Forescout Technologies, Inc. (NASDAQ: FSCT), the leader in device
visibility and control, today announced results for its second
quarter ended June 30, 2020.
“I’m proud of our strong execution during the second quarter,
despite many uncertainties. We closed strategic deals with both new
and existing customers, made continued progress in the market with
our eyeSegment product, and improved profitability,” said Michael
DeCesare, CEO and President of Forescout Technologies. “We look
forward to completing our pending transaction with Advent
International, and building upon our strategic cloud transformation
and transition to a recurring subscription business model. As we
move to our next chapter as a private company, I would like to
thank our customers, partners, talented employees, and shareholders
for their unwavering support.”
Second Quarter 2020 Financial Highlights
- Revenue: Total revenue was $79.9 million, an increase of 2%
over the second quarter of 2019o License revenue was
$37.6 million, a decrease of 3% over the second quarter of
2019o Subscription revenue was $37.6 million, an
increase of 8% over the second quarter of 2019o
Professional Services revenue was $4.7 million, an increase
of 1% over the second quarter of 2019
- Gross Profit: GAAP gross profit was $60.4 million, or 76% of
total revenue, compared to $60.8 million in the second quarter of
2019, or 78% of total revenue. Non-GAAP gross profit was $61.8
million, or 77% of total revenue, compared to $62.3 million in the
second quarter of 2019, or 80% of total revenue.
- Operating Loss: GAAP operating loss was $22.7 million, or 28%
of total revenue, compared to a loss of $30.6 million in the second
quarter of 2019, or 39% of total revenue. Non-GAAP operating income
was $0.3 million, or 0% of total revenue, compared to operating
loss of $14.7 million in the second quarter of 2019, or 19% of
total revenue.
- Net Loss: GAAP net loss was $23.5 million, or $0.48 per share,
compared to a loss of $30.8 million in the second quarter of 2019,
or $0.68 per share. Non-GAAP net income was $0.2 million, or $0.00
per share, based on 51.5 million weighted average diluted shares
outstanding, compared to a net loss of $15.1 million in the second
quarter of 2019, or $0.33 per share, based on 45.5 million weighted
average diluted shares outstanding.
- Cash Flow: Net cash used in operating activities was $30.3
million, or 38% of total revenue, compared to $25.2 million in the
second quarter of 2019, or 32% of total revenue. Free cash flow was
negative $30.8 million, or 39% of total revenue, compared to
negative $27.0 million in the second quarter of 2019, or 34% of
total revenue.
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.”
Transaction with Advent
On July 15, 2020, Forescout announced that it had entered into
an amended and restated merger agreement to be acquired by entities
affiliated with Advent International Corporation (Advent). Pursuant
to the amended and restated merger agreement, Advent commenced a
tender offer on July 20, 2020, to acquire all of Forescout’s
outstanding shares of common stock for $29.00 in cash per share.
The tender offer is scheduled to expire at the end of the day, one
minute after 11:59 p.m., Eastern time, on August 14, 2020, unless
the offer is extended or earlier terminated. The closing of the
tender offer is subject to certain limited customary conditions,
including the tender by Forescout stockholders of at least one
share more than 50% of Forescout’s issued and outstanding shares.
Upon completion of the transaction, Forescout will become a private
company and its common stock will no longer be listed on any public
market.
In light of the pending transaction with Advent, Forescout will
not hold a conference call or provide forward looking guidance.
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.
