Forescout Technologies, Inc. (NASDAQ:FSCT), the leader in device
visibility and control, today announced results for its first
quarter ended March 31, 2020.
“In March, the severity of the COVID-19 pandemic sharply
escalated around the world, causing some customers to delay
purchasing decisions in order to prioritize employee health and
safety and business continuity planning,” said Michael DeCesare,
CEO and President of Forescout Technologies. “As organizations have
shifted to remote workforces, their network footprint has evolved
but the need for visibility and control of all devices on the
network remains imperative, regardless of whether devices reside
within the confines of corporate offices or in remote, work from
home environments. Forescout’s platform is uniquely positioned to
help enterprises in today’s perimeter-less world and defend against
increasingly sophisticated cyber threats. We look forward to
completing our pending transaction with Advent International
Corporation, which will position us for long-term success as we
execute on our large and growing market opportunity.”
First Quarter 2020 Financial Highlights
- Revenue: Total revenue was $57.2 million, a decrease of 24%
over the first quarter of 2019, primarily due to the effect of the
COVID-19 pandemic on large-size deals and new perpetual licenses,
as well as customer uncertainty related to our pending transaction
with Advent International Corporation (Advent).
- License revenue was $14.8 million, a decrease of 61% over the
first quarter of 2019
- Subscription revenue was $37.5 million, an increase of 11% over
the first quarter of 2019
- Professional Services revenue was $4.8 million, an increase of
18% over the first quarter of 2019
- Gross Profit: GAAP gross profit was $37.6 million, or 66% of
total revenue, compared to $56.6 million in the first quarter of
2019, or 75% of total revenue. Non-GAAP gross profit was $39.2
million, or 69% of total revenue, compared to $58.0 million in the
first quarter of 2019, or 77% of total revenue.
- Operating Loss: GAAP operating loss was $60.0 million, or 105%
of total revenue, compared to a loss of $34.1 million in the first
quarter of 2019, or 45% of total revenue. Non-GAAP operating loss
was $31.4 million, or 55% of total revenue, compared to $17.8
million in the first quarter of 2019, or 24% of total revenue.
- Net Loss: GAAP net loss was $61.2 million, or $1.26 per share,
compared to $34.3 million in the first quarter of 2019, or $0.78
per share. Non-GAAP net loss was $32.5 million, or $0.67 per share,
based on 48.6 million weighted average diluted shares outstanding,
compared to a net loss of $18.2 million in the first quarter of
2019, or $0.41 per share, based on 44.2 million weighted average
diluted shares outstanding.
- Cash Flow: Net cash used in operating activities was $14.5
million, or 25% of total revenue, compared to net cash provided by
operating activities of $6.4 million in the first quarter of 2019,
or 9% of total revenue. Free cash flow was negative $15.3 million,
or (27)% of total revenue, compared to positive $4.9 million in the
first quarter of 2019, or 6% 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 February 6, 2020, Forescout announced that it has entered
into an agreement to be acquired by entities affiliated with Advent
for $1.9 billion in cash, or $33.00 per share. Advent has partnered
with Crosspoint Capital Partners, a private equity investment firm
focused on the cybersecurity and privacy industries, as a
co-investor and advisor. The transaction was approved by Forescout
shareholders on April 23, 2020. 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 the
effects of the COVID-19 pandemic on our business, customers and
markets, demand for our products, and market opportunity; the
benefits of our solution to customers; our pending transaction with
Advent, 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 or that the
transaction is not consummated; 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 our
current plans and operations; 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, 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 March 31, 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, 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, amortization of acquired
intangible assets, merger-related expenses, and restructuring
expenses.
Non-GAAP Operating Loss. Forescout defines non-GAAP operating
loss as operating loss excluding stock-based compensation expense,
acquisition-related expenses, amortization of acquired intangible
assets, merger-related expenses, and restructuring expenses.
