WBSN Q412 Investor Presentation

Q4’12 Investor Presentation

© 2012 Websense, Inc.

GAAP to Non-GAAP Reconciliation
During 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 financial
information on our website at www.Websense.com under “About Us” in the
“Investors” section. www.investor.websense.com

Forward Looking Statements
This presentation contains projections and other forward-looking statements
regarding future events or the future financial performance of Websense,
including future operating results. These projections and statements are only
predictions. Actual events or results may differ materially from those in the
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 could cause actual events or results to differ
materially from those in the projections or other forward-looking statements.

© 2012 Websense, Inc. 2

Agenda

• Introduction to Websense
• Aligned with modern security needs
• Growth company with a legacy business
• Attractive subscription-based business model


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
– 15 years classifying content and threats
– >170 patents granted or pending
Web
– First to market with unified web/email/data security, Security
hybrid SaaS/on-premise, Threatseeker, ACE, Defensio

• Global presence
– ~1,500 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
• 2011 revenue of ~90% subscription software Security
and service/~10% appliances
– $363 million annual billings (2011)


Websense Transformation
Vision, Opportunity, Solutions, Sales

Content Security
Leader
(>$6B market
opportunity)

Data-centric Sales
security and
2006 Support
TRITON
solutions

Vision
Transaction to
Strategic
Web filtering R&D 2010-2011
company investment
($750M market 2007-2011 Content
opportunity) security
solutions


Websense R&D Investment

Commitment to innovation reflected in increased R&D spending.

Annual R&D Spending (non-GAAP) 14.9%
$60 14.6% 15.0%
14.3%
14.0%
$50
14.0%

$40 13.0%
13.0%
$30
10.7% 12.0%
$20

11.0%
$10

$0 10.0%
2006 2007 2008 2009 2010 2011
R&D Spending % of Revenue


Leader in Content Security

Portfolio of security
technologies Recurring revenue model $600M Installed base
Annual Billings ($M) 2012E
$359.5-
$362.9 364.5
$347.0

Legacy TRITON TRITON SUITE
2010 2011 2012E*
“No One Stops More Software and service Appliance
Threats”

* Guidance range as of 10/23/12


Why Invest in Websense?

Aligned with modern
security needs

Positioned for
growth
Growth company with
a legacy business

Attractive subscription-based
business model


Agenda



Modern Security Requirements
Protection 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)

Global Security Spending
Security remains a top IT priority

Large and growing market supported by increasingly targeted and complex attacks, as
well 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 Services
Presented by Lawrence Pingree at the Gartner Security and Risk Management Summit, June 20-23, 2011

TRITON Advanced Security

Threat Seeker Global SaaS
Network Infrastructure


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

TRITON is the…
Foundation for Long-term Billings Growth

Substantial opportunity to upgrade customers from legacy filtering to TRITON as
well as within the TRITON portfolio of products and technologies.
2012
Upgrade cycle FUTURE
began in
Upgrade cycle 2H 2011
~ $20M
began in Installed base
2009

~ $280M
Installed base
~ $300M Mobile
Installed base Security
TRITON
Security TRITON
Gateway Enterprise i-Platform
Web Web Anywhere
Security Web Security
Suite Security Gateway
Gateway Anywhere
Web Filter


Solutions Feature Matrix
Quick 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


Agenda



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


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 i-Platform
ANALYTICS

LEGACY
FILTERING


TRITON Billings

$80 70%
61% 59% 61%
59%
$70 60%
54%
52%
$60
45% 50%

% of Total Billings
$50
40%
Millions

$40
$68.3 30%
$30
$49.0 $50.7 $49.4
$44.5 $45.3 20%
$20
$34.4
$10 10%

$0 0%
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
$ % 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.


Agenda



Value Creation Priorities

Deliver shareholder value
through top-line growth
Capital
Billings Business Productivity
Allocation

“TRITON effect” Sales performance Excess free cash flow
used for share
Expense management repurchases
for growth

Sustainable Cash flow and Shareholder
growth profitability value


Subscription Model Dynamics

Upgrade and “new logo” Cash flow statement
opportunities In 2012, higher cash taxes will
Migration to TRITON and impact cash generated by
within the TRITON billings
portfolio of products
yields growth
Billings Cash
(Non-GAAP)
Flow

Renewal/
Revenue
Upgrade
Income statement
Revenue follows billings
Expiration/renewal growth. In 2012, revenue is
Expansion of TRITON billings impacted by the decline in revenue
drives improved customer recognized from OEM and appliance
retention rates deferred revenue


Quality of Up for Renewal

TRITON solutions increase quality and quantity of subscriptions up for renewal.

