Websense Reports Third Quarter 2012 Results PR Newswire SAN DIEGO, Oct. 23, 2012 SAN DIEGO, Oct. 23, 2012 /PRNewswire/ -- Websense, Inc. (NASDAQ: WBSN) today announced financial results for the third quarter of 2012. "In the third quarter, we had double-digit growth in sales to new customers and we started to see a recovery in our international sales territories, with sales outside the U.S. growing by 14 percent," said Gene Hodges, Websense^® CEO. "While our customer retention rates remain solid, we were negatively impacted by fewer upgrades from our installed base in the U.S. Looking ahead, we see good opportunities to upgrade our customers and increase new customer sales. The need and awareness for content security is increasing, and security experts recognize we have the best solutions to protect against data theft and advanced attacks." Third Quarter 2012 GAAP Financial Highlights oRevenues of $90.4 million, compared with $92.1 million in the third quarter of 2011. oSoftware and service revenues of $82.3 million, compared with $81.8 million in the third quarter of 2011. oAppliance revenues of $8.1 million, which consisted of approximately $6.6 million in current-period appliance sales and approximately $1.5 million of deferred appliance revenue primarily from pre-2011 appliance sales, compared with $10.3 million of appliance revenues in the third quarter of 2011, which consisted of approximately $7.7 million in current-period appliance sales and the remainder from deferred appliance revenue primarily from pre-2011 appliance sales. oOperating income of $13.8 million, compared with $13.7 million in the third quarter of 2011. oProvision for income taxes of $4.6 million, compared with $5.4 million in the third quarter of 2011. oNet income of $8.5 million, or 23 cents per diluted share, compared with net income of $8.1 million, or 20 cents per diluted share, in the third quarter of 2011. oWeighted average diluted shares outstanding of 36.8 million, compared with 40.4 million in the third quarter of 2011. oCash flow from operations of $5.6 million, compared with $16.7 million in the third quarter of 2011. Cash flow from operations 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. The company had expected these payments to total $15 to $16 million in the third quarter. oQuarter-end accounts receivable of $54.4 million, compared with $59.8 million at the end of the third quarter of 2011 and $61.8 million at the end of the second quarter of 2012. oDays billings outstanding of 60 days, compared with 64 days at the end of the third quarter of 2011 and 65 days billings outstanding at the end of the second quarter of 2012. oDeferred revenue of $370.7 million, an increase of $0.9 million compared with deferred revenue of $369.8 million at the end of the third quarter of 2011. Deferred revenue at the end of the third quarter of 2012 included $5.8 million from extended warranties and pre-2011 appliance sales, a decrease of $5.8 million from the year ago period. Deferred revenue from pre-2011 appliance sales will continue to decrease quarterly. Third Quarter 2012 Non-GAAP^1 Financial Highlights oBillings of $81.5 million, a decrease of three percent compared with the third quarter of 2011. Currency exchange rates had a negative impact on billings of approximately $1.9 million in the third quarter of 2012 compared with the prevailing exchange rates in effect during the third quarter of 2011. oTRITON™ solution billings of $49.4 million, an increase of nine percent compared with the third quarter of 2011. oNon-GAAP operating income of $20.3 million, compared with non-GAAP operating income of $21.8 million in the third quarter of 2011. Non-GAAP operating margin in the third quarter of 2012, calculated as a percentage of revenues, was 22.4 percent, compared with 23.7 percent in the third quarter of 2011. oBillings-based operating margin of 14.8 percent, compared with billings-based operating margin of 17.9 percent in the third quarter of 2011. Billings-based operating margin is calculated like 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. oA