Financial Analyst Day 2013

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  • The first deal is a fortune 500 global manufacturing company that purchased TRITON Data Security. This was a new customer for Websense and a competitive win against Symantec. They selected TRITON because of the ease of integration into their existing network environment, the scalability and accuracy of our ability to identify specific product designs, and the unique ability for data to be tracked and controlled while employees are outside their corporate network. This win demonstrates the value of one of the key advantages that TRITON provides- specifically data protection whether the data is on or off the corporate network. The second deal is a fortune 500 global defense firm that back in the first quarter of 2012 selected TRITON Data Security over Symantec on the strength of our endpoint capability and our comprehensive ability to cover all network communications channels. In the fourth quarter they extended their investment in the TRITON solution when we were selected to replace their Bluecoat legacy security on the strength of our hybrid cloud-appliance architecture and proven advanced web security capabilities. This win demonstrates our ability to increase our customer lifecycle value through extensions to the integrated TRITON platform.The third deal is a large European government agency that purchased our TRITON hybrid email security solution to replace their legacy Cisco Ironport system. They were an existing TRITON Web Security customer who saw the advantages of the advanced threat protection provided by our cloud-appliance based TRITON Email Security. In addition they saw the operational efficiencies they could gain through consolidation on the TRITON platform. This win demonstrates another dimension of our ability to expand our customer value once they are on the TRITON platform.To summarize: in a world that increasingly demands more advanced security to stop the theft of intellectual property and vital corporate assets, customers continue to recognize that our unique and proven best-in-class TRITON security platform has significant advantages over alternative solutions that only address legacy threats.
  • From Labs diagram:10 million emails per hour2.5 billion URLS per day400 million web sites probed per day1 billion links from Facebook per day1.1 billion pieces of content inspected per dayFrom Steven:WEB•  29.7billion requests per month – 3.3TB data per month•  Requests detected by ACE analytics in the past month for Cloud Web: 7.3 million (note – not all of them are to do with security threats)•  Malware blocks (either category-based or with ACE) in the past month: 28.7 million EMAIL•  1B emails per month – 58,000 messages per minute – peak over 1,000 emails per second.•  175,000 emails containing malware detected before AV sigs available in the last month
  • This slide shows the dramatic increase in our addressable market with out transformation – the opportunity associated with the new offerings is more than 2x the software only opportunityThe bottom of the chart shows the opportunity for software-only Web security – essentially a flat market out through 2013, consistent with the renewal nature of the business As we’ve added new products, including SaaS, appliance-based Web security and integrated content gateway offerings, we have nearly tripled our opportunity over time.Now its up to us to leverage our leadership position and deliver growth
  • Map of world on one half where we canShow where we’re making investmentKey metrics about the investmentDrive new customer acquisitionDrive upgrading customer baseChannel Development for ScaleExpand beyond Web Security bothSales force & Channel alignment
  • Differentiation from the Threat IntelligenceBest of breed Threat & Security IntelligenceActive participation the seeking out threatsLeveraging the network of existing customersExtending the view into the cloud infrastructureBuilding more detection by accessing mobile SPsThreatSeeker & ThreatScope – targeting and isolation threatsLeveraging cloud technology in threat protectionMany security solutions are delivered FROM the cloudReal security is only viable while USING the cloud
  • 600% increase in…Cloud-based sandboxingPersistent analysis…Sphere phishing – good…Threatscope – fireeye-like feed the intelligence cloudClose on the “unknown "holes".Unifies 900M+ endpointsAnalyzes 3-5B requests/dayFacebook PartnershipLargest Intelligence Network
  • Threat VisualizationMobile SecurityEverywhere ControlExtensible ProtectionUnified Visibility
  • INFORMATION TECHNOLOGY & ATTACK SURFACE LANDSCAPES EVOLVINGSoftware-as-a-Service – Majority of IT application – outsourcedCloud computing, Dense Virtual Data Centers – Data everywhereTHREATS & PREDATORS ARE LONG-TERM & BUSINESS DRIVENAdvanced Persistent Threats – live inside foreverIntellectual Property fueling global – advanced attacksTRITON & THREATSEEKER UNIQUELY…Cover all the paths the threats traverseVisibility from the outside – stopping threats from enteringSeeking out from inside – preventing threats from getting data out
  • In the position and the right materials (stuff) for vast growthGood position for the future – positions and close…Unifies 900M+ endpointsAnalyzes 3-5B requests/dayFacebook PartnershipLargest Intelligence NetworkPATHS TO ALL ATTACKSWeb space the advent of the cloud based applicationsMessaging moving to the cloud from mobile, etc.Data - going all directions (virtualized, cloudiezed)ATTACKS LEVERAGE CONTENTHeavy used of encryption Custom layering and technologyCONTENT SECURITY REQUIREDAll security solutions eventually review data for real protectionWeb and Message drive and deliver CONTENT
  • Financial Analyst Day 2013

    1. 1. WEBSENSE FINANCIAL ANALYST DAYFebruary 26, 2013 ©2013 Websense, Inc.
