WEBSENSE INC 
By SAN DIEGO, April 25, 2013 /PRNewswire/ -- Websense, Inc. (NASDAQ: WBSN) today announced financial results for the first quarter of 2013.
"Our first quarter results reflect the continued strength of our Websense(®) TRITON(®) solutions, which increased 11.6 percent year-over-year and represented 67 percent of total billings in the quarter," said John McCormack, Websense CEO. "We are particularly pleased with the 19 percent increase in transactions greater than $100k. This demonstrates the strength of our core business and the appeal of TRITON to our larger enterprise target customers. Our recent sales expansion is already showing benefits with an increased sales pipeline for the second quarter and the rest of the year. We remain confident in our ability to execute successfully on the growing market opportunity for advanced security solutions, and to deliver sustained and profitable billings growth."
First Quarter 2013 GAAP Financial Highlights
-- Revenues of $87.5 million, compared with $89.5 million in the first
quarter of 2012.
-- Software and service revenues of $80.1 million, compared with $82.0
million in the first quarter of 2012.
-- Appliance revenues of $7.4 million, which consisted of approximately
$6.5 million in current-period appliance sales and approximately $0.9
million of deferred appliance revenue primarily from pre-2011 appliance
sales, compared with $7.5 million of appliance revenues in the first
quarter of 2012, which consisted of approximately $5.8 million in
current-period appliance sales and $1.7 million of deferred appliance
revenue primarily from pre-2011 appliance sales.
-- Operating income of $3.5 million, compared with $10.7 million in the
first quarter of 2012, as we incurred increased operating expenses
primarily related to our sales force expansion, which was substantially
completed in the quarter.
-- Benefit from income taxes of $0.3 million, compared with a provision for
income taxes of $11.7 million in the first quarter of 2012.
-- Net income of $2.8 million, or eight cents per diluted share, compared
with a net loss of $1.8 million, or five cents per diluted share, in the
first quarter of 2012.
-- Weighted average diluted shares outstanding of 36.8 million, compared
with 37.6 million in the first quarter of 2012.
-- Cash flow from operations of $29.2 million, compared with $22.4 million
in the first quarter of 2012.
-- Quarter-end accounts receivable of $57.9 million, compared with $61.9
million at the end of the first quarter of 2012.
-- Days billings outstanding of 64 days, compared with 69 days at the end
of the first quarter of 2012.
-- Deferred revenue of $395.4 million, compared with deferred revenue of
$384.1 million at the end of the first quarter of 2012.
First Quarter 2013 Non-GAAP(1) Financial Highlights
-- Total billings of $81.8 million, an increase of 1.5 percent compared
with the first quarter of 2012. Changes in currency exchange rates,
compared with exchange rates prevailing in the first quarter of 2012,
did not materially impact first quarter 2013 billings performance.
-- TRITON solution billings of $54.7 million, an increase of 11.6 percent
compared with the first quarter of 2012.
-- Non-GAAP operating income of $10.0 million, compared with non-GAAP
operating income of $17.8 million in the first quarter of 2012. Non-GAAP
operating margin in the first quarter of 2013, calculated as a
percentage of revenues, was 11.4 percent, compared with 19.9 percent in
the first quarter of 2012. We incurred increased operating expenses in
the first quarter of 2013 primarily related to our sales force expansion
which was substantially completed in the quarter.
-- Billings-based operating margin of 5.6 percent, compared with
billings-based operating margin of 11.9 percent in the first quarter of
2012. Billings-based operating margin is calculated similar to
revenue-based non-GAAP operating margin, but is computed using billings
as the top-line measure and excludes deferred appliance costs to match
current period sales activities with current period costs.
-- A non-GAAP tax provision of $1.7 million, compared with a non-GAAP tax
provision of $3.2 million in the first quarter of 2012, both based on an
effective non-GAAP tax rate of 19.0 percent.
-- Non-GAAP net income of $7.3 million, or 20 cents per diluted share,
compared with $13.7 million, or 36 cents per diluted share, in the first
quarter of 2012, as we incurred increased operating expenses primarily
related to our sales force expansion, which was substantially completed
in the quarter.
