Forescout Technologies, Inc. (NASDAQ:FSCT), the leader in device
visibility and control, today announced results for its fourth
quarter and full year ended December 31, 2019.
“Our results for the fourth quarter reflect strength across many
parts of the business as we continue to see strong demand for
device control and visibility across all segments of the market,”
said Michael DeCesare, CEO and President of Forescout Technologies.
“We expanded our market footprint with the addition of 160 new
logos and 3.2 million new devices under management and we are
making progress toward our transition to a more ratable revenue
model, as demonstrated by a greater mix of term-based license
contracts and strong initial results for eyeSegment, our first
software as a service product. We continued to face macro and
execution challenges in EMEA, however, we are taking steps to
improve those variables that are within our control. Finally, we
are excited about the transaction we announced today with Advent
International, which positions us for long-term success in the
large and growing market for device visibility and control.”
Fourth Quarter 2019 Financial Highlights
- Revenue: Total revenue was $91.3 million, an increase of 8%
over the fourth quarter of 2018
- License revenue was $48.4 million, an increase of 2% over the
fourth quarter of 2018
- License revenue included $6.6 million in one-year term-based
license subscription contracts
- Subscription revenue was $37.6 million, an increase of 14% over
the fourth quarter of 2018
- Professional Services revenue was $5.3 million, an increase of
23% over the fourth quarter of 2018
- Gross Profit: GAAP gross profit was $70.3 million, or 77% of
total revenue, compared to $67.2 million in the fourth quarter of
2018, or 79% of total revenue. Non-GAAP gross profit was $71.9
million, or 79% of total revenue, compared to $68.4 million in the
fourth quarter of 2018, or 81% of total revenue.
- Operating Loss: GAAP operating loss was $19.6 million, or 21%
of total revenue, compared to a loss of $17.2 million in the fourth
quarter of 2018, or 20% of total revenue. Non-GAAP operating loss
was $3.8 million, or 4% of total revenue, compared to Non-GAAP
operating income of $0.2 million in the fourth quarter of 2018, or
0% of total revenue.
- Net Loss: GAAP net loss was $20.0 million, or $0.42 per share,
compared to $17.9 million in the fourth quarter of 2018, or $0.42
per share. Non-GAAP net loss was $4.4 million, or $0.09 per share,
based on 47.5 million weighted average diluted shares outstanding,
compared to a Non-GAAP net loss of $0.4 million in the fourth
quarter of 2018, or $0.01 per share, based on 43.0 million weighted
average diluted shares outstanding.
- Cash Flow: Net cash provided by operating activities was $10.2
million, or 11% of total revenue, compared to net cash provided by
operating activities of $6.1 million in the fourth quarter of 2018,
or 7% of total revenue. Free cash flow was positive $8.0 million,
or 9% of total revenue, compared to positive $5.2 million in the
fourth quarter of 2018, or 6% of total revenue.
Full Year 2019 Financial Highlights
- Revenue: Total revenue was $336.8 million, an increase of 13%
over the full year 2018.
- Operating Loss: GAAP operating loss was $101.2 million, or 30%
of total revenue, compared to $73.5 million in the full year 2018,
or 25% of total revenue. Non-GAAP operating loss was $37.8 million
or 11% of total revenue, compared to a loss of $16.1 million in the
full year 2018, or 5% of total revenue.
- Net Loss: GAAP net loss was $118.5 million, or $2.58 per share,
compared to $74.8 million in the full year 2018, or $1.83 per
share. Non-GAAP net loss was $38.4 million, or $0.84 per share,
compared to a loss of $17.4 million in the full year 2018, or $0.42
per share.