    2. 2. Agenda TIME SPEAKER TOPIC 9:00 John McCormack, CEO Executing the TRITON Strategy 9:45 Russ Dietz, CTO Technology Leadership 10:15 break 10:30 John McCormack, CEO TRITON Security Alliance Jason Clark, CISO 10:45 The Customer Perspective Lamont Orange, Sr. Director, Information Security 11:15 Mike Newman, CFO Financial Strategy 11:45 pick up lunches 12:00 Q&A ©2013 Websense, Inc. Page 2
    3. 3. GAAP ReconciliationDuring this presentation references to financial measures of Websense, Inc. (“Websense”) will includereferences to non-GAAP financial measures. Websense provides a reconciliation between GAAPand non-GAAP financial information on our website at www.Websense.com under “About Us” in the“Investors” section. www.investor.websense.comForward Looking StatementsThis presentation contains projections and other forward-looking statements regarding future eventsor the future financial performance of Websense, including future operating results. These projectionsand statements are only predictions. Actual events or results may differ materially from those inthe projections or other forward-looking statements. Please see Websense’s filings with the SEC,including its most recent filings on Form 10-K, for a discussion of important risk factors that couldcause actual events or results to differ materially from those in the projections or other forward-lookingstatements. ©2013 Websense, Inc. Page 3
    4. 4. Key Takeaways• PROVE IT – We have the world’s best hybrid security technology and we will prove it• Invest in Sales Coverage – Sales capacity to expand $625 million install base and win new customer accounts• Leverage Security Ecosystem – Expands our addressable markets and our growth opportunities ©2013 Websense, Inc. Page 4
    5. 5. 11,000 TRITON Customers… 21% TRITON GROWTH $233M TRITON BILLINGS ...AND GROWING ©2013 Websense, Inc. Page 5
    6. 6. Executing the TRITON Strategy Technology Leadership TRITON Security Alliance The Customer Perspective Financial Strategy ©2013 Websense, Inc. Page 6
    7. 7. The TRITON Company Profile 11,000 TRITON CUSTOMERS NEW CUSTOMER SUCCESS TRITON SECURITY ALLIANCE• TRITON products represent • Double-digit billings growth • F5 Networks 60% of install base value each quarter of 2012 • VMware• TRITON product retention • Over 1,700 new customers in • Citrix 15-20% higher than legacy 2012 • Microsoft • IBM • 50%+ growth in new logo deals • Facebook over $100K in 2012 • And more… RECOGNITION & ACHIEVEMENTS 7 Nominations: RSA 2013 2012 Secure Web Gateway MQ: 2012 Email Content Security: Leaders’ Quadrant Leader, Forrester Wave 7 Nominations: Infosecurity Europe 2013 Vendor with most nominations 2013 Content-Aware Data Loss Prevention MQ: Leaders’ 2013 Quadrant NOMINATIONS Web Security: 2012 Secure Email Gateway MQ: 2012 Overall Market Share Leader Visionaries Quadrant ©2013 Websense, Inc.