Summary Metrics
Millions, except
percentages, number of
transactions, duration,
and days billings
outstanding Q1'12 Y/Y Chg
Q1'13
--- -----
Total billings $81.8 $80.6 1.5%
-------------- ----- ----- ---
U.S. billings $39.0 $37.5 4.0%
------------- ----- ----- ---
International billings $42.8 $43.1 -0.7%
---------------------- ----- ----- ----
TRITON solution
billings(2) $54.7 $49.0 11.6%
--------------- ----- ----- ----
Appliance billings $6.9 $6.0 15.0%
------------------ ---- ---- ----
Number of transactions
>$100K 144 121 19.0%
---------------------- --- --- ----
Average contract
duration (months) 23.3 25.5 -8.6%
------------------ ---- ---- ----
Days billings
outstanding (DSOs) 64 69 -5 days
------------------- --- --- -------
Cash and cash
equivalents $83.7 $70.3 19.1%
------------- ----- ----- ----
Balance on revolving
credit facility $68.0 $68.0 -
-------------------- ----- ----- ---
Share repurchases ($) $5.0 $20.0 -75.0%
-------------------- ---- ----- -----
1. A detailed description of the company's
non-GAAP financial measures appears
under "Non-GAAP Financial Measures"
and a full reconciliation of GAAP to
non-GAAP results is included at the
end of this news release in the tables
"Reconciliation of GAAP to Non-GAAP
Financial Measures."
2. 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. Non-
TRITON solutions include web filtering
products, including Websense Web
Filtering, Websense Web Security Suite
and related appliances, plus
SurfControl email security products.
Outlook for the Second Quarter and Fiscal Year 2013
Websense provides guidance on anticipated financial performance for the second quarter and the year based on an assessment of the current business environment, historical seasonal business trends, and prevailing exchange rates between the U.S. dollar and other major currencies. Annual guidance is updated each quarter with the release of quarterly results. In providing guidance, the company emphasizes that all forward-looking statements are based on current expectations, including average contract duration between 24 and 26 months and prevailing currency exchange rates of $1.28 for the Euro and $1.52 for the Pound Sterling. The company disclaims any obligation to update the statements as circumstances change.
Millions, except
percentages and
per share
amounts Q2'13 Outlook 2013 Outlook
---------------- ------------- ------------
Total billings $86.5 - 91.5 $374 - 394
-------------- ------------ ----------
Appliance
billings (% of
total billings) 7 - 8% 7 - 8%
---------------- ----- -----
Revenues $86 - 89 $351 - 361
-------- -------- ----------
Non-GAAP gross
profit margin Approximately 83% Approximately 83%
-------------- ---------------- ----------------
Non-GAAP
operating
margin 9 - 12% 11 - 13%
---------- ------ -------
Billings-based
non-GAAP
operating
margin 9 - 14% 17 - 20%
-------------- ------ -------
Non-GAAP
earnings per
diluted share $0.17 - 0.21 $0.78 - 0.93
-------------- ------------ ------------
Non-GAAP
effective tax
rate 19% 19%
-------------- --- ---
Average diluted
shares
outstanding Approximately 37 Approximately 37
--------------- ---------------- ----------------
Cash flow from
operations $9 - 11 $66 - 76
-------------- ------- --------
Capital
expenditures Approximately $4 $15 - 17
------------- ---------------- --------
Management further indicates:
-- Expected stock repurchases of approximately $5.0 million per quarter in
2013.
-- Non-cash items related to the recognition of revenue and costs
associated with pre-2011 appliance billings:
-- Remaining deferred revenue of $1.9 million from pre-2011 appliance
billings (as of March 31, 2013) that will continue to be recognized
ratably according to the original subscription periods, including
$0.6 million to be recognized in the second quarter of 2013
(compared with $1.6 million in the second quarter of 2012).
-- Remaining deferred costs of $1.0 million from pre-2011 appliance
billings (as of March 31, 2013) that will continue to be recognized
ratably according to the original subscription periods, including
$0.3 million to be recognized in the second quarter of 2013
(compared with $0.7 million in the second quarter of 2012).