©2020 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
demand for our products, and market opportunity; the benefits of
our solution to customers; our pending transaction with Advent,
including timing for closing, and the Company's prospects. 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 COVID-19 pandemic and related public
health measures on our business, customers, markets and the
worldwide economy; our pending transaction with Advent, including
the risk that the conditions to the closing of the transaction are
not satisfied and uncertainty as to how many of our stockholders
will tender their shares in the tender offer; potential litigation
relating to the transaction; uncertainties as to the timing of the
consummation of the transaction and the ability of each party to
consummate the transaction; risks related to the ability to realize
the anticipated benefits of the pending transaction, including the
possibility that the expected benefits will not be realized or will
not be realized within the expected time periods; risks that the
proposed transaction disrupts Forescout’s current plans and
operations; risks that the proposed transaction will affect
Forescout’s ability to retain or recruit employees; the risk that
Forescout’s stock price may decline significantly if the proposed
transaction is not completed; the evolution of the cyberthreat
landscape facing enterprises in the United States and other
countries; our plans to attract new customers, retain existing
customers and increase our annual revenue; the development and
delivery of new products; our plans and expectations regarding
software-as-a-service offerings; our ability to execute on,
integrate, and realize the benefits of any acquisition;
fluctuations in our quarterly results of operations and other
operating measures; increasing competition; new integrations to the
Forescout platform; 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 (SEC) on February
28, 2020, as amended by Amendment No. 1 on Form 10-K/A to our
Annual Report on Form 10-K, which was filed the SEC on April 29,
2020, as well as our Quarterly Report on Form 10-Q for the quarter
ended March 30, 2020 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 our Quarterly Report on Form
10-Q for the quarter ended June 30, 2020 filed on or about the
date hereof. 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 relating to our acquisition of
SecurityMatters B.V. and Bullguard Israel Ltd., 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 relating to our acquisition
of SecurityMatters B.V. and Bullguard Israel Ltd., amortization of
acquired intangible assets, merger-related expenses relating to our
transaction with Advent, and restructuring expenses.
Non-GAAP Operating Loss. Forescout defines non-GAAP operating
loss as operating loss excluding stock-based compensation expense,
acquisition-related expenses relating to our acquisition of
SecurityMatters B.V. and Bullguard Israel Ltd., amortization of
acquired intangible assets, merger-related expenses relating to our
transaction with Advent, and restructuring expenses.
Non-GAAP Net Loss. Forescout defines non-GAAP net loss as net
loss excluding stock-based compensation expense,
acquisition-related expenses relating to our acquisition of
SecurityMatters B.V. and Bullguard Israel Ltd., amortization of
acquired intangible assets, merger-related expenses relating to our
