Exhibit 99.1
[WEBSENCE LOGO]
IR CONTACT: Kate Patterson MEDIA CONTACT: Carolyn Krytzer
Websense Inc. Websense Inc.
(858) 320-8072 (858) 320-9276
kpatterson@websense.com ckrytzer@websense.com
N E W S R E L E A S E
WEBSENSE CONFIRMS RECORD SECOND QUARTER REVENUE, STRONG GROWTH IN BILLINGS
Revenue Rises 34 Percent to $19.5 Million and Billings Increase 41 Percent to
$25.8 Million Compared to the Second Quarter of 2002
SAN DIEGO, July 22, 2003 - Websense Inc. (NASDAQ: WBSN), the world's
leading provider of employee Internet management (EIM) software, today announced
final results for the second quarter ended June 30, 2003.
Revenue for the second quarter was a record $19.5 million, an increase of
34 percent from the $14.6 million reported in the second quarter a year ago.
Second quarter net income was $4.1 million, or 18 cents per diluted share,
compared to net income in the second quarter of 2002 of $3.5 million, or 15
cents per diluted share. Second quarter 2003 results reflected an effective tax
rate of 39 percent, compared to an effective tax rate of approximately seven
percent in the second quarter of 2002.
The company ended the quarter with $156.9 million in cash and investments,
an increase of $5.7 million from the prior quarter, and no debt. The increase in
the cash and investments balance reflected strong operating cash flow, partially
offset by $2.8 million in estimated tax payments and $2.4 million spent during
the second quarter to repurchase 165,000 shares of the company's common stock at
an average price of $14.64.
For the six months ended June 30, revenue was $38.0 million, up 38 percent
from $27.6 million in the first six months of 2002. Net income totaled $7.9
million, or 35 cents per diluted share, compared to $6.2 million, or 26 cents
per diluted share, during the first six months of 2002. Results for the first
six months of 2003 reflected an effective tax rate of 39 percent, compared to an
effective tax rate of approximately five percent in the first six months of
2002.
"We are very pleased with our results this quarter, which, along with
recently published data from IDC, confirm that Websense continues to lead the
market in EIM solutions," said John Carrington, chairman and CEO of Websense.
"We believe the strong sequential quarter increase in billings is attributable
to a number of factors. Most notably, customers are choosing Websense Enterprise
not only for its Web filtering capabilities and the quality of the database, but
for the added features that have been built into the recently released Websense
Enterprise
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version 5 that are unmatched by any other EIM solution. In addition, our VAR
channel is becoming more proficient in demonstrating the value proposition of
the new features to their customers. The net result is continued strong demand
for our products."
"Websense Enterprise is the only EIM solution that extends the IT
administrator's control from the Internet gateway to the desktop and onto the
network," Carrington added. "Instant messaging, peer-to-peer networks, spyware,
and hacking tools create additional challenges for IT administrators that can
only be managed by having a presence at all three of these points of policy
enforcement. With Websense Enterprise version 5 and our add-on application
modules, administrators can manage application use at the desktop, bandwidth
allocation within the network and Internet use at the gateway. Customers are
beginning to realize how powerful this combination can be in mitigating risks
and improving productivity."
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 second quarter were $25.8 million, an increase of 38
percent compared with $18.7 million in the first quarter of 2003 and an increase
of 41 percent compared with $18.3 million in the second quarter of 2002.
Billings for the quarter included a $1.1 million, three-year transaction with
AT&T and several other smaller transactions that had been expected to close in
the first quarter of 2003.
Deferred revenue - which represents amounts billed to customers but not
yet recognized as subscription revenue - was $71.1 million at the end of the
second quarter, an increase of approximately $6.2 million from the first quarter
of 2003. 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 30 percent for the quarter, reflecting both revenue
growth and continued prudent financial controls. Operating expenses were 63
percent of revenue, compared with 71 percent in the second quarter of 2002, as
the company continues to generate a strong return on its investments in
marketing and research and development.
BUSINESS HIGHLIGHTS
Business highlights since the end of the first quarter included:
- IDC confirmed the company's position as market share leader in the
Web filtering segment of the Secure Content Market. Websense gained
five points of market share during 2002, primarily at the expense of
its two largest competitors, which each lost share during the year.
- Websense added more than 800 new customers during the quarter,
increasing the number of customers to approximately 19,400
worldwide. Seats under subscription increased by more than 1.2
million seats to more than 15 million.
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- The Websense Master Database grew to 4.6 million Web sites
representing more than 1.1 billion unique Web pages. Websense has
now categorized nearly six million Web sites in more than 50
languages, including approximately 1.3 million dead links that have
been removed from the database. Additionally, the company has
identified and categorized more than 115,000 applications and
executable files in the Client Application Manager(TM) database.
- The company added important domestic and international customers to
its roster of clients, including ADP, Inc., Sara Lee Corporation,
Telstra, Mayo Foundation, Conoco Oil, Telecom Italia and the Swedish
Tax Authority. International customers accounted for 29 percent of
subscription revenue in the quarter.
