Founded in 1994 as a value-added reseller (VAR) of firewalls and Internet solutions, the company launched its first web
filtering product in 1996. Since then, Websense has evolved its product offering to address the changing nature of employee Internet usage with solutions that manage network bandwidth, instant messaging use,
spyware, peer-to-peer file sharing and desktop applications. Websense has won numerous technology awards, obtained patents for its filtering technology, and evolved into a highly profitable company
generating 30% operating income and more than $100 million in annual customer billings in 2003. Websense was also named the market leader in Web filtering by both IDC and Frost & Sullivan in 2003. The company is committed to building shareholder value through a strong focus on executing its business model. Consistent with its market leading position, Websense has experienced steady growth
and has a solid balance sheet. Websense products are sold on a subscription basis and the full amount of the customer commitment is initially booked as deferred revenue on the balance sheet. Subscription
revenue is then recognized on a pro-rata basis each month over the life of the contract, resulting in a predictable revenue stream, with more than 80% of quarterly revenue already on the balance sheet at the
beginning of each quarter. For 2003, subscription revenue increased 34%, operating income increased 87%, and income before taxes increased 70%, compared to 2002. The company's strong growth and improving
profitability resulted in an increase in the effective tax rate for 2003 to 38%, from a net tax benefit in 2002 and as a result net income declined slightly in 2003 compared to 2002. In addition to revenue
predictability, the company's subscription-based business model generates substantial free cash flows, further strengthening the balance sheet. As of 12/31/03 Websense had $182.9 million in cash and
investments, deferred revenue of $94 million, and zero debt. |