    8. 8. Key Differentiators ADVANCED threat detection mechanisms FLEXIBLE EASE deploymentof integration with existing network WHY options customers choose COMPREHENSIVE TRACK & protection of network communication channels PROTECT & endpoints data ON or OFF network ©2013 Websense, Inc. Page 8
    9. 9. 2013 – The Year of the TRITON PlatformIndustry’s First Industry’s First Industry’s First Most Scalable TRITON – The BestReal-Time Hybrid Content Integrated & Extensible Content Content Security PlatformWeb Security Security Content Security Security Solution 2009 2010 2011 2012 2013 and beyond ©2013 Websense, Inc. Page 9
    10. 10. The TRITON Cloud Security Advantage TRITON Delivery Cloud • Over 1B Web requests per day • Processing over 1B emails/month • Delivering over 400TB interactive data per month; 99.99% availability • Stopping nearly 1M malware infections per day THREATSEEKER Intelligence Cloud • Analytic updates every 1.9 sec • Over 600% increase in unique threats detected in 2012 ©2013 Websense, Inc. Page 10
    11. 11. Initiatives for Sustained Growth Sales investment Multi-year sustained growth Multiple insertion points Aggressive marketing Extending the TRITON platform Customer success EXECUTE 2013 PLAN 2014 & BEYOND TALENT STRENGTHEN ECOSYSTEM Enhancing our trusted Create pull to amplify advisor skills our push Strategic engagement Advanced training of in the next generation partner community IT environment Page 11
    12. 12. New Insertion Capability Expands Opportunity 6% 2013 22% ACE-IN-THE-CLOUD 32% 40% SPEAR-PHISHING APT WSG Legacy On-Premise Cloud-Enabled TRITON THREAT*VISION Filtering TRITON TRITON ENTERPRISE V - SERIES APPLIANCES*Represents percent of software install base on each product segment Page 12
    13. 13. Websense Addressable Market Integrated Content Security Gateway Data Loss Prevention $7 $6.4B Email Security On Premise Cloud Security (Web and Email) $6 $5.9B Web Security Appliance Web Security Software $5$ Billions $4 Incremental opportunity with TRITON products $3 ~10% CAGR $2 $1 $0 2013 2014 (1) IDC "Worldwide Web Security 2012-2016 Forecast and 2011 Vendor Shares” (Doc #235515), by Phil Hochmuth, July 2012 (2) IDC "Worldwide Messaging Security 2012-2016 Forecast and 2011 Vendor Shares" (Doc #235544), by Phil Hochmuth, June 2012 (3) IDC, "Worldwide Data Loss Prevention 2012-2016 Forecast and 2011 Vendor Shares" (Doc #23657) by Phil Hochmuth. September 2012 (4) Infonetics Research, "Content Security Appliances, Software and SaaS Quarterly Worldwide Market Share and Forecasts: 3Q12", 11/27/12
    14. 14. Investing in Field Sales and Channel Capacity Developed Markets Growth Economies New Territories • 70 50 Enterprise Accounts • Support 20+% growth • e.g., Korea, Chile, etc. ©2013 Websense, Inc. Page 14
    15. 15. The Three Pillars of our PROVE-IT Initiative TRITON STOPS MORE THREATS, WE CAN PROVE IT Page 15
    16. 16. Threats Stopped Across 2.2M Live Web Samples Page 16
    17. 17. Threat Assessment Scope©2013 Websense, Inc. Page 17
    18. 18. Executing the TRITON Strategy Technology Leadership TRITON Security Alliance The Customer Perspective Financial Strategy ©2013 Websense, Inc. Page 18
    19. 19. Transformation of IT Security TODAY TOMORROW Data People OUTSIDE Internet Consumer Applications Storage Internet Public Private Cloud Cloud NGDMZ DMZ NGFW WEB SECURITY AV IDS FW PROXY URL FILTER IPS DLP ANTI-MALWARE Web Server INSIDE Applications Storage PCs People BYOD People
    20. 20. Verizon Breach Report - Compromised Assets Involving IP Theft Page 20
    21. 21. Technology Leadership Russ Dietz, CTOTRITON STOPS MORE THREATS. WE CAN PROVE IT. Page 21
    22. 22. Infiltration is an Architectural Problem EMAIL PROXY ANTI ANTI DATA LOSS GATEWAY MALWARE VIRUS PREVENTION ©2013 Websense, Inc. Page 22
    23. 23. PERSISTENT - Threat Protection Architecture Data ADVANCED Web PERSISTENT Threats THREATS Message ©2013 Websense, Inc.