-- On January 1, 2011, Websense adopted Accounting Standards Update
(ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU
2009-14 (Certain Revenue Arrangements That Include Software
Elements), which requires 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 related software subscription terms. The schedules below
summarize the actual and expected recognition of remaining deferred
appliance revenues and costs by quarter for 2012 and 2013:
2012 Summary of Amounts Related to pre-2011 Appliance Sales
-----------------------------------------------------------
Millions Deferred balances 2012 Recognition Schedule (actual) Remaining deferred balances
as of 12/31/11 as of 12/31/12
(actual) (actual)
--- ------- -------
Q1'12 Q2'12 Q3'12 Q4'12 2012
----- ----- ----- ----- ----
Revenue $8.6 $1.7 $1.6 $1.4 $1.2 $5.9 $2.7
------- ---- ---- ---- ---- ---- ---- ----
Costs $4.0 $0.8 $0.7 $0.6 $0.5 $2.6 $1.4
----- ---- ---- ---- ---- ---- ---- ----
2013 Summary of Amounts Related to pre-2011 Appliance Sales
-----------------------------------------------------------
Millions Deferred balances 2013 Recognition Schedule Remaining deferred balances
as of 12/31/12 as of 12/31/13 (expected)
(actual)
--- -------
Q1'13 Q2'13 (expected) Q3'13 Q4'13 2013
(actual) (expected) (expected) (expected)
------- --------- --------- ---------
Revenue $2.7 $0.8 $0.6 $0.5 $0.3 $2.2 $0.5
------- ---- ---- ---- ---- ---- ---- ----
Costs $1.4 $0.4 $0.3 $0.2 $0.1 $1.0 $0.4
----- ---- ---- ---- ---- ---- ---- ----
Conference Call Details
Management will host a conference call and simultaneous webcast to discuss the financial results and outlook today, April 25, at 2 p.m. PDT / 5 p.m. EDT. To participate in the conference call, investors should dial (866) 757-5630 (domestic) or 707-287-9356 (international) 10 minutes prior to the scheduled start of the call. A simultaneous audio-only webcast of the call may be accessed on the internet at investor.websense.com. An archive of the webcast will be available on the company's website through June 30, 2013, and a recorded replay of the call will be available for one week at 855-859-2056 or 404-537-3406, pass code 22448863.
Non-GAAP Financial Measures
This news release provides financial measures for non-GAAP gross profit, operating expenses, operating margin, income from operations, provision for income taxes, net income, and diluted earnings per share that are not calculated in accordance with GAAP. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding performance that enhances management's and investors' ability to evaluate the company's operating results, trends, and prospects and to compare current operating results with historical operating results. Reconciliations of the GAAP and non-GAAP financial measures for the first quarters of both years are provided at the end of this news release.
This news release also includes financial measures for various categories of billings, billings operating margin and other billings-related measures that are numerical measures that cannot be calculated in accordance with GAAP. Billings-based non-GAAP operating margin is calculated similar to revenue-based non-GAAP operating margin, but uses billings as the top-line measure and excludes deferred appliance costs to match current period sales activities with current period costs. Websense provides these measurements in reporting financial performance because these measurements provide a consistent basis for understanding the company's sales activities in the current period. The company believes that these measurements are useful to investors because the GAAP measurements of revenues and deferred revenue in the current period include subscription contracts commenced in prior periods. The rollforward of deferred revenue (which includes billings and revenues) for the first quarter of 2013 is set forth at the end of this news release.
About Websense, Inc.
Websense, Inc. (NASDAQ: WBSN) is a global leader in protecting organizations from the latest cyber attacks and data theft. Websense TRITON comprehensive security solutions unify web security, email security, mobile security and data loss prevention (DLP) at the lowest total cost of ownership. Tens of thousands of enterprises rely on Websense TRITON security intelligence to stop advanced persistent threats, targeted attacks and evolving malware. Websense prevents data breaches, intellectual property theft and enforces security compliance and best practices. A global network of channel partners distributes scalable, unified appliance- and cloud-based Websense TRITON solutions.
Websense TRITON stops more threats, visit www.websense.com/proveit to see proof. To access the latest Websense security insights and connect through social media, please visit social.websense.com. For more information, visit www.websense.com and www.websense.com/triton.
