SAN DIEGO April 25, 2006 -- Websense, Inc. (NASDAQ: WBSN), a global leader in web security and web filtering productivity software, today announced its financial results for the first quarter ended March 31, 2006. Revenue in the first quarter was a record $42.4 million, an increase of 24 percent from the first quarter of 2005. Net income calculated using generally accepted accounting principles (GAAP) was $8.2 million, or 17 cents per diluted share. First quarter non-GAAP net income, which excludes stock-based compensation expense and the related tax effects, increased 37 percent from the first quarter of 2005 to $11.8 million, or 24 cents per diluted share. Per share amounts reflect a two-for-one stock split effected through a stock dividend on March 17, 2006. View Statements of Operations and Balance Sheets
Billings for the first quarter were $39.0 million, an increase of 10 percent from the first quarter of 2005. Billings represent the full amount of subscription contracts billed to customers during the quarter. The difference between billings booked and revenue recognized in the first quarter resulted in a decrease in deferred revenue of $3.4 million from the end of December, bringing total deferred revenue to $176.5 million at the end of March.
"Our first quarter results demonstrate the soundness and predictability of our subscription-based business model, as well as the strength of our security offerings. Although our billings performance was unfavorably impacted by sales execution issues in North America and normal seasonality, our revenue reached record levels and our earnings exceeded guidance," said Gene Hodges, Websense president and chief executive officer. "We are addressing these issues through on-going marketing programs and increased channel focus, and believe we are well positioned for the remainder of 2006 and beyond with new products, excellent channel relationships and expanded technology partnerships."
"Websense leads the market in providing highly effective, yet easy to install and administer, web security solutions. The ability of the Websense® Security Labs(tm) to identify and investigate new web-based threats early in the attack cycle translates into proactive protection for our customers. In fact, the Websense Security Labs team was able to identify the recent Internet Explorer vulnerabilities and notify subscribers to Real Time Security Updates(tm) within hours of the first exploit, providing unparalleled zero-day protection. Demand for this level of security continues to increase and will help drive growth in our billings and revenue," added Hodges.
First Quarter Operating Model
For the first quarter of 2006, GAAP operating income was $10.4 million, or approximately 24 percent of revenue. Cost of revenue, which includes on-going investments in maintaining the company's URL, application and protocol databases, was eight percent of revenue, resulting in gross margin of approximately 92 percent of revenue.
Non-GAAP operating income, which excludes approximately $4.7 million in stock-based compensation expense, was a record $15.1 million or approximately 36 percent of revenue.
The company ended the first quarter of 2006 with $348.4 million in cash and investments, an increase of $28 million from the end of 2005, and zero debt. During the quarter, the company generated $32.7 million in net operating cash flow. The company also spent approximately $8.9 million to repurchase 300,000 shares of the company's common stock at an average price of $29.68. To date, Websense has repurchased 4,170,000 shares out of eight million shares authorized for repurchase by the Board of Directors.
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About Websense, Inc.
Websense, Inc. (NASDAQ: WBSN), a global leader in web security and web filtering software, is trusted to protect 24 million employees worldwide. Websense proactively discovers and immediately protects customers against web-based threats such as spyware, phishing attacks, viruses and crimeware with maximum protection and minimal effort. With diverse partnerships and integrations, Websense enhances our customers' network and security environments. For more information, visit
www.websense.com.
© 2006, Websense, Inc. All rights reserved. Websense and Websense Enterprise are registered trademarks of Websense, Inc. in the United States and certain international markets. Websense has numerous other unregistered trademarks in the United States and internationally. All other trademarks are the property of their respective owners.
IR CONTACT
Kate Patterson
VP, Investor Relations
Websense, Inc.
Phone: 858 320 8072
kpatterson@websense.com
MEDIA CONTACT
Jennifer Culter
Manager, Public Relations
Websense, Inc.
Phone: 858 320 9511
jculter@websense.com