non-GAAP tax provision of $3.7 million, based on a long-term effective tax rate of 19 percent, compared with a non-GAAP tax provision of $3.8 million, based on an effective tax rate of 17.7 percent, in the third quarter of 2011. oNon-GAAP net income of $15.9 million, or 43 cents per diluted share, compared with $17.9 million, or 44 cents per diluted share, in the third quarter of 2011. Summary Metrics Millions, except percentages, number of transactions, duration, and days billings outstanding Q3'11 Y/Y Chg Q3'12 Total billings $81.5 $84.3 -3% U.S. billings $39.3 $47.2 -17% International billings $42.2 $37.1 14% TRITON solution billings^2 $49.4 $45.3 9% Appliance billings $6.9 $8.0 -14% Number of transactions >$100K 144 132 9% Average contract duration (months) 24.1 23.1 4% Days billings outstanding (DSOs) 60 64 -4 days Cash and cash equivalents $57.6 $75.6 -24% Balance on revolving credit facility $68.0 $73.0 -7% Share repurchases ($) $2.9 $25.0 -88% A detailed description of the company's non-GAAP financial measures appears 1. 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." TRITON solutions include the TRITON family of security gateways for web, email, mobile, and data security (including related appliances and 2. 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 Fourth Quarter and Fiscal Year 2012 Websense provides guidance on anticipated financial performance for 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 23 and 24 months and prevailing currency exchange rates of $1.29 for the Euro and $1.61 for the Pound Sterling. The company disclaims any obligation to update the statements as circumstances change. Millions, except percentages and per-share Implied amounts Q4'12 Outlook 2012 Outlook Total billings $112 – 117 $359.5 – 364.5 Appliance billings (% of total billings) 7 – 8% 7 – 8% Revenues $90 – 92 $359.8 – 361.8 Non-GAAP gross profit margin 83 – 84% 84 – 85% Non-GAAP operating margin 16 – 18% 19 – 20% Non-GAAP earnings per diluted share $0.32 – 0.35 $1.50 – 1.53 Non-GAAP effective tax rate 19% 19% Average diluted shares outstanding 37.0 – 37.5 37.0 – 37.5 Cash flow from operations $8.0 – 11.0 $45.8 – 48.8 Capital expenditures $3.0 – 3.5 $12.5 – 13.0 Cash taxes (net of refunds) $3.0 – 4.0 $28.0 – 29.0 Additionally, outlook ranges for 2012 reflect: oBillings-based non-GAAP operating margin of 20 to 22 percent. oExpected stock repurchases in the fourth quarter of approximately $5 million to more closely align with expected cash flow. oNon-cash items related to the recognition of revenue and costs associated with pre-2011 appliance billings: oRemaining deferred revenue of $3.9 million from pre-2011 appliance billings (as of September 30, 2012) that will continue to be recognized ratably according to the original subscription periods, including $1.2 million to be recognized in the fourth quarter of 2012 (compared with $2.1 million in the fourth quarter of 2011). oRemaining deferred costs of $1.9 million from pre-2011 appliance billings (as of September 30, 2012) that will continue to be recognized ratably according to the original subscription periods, including $0.5 million to be recognized in the fourth quarter of 2012 (compared with $1.0 million in the fourth quarter of 2011). oOn 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. The schedules below summarize the actual and expected recognition of remaining deferred appliance revenues and costs by quarter for 2011 and 2012: 2011 Summary of Amounts Related to pre-2011 Appliance Sales Deferred 2011 Recognition Schedule (actual) Remaining deferred balances balances Millions Q1'11 Q2'11 Q3'11 Q4'11 2011 as of 12/31/10 as of 12/31/11 (actual) (actual) Revenue $20.0 $3.5 $3.2 $2.6 $2.1 $11.4 $8.6 Costs $9.2 $1.6 $1.5 $1.1 $1.0 $5.2 $4.0 2012 Summary of Amounts Related to pre-2011 Appliance Sales Deferred Remaining balances 2012 Recognition Schedule deferred balances Millions as of Q1'12 Q3'12 Q4'12 2012 12/31/11 Q2'12 as of (actual) (actual) (actual) (expected) (expected) 12/31/12 (actual) (expected) 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 Conference Call Details Management will host a conference call and simultaneous webcast to discuss the financial results and outlook today, October 23, at 2 p.m. Pacific Daylight Time. 