- Cash Flow: Net cash used in operating activities was $22.5
million, compared to net cash provided by operating activities of
$13.5 million in the full year 2018. Free cash flow was negative
$30.3 million, or 9% of total revenue, compared to positive $5.9
million in the full year 2018, or 2% 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 International
In a separate press release issued today, Forescout announced
that it has entered into an agreement to be acquired by Advent
International for $1.9 billion in cash, or $33.00 per share. Advent
will be joined by Crosspoint Capital Partners, a private equity
investment firm focused on the cybersecurity and privacy
industries, as a co-investor and advisor. The transaction is
expected to close in the second calendar quarter of 2020, subject
to customary closing conditions, including approval by Forescout
shareholders and receipt of regulatory approvals. Upon
completion of the transaction, Forescout will become a private
company and its common stock will no longer be listed on any public
market.
Cancellation of Conference Call and Suspension of
Guidance
In light of the announced transaction with Advent International,
the Company has cancelled its fourth quarter and full year 2019
earnings conference call, previously scheduled to be held today at
1:30 p.m. Pacific time. In addition, the Company is suspending
financial guidance for the first quarter and full year 2020 as a
result of the pending transaction.
©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 our
pending acquisition by Advent International, including expected
timing of the closing of the transaction; statements about our
business model transition; and statements regarding our prospects
and the markets in which we compete and our position in those
markets. 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 risk that the conditions
to the closing of the transaction are not satisfied, including the
risk that required approvals from the stockholders of the Company
for the transaction or required regulatory approvals are not
obtained; 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 that the proposed transaction disrupts the
current plans and operations of the Company; 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 plans to
attract new customers, retain existing customers and increase our
annual revenue; the development and profitability of our business
model, including risks associated with the transition of our
licensing model toward term-based licenses and delays or changes in
the transition; risks associated with large agreements,
including the length of the sales cycle and lack of predictability
in the timing of the closing; 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; general economic,
market and business conditions and the risks described in the
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 Annual Report on Form 10-K
for the fiscal year ended December 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
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 Income (Loss). Forescout defines non-GAAP
operating income (loss) as operating income (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 (used in) 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.CONSOLIDATED BALANCE SHEETS (Unaudited, in