    24. 24. Complete Threat Protection – TRITON Architecture GLOBAL THREAT REAL-TIME PERSISTENT PROTECTION & AWARENESS THREAT DETECTION VISIBILITY DEPLOYMENT ©2013 Websense, Inc. Page 24
    25. 25. THREATSEEKER – Detection Evolution GLOBAL THREAT REAL-TIME AWARENESS THREAT DETECTION ACTIVE PROTECTION APT MITIGATION THREAT AWARENESS & EDUCATION ©2013 Websense, Inc. Page 25
    26. 26. TRITON Architecture – Protection Evolution PERSISTENT PROTECTION & OVERLAYS CURRENT DEFENSES ADVANCED THREAT DEFENSES VISIBILITY DEPLOYMENT MOBILE SECURITY ENDPOINT PROTECTION • Any OS • Any Browser • Anywhere ©2013 Websense, Inc. Page 26
    27. 27. Unique, Patented, TRITON Architecture… ADVANCED PERSISTENT THREATS BLOCKED Full content analysis Encrypted visibility & Safe & Scalable Recognize legitimate data Web, Message & Data prevent criminal encryption content sandboxing Validate Identities Evolve… Block known compromised… Double check TRUST beyond attacks Page 27
    28. 28. Impact on Real Protection – Today & Going Forward… INFORMATION TECHNOLOGY & ATTACK SURFACE LANDSCAPES EVOLVING THREATS & PREDATORS ARE LONG-TERM & BUSINESS DRIVEN CYBER WARFARE ADVANCING TECHNOLOGY Page 28
    29. 29. TRITON & THREATSEEKER MOMENTUMINDUSTRY UNIQUE THE FUTURE…LEADING INTELLECTUAL TODAYPROGRESS PROPERTY ©2013 Websense, Inc. Page 29
    30. 30. Executing the TRITON Strategy Technology Leadership TRITON Security Alliance The Customer Perspective Financial Strategy ©2013 Websense, Inc. Page 30
    31. 31. Websense – F5 Strategic PartnershipTODAY 2014 Web Application Web Server FarmPeople 2014 WebPeople People COMMON SECURITY SERVICES & POLICY MANAGEMENT Page 31
    32. 32. TRITON Security Alliance • ARUBA • HP ARCSIGHT • JUNIPER NETWORKS • FACEBOOK • F5 NETWORKS • IMPERVA • IBM QRADAR • AEROHIVE • WORDPRESS • VMWARE • MICROSOFT Page 32
    33. 33. Executing the TRITON Strategy Technology Leadership TRITON Security Alliance The Customer Perspective Financial Strategy ©2013 Websense, Inc. Page 33
    34. 34. Needs Driving the Demand for the Best Security ©2013 Websense, Inc. Page 34
    35. 35. Real World Phishing Test – Typical Results 29% 71% 15% 85% 35% 65% Not Opened Email Didn’t Click Link Didn’t Give Credentials Opened Email Clicked Link Gave Credentials 0% 25% 50% 75% 100%Location Outside Company Inside Company
    36. 36. Real Example of Spear-Phishing in Action • CEO and executive teams are being targeted • Spear-Phishing is the most common tactic of the bad guys to get a door open inside a company URL SANDBOXED: http://webdefence.global.blackspider.com/urlwrap/?q=AXicY • Most companies 3RmuMjNwHBHhYGhKKfS0CJJr7ioTC83MTMnOT- do not have a defense today vpCg_Ry85P5ehyNDTLTArOMrA2NDSwoAhOTknMy_VZ Page 36
    37. 37. Spear-Phishing Attempt Blocked Only way to successfully protect is to leverage the cloud to inspect /sandbox the dangers in real-time when the email recipient clicks on the malicious link ©2013 Websense, Inc. Page 37
    38. 38. Innovative Approach in Reaching Customers Websense CISO Team Websense Global CISOs Sales Force 100+ Years of ExperienceInnovating how we reach / engage with CISOs Driving Results• Building trusted advisor relationships • Growth of $100K+ deals• Driving community best practices • Turning CISOs into evangelists ©2013 Websense, Inc. Page 38
    39. 39. Ways We Prove It ©2013 Websense, Inc. Page 39
    40. 40. Lamont Orange – CISO Charter Communications • Uncovered compromised network • Significant operational efficiencies realized • Strong vision for current and future security needs©2013 Websense, Inc. Page 40
