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8-K - FORM 8-K - ArcSight Inc | f56783e8vk.htm |
Exhibit 99.01
ArcSight Reports 39% Year-over-Year Quarterly Growth
for Fiscal First Quarter Ended July 31, 2010
for Fiscal First Quarter Ended July 31, 2010
Company Posts Total Revenues of $48.1M for Fiscal First Quarter and
GAAP and Non-GAAP Earnings per Diluted Share of $0.08 and $0.18, Respectively
GAAP and Non-GAAP Earnings per Diluted Share of $0.08 and $0.18, Respectively
For the Fiscal First Quarter:
| Total Revenue: $48.1M, a 39% increase year-over-year | ||
| Non-GAAP Operating Income: $8.5M, or 18% of total revenue | ||
| GAAP Operating Income: $4.9M | ||
| GAAP Net Income: $3.0M or $0.08 per diluted share | ||
| Non-GAAP Net Income: $6.6M or $0.18 per diluted share | ||
| Positive Cash Flows from Operations: $3.4M |
CUPERTINO, CA September 2, 2010 ArcSight, Inc. (NASDAQ: ARST), a leading global provider of
cybersecurity and compliance solutions, today announced financial results for its fiscal first
quarter ended July 31, 2010.
For the first quarter of fiscal 2011, ArcSight reported total revenues of $48.1 million compared to
total revenues of $34.6 million reported in the first quarter of fiscal 2010. Net income on a GAAP
basis for the first quarter of fiscal 2011 was $3.0 million, or $0.08 per diluted share, including
$106,000 in amortization of intangible assets and $3.5 million in stock-based compensation expense.
This compares to a GAAP net income of $1.0 million, or $0.03 per diluted share, reported in the
first quarter of fiscal 2010, including $222,000 in amortization of intangible assets and $1.9
million in stock-based compensation expense.
Non-GAAP net income for the first quarter of fiscal 2011 was $6.6 million, or $0.18 per diluted
share, excluding the above-mentioned amortization of intangibles and stock-based compensation
charges. This compares to a non-GAAP net income of $3.2 million, or $0.09 per diluted share,
reported in the first quarter of fiscal 2010, excluding the above-mentioned charges.
For the first quarter of fiscal 2011, ArcSight reported GAAP operating income of $4.9 million,
including $106,000 in amortization of intangible assets and $3.5 million in stock-based
compensation expense. This compares to GAAP operating income of $1.7 million in the first quarter
of fiscal 2010, including $222,000 in amortization of intangibles and $1.9 million in stock-based
compensation expense.
Non-GAAP operating income for the first quarter of fiscal 2011 was $8.5 million or 18% of revenue,
excluding the above-mentioned amortization of intangibles and stock-based compensation charges.
This compares to a non-GAAP operating income of $3.8 million or 11% of revenue, reported in the
first quarter of fiscal 2010, excluding the above-mentioned charges.
During the first quarter of fiscal 2011, the company generated $3.4 million in cash from operations
and closed the first quarter with cash, cash equivalents and short term investments of $150.7
million.
With growing cybercriminal activity and heightened awareness of the Advanced Persistent Threat, we
are experiencing strong growth in our core government and commercial markets and increasingly we
are broadening our business into
emerging verticals and new geographies internationally, commented
Tom Reilly, president and CEO of ArcSight. Our strong fiscal first quarter demonstrates our
ability to execute on our growth strategy of expanding our existing customer
relationships, delivering a platform for Enterprise Threat and Risk Management and broadening our
reach into the mid-market with our channel partners.
Business Outlook
The following forward-looking statements reflect expectations as of September 2, 2010. Results may
be materially different and could be affected by the factors detailed in this release and in recent
ArcSight SEC filings.
Second Quarter Expectations Ending October 31, 2010
Based on the visibility the company has from first quarter performance, ArcSight expects revenue
for the second quarter of fiscal 2011 to be in the range of $55 million to $57 million,
representing growth in the range of 21%-25% over the same quarter of fiscal 2010.
ArcSight expects non-GAAP net income for the second quarter of fiscal 2011 to be in the range of
$6.8 million to $7.3 million, or $0.19 to $0.20 per diluted share, which excludes stock-based
compensation expense and amortization of intangibles.