thousands) |
|
|
December
31,2019 |
December
31,2018 |
|
|
|
Assets |
|
|
Current
assets: |
|
|
Cash and cash equivalents |
$ |
69,030 |
|
$ |
66,895 |
|
Marketable securities |
|
29,181 |
|
|
47,632 |
|
Accounts receivable |
|
84,168 |
|
|
79,255 |
|
Inventory |
|
372 |
|
|
1,501 |
|
Deferred commissions - current |
|
12,843 |
|
|
12,543 |
|
Prepaid expenses and other current assets |
|
17,024 |
|
|
13,353 |
|
Total current assets |
|
212,618 |
|
|
221,179 |
|
Deferred
commissions - non-current |
|
23,036 |
|
|
22,831 |
|
Property and
equipment, net |
|
23,835 |
|
|
24,349 |
|
Operating
lease right-of-use assets |
|
29,626 |
|
|
- |
|
Restricted
cash - non current |
|
1,555 |
|
|
1,266 |
|
Intangible
assets, net |
|
19,367 |
|
|
19,002 |
|
Goodwill |
|
98,018 |
|
|
92,482 |
|
Other
assets |
|
8,172 |
|
|
7,369 |
|
Total assets |
$ |
416,227 |
|
$ |
388,478 |
|
Liabilities and stockholders' equity |
|
|
Current
liabilities: |
|
|
Accounts payable |
$ |
10,692 |
|
$ |
12,118 |
|
Accrued compensation |
|
34,007 |
|
|
32,649 |
|
Accrued expenses |
|
16,279 |
|
|
14,558 |
|
Deferred revenue - current |
|
112,232 |
|
|
101,900 |
|
Notes payable - current |
|
8,248 |
|
|
7,331 |
|
Operating lease liabilities - current |
|
5,840 |
|
|
- |
|
Total current liabilities |
|
187,298 |
|
|
168,556 |
|
Deferred
revenue - non-current |
|
75,366 |
|
|
69,618 |
|
Notes
payable - non-current |
|
- |
|
|
8,248 |
|
Operating
lease liabilities - non-current |
|
32,125 |
|
|
- |
|
Other
liabilities |
|
23,893 |
|
|
14,335 |
|
Total liabilities |
|
318,682 |
|
|
260,757 |
|
|
|
|
Stockholders' equity: |
|
|
Common stock |
|
48 |
|
|
43 |
|
Additional paid-in capital |
|
727,922 |
|
|
639,237 |
|
Accumulated other comprehensive loss |
|
(633 |
) |
|
(302 |
) |
Accumulated deficit |
|
(629,792 |
) |
|
(511,257 |
) |
Total stockholders’ equity |
|
97,545 |
|
|
127,721 |
|
Total
liabilities and stockholders' equity |
$ |
416,227 |
|
$ |
388,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FORESCOUT
TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited,
in thousands, except per share amounts) |
|
|
Three Months
EndedDecember 31, |
Year
EndedDecember 31, |
|
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
Revenue: |
|
|
|
|
License |
$ |
48,401 |
|
$ |
47,482 |
|
$ |
175,115 |
|
$ |
162,667 |
|
Subscription |
|
37,586 |
|
|
32,888 |
|
|
142,777 |
|
|
118,572 |
|
Maintenance and professional services |
|
5,344 |
|
|
4,362 |
|
|
18,909 |
|
|
16,412 |
|
Total revenue |
|
91,331 |
|
|
84,732 |
|
|
336,801 |
|
|
297,651 |
|
Cost of
revenue: |
|
|
|
|
License |
|
8,180 |
|
|
6,852 |
|
|
31,301 |
|
|
27,854 |
|
Subscription |
|
5,795 |
|
|
4,613 |
|
|
21,977 |
|
|
16,215 |
|
Maintenance and professional services |
|
7,050 |
|
|
6,021 |
|
|
25,900 |
|
|
23,813 |
|
Total cost of revenue |
|
21,025 |
|
|
17,486 |
|
|
79,178 |
|
|
67,882 |
|
Total gross
profit |
|
70,306 |
|
|
67,246 |
|
|
257,623 |
|
|
229,769 |
|
Operating
expenses: |
|
|
|
|
Research and development |
|
24,302 |
|
|
17,161 |
|
|
82,795 |
|
|
61,713 |
|
Sales and marketing |
|
49,915 |
|
|
50,464 |
|
|
213,046 |
|
|
183,880 |
|
General and administrative |