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, merger-related expenses, 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) |
|
|
|
March 31,2020 |
December 31,2019 |
|
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
83,795 |
|
$ |
69,030 |
|
|
Marketable securities |
|
16,126 |
|
|
29,181 |
|
|
Accounts receivable |
|
39,650 |
|
|
84,168 |
|
|
Inventory |
|
377 |
|
|
372 |
|
|
Deferred commissions - current |
|
12,854 |
|
|
12,843 |
|
|
Prepaid expenses and other current assets |
|
12,867 |
|
|
17,024 |
|
|
Total current assets |
|
165,669 |
|
|
212,618 |
|
|
Deferred
commissions - non-current |
|
21,294 |
|
|
23,036 |
|
|
Property and
equipment, net |
|
22,618 |
|
|
23,835 |
|
|
Operating
lease right-of-use assets |
|
28,326 |
|
|
29,626 |
|
|
Restricted
cash - non-current |
|
1,530 |
|
|
1,555 |
|
|
Intangible
assets, net |
|
18,353 |
|
|
19,367 |
|
|
Goodwill |
|
98,018 |
|
|
98,018 |
|
|
Other
assets |
|
7,460 |
|
|
8,172 |
|
|
Total assets |
$ |
363,268 |
|
$ |
416,227 |
|
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
6,377 |
|
$ |
10,692 |
|
|
Accrued compensation |
|
26,881 |
|
|
34,007 |
|
|
Accrued expenses |
|
15,397 |
|
|
16,279 |
|
|
Deferred revenue - current |
|
111,402 |
|
|
112,232 |
|
|
Notes payable - current |
|
6,402 |
|
|
8,248 |
|
|
Revolving credit facility |
|
16,000 |
|
|
- |
|
|
Operating lease liabilities - current |
|
5,704 |
|
|
5,840 |
|
|
Total current liabilities |
|
188,163 |
|
|
187,298 |
|
|
Deferred
revenue - non-current |
|
68,438 |
|
|
75,366 |
|
|
Operating
lease liabilities - non-current |
|
30,333 |
|
|
32,125 |
|
|
Other
liabilities |
|
23,705 |
|
|
23,893 |
|
|
Total liabilities |
|
310,639 |
|
|
318,682 |
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
Common stock |
|
49 |
|
|
48 |
|
|
Additional paid-in capital |
|
744,299 |
|
|
727,922 |
|
|
Accumulated other comprehensive loss |
|
(688 |
) |
|
(633 |
) |
|
Accumulated deficit |
|
(691,031 |
) |
|
(629,792 |
) |
|
Total stockholders’ equity |
|
52,629 |
|
|
97,545 |
|
|
Total liabilities and stockholders' equity |
$ |
363,268 |
|
$ |
416,227 |
|
|
|
|
|
|
FORESCOUT
TECHNOLOGIES, INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited, in thousands, except per share
amounts) |
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
Revenue: |
|
|
|
License |
$ |
14,799 |
|
$ |
37,680 |
|
|
Subscription |
|
37,526 |
|
|
33,799 |
|
|
Professional services |
|
4,828 |
|
|
4,089 |
|
|
Total revenue |
|
57,153 |
|
|
75,568 |
|
|
Cost of
revenue: |
|
|
|
License |
|
5,419 |
|
|
7,607 |
|
|
Subscription |
|
7,013 |
|
|
5,207 |
|
|
Professional services |
|
7,165 |
|
|
6,186 |
|
|
Total cost of revenue |
|
19,597 |
|
|
19,000 |
|
|
Total gross
profit |
|
37,556 |
|
|
56,568 |
|
|
Operating
expenses: |
|
|
|
Research and development |
|
23,246 |
|
|
18,497 |
|
|
Sales and marketing |
|
47,288 |
|
|
55,923 |
|
|
General and administrative |
|
24,481 |
|
|
16,213 |
|
|
Restructuring |
|
2,512 |
|
|
- |
|
|
Total operating expenses |
|
97,527 |
|
|
90,633 |
|
|
Loss from
operations |
|
(59,971 |
) |
|
(34,065 |
) |
|
Interest
expense |
|
(235 |
) |
|
(93 |
) |
|
Other
(expense) income, net |
|
(601 |
) |
|
617 |
|
|
Loss before
income taxes |
|
(60,807 |
) |
|
(33,541 |
) |
|
Income tax
provision |
|
432 |
|
|
711 |
|
|
Net
loss |
$ |
(61,239 |
) |
$ |
(34,252 |
) |
|
Net loss per
share, basic and diluted |
$ |
(1.26 |
) |
$ |
(0.78 |
) |
|
Weighted-average shares used to compute net loss per share, basic
and diluted |
|
48,593 |
|
|
44,196 |
|
|
|
|
|
|
FORESCOUT
TECHNOLOGIES, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited, in thousands) |
|
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
Cash
flows from operating activities: |
|
|
|
Net loss |
$ |
(61,239 |
) |
$ |
(34,252 |
) |
|
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities |
|
|
|
Stock-based compensation |
|
13,858 |
|
|
13,828 |
|
|
Depreciation and amortization |
|
3,056 |
|
|
2,845 |
|
|
Other |
|
358 |
|
|
(15 |
) |
|
Changes in operating assets and liabilities |
|
|
|
Accounts receivable |
|
44,518 |
|
|
22,227 |
|
|
Inventory |
|
(196 |
) |
|
253 |
|
|
Deferred commissions |
|
1,731 |