Full Year Expectations Ending April 30, 2011
For fiscal 2011, ArcSight expects to increase revenue by more than 20% on a year over year basis
and generate non-GAAP operating margins in the range of 17% to 18% of revenue, as the company
continues to invest for future growth. The company believes that it will remain on track to
generate non-GAAP operating margins in the range of 18% to 20% in fiscal 2012.
Conference Call and Webcast Information
ArcSight will host a conference call and live webcast to discuss these financial results for
investors and analysts at 2:00 p.m. Pacific Time on September 2, 2010. To access the conference
call, dial (877) 303-6129 for the U.S. or Canada and (678) 809-1057 for international callers. The
webcast will be available live on the Investor Relations section of the companys website at
www.arcsight.com. An audio replay of the call will also be available to investors by phone
beginning at approximately 5:00 p.m. Pacific Time on September 2, 2010 until 9:00 p.m. Pacific Time
on September 7, 2010, by dialing (800) 642-1687 for the U.S. or Canada or (706) 645-9291 for
international callers, and entering passcode 94227564. In addition, an archived webcast will be
available on the Investor Relations section of the companys website at www.arcsight.com.
Use of Non-GAAP Financial Measures
ArcSight reports all financial information required in accordance with generally accepted
accounting principles (GAAP). To supplement the ArcSight unaudited condensed consolidated financial
statements presented in accordance with GAAP, ArcSight uses certain non-GAAP measures of financial
performance. The presentation of these non-GAAP financial measures is not intended to be considered
in isolation from, as a substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP, and may be different from non-GAAP financial measures used by
other companies. In addition, these non-GAAP measures have limitations in that they do not reflect
all of the amounts associated with the results of ArcSight operations as determined in accordance
with GAAP. The non-GAAP financial measures used by ArcSight include historical non-GAAP operating
income, non-GAAP net income and non-GAAP basic and diluted earnings per share. These non-GAAP
financial measures exclude amortization of intangible asset and stock-based compensation from the
ArcSight statement of operations.
For a description of these items, including the reasons why management adjusts for them, and
reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial
measures, please see the section of the
accompanying tables titled Use of Non-GAAP Financial Information as well as the related tables
that precede it. ArcSight may consider whether other significant non-recurring items that arise in
the future should also be excluded in calculating the non-GAAP financial measures it uses.
ArcSight believes that these non-GAAP financial measures, when taken together with the
corresponding GAAP financial measures, provide meaningful supplemental information regarding the
performance of ArcSight by excluding certain items that may not be indicative of the companys core
business, operating results or future outlook. ArcSight management uses, and believes that
investors benefit from referring to, these non-GAAP financial measures in assessing operating
results of ArcSight, as well as when planning, forecasting and analyzing future periods. These
non-GAAP financial measures also facilitate comparisons of the performance of ArcSight to prior
periods.
Cautionary Statement Regarding Forward Looking Statements
This news release contains forward-looking statements, including without limitation those regarding
ArcSights Business Outlook (Second Quarter Expectations Ending October 31, 2010 and Full
Year Expectations Ending April 30, 2011), and ArcSights belief that, with growing cybercriminal
activity and heightened awareness of the Advanced Persistent Threat, it may continue to experience
strong growth in its core government and commercial markets and increasingly it will continue to
broaden its business into emerging verticals and new geographies internationally; and ArcSights
intent to continue to execute on its growth strategy of expanding its existing customer
relationships, delivering a platform for Enterprise Threat and Risk Management and broadening its
reach into the mid-market with our channel partners. These forward-looking statements are subject
to material risks and uncertainties that may cause actual results to differ substantially from
expectations. Investors should consider important risk factors, which include: the risk that growth
resulting from awareness around the Advance Persistent Threat and the need to combat sophisticated
cyber crime will be less than anticipated and that demand for the companys enterprise threat and
risk management solutions otherwise may not increase and may decrease; and other risks detailed
under the caption Risk Factors in the ArcSight Annual Report on Form 10-K filed with the
Securities and Exchange Commission, or the SEC, on July 9, 2010 and the companys other filings
with the SEC. You can obtain copies of the companys Annual Report on Form 10-K and its other SEC
filings on the SECs website at www.sec.gov.
The foregoing information represents the companys outlook only as of the date of this press
release, and ArcSight undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new information, new developments or otherwise.