|
15,649 |
|
|
16,849 |
|
|
63,018 |
|
|
57,721 |
|
Total operating expenses |
|
89,866 |
|
|
84,474 |
|
|
358,859 |
|
|
303,314 |
|
Loss from
operations |
|
(19,560 |
) |
|
(17,228 |
) |
|
(101,236 |
) |
|
(73,545 |
) |
Interest
expense |
|
(105 |
) |
|
(237 |
) |
|
(496 |
) |
|
(913 |
) |
Other
income, net |
|
422 |
|
|
527 |
|
|
1,918 |
|
|
2,567 |
|
Loss before
income taxes |
|
(19,243 |
) |
|
(16,938 |
) |
|
(99,814 |
) |
|
(71,891 |
) |
Income tax
provision |
|
767 |
|
|
1,010 |
|
|
18,721 |
|
|
2,945 |
|
Net
loss |
$ |
(20,010 |
) |
$ |
(17,948 |
) |
$ |
(118,535 |
) |
$ |
(74,836 |
) |
Net loss per
share, basic and diluted |
$ |
(0.42 |
) |
$ |
(0.42 |
) |
$ |
(2.58 |
) |
$ |
(1.83 |
) |
Weighted-average shares used to compute net loss per share, basic
and diluted |
|
47,511 |
|
|
43,016 |
|
|
45,957 |
|
|
40,980 |
|
|
|
|
|
|
|
|
FORESCOUT TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS
OF CASH FLOWS(Unaudited, in thousands) |
|
|
Year EndedDecember 31, |
|
2019 |
2018 |
Cash
flows from operating activities |
|
|
Net loss |
$ |
(118,535 |
) |
$ |
(74,836 |
) |
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities |
|
|
Stock-based compensation |
|
55,450 |
|
|
53,497 |
|
Depreciation and amortization |
|
11,912 |
|
|
8,003 |
|
Other |
|
38 |
|
|
461 |
|
Changes in operating assets and liabilities, net of
business acquisition |
|
|
Accounts receivable |
|
(5,220 |
) |
|
(10,899 |
) |
Inventory |
|
1,129 |
|
|
2,168 |
|
Deferred commissions |
|
(506 |
) |
|
(2,621 |
) |
Prepaid expenses and other current assets |
|
(2,289 |
) |
|
(3,084 |
) |
Other assets |
|
(188 |
) |
|
(3,543 |
) |
Accounts payable |
|
(1,239 |
) |
|
4,632 |
|
Accrued compensation |
|
1,370 |
|
|
7,057 |
|
Accrued expenses |
|
3,415 |
|
|
2,667 |
|
Deferred revenue |
|
15,939 |
|
|
30,366 |
|
Other liabilities |
|
16,200 |
|
|
(379 |
) |
Net
cash (used in) provided by operating activities |
|
(22,524 |
) |
|
13,489 |
|
Cash
flows from investing activities |
|
|
Purchases of property and equipment |
|
(7,760 |
) |
|
(7,628 |
) |
Purchases of marketable securities |
|
(63,569 |
) |
|
(54,530 |
) |
Proceeds from maturities of marketable securities |
|
82,345 |
|
|
130,633 |
|
Business acquisition, net of cash acquired |
|
(10,271 |
) |
|
(105,425 |
) |
Net
cash provided by (used in) investing activities |
|
745 |
|
|
(36,950 |
) |
Cash
flows from financing activities |
|
|
Repayments of notes payable |
|
(7,500 |
) |
|
(7,500 |
) |
Proceeds from sales of shares through employee equity incentive
plans |
|
36,380 |
|
|
31,790 |
|
Payment related to shares withheld for taxes on vesting of
restricted stock units |
|
(4,538 |
) |
|
(11,443 |
) |
Payments of deferred offering costs |
|
- |
|
|
(1,542 |
) |
Proceeds from public offering, net of underwriting discounts and
commissions |
|
- |
|
|
13,818 |
|
Others |
|
20 |
|
|
- |
|
Net
cash provided by financing activities |
|
24,362 |
|
|
25,123 |
|
Effect of exchange rate changes on cash and cash
equivalents |
|
(4 |
) |
|
(7 |
) |
Net
change in cash, cash equivalents, and restricted cash for
period |
|
2,579 |
|
|
1,655 |
|
Cash, cash equivalents, and restricted cash at beginning of
period |
|
69,012 |
|
|
67,357 |
|