Follow Websense on Twitter: www.twitter.com/websense
Join the discussion on Facebook: www.facebook.com/websense
This news 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 financial estimates; the statements of John McCormack; statements about our expected success of our strategic initiatives and selling products; statements regarding market share gains and trends; statements about the effectiveness of our products; statements about customer acceptance of our products and services; billings, revenues, and growth trends; statements regarding expected repurchases of our common stock; and statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates," and similar words. The potential risks and uncertainties that contribute to the uncertain nature of these statements include, among others, risks associated with product performance, launching new product offerings, products and fee structures in a changing market, the success of Websense's brand development efforts, the volatile and competitive nature of the internet and security industries, changes in domestic and international market conditions, fluctuations in currency exchange rates and impacts of macro-economic conditions on our customers, ongoing compliance with the covenants in the company's credit facility, changes in accounting interpretations, and the other risks and uncertainties described in Websense's public filings with the Securities and Exchange Commission, available at www.websense.com/investors. Websense assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.
The following financial information should be read in conjunction with the audited financial statements and notes thereto, included in Websense, Inc.'s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
INVESTOR CONTACT: MEDIA CONTACT:
Avelina Kauffman Patricia Hogan
Websense, Inc. Websense, Inc.
(858) 320-9364 (858) 320-9393
akauffman@websense.com phogan@websense.com
Websense, Inc.
Consolidated Statements of Operations
(Unaudited and in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------
2013 2012
---- ----
Revenues:
Software and service $80,146 $82,008
Appliance 7,349 7,516
----- -----
Total revenues 87,495 89,524
Cost of revenues:
Software and service 11,433 10,975
Appliance 2,939 3,187
----- -----
Total cost of revenues 14,372 14,162
------ ------
Gross profit 73,123 75,362
Operating expenses:
Selling and marketing 43,657 39,027
Research and development 16,716 15,290
General and administrative 9,263 10,318
Total operating expenses 69,636 64,635
------ ------
Income from operations 3,487 10,727
Interest expense (634) (656)
Other income (expense), net (379) (252)
---- ----
Income before income taxes 2,474 9,819
Provision (benefit) for income
taxes (298) 11,652
---- ------
Net income (loss) $2,772 $(1,833)
====== =======
Basic net income (loss) per share $0.08 $(0.05)
===== ======
Diluted net income (loss) per
share $0.08 $(0.05)
===== ======
Weighted average shares - basic 36,461 37,630
====== ======
Weighted average shares - diluted 36,823 37,630
====== ======
Financial Data:
Total deferred revenue $395,353 $384,076
======== ========
Websense, Inc.
Consolidated Balance Sheets
(In thousands)
March 31, 2013 December 31, 2012
-------------- -----------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $83,687 $64,584
Accounts receivable, net 57,925 89,071
Income tax receivable/
prepaid income tax 3,900 3,989
Current portion of deferred
income taxes 27,914 28,933
Other current assets 14,748 13,249
------ ------
Total current assets 188,174 199,826
Cash and cash equivalents -
restricted 674 662
Property and equipment, net 20,405 18,901
Intangible assets, net 16,510 17,940
Goodwill 372,445 372,445
Deferred income taxes, less
current portion 8,154 7,335
Deposits and other assets 6,459 7,352
Total assets $612,821 $624,461
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $4,157 $7,941
Accrued compensation and
related benefits 23,370 24,981
Other accrued expenses 11,779 12,413
Current portion of income
taxes payable 3,577 694
Current portion of deferred
tax liability 42 42
Current portion of deferred
revenue 241,960 243,945
------- -------
Total current liabilities 284,885 290,016
Other long term liabilities 2,987 2,044
Income taxes payable, less
current portion 9,644 10,514
Secured loan 68,000 68,000
Deferred tax liability, less
current portion 2,021 2,026
Deferred revenue, less
current portion 153,393 157,112
------- -------
Total liabilities 520,930 529,712
Stockholders' equity:
Common stock 584 580
Additional paid-in capital 444,101 443,100
Treasury stock, at cost (443,145) (436,426)
Retained earnings 93,368 90,596
Accumulated other
comprehensive loss (3,017) (3,101)
Total stockholders' equity 91,891 94,749
Total liabilities and
stockholders' equity $612,821 $624,461
======== ========
