Websense Inc. (WBSN, Financial) filed Quarterly Report for the period ended 2009-03-31.
Websense Inc. provide employee Internet management products that enable businesses to monitor report and manage how their employees use the Internet. The Websense Enterprise software and database product gives managers the ability to implement Internet access policies for different users and groups within their businesses and supports their efforts to improve employee productivity conserve network bandwidth and mitigate potential legal liability. Websense Inc. has a market cap of $743.4 million; its shares were traded at around $16.57 with a P/E ratio of 16.9 and P/S ratio of 2.5.
Cost of revenues. Cost of revenues consists of the costs of content review, technical support and infrastructure costs associated with maintaining our databases and costs associated with providing our hosted security services. Cost of revenues decreased to $8.6 million in the first quarter of 2009 from $8.9 million in the first quarter of 2008. The $0.3 million decrease was primarily due to decreased temporary personnel costs in our technical support and database groups in 2009 from 2008 as we substantially completed the SurfControl integration during 2008. Our full-time employee headcount in cost of revenue departments increased from an average of 217 employees during the first quarter of 2008 to an average of 241 employees during the first quarter of 2009. We allocate the costs for human resources, employee benefits, payroll taxes, information technology, facilities and fixed asset depreciation to each of our functional areas based on headcount data. As a percentage of revenue, cost of revenues decreased to 11% from 13% during the first quarter of 2009 compared to 2008. We expect cost of revenue will increase in absolute dollars due to the higher headcount for the remainder of 2009 but as a percentage of revenue will remain approximately the same as compared to 2008. We expect cost of revenues to increase to support the growth and maintenance of our databases and costs associated with providing our hosted security services as well as the technical support needs of our customers.
Amortization of acquired technology. Amortization of acquired technology, which primarily relates to the developed technology acquired from the PortAuthority and SurfControl acquisitions in 2007, was $3.3 million in the first quarter of 2009 compared to $3.1 million in the first quarter of 2008. The increase of $0.2 million in amortization of acquired technology from the first quarter of 2008 to the first quarter of 2009 was primarily due to the acquisition of additional acquired technology in the second half of 2008. As of March 31, 2009, the acquired technology is being amortized over a weighted average period of 2.2 years. We expect to incur $9.6 million in amortization expense of acquired technology during the remainder of 2009 and that 2009 levels will be slightly higher than 2008 in absolute dollars.
Selling and marketing. Selling and marketing expenses consist primarily of salaries, commissions and benefits related to personnel engaged in selling, marketing and customer support functions, including costs related to public relations, advertising, promotions and travel, amortization of acquired customer relationships as well as allocated costs. Selling and marketing expenses do not include payments to channel partners for marketing services and rebates. Selling and marketing expenses decreased to $39.8 million, or 49% of revenue, in the first quarter of 2009, from $42.8 million, or 64% of revenue, in the first quarter of 2008. The $3.0 million decrease was primarily due to a reduction in the amortization of acquired intangibles (customer relationships) of approximately $2.8 million and due to improvements in the U.S. currency rates relative to the foreign currencies in which certain of our international expenses were incurred. As of March 31, 2009, the acquired customer relationships intangible assets are being amortized over a weighted average period of approximately 5.3 years. Even though our headcount in sales and marketing increased
Interest expense decreased to $2.2 million in the first quarter of 2009 from $4.4 million in the first quarter of 2008. The decrease was primarily due to a lower average outstanding loan balance on our senior secured term loan of $118 million during the first quarter of 2009 compared to an average loan balance of $175 million during the first quarter of 2008. In addition, the marginal interest rates were lower in the first quarter of 2009 compared to 2008. Included in the interest expense for the first quarter of 2009 and 2008 is $0.4 million and $1.0 million, respectively, of amortization of deferred financing fees that were capitalized as part of the senior secured credit facility. We made prepayments on the senior secured term loan totaling $15 million and $30 million during the first quarter of 2009 and 2008, respectively. As a result of reductions in the LIBOR interest rate and improvements in our leverage ratio, our weighted average interest rate decreased from 6.5% at March 31, 2008 to 5.7% at March 31, 2009. The amount of interest expense will fluctuate due to changes in the outstanding principal balance, changes in LIBOR and changes in our applicable spread to LIBOR based upon improvements in our leverage ratio in accordance with our senior secured credit facility agreement. Interest expense should decline in the remaining quarters of 2009 as compared to 2008 due to the lower outstanding principal amount and the expected lower marginal interest rate on the non-fixed rate component of our senior secured credit facility.