transaction with Advent, restructuring expenses, 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.
Investor Relations Contact: |
Media Relations Contact: |
Michelle Spolver |
Katie Beck |
408-721-5884 |
650-314-8705 |
michelle.spolver@forescout.com |
katie.beck@forescout.com |
|
|
|
|
|
FORESCOUT TECHNOLOGIES, INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited, in thousands) |
|
|
|
|
|
|
|
|
June 30,2020 |
December 31,2019 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
54,947 |
|
$ |
69,030 |
|
Marketable securities |
|
2,021 |
|
|
29,181 |
|
Accounts receivable |
|
63,924 |
|
|
84,168 |
|
Inventory |
|
1,418 |
|
|
372 |
|
Deferred commissions - current |
|
13,350 |
|
|
12,843 |
|
Prepaid expenses and other current assets |
|
11,383 |
|
|
17,024 |
|
Total current assets |
|
147,043 |
|
|
212,618 |
|
Deferred commissions - non-current |
|
20,848 |
|
|
23,036 |
|
Property and equipment, net |
|
20,718 |
|
|
23,835 |
|
Operating lease right-of-use assets |
|
27,265 |
|
|
29,626 |
|
Restricted cash - non-current |
|
1,554 |
|
|
1,555 |
|
Intangible assets, net |
|
17,339 |
|
|
19,367 |
|
Goodwill |
|
98,018 |
|
|
98,018 |
|
Other assets |
|
6,946 |
|
|
8,172 |
|
Total assets |
$ |
339,731 |
|
$ |
416,227 |
|
|
|
|
Liabilities and stockholders' equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
11,899 |
|
$ |
10,692 |
|
Accrued compensation |
|
29,770 |
|
|
34,007 |
|
Accrued expenses |
|
16,381 |
|
|
16,279 |
|
Deferred revenue - current |
|
104,191 |
|
|
112,232 |
|
Notes payable - current |
|
4,550 |
|
|
8,248 |
|
Operating lease liabilities - current |
|
5,812 |
|
|
5,840 |
|
Total current liabilities |
|
172,603 |
|
|
187,298 |
|
Deferred revenue - non-current |
|
67,274 |
|
|
75,366 |
|
Operating lease liabilities - non-current |
|
29,211 |
|
|
32,125 |
|
Other liabilities |
|
23,638 |
|
|
23,893 |
|
Total liabilities |
|
292,726 |
|
|
318,682 |
|
|
|
|
Stockholders' equity: |
|
|
Common stock |
|
50 |
|
|
48 |
|
Additional paid-in capital |
|
762,187 |
|
|
727,922 |
|
Accumulated other comprehensive loss |
|
(678 |
) |
|
(633 |
) |
Accumulated deficit |
|
(714,554 |
) |
|
(629,792 |
) |
Total stockholders’ equity |
|
47,005 |
|
|
97,545 |
|
Total liabilities and stockholders' equity |
$ |
339,731 |
|
$ |
416,227 |
|
|
|
|
|
|
|
|
FORESCOUT TECHNOLOGIES, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(Unaudited, in thousands, except per share
amounts) |
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Revenue: |
|
|
|
|
License |
$ |
37,577 |
|
$ |
38,831 |
|
$ |
52,376 |
|
$ |
76,511 |
|
Subscription |
|
37,612 |
|
|
34,822 |
|
|
75,138 |
|
|
68,621 |
|
Professional services |
|
4,687 |
|
|
4,627 |
|
|
9,515 |
|
|
8,716 |
|
Total revenue |
|
79,876 |
|
|
78,280 |
|
|
137,029 |
|
|
153,848 |
|
Cost of revenue: |
|
|
|
|
License |
|
6,282 |
|
|
5,622 |
|
|
11,701 |
|
|
13,229 |
|
Subscription |
|
7,041 |
|
|
5,599 |
|
|
14,054 |
|
|
10,806 |
|
Professional services |
|
6,148 |
|
|
6,235 |
|
|
13,313 |
|
|
12,421 |
|
Total cost of revenue |
|
19,471 |
|
|
17,456 |
|
|
39,068 |
|
|
36,456 |
|
Total gross profit |
|
60,405 |
|
|
60,824 |
|
|
97,961 |
|
|
117,392 |
|
Operating expenses: |
|
|
|
|
Research and development |
|
21,514 |
|
|
19,440 |
|
|
44,760 |
|
|
37,937 |
|
Sales and marketing |
|
38,988 |
|
|
56,173 |
|
|
86,276 |
|
|
112,096 |
|
General and administrative |
|
21,733 |
|
|
15,838 |
|
|
46,214 |
|
|
32,051 |
|
Restructuring |