    41. 41. Future Perspective • A strategic tool for CISO • Trusted advisor for security intelligence and analysis security • Thought leader (proven technology, process and strategies) ©2013 Websense, Inc. Page 41
    42. 42. Executing the TRITON Strategy Technology Leadership TRITON Security Alliance The Customer Perspective … Financial Strategy ©2013 Websense, Inc. Page 42
    43. 43. Financial Strategy Mike Newman, CFOTRITON STOPS MORE THREATS. WE CAN PROVE IT. Page 43
    44. 44. GAAP ReconciliationDuring this presentation references to financial measures of Websense, Inc. (“Websense”) will includereferences to non-GAAP financial measures. Websense provides a reconciliation between GAAPand non-GAAP financial information on our website at www.Websense.com under “About Us” in the“Investors” section. www.investor.websense.comForward Looking StatementsThis presentation contains projections and other forward-looking statements regarding future eventsor the future financial performance of Websense, including future operating results. These projectionsand statements are only predictions. Actual events or results may differ materially from those inthe projections or other forward-looking statements. Please see Websense’s filings with theSEC, including its most recent filings on Form 10-K, for a discussion of important risk factors that couldcause actual events or results to differ materially from those in the projections or other forward-lookingstatements. ©2013 Websense, Inc. Page 44
    45. 45. Transition from Websense Legacy to TRITONIn 2012, we sold $233 million of TRITON products, compared with $93 million in2009, for a CAGR of 36%. Legacy TRITON Products TRITON Suites Upgrade cycle began in 2013+ Upgrade cycle 2H 2011 ~ $40M began in Software 2009 ~ $335M Install Base ACE-in-the-Cloud Software ~ $250M Spear-Phishing Install Base Software APT Install Base WSG Web Threat*Vision Security Suite On-Premise Cloud-Enabled TRITON Mobile Security Web Filter TRITON TRITON Enterprise ~$80M Appliance Install Base ©2013 Websense, Inc. Page 45
    46. 46. TRITON Cloud OpportunityAddition of Cloud capabilities provides upgrade value within TRITON product set. TRITON Products ~$335M Software Install Base ~ $135M ~ $200M Cloud-Enabled TRITON On-Premise TRITON Web Security Gateway Anywhere Web Security Gateway Email Security Gateway Anywhere Email Security Gateway Cloud Web Security Data Security Cloud Email Security ~$70M Appliance Install Base ©2013 Websense, Inc. Page 46
    47. 47. Increased Value of the Install BaseThe quantity and quality of the install base continue to improve. TRITON Suites 7% TRITON Suites 3% Legacy 40% TRITON Products TRITON Legacy 53% Products 50% 47% 2013 $625M Software Install Base 2012 $80M Hardware Install Base $600M Software Install Base $55M Hardware Install Base ©2013 Websense, Inc. Page 47
    48. 48. Lifetime Value of a TRITON Customer Each sales cycle generates incremental customer purchases and strengthens commitment to the TRITON security platform. Customer has Customer off-cycleCustomer signs strengthened unlocks productinitial TRITON transaction commitment to upgrades or expands coverage (Typically 3-year TRITON architecturecontract + appliance) At renewal: TRITON customer • Unlock product has higher renewal upgrades rates of 85-90% • Renew for 1-3 years • Refresh appliance ©2013 Websense, Inc. Page 48