2011 2012E 2013E

TRITON
23% TRITON
35% TRITON Legacy
Legacy ~50% ~50%
Legacy
65%
77%


Total Billings (Non-GAAP)

TRITON billings growth drives overall growth and quality of the installed base.

$400
$362.9 $359.5-364.5
$347.0
40%
47%
$300
61%
Millions

$200
60%
53%

$100 39%

$0
2010 2011 2012E*
TRITON Legacy OEM
* Guidance range as of 10/23/12


Deferred Revenue

Growth in software and service billings drives increases in deferred revenue.
$450
$394.3 $393.0 0-1% $393-396

$350

$250
Millions

2-3%
$150
5%

$50

2010 2011 2012E*
-$50
Software and Service Appliance OEM

* Based on billings and revenue guidance ranges as of 10/23/12
25

Q3’12 Financial Results

October 23, 2012


Billings Metrics

Q3'12 YTD'12
$ in millions, except no. of transactions, average contract duration and
percentages Q3'11 $ % ∆ YTD'11 $ %∆

Software and service $76.3 $74.6 -2% $226.9 $227.6 0%
Appliance $8.0 $6.9 -14% $20.0 $19.9 -1%
Total billings $84.3 $81.5 -3% $246.9 $247.5 0%
Billings by Product Category
TRITON $45.3 $49.4 9% $124.1 $149.1 20%
Non-TRITON $39.0 $32.1 -18% $122.8 $98.4 -20%
Billings by Region
U.S. $47.2 $39.3 -17% $121.5 $119.7 -1%
International $37.1 $42.2 14% $125.4 $127.8 2%
Contract Metrics
Number of customer transactions >$100k 132 144 9% 358 405 13%
Average contract duration (months) 23.1 24.1 4%

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.


Revenues and Deferred Revenue

Q3'12 YTD'12
Q3'11 $ % ∆ YTD'11 $ % ∆

Revenues ($ in millions, except percentages)

Software and service $81.8 $82.3 1% $243.1 $246.0 1%
Current period appliance 1 $7.7 $6.6 -14% $19.1 $19.0 -1%
Pre-2011 appliance 2 $2.6 $1.5 -42% $9.3 $4.8 -48%
Total appliance $10.3 $8.1 -21% $28.4 $23.8 -16%
Total revenues $92.1 $90.4 -2% $271.5 $269.8 -1%
Deferred Revenue ($ in millions, except percentages)

Software and service $358.2 $364.9 2%
Appliance $11.6 $5.8 -50%
Total deferred revenue $369.8 $370.7 0%

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.

Revenue-based Operating Models

Q3'11 Q3'12 YTD'11 YTD'12
Revenues
Software and service 88.8% 91.1% 89.5% 91.2%
Current period appliance 1 8.4% 7.3% 7.0% 7.0%
Pre-2011 appliance 2 2.8% 1.6% 3.5% 1.8%
Total appliance 11.2% 8.9% 10.5% 8.8%
Total GAAP revenues 100.0% 100.0% 100.0% 100.0%
GAAP M argins
Gross profit margin % 83.8% 83.4% 83.5% 83.7%
Operating expenses % 68.9% 68.1% 72.1% 70.4%
Operating margin % 14.9% 15.3% 11.4% 13.3%
Non-GAAP M argins
Non-GAAP gross profit margin % 84.8% 84.3% 84.6% 84.7%
Non-GAAP operating expenses % 61.1% 61.9% 63.6% 63.6%
Non-GAAP operating margin % 23.7% 22.4% 21.0% 21.1%
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.