|
859 |
|
|
- |
|
|
3,371 |
|
|
- |
|
Total operating expenses |
|
83,094 |
|
|
91,451 |
|
|
180,621 |
|
|
182,084 |
|
Loss from operations |
|
(22,689 |
) |
|
(30627 |
) |
|
(82,660 |
) |
|
(64,692 |
) |
Interest expense |
|
(118 |
) |
|
(142 |
) |
|
(353 |
) |
|
(235 |
) |
Other income (expense), net |
|
572 |
|
|
505 |
|
|
(29 |
) |
|
1,122 |
|
Loss before income taxes |
|
(22,235 |
) |
|
(30264 |
) |
|
(83,042 |
) |
|
(63,805 |
) |
Income tax provision |
|
1,288 |
|
|
496 |
|
|
1,720 |
|
|
1,207 |
|
Net loss |
$ |
(23,523 |
) |
$ |
(30,760 |
) |
$ |
(84,762 |
) |
$ |
(65,012 |
) |
Net loss per share, basic and diluted |
$ |
(0.48 |
) |
$ |
(0.68 |
) |
$ |
(1.73 |
) |
$ |
(1.45 |
) |
Weighted-average shares used to compute net loss per share, basic
and diluted |
|
49,371 |
|
|
45,494 |
|
|
48,982 |
|
|
44,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FORESCOUT TECHNOLOGIES, INC.CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(Unaudited, in thousands) |
|
|
|
|
Six Months EndedJune 30, |
|
2020 |
2019 |
Cash flows from operating activities: |
|
|
Net loss |
$ |
(84,762 |
) |
$ |
(65,012 |
) |
Adjustments to reconcile net loss to net cash used in
operating activities |
|
|
Stock-based compensation |
|
25,625 |
|
|
27,893 |
|
Depreciation and amortization |
|
6,465 |
|
|
5,790 |
|
Other |
|
655 |
|
|
(8 |
) |
Changes in operating assets and liabilities |
|
|
Accounts receivable |
|
20,244 |
|
|
12,177 |
|
Inventory |
|
(1,293 |
) |
|
(593 |
) |
Deferred commissions |
|
1,681 |
|
|
1,809 |
|
Prepaid expenses and other current assets |
|
5,142 |
|
|
318 |
|
Other assets |
|
536 |
|
|
551 |
|
Accounts payable |
|
1,297 |
|
|
(2,509 |
) |
Accrued compensation |
|
(4,237 |
) |
|
(905 |
) |
Accrued expenses |
|
152 |
|
|
407 |
|
Deferred revenue |
|
(16,133 |
) |
|
1,495 |
|
Other liabilities |
|
(143 |
) |
|
(160 |
) |
Net cash used in operating activities |
|
(44,771 |
) |
|
(18,747 |
) |
Cash flows from investing activities: |
|
|
Purchases of property and equipment |
|
(1,355 |
) |
|
(3,402 |
) |
Purchases of marketable securities |
|
- |
|
|
(63,569 |
) |
Proceeds from maturities of marketable securities |
|
27,000 |
|
|
53,354 |
|
Net cash provided by (used in) investing
activities |
|
25,645 |
|
|
(13,617 |
) |
Cash flows from financing activities: |
|
|
Proceeds from revolving credit facility |
|
16,000 |
|
|
- |
|
Repayment of revolving credit facility |
|
(16,000 |
) |
|
- |
|
Repayments of notes payable |
|
(3,750 |
) |
|
(3,749 |
) |
Proceeds from sales of shares through employee equity incentive
plans |
|
11,583 |
|
|
20,726 |
|
Payment related to shares withheld for taxes on vesting of
restricted stock units |
|
(3,316 |
) |
|
(4,302 |
) |
Others |
|
25 |
|
|
- |
|
Net cash provided by financing activities |
|
4,542 |
|
|
12,675 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
- |
|
|
(4 |
) |
Net change in cash, cash equivalents, and restricted cash
for period |
|
(14,584 |
) |
|
(19,693 |
) |
Cash, cash equivalents, and restricted cash at beginning of
period |
|
71,591 |
|
|
69,012 |
|
Cash, cash equivalents, and restricted cash at end of
period |
$ |
57,007 |
|
$ |
49,319 |
|
|
|
|
|
|
|
FORESCOUT TECHNOLOGIES, INC.RECONCILIATION OF GAAP TO
NON-GAAP MEASURES(Unaudited, in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedJune 30, |
Six Months EndedJune 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
GAAP gross profit |
$ |
60,405 |