- The company closed a $1.1 million, three-year subscription to
Websense Enterprise(R) and all three Premium Groups with AT&T, a
long-time managed service provider customer. AT&T's Managed Services
group offers the Websense EIM solution bundled with its Managed
Firewall Service to customers worldwide. The new subscription
contract represents both new and renewal seats.
- Renewals remained strong, and significant renewing or upgrading
customers included Federated Systems, Chicago Public Schools,
Southwest Airlines, Waste Management, Petrobas, Saudi Telecom, and
HSBC in the U.K.
- Websense continued to expand the number of platform integrations
available to customers with a new agreement to embed Websense
Enterprise directly on Cisco's Content Engine, and support for
Cisco's IOS software and Squid open source proxy server. Websense
now has more than 30 platform integrations, including several
"on-box" integrations, as well as a platform-independent solution
for small and medium-sized businesses.
- The company released Websense Explorer(TM), an interactive,
Web-based reporting tool that provides real-time Internet use data.
With Websense Explorer, non-technical managers can easily view
summary data to pinpoint areas of possible risk and develop usage
policies to mitigate those risks.
THIRD 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. 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.
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Q2 2003 EARNINGS RELEASE (PAGE 4)
The company expects year-over-year revenue growth in the third quarter of
2003 to be approximately 30 percent. Earnings per share are expected to be in
the range of 17 to 18 cents and will reflect a 39 percent effective tax rate.
CONFERENCE CALL
Websense is hosting a conference call and simultaneous Webcast today at
5:00 p.m. (EDT) to discuss these results. To participate in the call, investors
should dial (800) 289-0544 (domestic) or (913) 981-5534 (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 September 30 and a taped
replay of the call will be available for one week at (888) 203-1112 or (719)
457-0820, passcode 725042.
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
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
second 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 19,400 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
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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 SIX MONTHS ENDED
---------------------- ----------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
------- ------- ------- -------
Revenue $19,524 $14,550 $38,028 $27,585
Cost of revenue 1,290 1,061 2,595 1,994
------- ------- ------- -------
Gross margin 18,234 13,489 35,433 25,591
Operating expenses:
Selling and marketing 7,546 6,296 14,181 12,235
Research and development 3,106 2,571 6,324 4,878
General and administrative 1,672 1,378 3,216 3,045
Amortization of stock-based compensation 22 125 65 285
------- ------- ------- -------
Total operating expenses 12,346 10,370 23,786 20,443
------- ------- ------- -------
Income from operations 5,888 3,119 11,647 5,148
Other income, net 780 688 1,455 1,401
------- ------- ------- -------
Net income before income taxes 6,668 3,807 13,102 6,549
Provision for income taxes 2,580 261 5,154 347
------- ------- ------- -------
Net income $ 4,088 $ 3,546 $ 7,948 $ 6,202
======= ======= ======= =======
Basic net income per share $ 0.19 $ 0.17 $ 0.36 $ 0.30
======= ======= ======= =======
Diluted net income per share $ 0.18 $ 0.15 $ 0.35 $ 0.26
======= ======= ======= =======
Basic common shares 21,882 21,105 21,838 20,942
======= ======= ======= =======
Diluted common shares 22,613 23,411 22,673 23,411
======= ======= ======= =======
FINANCIAL DATA:
Total deferred revenue $71,093 $50,016 $71,093 $50,016
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WEBSENSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
2003 2002
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ASSETS
Current assets:
Cash and cash equivalents $ 98,270 $ 61,713
Investments in marketable securities 58,586 78,753
Accounts receivable, net 18,458 19,840
Deferred income taxes 8,731 8,731
Other current assets 1,497 1,184
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Total current assets 185,542 170,221
Property and equipment, net 2,985 2,967
Deferred income taxes, less current portion 6,701 6,701
Deposits and other assets 259 299
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TOTAL ASSETS $ 195,487 $ 180,188
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 777 $ 761
Accrued payroll and related benefits 3,949 3,627
Other accrued expenses 2,975 3,440
Income taxes payable 3,541 970
Deferred revenue, current portion 51,492 46,964
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Total current liabilities 62,734 55,762
Deferred revenue, less current portion 19,601 17,715
STOCKHOLDERS' EQUITY:
Common stock 221 217
Additional paid-in capital 108,308 107,058
Deferred compensation (18) (83)
Retained earnings (deficit) 6,991 (957)
Accumulated other comprehensive income 66 476
Treasury stock (2,416) --
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Total stockholders' equity 113,152 106,711
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 195,487 $ 180,188
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WEBSENSE, INC.
RECONCILIATION OF BILLINGS TO DEFERRED REVENUE
(IN THOUSANDS)
Deferred revenue balance March 31, 2003 $ 64,863
Billings second quarter 2003 25,754
Revenue recognized second quarter 2003 (19,524)
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Deferred revenue balance June 30, 2003 $ 71,093
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