Billings-based Operating Models (Non-GAAP)
Operating model as a percent of billings, excluding appliance costs associated
with pre-2011 appliance sales.
Q3'11 Q3'12 YTD'11 YTD'12
Billings Mix
Software and service billings 90.5% 91.5% 91.9% 92.0%
Appliance billings 9.5% 8.5% 8.1% 8.0%
Total billings 100.0% 100.0% 100.0% 100.0%
Non-GAAP Gross Profit Margin
Gross margin software and service % 87.8% 85.4% 87.6% 86.2%
Gross margin appliance %1 55.5% 60.7% 52.4% 60.6%
Billings gross margin %1 84.7% 83.3% 84.7% 84.1%
Non-GAAP Operating Expense and Margin
Sales and marketing % 40.3% 40.0% 43.5% 41.4%
Research & development % 16.7% 18.0% 16.5% 17.4%
General & administrative % 9.8% 10.5% 9.9% 10.5%
Total expenses % 66.8% 68.5% 69.9% 69.3%
Billings non-GAAP operating margin % 1 17.9% 14.8% 14.8% 14.8%

1. Excludes previously deferred appliance costs of $1.1 million in Q3’11, $0.6 million in Q3’12, $4.2 million in Q3 YTD’11 and $2.1 million in Q3
YTD’12 associated with pre-2011 appliance sales.


Balance Sheet Highlights

Y/Y Comparison

$ millions, except DSO and percentages Q3'11 Q3'12 $ Chg % Chg

Cash and receivables

Cash and cash equivalents $75.6 $57.6 ($18.0) -24%
(excluding restricted cash)

Accounts receivable $59.8 $54.4 ($5.4) -9%

Days billings outstanding (DSO) 64 days 60 days

Deferred revenues

Current deferred revenue $238.6 $231.6 ($7.0) -3%

Long term deferred revenue $131.2 $139.1 $7.9 6%

Total deferred revenue $369.8 $370.7 $0.9 0%
1
Deferred software and service revenue $358.2 $364.9 $6.7 2%

Borrowings

Balance on revolving credit facility $73.0 $68.0 -$5.0 -7%

1. Excludes deferred revenue from pre-2011 appliance sales.


Cash Flow Highlights

Q3'12 YTD'12
$ in millions Q3'11 $ ∆ YTD'11 $ ∆
Cash flow from operations
Net income $8.1 $8.5 $0.4 $20.6 $14.5 ($6.1)
Adjustments to reconcile net income to net cash
provided by operating activities $10.0 $9.5 ($0.5) $31.5 $29.7 ($1.8)
1 3 1 3
Changes in operating assets and liabilities ($1.4) ($12.4) ($11.0) $5.2 ($6.4) ($11.6)
Net cash provided by operating activities 3 3
$16.7 $5.6 ($11.1) $57.3 $37.8 ($19.5)
Free cash flow
Purchase of property and equipment ($2.5) ($3.5) ($1.0) ($7.2) ($9.6) ($2.4)
1 $14.2 $2.1 ($12.1) $50.1 $28.2 ($21.9)
Free cash flow
Financing cash flows
Borrowings (repayments), net $10.0 $0.0 ($10.0) $6.0 ($5.0) ($11.0)

Purchase of treasury stock $25.1 $4.2 ($20.9) $74.0 $44.7 ($29.3)
Supplemental cash flow disclosures 2
Cash taxes paid (net of refunds) $3.4 $17.3 $13.9 $5.0 $25.4 $20.4
Interest paid $0.3 $0.6 $0.3 $1.0 $1.7 $0.7

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.

Q4 2012 Outlook

Q4'12 Guidance
Q4'11 (as of 10/23/12)
Actual
$ in millions, except per share and percentages Range Y/Y Chg
GAAP
Revenues $92.7 $90 - $92 -3% - -1%
Cash flow from operations $21.9 $8 - $11
Cash taxes (net of refunds) $3.6 $3 - $4
Capital expenditures $1.9 $3 - $3.5
Weighted average diluted shares 38.9 37.0 - 37.5
Non-GAAP
Software and service billings % 92.6% 92% - 93%
Appliance billings % 7.4% 7% - 8%
Total billings $116.0 $112 - $117 -3% - 1%
Non-GAAP gross profit margin 84.8% 83% - 84%
Non-GAAP operating margin 23.4% 16% - 18%
Diluted non-GAAP EPS $0.44 $0.32 - $0.35 -27% - -20%
Non-GAAP tax rate 18.5% 19.0% 1

