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SAN JOSE, Calif., May 09, 2019 (GLOBE NEWSWIRE) -- Forescout Technologies, Inc. (NASDAQ:FSCT), the leader in device visibility and control, today announced results for its first quarter ended March 31, 2019.
“We had a strong start to the year and are particularly pleased with the growing diversification of our customer base, both from a geographic as well as vertical perspective,” said Michael DeCesare, CEO and President of Forescout Technologies. “The market opportunity ahead of us in device visibility and control is substantial, driven by the explosion of connected devices, the convergence of IT, IoT and OT network environments, as well as the increasing willingness of CIOs to automate their IT and security solutions. Forescout is at the center of these converging tailwinds, and we remain excited about our opportunity to capitalize on the market for visibility in the years ahead.”
First Quarter 2019 Financial Highlights
A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”
“We are pleased with our first quarter results, highlighted by total revenue growth of 27% year-over-year and free cash flow of $4.9 million,” said Criss Harms, Chief Financial Officer of Forescout. “Despite making incremental investments this quarter as planned, we saw consistency in year-over-year operating margins and once again generated positive operating and free cash flow. We remain on track to achieve our profitability targets and to introduce more recurring revenue elements to our financial model.”
First Quarter 2019 Business Highlights
During the first quarter and recently, Forescout:
Second Quarter and Full Year 2019 Outlook
Forescout provides guidance based on current market conditions and expectations.
For the second quarter of 2019, Forescout expects:
For the full year 2019, Forescout expects:
Guidance for non-GAAP operating loss and non-GAAP net loss per share excludes stock-based compensation expense, acquisition-related expenses, and amortization of acquired intangible assets. We have not reconciled non-GAAP operating loss guidance to GAAP operating loss, nor have we reconciled non-GAAP net loss per share to GAAP net loss per share, as a result of the uncertainty and the potential variability of the excluded items. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
Conference Call Information
Forescout will host a conference call for analysts and investors to discuss its first quarter 2019 financial results today at 1:30 p.m. Pacific time. Open to the public, interested parties may access the conference call by dialing either (855) 659-9329 or (615) 247-5915 using the passcode 8167879.
A live webcast will be accessible on Forescout’s investor relations website at http://investors.Forescout.com. A telephonic replay of the conference call will be available through Thursday, May 16, 2019. To access the replay, interested parties should dial either (855) 859-2056 or (404) 537-3406 using the passcode 8167879.
About Forescout
Forescout Technologies, Inc. provides security at first sight. Our company delivers device visibility and control to enable enterprises and government agencies to gain complete situational awareness of their environment and orchestrate action. Learn more at www.Forescout.com.
© 2019 Forescout Technologies, Inc. All rights reserved. Forescout Technologies, Inc. is a Delaware corporation. A list of our trademarks and patents can be found at https://www.Forescout.com/company/legal/intellectual-property-patents-trademarks. Other brands, products, or service names may be trademarks or service marks of their respective owners.
FSCT - F
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our financial outlook for the second quarter of 2019 and fiscal year 2019, our markets and the demand for our products, our growth prospects and market opportunity, the benefits of our solution to customers, the development of our sales organization, expectations regarding profitability, and improvements in our revenue, gross margin, and product mix data. These forward-looking statements involve risks and uncertainties. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include risks associated with: the evolution of the cyberthreat landscape facing enterprises in the United States and other countries; developments and trends in the domestic and international markets for network security products; our growth in international markets; our expectations concerning the productivity of our expanding sales force as our sales representatives become more seasoned; our plans to attract new customers, retain existing customers and increase our annual revenue; fluctuations in our quarterly results of operations and other operating measures; increasing competition; new integrations to the Forescout platform; the receipt of product certifications and the importance of such certifications for government buyers and contractors; general economic, market and business conditions and the risks described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the headings “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 1, 2019, and which should be read in conjunction with our financial results and forward-looking statements, and is available on the SEC filings section of the Investor Relations page of our website at https://investors.Forescout.com. Additional information will also be set forth in Forescout’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
Non-GAAP Financial Measures
Forescout has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Forescout uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Forescout’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Forescout’s condensed consolidated financial statements prepared in accordance with GAAP. A reconciliation of Forescout’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.
Non-GAAP Gross Profit. Forescout defines non-GAAP gross profit as gross profit plus stock-based compensation expense, acquisition-related expenses, and amortization of acquired intangible assets.
Non-GAAP Operating Expense. Forescout defines non-GAAP operating expense as operating expense excluding stock-based compensation expense, acquisition-related expenses, and amortization of acquired intangible assets.
