FSCT
$28.99
Forescout Technologies
Earnings Details
2nd Quarter June 2020
Wednesday, August 05, 2020 4:05:00 PM
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Summary

Forescout Technologies (FSCT) Recent Earnings

Forescout Technologies (FSCT) reported a 2nd Quarter June 2020 loss of $0.48 per share on revenue of $79.9 million. The consensus estimate was a loss of $0.67 per share on revenue of $72.3 million. Revenue grew 2.0% on a year-over-year basis.

Results
Reported Earnings
($0.48)
Earnings Whisper
-
Consensus Estimate
($0.67)
Reported Revenue
$79.9 Mil
Revenue Estimate
$72.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Forescout Technologies Reports Second Quarter 2020 Financial Results

  • Total Revenue of $79.9 million, up 40% quarter-over-quarter
  • On track to close pending transaction with Advent International Corporation

SAN JOSE, Calif., Aug. 05, 2020 (GLOBE NEWSWIRE) -- 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 2019
    o   License revenue was $37.6 million, a decrease of 3% over the second quarter of 2019
    o   Subscription revenue was $37.6 million, an increase of 8% over the second quarter of 2019
    o   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 SpolverKatie Beck
408-721-5884650-314-8705
michelle.spolver@forescout.comkatie.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 Ended
June 30,
 20202019
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 Ended
June 30,
Six Months Ended
June 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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Source: Forescout Technologies, Inc.