WBSN Q113 Investor Presentation
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WBSN Q113 Investor Presentation WBSN Q113 Investor Presentation Presentation Transcript

  • Q1’13 Investor Presentation © 2013 Websense, Inc.
  • GAAP to Non-GAAP ReconciliationDuring this presentation references to financial measures of Websense, Inc.(“Websense”) will include references to non-GAAP financial measures.Websense provides a reconciliation between GAAP and non-GAAP financialinformation 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 statementsregarding future events or the future financial performance of Websense,including future operating results. These projections and statements are onlypredictions. Actual events or results may differ materially from those in theprojections or other forward-looking statements. Please see Websense’s filingswith the SEC, including its most recent filings on Form 10-K, for a discussion ofimportant risk factors that could cause actual events or results to differmaterially from those in the projections or other forward-looking statements. © 2013 Websense, Inc. 2
  • Agenda• Introduction to Websense• Aligned with modern security needs• Growth company with a legacy business• Attractive subscription-based business model © 2013 Websense, Inc. 3
  • About Websense• Market leader – Advanced web security, email security, mobile security and data loss prevention (DLP) solutions – Market share leader in content security• Technology pioneer – 16 years classifying content and threats – >180 patents granted or pending Web – First to market with unified web/email/data security, Security hybrid SaaS/on-premise, Threatseeker, ACE, Defensio• Global presence – ~1,600 employees in 35 countries – 15,000 resellers in 130 countries Mobile Email – R&D on four continents Security Security – Follow-the-sun technical support – ~50% of revenue outside the U.S.• Financial strength – Attractive business model Data • 2012 revenue of more than 90% subscription revenue Security – $369.5 million annual billings (2012) © 2013 Websense, Inc. 4
  • Websense R&D Investment Commitment to innovation reflected in increased R&D spending. Annual R&D Spending (non-GAAP) $70 17.0% 14.9% 15.8% 13.9% 16.0% 14.1% $60 13.4% 15.0% 14.0% $50 11.9% 13.0% $40 9.1% 12.0% 11.0% $30 10.0% 9.0% $20 8.0% $10 7.0% 6.0% $0 5.0% 2006 2007 2008 2009 2010 2011 2012 R&D Spending % of Billings © 2013 Websense, Inc. 5
  • Leader in Content Security Portfolio of security technologies Recurring revenue model $600M Installed base Annual Billings ($M) 2012 $374- 394 $362.9 $369.5 Legacy TRITON TRITON SUITE 2011 2012 2013* “No One Stops More Software and service Appliance Threats” *Guidance range as of 01/29/13 © 2013 Websense, Inc. 6
  • Why Invest in Websense? Aligned with modern security needs Positioned for growth Growth company with a legacy business Attractive subscription-based business model © 2013 Websense, Inc. 7
  • Agenda• Introduction to Websense• Aligned with modern security needs• Growth company with a legacy business• Attractive subscription-based business model © 2013 Websense, Inc. 8
  • Modern Security RequirementsProtection from APTs, modern malware and targeted threats Risk management, governance, and Data Loss compliance Social Web & Theft Cloud Computing Mobility Modern Malware and Productivity & Liability Advanced Persistent Threats (APTs) © 2013 Websense, Inc. 9
  • Global Security SpendingSecurity remains a top IT priorityLarge and growing market supported by increasingly targeted and complex attacks, aswell as regulatory and compliance requirements. Gartner Global Security Spending Forecast ($ billions) $80 $71.2 $70 $65.8 $60.5 $60 $55.3 $50.4 $50 Services 8% CAGR $40 $30 $20 Infrastructure 11% CAGR $10 $0 2010 2011 2012 2013 2014 Infrastructure ServicesPresented by Lawrence Pingree at the Gartner Security and Risk Management Summit, June 20-23, 2011 © 2013 Websense, Inc. 10
  • TRITON Advanced Security Threat Seeker Global SaaS Network Infrastructure © 2013 Websense, Inc. 11