    49. 49. Improved Quality of Up-for-Renewal in 2013The improved quality of the 2013 up-for-renewal subscriptions supports moreconsistent billings growth opportunity. TRITON TRITON Suites Suites 1% 2% TRITON Products TRITON 23% Products 34% TRITON Products 46% Legacy 52% Legacy Legacy 77% 65% 2011 2012 2013 ©2013 Websense, Inc. Page 49
    50. 50. Buying Patterns Remain StableCustomers consistently make long term commitment to TRITON products. 2010 Billings 2013 Billings TRITON 39% / Legacy 61% TRITON ~70% / Legacy ~30% Mix Shift Toward TRITON Legacy 25-29 months 19-20 months Legacy 20-21 months 26-28 months Average Contract Duration Average Contract Duration 22-24 months 24-26 months ©2013 Websense, Inc. Page 50
    51. 51. Sales Force Expansion Follows TransformationThe sales force investment is designed to drive both new customer acquisitionand install base upgrades – when we compete, we win. 2011 2012 2013 Focus on Drive Double-Digit Drive Consistent Install Base Growth New Customer Growth Execution on Both Fronts ©2013 Websense, Inc. Page 51
    52. 52. Expense Growth Will Follow Seasonal Patterns2013 sales expansion investment was front-loaded in Q4’12 and Q1’13. 2012 2013 $70 16% $65 12% Sequential Growth Impact of decline $60 in YoY billings 8% Millions $55 4% $50 $45 0% $40 -4% Q112 Q212 Q312 Q412 Q113E Q213E Q313E Q413E Non-GAAP Operating Expenses Sequential GrowthBased on guidance provided 01/29/13. ©2013 Websense, Inc. Page 52
    53. 53. Economics of a Sales Team InvestmentIn first year, a new sales team generates more billings than expense,with revenue outpacing costs in future periods. Billings Billings REVENUE Billings Fully Fully Fully Loaded Loaded Loaded Costs Costs Costs YEAR 1 YEAR 2 YEAR 3 ©2013 Websense, Inc. Page 53
    54. 54. Consistent Growth Drives Subscription ModelOur investment in sales capacity will yield billings growth in 2013, with future ability to drivebillings growth through productivity improvements. $400M+ $3 $384M* $369M $0 New Logo Billings $2 Install Base Billings Productivity Per Rep ~200 Reps ~240 Reps 240+ Reps $1 $0 $0 2012 2013 2014+*Midpoint of guidance provided 01/29/13 ©2013 Websense, Inc. Page 54
    55. 55. Operating Model TrendsBillings operating margins will improve as the sales expansion generatesbillings growth. 2012 2013 Target Billings TRITON 63% TRITON ~70% TRITON >80% Billings-based operating 21.8% 17-20% 24-26% margins Revenue-based operating 19.3% 11-13% >20% margins (Non-GAAP) Increasing with billings-based Operating cash flow $48.9M $66-76M EBITDA ©2013 Websense, Inc. Page 55
    56. 56. Billing-Based Operating ModelOur long-term vision is to grow billings with margin improvement over time. Guidance Long Term 2012A 2013 Target Model Mix as a % of Billings Software and Services % 92% 92-93% 90-92% Hardware % 8% 7-8% 7-9% Costs as a % of Billings Software COGS (incl OEM) 12.4% 11-12% Hardware COGS 38.8% 44-45% Total COGS 14.4% 15-16% 14-15% Sales and Marketing 38.4% 37-38% Research and Development 15.8% 14-15% General and Administrative 9.6% 7.5-8.5% Operating Expense 63.8% 65-67% 59-62% Operating Margin 21.8% 17-20% 24-26% ©2013 Websense, Inc. Page 56
    57. 57. Key Takeaways• PROVE IT – We have the world’s best hybrid security technology and we will prove it• Invest in Sales Coverage – Sales capacity to expand $625 million install base and win new customer accounts• Leverage Security Ecosystem – Expands our addressable markets and our growth opportunities ©2013 Websense, Inc. Page 57
    58. 58. Q&A Page 58

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