Websense, Inc.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
Three Months Ended
March 31,
-------------------
2013 2012
---- ----
Operating activities:
Net income (loss) $2,772 $(1,833)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,655 4,906
Share-based compensation 5,133 5,014
Unrealized loss on foreign exchange 628 144
Excess tax benefit from share-based
compensation (49) (130)
Changes in operating assets and liabilities:
Accounts receivable 30,507 18,968
Other assets (481) 321
Accounts payable (5,502) (3,206)
Accrued compensation and related
benefits (1,491) (680)
Other liabilities 929 (483)
Deferred revenue (5,710) (8,962)
Income taxes payable and receivable/
prepaid (2,192) 8,297
Net cash provided by operating
activities 29,199 22,356
------ ------
Investing activities:
Change in restricted cash and cash
equivalents (1) (17)
Purchase of property and equipment (2,851) (2,784)
Net cash used in investing activities (2,852) (2,801)
------ ------
Financing activities:
Principal payments on secured loan - (5,000)
Principal payments on capital lease
obligation - (587)
Proceeds from exercise of stock options 88 1,383
Excess tax benefit from share-based
compensation 49 130
Tax payments related to restricted stock
unit issuances (1,715) (1,475)
Purchase of treasury stock (5,099) (20,490)
Net cash used in financing activities (6,677) (26,039)
------ -------
Effect of exchange rate changes on cash
and cash equivalents (567) 629
Increase (decrease) in cash and cash
equivalents 19,103 (5,855)
Cash and cash equivalents at beginning
of period 64,584 76,201
Cash and cash equivalents at end of
period $83,687 $70,346
======= =======
Cash paid during the period for:
Income taxes including interest and
penalties, net of refunds $1,146 $2,997
Interest $543 $607
Non-cash financing activities:
Change in operating assets and liabilities for unsettled
purchase of treasury
stock and exercise of stock options $(99) $313
Capital lease obligation incurred for a
software license arrangement $1,747 $ -
Websense, Inc.
Rollforward of Deferred Revenue
(Unaudited and in thousands)
Deferred revenue balance at December
31, 2012 $401,057
Net billings during first quarter
2013 81,786
Less revenue recognized during first
quarter 2013 (87,495)
Translation adjustment 5
Deferred revenue balance at March 31,
2013 $395,353
========
Websense, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited and in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------
2013 2012
---- ----
GAAP gross profit $73,123 $75,362
Amortization of acquired
technology (1) 10 539
Share-based compensation (2) 258 338
--- ---
Gross profit adjustment 268 877
Non-GAAP gross profit $73,391 $76,239
======= =======
GAAP operating expenses $69,636 $64,635
Amortization of other intangible
assets (1) (1,353) (1,512)
Share-based compensation (2) (4,875) (4,675)
------ ------
Operating expense adjustment (6,228) (6,187)
Non-GAAP operating expenses $63,408 $58,448
======= =======
GAAP income from operations $3,487 $10,727
Gross profit adjustment 268 877
Operating expense adjustment 6,228 6,187
Non-GAAP income from operations $9,983 $17,791
====== =======
GAAP provision (benefit) for
income taxes $(298) $11,652
Provision (benefit) for income
taxes adjustment (3) 2,014 (8,433)
----- ------
Non-GAAP provision for income
taxes $1,716 $3,219
====== ======
GAAP net income (loss) $2,772 $(1,833)
Gross profit adjustment 268 877
Operating expense adjustment 6,228 6,187
Amortization of deferred financing
fees (4) 59 59
Provision (benefit) for income tax
adjustment (2,014) 8,433
Non-GAAP net income $7,313 $13,723
====== =======
GAAP net income (loss) per diluted
share $0.08 $(0.05)
Non-GAAP adjustments as described
above per share, net of tax (1-
4) 0.12 0.41
Non-GAAP net income per diluted
share $0.20 $0.36
===== =====
(1) Amortization of acquired technology and
other intangible assets. When conducting
internal development of intangible assets
(including developed technology, customer
relationships, trademarks, etc.), GAAP
accounting rules require that we expense
the costs as incurred. In the case of
acquired businesses, however, we are
required to allocate a portion of the
purchase price to the accounting value
assigned to intangible assets acquired
and amortize this amount over the
estimated useful lives of the acquired
intangibles. The acquired company, in
most cases, has itself previously
expensed the costs incurred to develop
the acquired intangible assets, and the
purchase price allocated to these assets
is not necessarily reflective of the cost
we would incur in developing the
intangible asset. We eliminate these
amortization charges from our non-GAAP
operating results to provide better
comparability of pre- and post-
acquisition operating results and
comparability to results of businesses
utilizing internally developed intangible
assets.