Other income (expense), net increased to a net other income of $0.4 million in the first quarter of 2009 from net other expense of $0.1 million in the first quarter of 2008. The increase was due primarily to foreign exchange related gains of $0.3 million in the first quarter of 2009 compared to losses of $0.7 million in the first quarter of 2008 due to favorable movements in the foreign exchange rates during the first quarter of 2009, partially offset by reduced interest income of $0.5 million as a result of lower interest rates realized on our balances of cash and cash equivalents. Due to a lower interest rate environment, we expect our net other income for the remainder of 2009 will be less than 2008 levels.
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Websense Inc. provide employee Internet management products that enable businesses to monitor report and manage how their employees use the Internet. The Websense Enterprise software and database product gives managers the ability to implement Internet access policies for different users and groups within their businesses and supports their efforts to improve employee productivity conserve network bandwidth and mitigate potential legal liability. Websense Inc. has a market cap of $743.4 million; its shares were traded at around $16.57 with a P/E ratio of 16.9 and P/S ratio of 2.5.
Highlight of Business Operations:
Revenue increased to $81.0 million in the first quarter of 2009 from $67.0 million in the first quarter of 2008. The increase was primarily a result of additional customer seats in new, renewed and upgraded subscriptions (including an increase of $10.3 million from new or renewed SurfControl seat subscriptions on a quarter over quarter basis) from the first quarter of 2008 to the first quarter of 2009. Revenue from DLP products increased by 60% from the first quarter of 2008 to the first quarter of 2009. The number of product seats under subscription increased from 42.4 million as of March 31, 2008 to 44.4 million as of March 31, 2009. Revenue from products sold in the United States accounted for $41.2 million or 51% of first quarter 2009 revenue compared to $39.8 million or 59% in the first quarter of 2008. Revenue from products sold internationally accounted for $39.8 million or 49% of first quarter 2009 revenue compared to $27.2 million or 41% in the first quarter of 2008. We had current deferred revenue of $213.0 million as of March 31, 2009, compared to $194.6 million as of March 31, 2008. For the remainder of 2009, we expect our revenue to increase over 2008 revenue levels due to the amount of current deferred revenue that will be recognized as revenue during 2009, subscriptions that are scheduled for renewal that are expected to be renewed and expected new business for which some revenue will be recognized during 2009. Our revenue in 2009 may be impacted by the duration of contracts for renewal and new subscriptions, the timing of sales of renewal and new subscriptions, the average annual contract value and per seat price, and currency exchange rates impacting new and renewal subscriptions in international markets.Cost of revenues. Cost of revenues consists of the costs of content review, technical support and infrastructure costs associated with maintaining our databases and costs associated with providing our hosted security services. Cost of revenues decreased to $8.6 million in the first quarter of 2009 from $8.9 million in the first quarter of 2008. The $0.3 million decrease was primarily due to decreased temporary personnel costs in our technical support and database groups in 2009 from 2008 as we substantially completed the SurfControl integration during 2008. Our full-time employee headcount in cost of revenue departments increased from an average of 217 employees during the first quarter of 2008 to an average of 241 employees during the first quarter of 2009. We allocate the costs for human resources, employee benefits, payroll taxes, information technology, facilities and fixed asset depreciation to each of our functional areas based on headcount data. As a percentage of revenue, cost of revenues decreased to 11% from 13% during the first quarter of 2009 compared to 2008. We expect cost of revenue will increase in absolute dollars due to the higher headcount for the remainder of 2009 but as a percentage of revenue will remain approximately the same as compared to 2008. We expect cost of revenues to increase to support the growth and maintenance of our databases and costs associated with providing our hosted security services as well as the technical support needs of our customers.
