Websense Confirms First Quarter 2009 Results and Increases Full-Year Non-GAAP Operating Margin and Non-GAAP Earnings Guidance Ranges

Quarterly Cash Flow From Operations at All-Time High

SAN DIEGO, CA, Apr 28, 2009 (MARKET WIRE via COMTEX News Network) -- Websense, Inc. (NASDAQ: WBSN) today confirmed financial results for the first quarter of 2009 and increased the guidance ranges for non-GAAP operating margin and non-GAAP earnings per diluted share for the full year, reflecting strong first quarter revenue and earnings performance.

First Quarter 2009 GAAP Financial Highlights:

-- Revenue, calculated in accordance with generally accepted accounting
principles (GAAP), increased 21 percent from the first quarter of 2008 to
$81 million, continuing the company's unbroken record of double-digit year-
over-year growth since the company's initial public offering in 2000.
Revenue included approximately $20.2 million of new and renewal
subscriptions for SurfControl products.
-- Operating income was $5.5 million, compared to an operating loss of
$14.1 million in the first quarter of 2008.
-- Net loss declined 31 percent to approximately $4.3 million, or 10
cents per diluted share, compared to a net loss of $6.2 million, or 14
cents per diluted share, in the first quarter of 2008.
-- Quarterly cash flow from operations of $36.2 million was an all-time
record, driven by strong receivables collections and expense management.
Long-term debt of $110 million reflects early repayments of $15 million in
the quarter and compares to $160 million at the end of the first quarter of
2008.



First Quarter 2009 Non-GAAP Financial Highlights:

-- Billings, which represent the full amount of subscription contracts
billed to customers during the period, totaled $67.0 million, compared to
$67.5 million in the first quarter of 2008.
-- International billings were approximately $32.9 million, compared to
$35.5 million in the first quarter of 2008. Using the same currency
exchange rates that prevailed in the first quarter of 2008, international
billings would have been approximately $37.9 million.
-- Non-GAAP revenue of $86.5 million included approximately $5.5 million
of revenue from SurfControl that would have been recognized during this
period had SurfControl remained an independent operating company reporting
under GAAP. This subscription revenue was included in SurfControl's
deferred revenue as of the date of the acquisition, but was not recognized
as revenue on a post-acquisition basis under GAAP due to a required write-
down of SurfControl's deferred revenue to fair value as of the acquisition
date. Non-GAAP revenue in the first quarter of 2008 was also $86.5
million, which included approximately $19.6 million of revenue from
SurfControl that would have been recognized during this period had
SurfControl remained an independent company.
-- Non-GAAP operating income was $26.8 million, representing 31 percent
of non-GAAP revenue. This compares to $27.8 million in the first quarter
of 2008.
-- Non-GAAP net income increased 4 percent from the first quarter of 2008
to $16.8 million, or 37 cents per diluted share, from $16.1 million, or 35
cents per diluted share.



"We continue to extend our technology and product leadership, and the results were evident in the growth of new and add-on business in the first quarter," said Websense Chief Executive Officer Gene Hodges. "Additionally, good renewal performance and ongoing expense management give us confidence we can meet our financial goals for the year."




Balance Sheet and Operating Cash Flow Metrics

Highlights of the balance sheet and cash flow performance compared to the first quarter of 2008 included:

-- Cash, cash equivalents and restricted cash worldwide of $76.2 million,
compared with $72.6 million at the end of the first quarter of 2008.
-- Total GAAP deferred revenue of $318.8 million, an increase of 11
percent compared to $287.6 million at the end of the first quarter of 2008.
-- Non-GAAP deferred revenue of $333.6 million, including approximately
$14.8 million of deferred revenue from SurfControl that was included in
SurfControl's deferred revenue as of the date of the acquisition, but is
not included in the company's GAAP deferred revenue on a post-acquisition
basis due to a required write-down of SurfControl's deferred revenue to
fair value as of the acquisition date. This compares to non-GAAP deferred
revenue of $340.8 million at the end of the first quarter of 2008.
-- Accounts receivable of $48.6 million, representing 68 days of sales
outstanding. This compares to 70 days outstanding at the end of the fourth
quarter of 2008 and 63 days outstanding at the end of the first quarter of
2008.
-- Cash flow from operations during the first quarter of 2009 was a
record $36.2 million, compared to $18.9 million in the first quarter of
2008. The increase was the result of higher beginning accounts receivable
balances coupled with strong collections performance and expense
management, as well as a decrease in expenses related to the integration of
SurfControl. Acquisition related integration expenses were approximately
$11 million in the first quarter of 2008, compared to approximately $91,000
in the first quarter of 2009.
-- Capital expenditures were $3.4 million in the quarter, compared to
$2.4 million in the first quarter of 2008. The increase was driven by the
build out of facilities in China and Ireland.



During the quarter, the company prepaid an additional $15 million in long term debt, bringing total principal payments to $100 million since October 2007, and reducing long term debt to $110 million as of March 31, 2009. The company also repurchased a total of approximately 649,500 shares during the quarter for approximately $7.5 million under a 10b5-1 stock repurchase plan.