Non-GAAP Operating Loss. Forescout defines non-GAAP operating loss as operating loss excluding stock-based compensation expense, acquisition-related expenses, and amortization of acquired intangible assets.
Non-GAAP Net Loss. Forescout defines non-GAAP net loss as net loss excluding stock-based compensation expense, acquisition-related expenses, amortization of acquired intangible assets, and tax effect of non-GAAP adjustments.
Non-GAAP Net Loss Per Share. Forescout defines non-GAAP net loss per share as non-GAAP net loss divided by the weighted average diluted shares outstanding.
Free Cash Flow. Forescout defines free cash flow as net cash provided by operating activities less purchases of property and equipment. Forescout defines free cash flow margin as free cash flow as a percentage of total revenue. Forescout considers free cash flow and free cash flow margin to be profitability and liquidity measures that provide useful information to management and investors about the amount of cash generated by the business that, after the purchases of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our balance sheet.
FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
March 31, 2019 |
December 31, 2018 |
||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 70,663 | $ | 66,895 | |||
Marketable securities | 56,266 | 47,632 | |||||
Accounts receivable | 56,734 | 79,255 | |||||
Inventory | 1,248 | 1,501 | |||||
Deferred commissions - current | 11,707 | 12,543 | |||||
Prepaid expenses and other current assets | 13,477 | 13,353 | |||||
Total current assets | 210,095 | 221,179 | |||||
Deferred commissions - non-current | 22,143 | 22,831 | |||||
Property and equipment, net | 23,900 | 24,349 | |||||
Operating lease right-of-use assets | 20,704 | — | |||||
Restricted cash - non-current | 1,283 | 1,266 | |||||
Intangible assets, net | 17,873 | 19,002 | |||||
Goodwill | 90,641 | 92,482 | |||||
Other assets | 7,034 | 7,369 | |||||
Total assets | $ | 393,673 | $ | 388,478 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 9,500 | $ | 12,118 | |||
Accrued compensation | 28,121 | 32,649 | |||||
Accrued expenses | 13,988 | 14,558 | |||||
Deferred revenue - current | 106,087 | 101,900 | |||||
Notes payable - current | 7,352 | 7,331 | |||||
Operating lease liabilities - current | 4,718 | — | |||||
Total current liabilities | 169,766 | 168,556 | |||||
Deferred revenue - non-current | 72,023 | 69,618 | |||||
Notes payable - non-current | 6,402 | 8,248 | |||||
Operating lease liabilities - non-current | 23,535 | — | |||||
Other liabilities | 7,018 | 14,335 | |||||
Total liabilities | 278,744 | 260,757 | |||||
Stockholders' equity: | |||||||
Common stock | 45 | 43 | |||||
Additional paid-in capital | 662,674 | 639,237 | |||||
Accumulated other comprehensive loss | (2,281 | ) | (302 | ) | |||
Accumulated deficit | (545,509 | ) | (511,257 | ) | |||
Total stockholders’ equity | 114,929 | 127,721 | |||||
Total liabilities and stockholders' equity | $ | 393,673 | $ | 388,478 | |||
FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
Three Months Ended
March 31, |
|||||||
2019 | 2018 | ||||||
Revenue: | |||||||
License | $ | 37,680 | $ | 29,780 | |||
Subscription | 33,799 | 26,359 | |||||
Professional services | 4,089 | 3,558 | |||||
Total revenue | 75,568 | 59,697 | |||||
Cost of revenue: | |||||||
License | 7,607 | 7,136 | |||||
Subscription | 5,207 | 3,801 | |||||
Professional services | 6,186 | 5,549 | |||||
Total cost of revenue | 19,000 | 16,486 | |||||
Total gross profit | 56,568 | 43,211 | |||||
Operating expenses: | |||||||
Research and development | 18,497 | 14,687 | |||||
Sales and marketing | 55,923 | 42,279 | |||||
General and administrative | 16,213 | 13,732 | |||||
Total operating expenses | 90,633 | 70,698 | |||||
Loss from operations | (34,065 | ) | (27,487 | ) | |||
Interest expense | (93 | ) | (243 | ) | |||
Other income, net | 617 | 662 | |||||
Loss before income taxes | (33,541 | ) | (27,068 | ) | |||
Income tax provision | 711 | 1,128 | |||||
Net loss | $ | (34,252 | ) | $ | (28,196 | ) | |
Net loss per share, basic | $ | (0.78 | ) | $ | (0.74 | ) | |
Weighted-average shares used to compute net loss per share, basic | 44,196 | 38,313 | |||||
FORESCOUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended March 31, |
|||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (34,252 | ) | $ | (28,196 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities | |||||||
Stock-based compensation | 13,828 | 13,590 | |||||
Depreciation and amortization | 2,845 | 1,607 | |||||
Other | (15 | ) | 125 | ||||
Changes in operating assets and liabilities, net of business acquisition | |||||||
Accounts receivable | 22,227 | 9,768 | |||||
Inventory | 253 | 3,534 | |||||
Deferred commissions | 1,520 | 411 | |||||
Prepaid expenses and other current assets | (203 | ) | (1,779 | ) | |||
Other assets | 385 | 108 | |||||
Accounts payable | (2,705 | ) | (5,355 | ) | |||
Accrued compensation | (4,512 | ) | (3,544 | ) | |||
Accrued expenses | 549 | (1,289 | ) | ||||
Deferred revenue | 6,559 | 34,332 | |||||
Other liabilities | (40 | ) | 1,142 | ||||
Net cash provided by operating activities | 6,439 | 24,454 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,589 | ) | (2,313 | ) | |||
Purchases of marketable securities | (37,651 | ) | (26,304 | ) | |||
Proceeds from maturities of marketable securities | 29,123 | 9,000 | |||||
Net cash used in investing activities | (10,117 | ) | (19,617 | ) | |||
Cash flows from financing activities: | |||||||
Repayments of notes payable | (1,875 | ) | (1,875 | ) | |||
Proceeds from sales of shares through employee equity incentive plans | 12,173 | 3,622 | |||||
Payment related to shares withheld for taxes on vesting of restricted stock units | (2,764 | ) | — | ||||
Proceeds from public offerings, net | — | 13,818 | |||||
Payments of deferred offering costs | — | (1,057 | ) | ||||
Net cash provided by financing activities | 7,534 | 14,508 | |||||
Effect of exchange rate changes on cash and cash equivalents | (70 | ) | — | ||||
Net change in cash, cash equivalents, and restricted cash for period | 3,786 | 19,345 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 69,012 | 67,357 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 72,798 | $ | 86,702 | |||
FORESCOUT TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited, in thousands, except per share amounts)
Three Months Ended March 31, |
|||||||
2019 | 2018 | ||||||
GAAP gross profit | $ | 56,568 | $ | 43,211 | |||
Add: | |||||||
Stock-based compensation expense | 927 | 826 | |||||
Acquisition-related expense | 14 | — | |||||
Amortization of acquired intangible assets | 467 | — | |||||
Non-GAAP gross profit | $ | 57,976 | $ | 44,037 | |||
GAAP operating expense: | $ | 90,633 | $ | 70,698 | |||
Less: | |||||||
Stock-based compensation expense | 12,901 | 12,764 | |||||
Acquisition-related expenses | 1,624 | — | |||||
Amortization of acquired intangible assets | 304 | — | |||||
Non-GAAP operating expense | $ | 75,804 | $ | 57,934 | |||
GAAP operating loss | $ | (34,065 | ) | $ | (27,487 | ) | |
Add: | |||||||
Stock-based compensation expense | 13,828 | 13,590 | |||||
Acquisition-related expenses | 1,638 | — | |||||
Amortization of acquired intangible assets | 771 | — | |||||
Non-GAAP operating loss | $ | (17,828 | ) | $ | (13,897 | ) | |
GAAP net loss | $ | (34,252 | ) | $ | (28,196 | ) | |
Add: | |||||||
Stock-based compensation expense | 13,828 | 13,590 | |||||
Acquisition-related expenses | 1,638 | — | |||||
Amortization of acquired intangible assets | 771 | — | |||||
Tax effect of non-GAAP adjustments | (145 | ) | — | ||||
Non-GAAP net loss | $ | (18,160 | ) | $ | (14,606 | ) | |
Non-GAAP net loss per share, diluted | $ | (0.41 | ) | $ | (0.38 | ) | |
Weighted-average shares used in per share calculation for GAAP and non-GAAP, diluted | 44,196 | 38,313 | |||||
Net cash provided by operating activities | $ | 6,439 | $ | 24,454 | |||
Less: | |||||||
Net purchases of property and equipment | (1,589 | ) | (2,313 | ) | |||
Free cash flow (non-GAAP) | $ | 4,850 | $ | 22,141 | |||
Net cash used in investing activities | $ | (10,117 | ) | $ | (19,617 | ) | |
Net cash provided by financing activities | $ | 7,534 | $ | 14,508 | |||
Free cash flow margin (non-GAAP) | 6 | % | 37 | % | |||
Investor Relations Contact: | Media Relations Contact: |
Michelle Spolver | Katie Beck |
408-721-5884 | 650-314-8705 |
michelle.spolver@forescout.com | katie.beck@forescout.com |