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 at www.websense.com/investors. An archive of the webcast will be available on the company's website through December 31, 2012, and a recorded replay of the call will be available for one week at (855) 859-2056 and (404) 537-3406, pass code 33392987. 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 historic operating results. Reconciliations of the GAAP and non-GAAP financial measures for the third quarters of 2012 and 2011 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 not numerical measures that can be calculated in accordance with GAAP. Billings-based non-GAAP operating margin is calculated like 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 roll forward of deferred revenue (which includes billings and revenues) for the third quarter of 2012 is set forth at the end of this news release. About Websense, Inc. Websense, Inc. (NASDAQ: WBSN), a global leader in unified web security, email security, mobile security, and data loss prevention (DLP) solutions, delivers the best content security for modern threats at the lowest total cost of ownership to tens of thousands of enterprise, mid-market and small organizations around the world. Distributed through a global network of channel partners and delivered as software, appliance and Security-as-a-Service (SaaS), Websense content security solutions help organizations leverage web 2.0 and cloud communication, collaboration, and social media while protecting from advanced persistent threats, preventing the loss of confidential information and enforcing internet use and security policies. Websense is headquartered in San Diego, California with offices around the world. For more information, visit www.websense.com. 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 Gene Hodges; statements about our expected success selling products; statements about the effectiveness of our products; 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 customer acceptance of the company's products and services, 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 (including in continental Europe), 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 as well as the interim financial statements and notes thereto included in Websense's Quarterly Reports on Form 10-Q. Certain reclassifications have been made for consistent presentation. Websense, Inc. Consolidated Statements of Operations (Unaudited and in thousands, except per share amounts) Three Months Ended September Nine Months Ended 30, September 30, 2012 2011 2012 2011 Revenues: Software and service $ 82,285 $ 81,803 $ 245,992 $ 243,057 Appliance 8,078 10,308 23,769 28,393 Total revenues 90,363 92,111 269,761 271,450 Cost of revenues: Software and service 11,643 10,234 33,918 30,993 Appliance 3,337 4,665 9,929 13,661 Total cost of 14,980 14,899 43,847 44,654 revenues Gross profit 75,383 77,212 225,914 226,796 Operating expenses: Selling and marketing 35,661 38,445 112,226 121,285 Research and 15,786 15,084 46,745 43,556 development General and 10,132 9,969 30,960 30,922 administrative Total operating 61,579 63,498 189,931 195,763 expenses Income from operations 13,804 13,714 35,983 31,033 Interest expense (644) (374) (1,943) (1,167) Other income (expense), (81) 204 (221) 1,530 net Income before income 13,079 13,544 33,819 31,396 taxes Provision for income 4,628 5,426 19,278 10,777 taxes Net income $ 8,451 $ 8,118 $ 14,541 $ 20,619 Basic net income per $ 0.23 $ 0.21 $ $ share 0.39 0.51 Diluted net income per $ 0.23 $ 0.20 $ $ share 0.39 0.50 Weighted average shares - 36,457 39,575 37,010 40,081 basic Weighted average shares - 36,782 40,428 37,590 41,273 diluted Financial Data: Total deferred revenue $ 370,739 $ 369,750 $ 370,739 $ 369,750 Websense, Inc. Consolidated Balance Sheets (In thousands) September 30, 2012 December 31, 2011 Assets (Unaudited) Current assets: Cash