Amortization of acquired technology. Amortization of acquired technology, which primarily relates to the developed technology acquired from the PortAuthority and SurfControl acquisitions in 2007, was $3.3 million in the first quarter of 2009 compared to $3.1 million in the first quarter of 2008. The increase of $0.2 million in amortization of acquired technology from the first quarter of 2008 to the first quarter of 2009 was primarily due to the acquisition of additional acquired technology in the second half of 2008. As of March 31, 2009, the acquired technology is being amortized over a weighted average period of 2.2 years. We expect to incur $9.6 million in amortization expense of acquired technology during the remainder of 2009 and that 2009 levels will be slightly higher than 2008 in absolute dollars.
Selling and marketing. Selling and marketing expenses consist primarily of salaries, commissions and benefits related to personnel engaged in selling, marketing and customer support functions, including costs related to public relations, advertising, promotions and travel, amortization of acquired customer relationships as well as allocated costs. Selling and marketing expenses do not include payments to channel partners for marketing services and rebates. Selling and marketing expenses decreased to $39.8 million, or 49% of revenue, in the first quarter of 2009, from $42.8 million, or 64% of revenue, in the first quarter of 2008. The $3.0 million decrease was primarily due to a reduction in the amortization of acquired intangibles (customer relationships) of approximately $2.8 million and due to improvements in the U.S. currency rates relative to the foreign currencies in which certain of our international expenses were incurred. As of March 31, 2009, the acquired customer relationships intangible assets are being amortized over a weighted average period of approximately 5.3 years. Even though our headcount in sales and marketing increased
Interest expense decreased to $2.2 million in the first quarter of 2009 from $4.4 million in the first quarter of 2008. The decrease was primarily due to a lower average outstanding loan balance on our senior secured term loan of $118 million during the first quarter of 2009 compared to an average loan balance of $175 million during the first quarter of 2008. In addition, the marginal interest rates were lower in the first quarter of 2009 compared to 2008. Included in the interest expense for the first quarter of 2009 and 2008 is $0.4 million and $1.0 million, respectively, of amortization of deferred financing fees that were capitalized as part of the senior secured credit facility. We made prepayments on the senior secured term loan totaling $15 million and $30 million during the first quarter of 2009 and 2008, respectively. As a result of reductions in the LIBOR interest rate and improvements in our leverage ratio, our weighted average interest rate decreased from 6.5% at March 31, 2008 to 5.7% at March 31, 2009. The amount of interest expense will fluctuate due to changes in the outstanding principal balance, changes in LIBOR and changes in our applicable spread to LIBOR based upon improvements in our leverage ratio in accordance with our senior secured credit facility agreement. Interest expense should decline in the remaining quarters of 2009 as compared to 2008 due to the lower outstanding principal amount and the expected lower marginal interest rate on the non-fixed rate component of our senior secured credit facility.
Other income (expense), net increased to a net other income of $0.4 million in the first quarter of 2009 from net other expense of $0.1 million in the first quarter of 2008. The increase was due primarily to foreign exchange related gains of $0.3 million in the first quarter of 2009 compared to losses of $0.7 million in the first quarter of 2008 due to favorable movements in the foreign exchange rates during the first quarter of 2009, partially offset by reduced interest income of $0.5 million as a result of lower interest rates realized on our balances of cash and cash equivalents. Due to a lower interest rate environment, we expect our net other income for the remainder of 2009 will be less than 2008 levels.
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