Outlook for Fiscal Year 2009 and 2010

Websense updates its annual guidance on its anticipated financial performance for the fiscal year each quarter based on its assessment of the current business environment and historical seasonal trends in its business and prevailing exchange rates between the US dollar and other major currencies. In providing guidance, the company emphasizes that its forward-looking statements are based on current expectations and prevailing currency exchange rates on the date the guidance is provided and disclaims any obligation to update the statements as circumstances change.

2009 Outlook
(as of 04/28/09)
-------------------------
Billings $365 - 375 million
Billings from renewals (% of total) 75 - 80%
GAAP revenue $326 - 334 million
Non-GAAP revenue $342 - 350 million
Non-GAAP operating margin 26 - 29%
Stock-based compensation expense $26 - 28 million
Amortization of intangible assets
(non-cash) approximately $39 million
Net cash interest expense $5 - 6 million
Non-GAAP earnings per diluted share $1.25 - 1.35
Estimated Non-GAAP tax rate 34 - 35%
Average diluted shares outstanding 44 - 46 million


Billings guidance for 2009 assumes an average contract duration in the range of 20 to 22 months. GAAP cash flow from operations for the year is expected to total more than $85 million, compared to $65.8 million in GAAP cash flow from operations in 2008.

Non-GAAP guidance for 2009 revenue and diluted earnings per share includes approximately $16.1 million in subscription revenue of SurfControl that would have been recognized under subscriptions that were included in deferred revenue as of the date of the acquisition that will not be recognized as revenue during the applicable period as revenue on a post acquisition basis under GAAP due to the impact of the write-down of the majority of SurfControl's deferred revenue to fair value as of the acquisition date.

Additionally, non-GAAP revenue for the second quarter of 2009 is expected to decline by approximately $2 million from first quarter 2009 non-GAAP revenue. Non-GAAP revenue for the third and fourth quarters of 2009 is expected to increase modestly on a sequential basis.

For 2010, the company believes it has the potential to generate substantial growth in non-GAAP earnings per diluted share of more than $1.50 per share, assuming that the company generates 2009 billings within the guidance range, and assuming expenses grow as planned in the range of 6 to 7 percent annually in 2009 and 2010.

Conference Call

Management will host a conference call and simultaneous webcast to discuss the final results today, April 28, at 2:00 p.m. Pacific Time. To participate in the conference call, investors should dial 877-852-6583 (domestic) or 719-325-4823 (international) ten minutes prior to the scheduled start of the call. A simultaneous audio-only webcast of the call may be accessed on the Internet at www.websense.com/investors.

An archive of the webcast will be available on the company's Web site through June 30, 2009, and a taped replay of the call will be available for one week at 719-457-0820 or 888-203-1112, passcode 4029109.

Non-GAAP Financial Measures

This news release provides financial measures for the first quarter of 2009, including measures for revenue, gross margin, income from operations, net income and earnings per diluted share, that include revenue from SurfControl that would have been recognized during the first quarter of 2009 under subscriptions that were included in deferred revenue as of the date of the acquisition but will not be recognized as revenue on a post-acquisition basis under GAAP due to the impact of the write-down of a majority of SurfControl's deferred revenue to fair value as of the acquisition date. In addition, first quarter GAAP operating results exclude certain cash and non-cash expenses relating the company's acquisitions, including amortization of intangible assets and deferred financing fees, restructuring costs relating to facility closures, integration travel, and professional fees, as well as stock based compensation expense and related tax effects. Based on the foregoing, the company's presentation of non-GAAP revenue, gross margin, operating expenses, income from operations, net income and earnings per diluted share are not calculated in accordance with GAAP. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance that enhances management's and investors' ability to evaluate the company's operating results, trends and prospects and to compare current operating results with historic operating results. A reconciliation of the GAAP and non-GAAP financial measures for the first quarter and a more detailed explanation of each non-GAAP financial measure and its uses are provided at the end of this news release.

This news release also provides guidance for the fiscal year 2009 and 2010, including guidance for revenue, income from operations, net income and earnings per diluted share, that include revenue from SurfControl that would have been recognized during the full year 2009 and 2010 under subscriptions that were included in deferred revenue as of the date of the acquisition but will not be recognized as revenue on a post-acquisition basis under GAAP due to the impact of the write-down of a majority of SurfControl's deferred revenue to fair value as of the acquisition date.

This news release also includes financial measures for billings for the first quarter and for guidance for the fiscal year 2009 and 2010 that are not numerical measures that can be calculated in accordance with GAAP. Websense provides this measurement in news releases reporting financial performance because this measurement provides a consistent basis for understanding the company's sales activities in the current period. The company believes the billings measurement is useful to investors because the GAAP measurements of revenue and deferred revenue in the current period include subscription contracts commenced in prior periods. The roll-forward of deferred revenue for the first quarter of 2009 is set forth at the end of this news release.

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