(2) Share-based compensation. Consists of
non-cash expenses for employee stock
options, restricted stock units and our
employee stock purchase plan determined
in accordance with the fair value method
of accounting for share-based
compensation. When evaluating the
performance of our business and
developing short and long-term plans, we
do not consider share-based compensation
charges. Although share-based
compensation is necessary to attract and
retain quality employees, our
consideration of share-based
compensation places its primary emphasis
on overall shareholder dilution rather
than the accounting charges associated
with such grants. Because of varying
available valuation methodologies,
subjective assumptions and the variety of
award types, we believe that the
exclusion of share-based compensation
allows for more accurate comparison of
our financial results to previous
periods. In addition, we believe it is
useful to investors to understand the
specific impact of the application of the
fair value method of accounting for
share-based compensation on our
operating results.
(3) Non-GAAP effective tax rate. The
company's annual non-GAAP effective tax
rate is calculated by dividing the
company's estimated annual non-GAAP tax
expense by its estimated annual non-GAAP
taxable income. The company's estimated
non-GAAP taxable income is determined by
adjusting its estimated GAAP taxable
income for its non-GAAP adjustments on a
country-by-country basis. The company
determines its annual estimated non-GAAP
tax expense by adding together the
estimated non-GAAP tax expense for each
country based on each country's
applicable tax rate. The company
determines its interim non-GAAP
effective tax expense in accordance with
the general principles of ASC 740,
Accounting for Income Taxes. The
company's non-GAAP effective tax rate is
based on the company's anticipated long
term annual non-GAAP tax expense divided
by the company's long term annual non-
GAAP taxable income on a country by
country basis.
(4) Amortization of deferred financing fees.
This is a non-cash charge that is
disregarded by the company's management
when evaluating our ongoing performance
and/or predicting our earnings trends,
and is excluded by us when presenting our
non-GAAP financial measures. Further, we
believe it is useful to investors to
understand the specific impact of this
charge on our operating results.
Websense, Inc.
Non-GAAP Billings Operating Margin Reconciliation
(Unaudited and in thousands, except percentages)
Three Months Ended March 31,
----------------------------
2013 2012
---- ----
Billings:
Software and service $74,935 91.6% $74,615 92.6%
Appliance 6,851 8.4% 5,952 7.4%
-----
Total billings 81,786 100.0% 80,567 100.0%
Non-GAAP cost of billings:
Software and service 11,165 14.9% 10,098 13.5%
Appliance (1) 2,594 37.9% 2,429 40.8%
-----
Total non-GAAP cost of billings 13,759 16.8% 12,527 15.5%
Non-GAAP gross margin:
Software and service 63,770 85.1% 64,517 86.5%
Appliance 4,257 62.1% 3,523 59.2%
-----
Total non-GAAP gross margin 68,027 83.2% 68,040 84.5%
Non-GAAP operating expenses:
Selling and marketing 40,482 49.5% 35,734 44.4%
Research and development 15,502 19.0% 14,019 17.4%
General and administrative 7,424 9.1% 8,695 10.8%
-----
Total non-GAAP operating expenses 63,408 77.6% 58,448 72.6%
Non-GAAP billings operating
margin $4,619 5.6% $9,592 11.9%
====== ======
(1) Excluding deferred
appliance expenses
associated with pre-2011
appliance sales.
The non-GAAP financial measures included in the tables above and in the tables on the preceding page are non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP net income per diluted share, billings, non-GAAP cost of billings, non-GAAP gross margin and non-GAAP billings operating margin which adjust for the following items: acquisition related adjustments, share-based compensation expense, amortization of intangible assets, deferred expenses and certain other items. We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding the company's operating performance for the reasons discussed below. Our management uses these non-GAAP financial measures in assessing the company's operating results, as well as when planning, forecasting and analyzing future periods. The annual operating plan approved by our Board of Directors is based upon non-GAAP financial measures and our management incentive plans also use non-GAAP financial measures as performance objectives. We believe that these non-GAAP financial measures also facilitate comparisons of the company's performance to prior periods and to our peers and that investors benefit from an understanding of these non-financial measures.
SOURCE Websense, Inc.