  • TRITON Addresses Today’s Threats Content Security Suite Contextual Reasoning Data Loss Prevention Who, What, Where, When, Why, How Secure Web Gateway Identity & Access Content Management Security IMPACT NAC URL Filters Packet Level Inspection Anti-spam Anti-virus IDS Firewall VPN Infrastructure Security 1980’s 1990’s 2000’s Today © 2013 Websense, Inc. 12
  • Solutions Feature MatrixQuick Reference Web filter Web TRITON and Web Web Security Security Security Security Gateway Gateway TRITON Suite Gateway Anywhere Anywhere Enterprise General availability 2000-2005 Q4 2008 Q2 2010 Q2 2011 Q2 2011 ~List price per seat (@ 1000 users) $15-30 $40 $50 $60 $70 Functionality URL filtering X X X X X Real-time Web Security X X X X Web channel TruWeb™ DLP X X X Email security X X Email channel TruEmail™ DLP X X Enterprise DLP X Deployment options Software-only X X Appliance X (WSS) X X X X Hybrid appliance/cloud service X X X © 2013 Websense, Inc. 13
  • Agenda• Introduction to Websense• Aligned with modern security needs• Growth company with a legacy business• Attractive subscription-based business model © 2013 Websense, Inc. 14
  • Websense: A Tale of Two Markets Legacy Next-generation (Web Filtering) (TRITON-based products, SaaS, DLP) Multi-billion, low Opportunity Saturated penetration Differentiation Low-commoditizing Maximum Competition Price-oriented Value-oriented Market growth rate 0% – (10%) 15-20% Accelerating interest and Market outlook Continued slow decline adoption © 2013 Websense, Inc. 15
  • The “TRITON Effect” Future Competitive Upsell displacement PLATFORM opportunity EXTENSIONS Expanded NEW CUSTOMERS footprint Improved retention ADD SEATS /$ Value of Customer Rates CROSS SELL Mobile Increased IN-LINE TECHNOLOGY Security protection REAL TIME ACE in ANALYTICS the Cloud LEGACY FILTERING © 2013 Websense, Inc. 16
  • TRITON Billings $90 80% 69% $80 70% 61% 59% 61% $70 59% 54% 60% 52% $60 % of Total Billings 45% 50% Millions $50 40% $40 $83.7 $68.3 30% $30 $49.0 $50.8 $49.4 $44.5 $45.3 20% $20 $34.4 $10 10% $0 0% Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 $ % of total billings TRITON solutions include the TRITON family of security gateways for web, email, mobile and data security (including related appliances and technical support subscriptions), Websense Data Security Suite and cloud-based security solutions. © 2013 Websense, Inc. 17
  • Agenda• Introduction to Websense• Aligned with modern security needs• Growth company with a legacy business• Attractive subscription-based business model © 2013 Websense, Inc. 18
  • Value Creation Priorities Deliver shareholder value through top-line growth Capital Billings Business Productivity Allocation “TRITON effect” Sales performance Excess US-based free cash flow used for share Expense management repurchases for growth Sustainable Cash flow and Shareholder growth profitability value © 2013 Websense, Inc. 19
  • Subscription Model Dynamics Upgrade and “new logo” Cash flow statement opportunities Cash flow from operations is Migration to TRITON and expected to grow each quarter within the TRITON in 2013 on a year-over-year portfolio of products basis. yields growth Billings Cash (Non-GAAP) Flow Renewal/ Revenue Upgrade Income statement Revenue follows billings Expiration/renewal growth. In 2013, revenue is Expansion of TRITON billings impacted by the continued drives improved customer recognition of deferred appliance retention rates revenue and costs. © 2013 Websense, Inc. 20
  • Total Billings (Non-GAAP) TRITON billings growth drives overall growth and quality of the installed base. $400 $369.5 $374-394 $362.9 $347.0 37% $300 47% 61% Millions $200 63% 53% $100 39% $0 2010 2011 2012 2013E* TRITON Non-TRITON *Guidance range as of 01/29/13 © 2013 Websense, Inc. 21
  • Deferred RevenueGrowth in software and service billings drives increases in deferred revenue. $450 $424-434 $394.3 $393.0 $401.1 $350 $250 Millions $150 $50 2010 2011 2012 2013E* -$50 Software and Service Appliance OEM *Guidance range as of 01/29/13 22 © 2013 Websense, Inc.