1. Long-term non-GAAP effective tax rate.

33

Implied 2012 Outlook

Implied 2012 Guidance
2011
(as of 10/23/12)
Actual
$ in millions, except per share and percentages Range Y/Y Chg Prior Guidance
GAAP
Revenues $364.2 $359.8 - $361.8 -1% $359 - $363
Cash flow from operations 1 $45.8 - $48.8 $50 - $54
$79.2
Cash taxes (net of refunds) $8.6 $28 - $29 $29 - $30
Capital expenditures $9.1 $12.5 - $13 $12 - $13
Weighted average diluted shares 40.7 37.0 - 37.5 37 - 38
Non-GAAP Revenue Based
Non-GAAP gross profit margin 84.6% 84% - 85% nc
Non-GAAP operating margin 21.6% 19% - 20% 19% - 21%
Diluted non-GAAP EPS $1.57 $1.50 - $1.53 -4% - -2% $1.50 - $1.57
1
Non-GAAP tax rate 18.5% 19.0% nc
Non-GAAP Billings Based
Software and service billings % 92.1% 92% - 93% nc
Appliance billings % 7.9% 7% - 8% nc
Total billings $362.9 $359.5 - $364.5 -1% - 0% $369 - $378
Billings operating margin 22.7% 20% - 22% 22% - 25%

1. Long-term non-GAAP effective tax rate.


Billings-based Operating Model
Long-term Target
2011 2012 Outlook
Model
Billings Billings Billings

Billings Mix

Software and service 92.1% 92% - 93% 92% - 93%

Current period appliance 7.9% 7% - 8% 7% - 8%
1
Non-GAAP Gross Profit Margin %
Software and service gross margin % 88.7% 87% - 89%

Appliance gross margin % 54.7% 55% - 56%

Billings gross margin % 86.0% 85% - 86%

Non-GAAP Operating Expenses and Income %

Sales and marketing % 39.3% 37% - 38%

Research and development % 15.0% 14% - 15%

General and administrative % 9.0% 7.5% - 8.5%

Total expenses 63.3% 60% - 62%

Billings non-GAAP operating margin %1 22.7% 20% - 22% 24% - 26%

1. Based on non-GAAP expenses, excluding deferred appliance expenses associated with pre-2011 appliance sales.


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

Billings Mix

Software and service 93.2% 92.6% 92.1% 91.8% 90.5% 91.5% 92.6%

Current period appliance 6.8% 7.4% 7.9% 8.2% 9.5% 8.5% 7.4%

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%

Appliance gross margin % 50.0% 59.2% 50.6% 61.3% 55.5% 60.7% 60.1%

Billings gross margin % 84.2% 84.5% 85.2% 84.6% 84.7% 83.3% 88.7%

Non-GAAP Operating Expenses and Income %

Sales and marketing % 47.4% 44.4% 43.4% 39.8% 40.3% 40.0% 30.1%

Research and development % 17.1% 17.4% 15.6% 17.0% 16.7% 18.0% 11.9%

General and administrative % 10.9% 10.8% 9.2% 10.3% 9.8% 10.5% 7.1%

Total expenses 75.4% 72.6% 68.2% 67.1% 66.8% 68.5% 49.1%
1
Billings non-GAAP operating margin % 8.8% 11.9% 17.0% 17.5% 17.9% 14.8% 39.6%

1. Based on non-GAAP expenses, excluding deferred appliance expenses associated with pre-2011 appliance sales.


2012 Guidance Assumptions as of 10/23/12

Exchange Rates
Q1 Q2 Q3 Q4
~% Billings Guidance
(expected) Assumption 2011 2012 2011 2012 2011 2012 2011 2012
GBP ~12% $1.61 $1.60 $1.59 $1.65 $1.58 $1.63 $1.58 $1.57
Euro ~12% $1.29 $1.37 $1.33 $1.44 $1.27 $1.44 $1.25 $1.36
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.


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


WBSN Q412 Investor Presentation

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Andere mochten auch

Andere mochten auch (8)

Ähnlich wie WBSN Q412 Investor Presentation

Ähnlich wie WBSN Q412 Investor Presentation (20)

WBSN Q412 Investor Presentation