and cash equivalents $ $ 57,602 76,201 Accounts receivable, net 54,436 80,147 Income tax receivable/prepaid 2,187 738 income tax Current portion of deferred 30,234 30,021 income taxes Other current assets 11,589 13,793 Total current assets 156,048 200,900 Cash and cash equivalents - 640 628 restricted Property and equipment, net 18,617 16,832 Intangible assets, net 20,058 26,412 Goodwill 372,445 372,445 Deferred income taxes, less current 8,670 8,599 portion Deposits and other assets 7,348 8,622 Total assets $ $ 583,826 634,438 Liabilities and stockholders' equity Current liabilities: Accounts payable $ $ 6,404 9,026 Accrued compensation and 23,358 22,770 related benefits Other accrued expenses 11,722 16,534 Current portion of income taxes 1,533 3,187 payable Current portion of deferred tax 86 86 liability Current portion of deferred 231,576 250,597 revenue Total current liabilities 274,679 302,200 Other long term liabilities 2,256 2,600 Income taxes payable, less current 10,308 11,955 portion Secured loan 68,000 73,000 Deferred tax liability, less 2,512 2,501 current portion Deferred revenue, less current 139,163 142,437 portion Total liabilities 496,918 534,693 Stockholders' equity: Common stock 577 568 Additional paid-in capital 434,089 415,573 Treasury stock, at cost (431,290) (385,544) Retained earnings 86,788 72,247 Accumulated other comprehensive (3,256) (3,099) loss Total stockholders' equity 86,908 99,745 Total liabilities and stockholders' $ $ equity 583,826 634,438 Websense, Inc. Consolidated Statements of Cash Flows (Unaudited and in thousands) Nine Months Ended September 30, 2012 2011 Operating activities: Net income $ 14,541 $ 20,619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,133 19,716 Share-based compensation 14,675 14,433 Deferred income taxes - (360) Unrealized loss (gain) on foreign exchange 412 (47) Excess tax benefit from share-based (532) (2,267) compensation Changes in operating assets and liabilities: Accounts receivable 26,760 21,149 Other assets 2,412 470 Accounts payable (3,437) 2,244 Accrued compensation and related benefits 451 533 Other liabilities (3,761) (3,385) Deferred revenue (22,297) (24,575) Income taxes payable and receivable/prepaid (6,559) 8,722 Net cash provided by operating activities 37,798 57,252 Investing activities: Change in restricted cash and cash (20) 33 equivalents Purchase of property and equipment (9,576) (7,176) Purchase of intangible assets - (500) Net cash used in investing activities (9,596) (7,643) Financing activities: Proceeds from secured loan - 87,000 Principal payments on secured loan (5,000) (81,000) Principal payments on capital lease obligation (587) (569) Proceeds from exercise of stock options 2,257 14,461 Proceeds from issuance of common stock for 3,595 3,446 stock purchase plan Excess tax benefit from share-based 532 2,267 compensation Tax payments related to restricted stock unit (2,830) (2,824) issuances Purchase of treasury stock (44,674) (73,998) Net cash used in financing activities (46,707) (51,217) Effect of exchange rate changes on cash and (94) (232) cash equivalents Decrease in cash and cash equivalents (18,599) (1,840) Cash and cash equivalents at beginning of 76,201 77,390 period Cash and cash equivalents at end of period $ 57,602 $ 75,550 Cash paid during the period for: Income taxes including interest and $ 25,385 $ 5,045 penalties, net of refunds Interest $ 1,746 $ 968 Non-cash financing activities: Change in operating assets and liabilities for unsettled purchase of treasury stock and exercise of stock $ (1,583) $ 994 options Websense, Inc. Rollforward of Deferred Revenue (Unaudited and in thousands) Deferred revenue balance at June 30, 2012 $ 379,606 Net billings during third quarter 2012 81,498 Less revenue recognized during third quarter 2012 (90,363) Translation adjustment (2) Deferred revenue balance at September 30, 2012 $ 370,739 Websense, Inc. Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited and in thousands, except per share amounts) Three Months Ended Nine Months Ended September September 30, 30, 2012 2011 2012 2011 GAAP Gross profit $ 75,383 $ 77,212 $ 225,914 $ 226,796 Amortization of 539 646 1,617 1,937 acquired technology (2) Share-based 238 276 883 829 compensation (1) Gross profit 777 922 2,500 2,766 adjustment Non-GAAP Gross profit $ 76,160 $ 78,134 $ 228,414 $ 229,562 GAAP Operating expenses $ 61,579 $ 63,498 $ 189,931 $ 195,763 Amortization of other (1,512) (3,159) (4,535) (9,479) intangible assets (2) Share-based (4,192) (4,004) (13,792) (13,605) compensation (1) Operating expense (5,704) (7,163) (18,327) (23,084) adjustment Non-GAAP Operating $ 55,875 $ 56,335 $ 171,604 $ 172,679 expenses GAAP Income from $ 13,804 $ 13,714 $ 35,983 $ 31,033 operations Gross profit 777 922 2,500 2,766 adjustment Operating expense 5,704 7,163 18,327 23,084 adjustment Non-GAAP Income from $ 20,285 $ 21,799 $ 56,810 $ 56,883 operations GAAP Provision for income $ 4,628 $ 5,426 $ 19,278 $ 10,777 taxes Provision for income taxes adjustment (900) (1,592) (8,861) (153) (3, 5) Non-GAAP Provision for $ 3,728 $ 3,834 $ 10,417 $ 10,624 income taxes GAAP Net income $ 8,451 $ 8,118 $ 14,541 $ 20,619 Gross profit 777 922 2,500 2,766 adjustment Operating expense 5,704 7,163 18,327 23,084 adjustment Amortization of deferred financing fees 59 60 178 179 (4) Provision for income 900 1,592 8,861 153 tax adjustment Non-GAAP Net income $ 15,891 $ 17,855 $ 44,407 $ 46,801 GAAP Net income per $ 0.23 $ 0.20 $ 0.39 $ diluted share 0.50 Non-GAAP adjustments as described above 0.20 0.24 0.79 0.63 per share, net of tax (1-5) Non-GAAP Net income per $ 0.43 $ 0.44 $ 1.18 $ diluted share 1.13 (1) 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. (2) 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. (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. In 2012, the company's 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. (5) Tax related adjustments from other discrete items. This amount represents the non-recurring tax effect from the transfer of customer relationship intangible assets and the related deferred tax liabilities from a higher tax rate jurisdiction to a lower tax rate jurisdiction. The tax benefit is reflected in the first quarter of 2011 upon the completion of our global distribution restructuring and is not expected to recur. Websense, Inc. Non-GAAP Billings Operating Margin Reconciliation (Unaudited and in thousands, except percentages) Three Months Ended September Nine Months Ended September 30, 30, Billings: 2012 2011 2012 2011 Software and $ $ $ $ service 74,585 91.5% 76,332 90.5% 227,631 92.0% 226,896 91.9% billings Appliance 6,913 8.5% 7,983 9.5% 19,839 8.0% 19,981 8.1% billings Total 81,498 100.0% 84,315 100.0% 247,470 100.0% 246,877 100.0% billings Non-GAAP Cost of billings: Software and service cost 10,866 14.6% 9,312 12.2% 31,418 13.8% 28,227 12.4% of billings Appliance cost of billings 2,716 39.3% 3,553 44.5% 7,842 39.5% 9,512 47.6% (1) Non-GAAP Cost of 13,582 16.7% 12,865 15.3% 39,260 15.9% 37,739 15.3% billings Non-GAAP Gross margin: Software and service gross 63,719 85.4% 67,020 87.8% 196,213 86.2% 198,669 87.6% margin Appliance 4,197 60.7% 4,430 55.5% 11,997 60.5% 10,469 52.4% gross margin Non-GAAP 67,916 83.3% 71,450 84.7% 208,210 84.1% 209,138 84.7% Gross margin Non-GAAP Operating expenses: Selling and 32,627 40.0% 33,953 40.3% 102,370 41.4% 107,494 43.5% marketing Research and 14,689 18.0% 14,123 16.7% 43,206 17.4% 40,669 16.5% development General and 8,559 10.5% 8,259 9.8% 26,028 10.5% 24,516 9.9% administrative Non-GAAP Operating 55,875 68.5% 56,335 66.8% 171,604 69.3% 172,679 69.9% expenses Non-GAAP Billings $ 14.8% $ 17.9% $ 14.8% $ 14.8% operating 12,041 15,115 36,606 36,459 margin (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 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. INVESTOR CONTACT: MEDIA CONTACT: Avelina Kauffman Patricia Hogan Websense, Inc. Websense, Inc. (858) 320-9364 (858) 320-9393 firstname.lastname@example.org email@example.com SOURCE Websense, Inc. Website: http://www.websense.com
Websense Reports Third Quarter 2012 Results
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