  • Q4’12 Financial ResultsJanuary 29, 2013 © 2013 Websense, Inc. 23
  • Billings Metrics Q412 $ in millions, except no. of transactions, average contract duration and percentages Q411 $ % ∆ Software and service $107.4 $113.4 6% Appliance $8.6 $8.6 0% Total billings $116.0 $122.0 5% Billings by Product Category TRITON $68.3 $83.7 23% Non-TRITON $47.7 $38.3 -20% Billings by Region U.S. $51.9 $54.4 5% International $64.1 $67.6 5% Contract Metrics Number of customer transactions >$100k 205 243 19% Average contract duration (months) 24.2 25.8 7% TRITON solutions include the TRITON family of security gateways for web, email, mobile and data security (including related appliances and technical support subscriptions), Websense Data Security Suite and cloud-based security solutions. © 2013 Websense, Inc. 24
  • Revenues and Deferred Revenue Q412 Q411 $ % ∆ Revenues ($ in millions, except percentages) Software and service $82.3 $82.3 0% Current period appliance1 $8.3 $8.2 0% Pre-2011 appliance2 $2.1 $1.2 -43% Total appliance $10.4 $9.4 -10% Total revenues $92.7 $91.7 -1% Deferred Revenue ($ in millions, except percentages) Software and service $383.3 $396.1 3% Appliance $9.7 $5.0 -48% Total deferred revenue $393.0 $401.1 2% 1. Excludes pre-2011 appliance revenues. 2. Previously deferred. On January 1, 2011, Websense was required to adopt Accounting Standards Update (ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU 2009-14 (Certain Revenue Arrangements that Include Software Elements), which require the immediate recognition of appliance revenues upon sale. Prior to January 1, 2011, the company recognized revenue and costs from appliance sales ratably according to the original subscription terms. © 2013 Websense, Inc. 25
  • Revenue-based Operating Models Q411 Q412 Revenues Software and service 88.8% 89.7% Current period appliance1 8.9% 9.0% Pre-2011 appliance2 2.3% 1.3% Total appliance 11.2% 10.3% Total GAAP revenues 100.0% 100.0% GAAP M argins Gross profit margin % 83.9% 83.3% Operating expenses % 69.5% 77.2% Operating margin % 14.4% 6.1% Non-GAAP M argins Non-GAAP gross profit margin % 84.8% 84.2% Non-GAAP operating expenses % 61.4% 70.0% Non-GAAP operating margin % 23.4% 14.2% 1. Excludes pre-2011 appliance revenues. 2. Previously deferred. On January 1, 2011, Websense was required to adopt Accounting Standards Update (ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU 2009-14 (Certain Revenue Arrangements that Include Software Elements), which require the immediate recognition of appliance revenues upon sale. Prior to January 1, 2011, the company recognized revenue and costs from appliance sales ratably according to the original subscription terms. © 2013 Websense, Inc. 26
  • Billings-based Operating Models (Non-GAAP) Operating model as a percent of billings, excluding appliance costs associated with pre-2011 appliance sales. Q411 Q412 Billings Mix Software and service billings 92.6% 92.9% Appliance billings 7.4% 7.1% Total billings 100.0% 100.0% Non-GAAP Gross Profit Margin Gross margin software and service % 91.0% 90.5% Gross margin appliance %1 60.1% 62.9% Billings gross margin %1 88.7% 88.6% Non-GAAP Operating Expense and Margin Sales and marketing % 30.2% 32.3% Research & development % 11.8% 12.6% General & administrative % 7.1% 7.7% Total expenses % 49.1% 52.6% Billings non-GAAP operating margin %1 39.6% 36.0% 1. Excludes previously deferred appliance costs of $1.0 million in Q4’11, $0.5 million in Q4’12, $5.1 million in Q4 YTD’11 and $2.6 million in Q4 YTD’12 associated with pre-2011 appliance sales. © 2013 Websense, Inc. 27
  • Balance Sheet Highlights Y/Y Comparison $ millions, except DSO and percentages Q411 Q412 $ Chg % Chg Cash and receivables Cash and cash equivalents $76.2 $64.6 ($11.6) -15% (excluding restricted cash) Accounts receivable $80.1 $89.1 $9.0 11% Days billings outstanding (DSO) 62 days 66 days Deferred revenues Current deferred revenue $250.6 $244.0 ($6.6) -3% Long term deferred revenue $142.4 $157.1 $14.7 10% Total deferred revenue $393.0 $401.1 $8.1 2% 1 Deferred software and service revenue $383.3 $396.1 $12.8 3% Borrowings Balance on revolving credit facility $73.0 $68.0 -$5.0 -7% 1. Excludes deferred revenue from pre-2011 appliance sales. © 2013 Websense, Inc. 28
  • Cash Flow Highlights Q412 $ in millions Q411 $ ∆ Cash flow from operations Net income $10.4 $3.8 ($6.6) Adjustments to reconcile net income to net cash provided by operating activities $16.5 $12.5 ($4.0) 1 3 Changes in operating assets and liabilities ($5.0) ($5.2) ($0.2) Net cash provided by operating activities 3 $21.9 $11.1 ($10.8) Free cash flow Purchase of property and equipment ($1.9) ($3.0) ($1.1) 1 $20.0 $8.1 ($11.9) Free cash flow Financing cash flows Borrowings (repayments), net $0.0 $0.0 $0.0 Purchase of treasury stock $24.7 $4.4 ($20.3) Supplemental cash flow disclosures 2 Cash taxes paid (net of refunds) $3.6 $2.9 ($0.7) Interest paid $0.5 $0.6 $0.1 1. Free cash flow = cash flow from operations less purchases of property, plant, and equipment. 2. Cash taxes and interest paid are included in cash flow from operations. 3. Includes one-time tax payments of $14.7 million relating to the company’s settlement with the U.S. Internal Revenue Service of certain audit adjustments for tax years 2005 through 2007. © 2013 Websense, Inc. 29
  • Q1 2013 Outlook Q113 Guidance Q112 (as of 01/29/13) Actual $ in millions, except per share and percentages Range Y/Y Chg GAAP Revenues $89.5 $84 - $87 -6% - -3% Cash flow from operations $22.4 $27 - $30 Capital expenditures $2.8 ~ $4 Weighted average diluted shares 37.6 ~ 37 Non-GAAP Software and service billings % 92.9% 92% - 93% Appliance billings % 7.1% 7% - 8% Total billings $80.6 $82 - $86 2% - 7% Non-GAAP gross profit margin 85.2% ~ 83% Non-GAAP operating margin 19.9% 8% - 11% Diluted non-GAAP EPS $0.36 $0.15 - $0.19 -58% - -47% Non-GAAP tax rate 19.0% 19.0% 11. Long-term non-GAAP effective tax rate. 30 © 2013 Websense, Inc.
