EX-99.1 2 a03312020exhibit991.htm EXHIBIT 99.1 Exhibit
 
forescoutlogoa05.jpg
 

Exhibit 99.1
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 Reports First Quarter 2020 Financial Results

Total Revenue of $57.2 million, compared to $75.6 million in the first quarter of 2019

SAN JOSE, Calif., May 11, 2020 – 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).
o
License revenue was $14.8 million, a decrease of 61% over the first quarter of 2019
o
Subscription revenue was $37.5 million, an increase of 11% over the first quarter of 2019
o
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.”





 
forescoutlogoa05.jpg
 

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.





 
forescoutlogoa05.jpg
 

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.





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
%