers to
its roster of clients, including the United States Army 5th Signal
Command, the U.S. Department of Justice, T-Mobile, Telecom Italia,
Chicago Transit Authority, Levi Strauss & Co, and Vodaphone
Netherlands.
- Renewals remained strong, and significant renewing or upgrading
customers included British Petroleum, Kimberly Clark Corporation,
Petrobras, Banco de Venezuela, Aurora Healthcare, Burlington Northern
Santa Fe Railroad, and the Los Angeles Unified School District.
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Q1 2003 EARNINGS RELEASE (PAGE 3)
- The Websense Master Database grew to 4.3 million sites consisting of
more than one billion Web pages in 49 languages. The database is
refreshed daily and, to date, more than 1,000,000 dead links have been
removed.
- Websense continued to expand the number of platform integrations
available to customers with a new agreement to install the Websense
Master Database directly on Blue Coat Systems' security appliance.
Websense now has 28 platform integrations.
- The company announced that it is leveraging the new high-performance
network agent technology in Websense Enterprise v5 to create Websense
Enterprise SMB, a platform-independent version of Websense Enterprise
targeted at small and medium-sized businesses. Gartner Inc., a
technology industry research firm, defines this market as "under 1,000
employees," which is the business segment targeted by many of the
1,100 value-added resellers that sell Websense.
SECOND QUARTER OUTLOOK
Although unsettled political and economic conditions in many parts of the
world continue to cloud the global business outlook, Websense provides guidance
on its anticipated financial performance in the coming quarter. Given the many
uncertainties in the outlook for the global economy, at this time the company is
not providing guidance for the calendar year, and investors should not assume
that prior 2003 guidance remains valid. 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.
The company expects year-over-year revenue growth in the second quarter of
2003 to be in the range of 31 to 33 percent. Earnings per share are expected to
be in the range of 16 to 17 cents and will reflect a 40 percent effective tax
rate.
CONFERENCE CALL
Websense is hosting a conference call and simultaneous Webcast today at
4:30 p.m. (EDT) to discuss these results. To participate in the call, investors
should dial (800) 406-5356 (domestic) or (913) 981-5572 (international) ten
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 Web site through June 30 and a taped replay
of the call will be available for one week at (888) 203-1112 or (719) 457-0820,
passcode 433143.
NON-GAAP FINANCIAL MEASURES
This press release includes financial measures for billings that are not
numerical measures that can be calculated in accordance with generally accepted
accounting principles (GAAP). Websense has provided this measurement in press
releases reporting financial performance, presently and in the past, because
this measurement provides a consistent basis for understanding the company's
sales activities in the current period. The company believes the billings
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WEBSENSE INC.
Q1 2003 EARNINGS RELEASE (PAGE 4)
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
first quarter of 2003 is set forth at the end of this press release.
ABOUT WEBSENSE INC.
Websense Inc. (Nasdaq: WBSN) is the world's leading provider of employee
Internet management solutions. Websense Enterprise software enables
organizations to manage how employees use their computing resources, including
Internet access, desktop applications and network bandwidth. These solutions
help improve productivity and security, conserve information technology
resources, and mitigate legal liability for our customers. Websense serves more
than 18,500 customers worldwide, including many of the world's largest
corporations. For more information, visit www.websense.com.
# # #
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 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; 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,
customer acceptance of the company's services, products and fee structures; the
success of Websense's brand development efforts; the volatile and competitive
nature of the Internet industry; changes in domestic and international market
conditions and the entry into and development of international markets for the
company's products; risks relating to intellectual property ownership; 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
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March 31, March 31,
2003 2002
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Revenue $ 18,504 $ 13,035
Cost of revenue 1,305 933
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Gross margin 17,199 12,102
Operating expenses:
Selling and marketing 6,635 5,939
Research and development 3,218 2,307
General and administrative 1,544 1,667
Amortization of stock-based compensation 43 160
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Total operating expenses 11,440 10,073
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Income from operations 5,759 2,029
Other income, net 675 713
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Net income before income taxes 6,434 2,742
Provision for income taxes 2,574 86
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Net income $ 3,860 $ 2,656
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Basic net income per share $ 0.18 $ 0.13
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Diluted net income per share $ 0.17 $ 0.11
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Basic common shares 21,795 20,777
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Diluted common shares 22,716 23,396
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FINANCIAL DATA:
Total deferred revenue $ 64,863 $ 46,272
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WEBSENSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, December 31,
2003 2002
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ASSETS
Current assets:
Cash and cash equivalents $ 66,978 $ 61,713
Investments in marketable securities 84,245 78,753
Accounts receivable, net 15,944 19,840
Deferred income taxes 8,731 8,731
Other current assets 1,627 1,184
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Total current assets 177,525 170,221
Property and equipment, net 2,985 2,967
Deferred income taxes, less current portion 6,701 6,701
Deposits and other assets 249 299
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TOTAL ASSETS $ 187,460 $ 180,188
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 796 $ 761
Accrued payroll and related benefits 4,124 3,627
Other accrued expenses 3,342 3,440
Income taxes payable 3,727 970
Deferred revenue, current portion 47,640 46,964
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Total current liabilities 59,629 55,762
Deferred revenue, less current portion 17,223 17,715
STOCKHOLDERS' EQUITY:
Common stock 218 217
Additional paid-in capital 107,185 107,058
Deferred compensation (40) (83)
Retained earnings (deficit) 2,903 (957)
Accumulated other comprehensive income 342 476
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Total stockholders' equity 110,608 106,711
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 187,460 $ 180,188
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WEBSENSE, INC.
RECONCILIATION OF BILLINGS TO DEFERRED REVENUE
(IN THOUSANDS)
Deferred revenue balance December 31, 2002 $ 64,679
Billings first quarter 2003 18,688
Revenue recognized first quarter 2003 (18,504)
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Deferred revenue balance March 31, 2003 $ 64,863
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