  • 2013 Outlook 2013 Guidance 2012 (as of 01/29/13) Actual $ in millions, except per share and percentages Range Y/Y Chg GAAP Revenues $361.5 $351 - $361 -3% - 0% Cash flow from operations $48.9 $66 - $76 Capital expenditures $12.5 $15 - $17 Weighted average diluted shares 37.5 ~37 Non-GAAP Revenue Based Non-GAAP gross profit margin 84.6% ~83% Non-GAAP operating margin 19.3% 11% - 13% Diluted non-GAAP EPS $1.46 $0.78 - $0.93 -47% - -36% Non-GAAP tax rate 19.0% 19.0% 1 Non-GAAP Billings Based Software and service billings % 92.3% 92% - 93% Appliance billings % 7.7% 7% - 8% Total billings $369.5 $374 - $394 1% - 7% Billings operating margin 21.8% 17% - 20%1. Long-term non-GAAP effective tax rate. 31 © 2013 Websense, Inc.
  • Billings-based Operating Model Q1 Q2 Q3 Q4 2011 2012 2011 2012 2011 2012 2011 2012 Total billings ($ in millions) $ 76.7 $ 80.6 $ 85.9 $ 85.4 $ 84.3 $ 81.5 $ 116.0 $ 122,021 Billings Mix Software and service 93.2% 92.6% 92.1% 91.8% 90.5% 91.5% 92.6% 92.9% Current period appliance 6.8% 7.4% 7.9% 8.2% 9.5% 8.5% 7.4% 7.1%Non-GAAP Gross Profit Margin % 1 Software and service gross margin % 86.7% 86.5% 88.1% 86.7% 87.8% 85.4% 91.0% 90.5% Appliance gross margin % 50.0% 59.2% 50.6% 61.3% 55.5% 60.7% 60.1% 63.1% Billings gross margin % 84.2% 84.5% 85.2% 84.6% 84.7% 83.3% 88.7% 88.6%Non-GAAP Operating Expenses and Income % Sales and marketing % 47.4% 44.4% 43.4% 39.8% 40.3% 40.0% 30.1% 32.3% Research and development % 17.1% 17.4% 15.6% 17.0% 16.7% 18.0% 11.9% 12.6% General and administrative % 10.9% 10.8% 9.2% 10.3% 9.8% 10.5% 7.1% 7.7% Total expenses 75.4% 72.6% 68.2% 67.1% 66.8% 68.5% 49.1% 52.6% 1 Billings non-GAAP operating margin % 8.8% 11.9% 17.0% 17.5% 17.9% 14.8% 39.6% 36.0% 1. Based on non-GAAP expenses, excluding deferred appliance expenses associated with pre-2011 appliance sales. © 2013 Websense, Inc. 32
  • 2013 Guidance Assumptions as of 01/29/13 Exchange Rates Q1 Q2 Q3 Q4 ~% Billings Guidance (expected) Assumption 2012 2013 2012 2013 2012 2013 2012 2013 GBP ~12% $1.62 $1.59 $1.58 $1.58 $1.61 Euro ~12% $1.32 $1.33 $1.27 $1.25 $1.30 Weaker dollar relative to the prior period increases billings and expenses; stronger dollar relative to prior Currency impact periods decreases billings and expenses. on financial results Deferred revenue primarily denominated in US dollars. © 2013 Websense, Inc. 33
  • Follow us… Websense Corporate – www.websense.com – http://twitter.com/websense – http://www.facebook.com/websense – http://www.youtube.com/user/WBSNMKTG – http://community.websense.com/blogs/ – http://community.websense.com/blogs/newsletter/ Websense Security Labs – securitylabs.websense.com – http://community.websense.com/blogs/securitylabs/ – http://twitter.com/websenselabs – http://www.youtube.com/user/wslabsutube © 2013 Websense, Inc. 34