|
$ |
60,824 |
|
$ |
97,961 |
|
$ |
117,392 |
|
Add: |
|
|
|
|
Stock-based compensation expense |
|
897 |
|
|
980 |
|
|
2,059 |
|
|
1,907 |
|
Acquisition-related expenses |
|
- |
|
|
15 |
|
|
- |
|
|
29 |
|
Amortization of acquired intangible assets |
|
470 |
|
|
467 |
|
|
941 |
|
|
934 |
|
Non-GAAP gross profit |
$ |
61,772 |
|
$ |
62,286 |
|
$ |
100,961 |
|
$ |
120,262 |
|
|
|
|
|
|
GAAP operating expense |
$ |
83,094 |
|
$ |
91,451 |
|
$ |
180,621 |
|
$ |
182,084 |
|
Less: |
|
|
|
|
Stock-based compensation expense |
|
10,870 |
|
|
13,085 |
|
|
23,566 |
|
|
25,986 |
|
Acquisition-related expenses |
|
775 |
|
|
1,043 |
|
|
1,550 |
|
|
2,667 |
|
Amortization of acquired intangible assets |
|
543 |
|
|
304 |
|
|
1,087 |
|
|
608 |
|
Merger-related expenses |
|
8,588 |
|
|
- |
|
|
19,009 |
|
|
- |
|
Restructuring expenses |
|
859 |
|
|
- |
|
|
3,371 |
|
|
- |
|
Non-GAAP operating expense |
$ |
61,459 |
|
$ |
77,019 |
|
$ |
132,038 |
|
$ |
152,823 |
|
|
|
|
|
|
GAAP operating loss |
$ |
(22,689 |
) |
$ |
(30627 |
) |
$ |
(82,660 |
) |
$ |
(64,692 |
) |
Add: |
|
|
|
|
Stock-based compensation expense |
|
11,767 |
|
|
14,065 |
|
|
25,625 |
|
|
27,893 |
|
Acquisition-related expenses |
|
775 |
|
|
1,058 |
|
|
1,550 |
|
|
2,696 |
|
Amortization of acquired intangible assets |
|
1,013 |
|
|
771 |
|
|
2,028 |
|
|
1,542 |
|
Merger-related expenses |
|
8,588 |
|
|
- |
|
|
19,009 |
|
|
- |
|
Restructuring expenses |
|
859 |
|
|
- |
|
|
3,371 |
|
|
- |
|
Non-GAAP operating income (loss) |
$ |
313 |
|
$ |
(14,733 |
) |
$ |
(31,077 |
) |
$ |
(32,561 |
) |
|
|
|
|
|
GAAP net loss |
$ |
(23,523 |
) |
$ |
(30,760 |
) |
$ |
(84,762 |
) |
$ |
(65,012 |
) |
Add: |
|
|
|
|
Stock-based compensation expense |
|
11,767 |
|
|
14,065 |
|
|
25,625 |
|
|
27,893 |
|
Acquisition-related expenses |
|
775 |
|
|
1,058 |
|
|
1,550 |
|
|
2,696 |
|
Amortization of acquired intangible assets |
|
1,013 |
|
|
771 |
|
|
2,028 |
|
|
1,542 |
|
Merger-related expenses |
|
8,588 |
|
|
- |
|
|
19,009 |
|
|
- |
|
Restructuring expenses |
|
859 |
|
|
- |
|
|
3,371 |
|
|
- |
|
Tax effect of non-GAAP adjustments |
|
753 |
|
|
(211 |
) |
|
907 |
|
|
(356 |
) |
Non-GAAP net income (loss) |
$ |
232 |
|
$ |
(15,077 |
) |
$ |
(32,272 |
) |
$ |
(33,237 |
) |
Non-GAAP net income (loss) per share, diluted |
$ |
- |
|
$ |
(0.33 |
) |
$ |
(0.66 |
) |
$ |
(0.74 |
) |
|
|
|
|
|
Weighted-average shares used in per share calculation for GAAP,
diluted |
|
49,371 |
|
|
45,494 |
|
|
48,982 |
|
|
44,848 |
|
Add: |
|
|
|
|
Weighted-average effect of potentially dilutive securities |
|
2,082 |
|
|
- |
|
|
- |
|
|
- |
|
Weighted-average shares used in per share calculation for non-GAAP,
diluted |
|
51,453 |
|
|
45,494 |
|
|
48,982 |
|
|
44,848 |
|
|
|
|
|
|
Net cash used in operating activities |
$ |
(30,308 |
) |
$ |
(25,186 |
) |
$ |
(44,771 |
) |
$ |
(18,747 |
) |
Less: |
|
|
|
|
Net purchases of property and equipment |
|
532 |
|
|
1,813 |
|
|
1,355 |
|
|
3,402 |
|
Free cash flow (non-GAAP) |
$ |
(30,840 |
) |
$ |
(26,999 |
) |
$ |
(46,126 |
) |
$ |
(22,149 |
) |
Net cash provided by (used in) investing activities |
$ |
13,468 |
|
$ |
(3,500 |
) |
$ |
25,645 |
|
$ |
(13,617 |
) |
Net cash (used in) provided by financing activities |
$ |
(12,484 |
) |
$ |
5,141 |
|
$ |
4,542 |
|
$ |
12,675 |
|
Free cash flow margin (non-GAAP) |
|
(39 |
)% |
|
(34 |
)% |
|
(34 |
)% |
|
(14 |
)% |
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