Cash, cash equivalents, and restricted cash at end of
period |
$ |
71,591 |
|
$ |
69,012 |
|
|
|
|
|
FORESCOUT
TECHNOLOGIES, INC.RECONCILIATION OF GAAP TO NON-GAAP
MEASURES(Unaudited, in thousands, except per share
amounts) |
|
Three Months EndedDecember 31, |
Year EndedDecember 31, |
|
2019 |
2018 |
2019 |
2018 |
|
|
|
|
|
GAAP gross profit |
$ |
70,306 |
|
$ |
67,246 |
|
$ |
257,623 |
|
$ |
229,769 |
|
Add: |
|
|
|
|
Stock-based
compensation expense |
|
1,076 |
|
|
883 |
|
|
3,927 |
|
|
3,268 |
|
Acquisition-related expenses |
|
6 |
|
|
16 |
|
|
50 |
|
|
16 |
|
Amortization of acquired intangible assets |
|
471 |
|
|
280 |
|
|
1,875 |
|
|
280 |
|
Non-GAAP
gross profit |
$ |
71,859 |
|
$ |
68,425 |
|
$ |
263,475 |
|
$ |
233,333 |
|
|
|
|
|
|
GAAP
operating expense: |
$ |
89,866 |
|
$ |
84,474 |
|
$ |
358,859 |
|
$ |
303,314 |
|
Less: |
|
|
|
|
Stock-based
compensation expense |
|
12,659 |
|
|
13,070 |
|
|
51,523 |
|
|
50,229 |
|
Acquisition-related expenses |
|
957 |
|
|
3,000 |
|
|
4,623 |
|
|
3,481 |
|
Amortization of acquired intangible assets |
|
544 |
|
|
183 |
|
|
1,459 |
|
|
183 |
|
Non-GAAP
operating expense |
$ |
75,706 |
|
$ |
68,221 |
|
$ |
301,254 |
|
$ |
249,421 |
|
|
|
|
|
|
GAAP
operating loss |
$ |
(19,560 |
) |
$ |
(17,228 |
) |
$ |
(101,236 |
) |
$ |
(73,545 |
) |
Add: |
|
|
|
|
Stock-based
compensation expense |
|
13,735 |
|
|
13,953 |
|
|
55,450 |
|
|
53,497 |
|
Acquisition-related expenses |
|
963 |
|
|
3,016 |
|
|
4,673 |
|
|
3,497 |
|
Amortization of acquired intangible assets |
|
1,015 |
|
|
463 |
|
|
3,334 |
|
|
463 |
|
Non-GAAP
operating (loss) income |
$ |
(3,847 |
) |
$ |
204 |
|
$ |
(37,779 |
) |
$ |
(16,088 |
) |
|
|
|
|
|
GAAP net
loss |
$ |
(20,010 |
) |
$ |
(17,948 |
) |
$ |
(118,535 |
) |
$ |
(74,836 |
) |
Add: |
|
|
|
|
Stock-based
compensation expense |
|
13,735 |
|
|
13,953 |
|
|
55,450 |
|
|
53,497 |
|
Acquisition-related expenses |
|
963 |
|
|
3,016 |
|
|
4,673 |
|
|
3,497 |
|
Amortization of acquired intangible assets |
|
1,015 |
|
|
463 |
|
|
3,334 |
|
|
463 |
|
Tax effect of non-GAAP adjustments |
|
(68 |
) |
|
104 |
|
|
16,682 |
|
|
(27 |
) |
Non-GAAP net
loss |
$ |
(4,365 |
) |
$ |
(412 |
) |
$ |
(38,396 |
) |
$ |
(17,406 |
) |
Non-GAAP net
loss per share, diluted |
$ |
(0.09 |
) |
$ |
(0.01 |
) |
$ |
(0.84 |
) |
$ |
(0.42 |
) |
Weighted-average shares used in per share calculation for GAAP and
non-GAAP, diluted |
|
47,511 |
|
|
43,016 |
|
|
45,957 |
|
|
40,980 |
|
|
|
|
|
|
Net cash
provided by (used in) operating activities |
$ |
10,164 |
|
$ |
6,097 |
|
$ |
(22,524 |
) |
$ |
13,489 |
|
Less: |
|
|
|
|
Net
purchases of property and equipment |
|
(2,149 |
) |
|
(862 |
) |
|
(7,760 |
) |
|
(7,628 |
) |
Free cash
flow (non-GAAP) |
$ |
8,015 |
|
$ |
5,235 |
|
$ |
(30,284 |
) |
$ |
5,861 |
|
Net cash
used in investing activities |
$ |
(3,420 |
) |
$ |
(72,704 |
) |
$ |
745 |
|
$ |
(36,950 |
) |
Net cash
provided by financing activities |
$ |
7,149 |
|
$ |
4,551 |
|
$ |
24,362 |
|
$ |
25,123 |
|
Free cash
flow margin (non-GAAP) |
|
9 |
% |
|
6 |
% |
|
(9 |
)% |
|
2 |
% |
|
|
|
|
|
ForeScout Technologies (NASDAQ:FSCT)
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ForeScout Technologies (NASDAQ:FSCT)
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