|
|
1,520 |
|
|
Prepaid expenses and other current assets |
|
4,168 |
|
|
(203 |
) |
|
Other assets |
|
328 |
|
|
385 |
|
|
Accounts payable |
|
(4,274 |
) |
|
(2,705 |
) |
|
Accrued compensation |
|
(7,126 |
) |
|
(4,512 |
) |
|
Accrued expenses |
|
(1,715 |
) |
|
549 |
|
|
Deferred revenue |
|
(7,758 |
) |
|
6,559 |
|
|
Other liabilities |
|
(172 |
) |
|
(40 |
) |
|
Net
cash (used in) provided by operating activities |
|
(14,463 |
) |
|
6,439 |
|
|
Cash
flows from investing activities: |
|
|
|
Purchases of property and equipment |
|
(823 |
) |
|
(1,589 |
) |
|
Purchases of marketable securities |
|
- |
|
|
(37,651 |
) |
|
Proceeds from maturities of marketable securities |
|
13,000 |
|
|
29,123 |
|
|
Net
cash provided by (used in) investing activities |
|
12,177 |
|
|
(10,117 |
) |
|
Cash
flows from financing activities: |
|
|
|
Proceeds from revolving credit facility |
|
16,000 |
|
|
- |
|
|
Repayments of notes payable |
|
(1,875 |
) |
|
(1,875 |
) |
|
Proceeds from sales of shares through employee equity incentive
plans |
|
5,207 |
|
|
12,173 |
|
|
Payment related to shares withheld for taxes on vesting of
restricted stock units |
|
(2,319 |
) |
|
(2,764 |
) |
|
Others |
|
13 |
|
|
- |
|
|
Net
cash provided by financing activities |
|
17,026 |
|
|
7,534 |
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
- |
|
|
(70 |
) |
|
Net
change in cash, cash equivalents, and restricted cash for
period |
|
14,740 |
|
|
3,786 |
|
|
Cash, cash equivalents, and restricted cash at beginning of
period |
|
71,591 |
|
|
69,012 |
|
|
Cash, cash equivalents, and restricted cash at end of
period |
$ |
86,331 |
|
$ |
72,798 |
|
|
|
|
|
|
FORESCOUT
TECHNOLOGIES, INC.RECONCILIATION OF GAAP TO NON-GAAP
MEASURES(Unaudited, in thousands, except per share
amounts) |
|
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
GAAP gross
profit |
$ |
37,556 |
|
$ |
56,568 |
|
|
Add: |
|
|
|
Stock-based
compensation expense |
|
1,162 |
|
|
927 |
|
|
Acquisition-related expenses |
|
- |
|
|
14 |
|
|
Amortization of acquired intangible assets |
|
471 |
|
|
467 |
|
|
Non-GAAP
gross profit |
$ |
39,189 |
|
$ |
57,976 |
|
|
|
|
|
|
GAAP
operating expense |
$ |
97,527 |
|
$ |
90,633 |
|
|
Less: |
|
|
|
Stock-based
compensation expense |
|
12,696 |
|
|
12,901 |
|
|
Acquisition-related expenses |
|
775 |
|
|
1,624 |
|
|
Amortization of acquired intangible assets |
|
544 |
|
|
304 |
|
|
Merger-related expenses |
|
10,421 |
|
|
- |
|
|
Restructuring expenses |
|
2,512 |
|
|
- |
|
|
Non-GAAP
operating expense |
$ |
70,579 |
|
$ |
75,804 |
|
|
|
|
|
|
GAAP
operating loss |
$ |
(59,971 |
) |
$ |
(34,065 |
) |
|
Add: |
|
|
|
Stock-based
compensation expense |
|
13,858 |
|
|
13,828 |
|
|
Acquisition-related expenses |
|
775 |
|
|
1,638 |
|
|
Amortization of acquired intangible assets |
|
1,015 |
|
|
771 |
|
|
Merger-related expenses |
|
10,421 |
|
|
- |
|
|
Restructuring expenses |
|
2,512 |
|
|
- |
|
|
Non-GAAP
operating loss |
$ |
(31,390 |
) |
$ |
(17,828 |
) |
|
|
|
|
|
GAAP net
loss |
$ |
(61,239 |
) |
$ |
(34,252 |
) |
|
Add: |
|
|
|
Stock-based
compensation expense |
|
13,858 |
|
|
13,828 |
|
|
Acquisition-related expenses |
|
775 |
|
|
1,638 |
|
|
Amortization of acquired intangible assets |
|
1,015 |
|
|
771 |
|
|
Merger-related expenses |
|
10,421 |
|
|
- |
|
|
Restructuring expenses |
|
2,512 |
|
|
- |
|
|
Tax effect
of non-GAAP adjustments |
|
154 |
|
|
(145 |
) |
|
Non-GAAP net
loss |
$ |
(32,504 |
) |
$ |
(18,160 |
) |
|
Non-GAAP net
loss per share, diluted |
$ |
(0.67 |
) |
$ |
(0.41 |
) |
|
Weighted-average shares used in per share calculation for GAAP and
non-GAAP, diluted |
|
48,593 |
|
|
44,196 |
|
|
|
|
|
|
Net cash
(used in) provided by operating activities |
$ |
(14,463 |
) |
$ |
6,439 |
|
|
Less: |
|
|
|
Net
purchases of property and equipment |
|
823 |
|
|
1,589 |
|
|
Free cash
flow (non-GAAP) |
$ |
(15,286 |
) |
$ |
4,850 |
|
|
Net cash
provided by (used in) investing activities |
$ |
12,177 |
|
$ |
(10,117 |
) |
|
Net cash
provided by financing activities |
$ |
17,026 |
|
$ |
7,534 |
|
|
Free cash
flow margin (non-GAAP) |
|
(27 |
)% |
|
6 |
% |
|
|
|
|
|
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