About ArcSight
ArcSight (NASDAQ: ARST) is a leading global provider of cybersecurity and compliance solutions that
protect organizations from enterprise threats and risks. Based on the market-leading SIEM
offering, the ArcSight Enterprise Threat and Risk Management (ETRM) platform enables businesses and
government agencies to proactively safeguard digital assets, comply with corporate and regulatory
policy and control the internal and external risks associated with cybertheft, cyberfraud,
cyberwarfare and cyberespionage. For more information, visit www.arcsight.com. (ARST-IR)
© 2010 ArcSight, Inc. All rights reserved. ArcSight and the ArcSight logo are trademarks of
ArcSight, Inc.
Investor Relations Contact
Robert Dougherty
FD
415-293-4427
robert.dougherty@fd.com
FD
415-293-4427
robert.dougherty@fd.com
ARCSIGHT, INC.
Consolidated Balance Sheets
(In thousands)
Consolidated Balance Sheets
(In thousands)
As of | As of | |||||||
July 31, | April 30, | |||||||
2010 | 2010 | |||||||
(unaudited) | (audited) | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 130,743 | $ | 137,358 | ||||
Marketable securities |
19,991 | 12,013 | ||||||
Accounts receivable, net |
30,521 | 33,609 | ||||||
Deferred tax asset, current |
9,547 | 8,807 | ||||||
Capitalized software licenses, current |
1,913 | 2,303 | ||||||
Prepaid expenses and other current assets |
4,638 | 6,557 | ||||||
Total current assets |
197,353 | 200,647 | ||||||
Property and equipment, net |
10,972 | 8,174 | ||||||
Deferred tax asset, non-current |
11,025 | 10,649 | ||||||
Goodwill |
5,746 | 5,746 | ||||||
Other long-term assets |
648 | 987 | ||||||
Total assets |
$ | 225,744 | $ | 226,203 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 4,211 | $ | 5,039 | ||||
Accrued compensation and benefits |
8,579 | 13,633 | ||||||
Obligations for software licenses, current |
2,264 | 2,832 | ||||||
Other accrued liabilities |
7,996 | 5,696 | ||||||
Deferred revenues, current |
45,789 | 49,674 | ||||||
Total current liabilities |
68,839 | 76,874 | ||||||
Deferred revenues, non-current |
10,168 | 11,237 | ||||||
Other long-term liabilities |
2,828 | 2,516 | ||||||
Total liabilities |
81,835 | 90,627 | ||||||
Stockholders equity: |
||||||||
Additional paid-in capital |
149,530 | 144,273 | ||||||
Accumulated other comprehensive loss |
(243 | ) | (290 | ) | ||||
Accumulated deficit |
(5,378 | ) | (8,407 | ) | ||||
Total stockholders equity |
143,909 | 135,576 | ||||||
Total liabilities and stockholders equity |
$ | 225,744 | $ | 226,203 | ||||
ARCSIGHT, INC.
Consolidated Statement of Operations
(On a GAAP basis)
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statement of Operations
(On a GAAP basis)
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended | ||||||||
July 31, | July 31, | |||||||
2010 | 2009 | |||||||
Revenues: |
||||||||
Products |
$ | 25,833 | $ | 18,265 | ||||
Maintenance |
16,649 | 11,919 | ||||||
Services |
5,654 | 4,371 | ||||||
Total revenues |
48,136 | 34,555 | ||||||
Cost of revenues: |
||||||||
Products |
3,108 | 1,944 | ||||||
Maintenance(1) |
2,623 | 1,925 | ||||||
Services(1) |
4,541 | 2,630 | ||||||
Total cost of revenues |
10,272 | 6,499 | ||||||
Gross profit |
37,864 | 28,056 | ||||||
Operating expenses(1): |
||||||||
Research and development |
7,406 | 5,598 | ||||||
Sales and marketing |
17,996 | 14,785 | ||||||
General and administrative |
7,513 | 6,018 | ||||||
Total operating expenses |
32,915 | 26,401 | ||||||
Income from operations |
4,949 | 1,655 | ||||||
Interest income |
43 | 28 | ||||||
Other income (expense), net |
(59 | ) | (117 | ) | ||||
Income before provision for income taxes |
4,933 | 1,566 | ||||||
Provision for income taxes |
1,904 | 551 | ||||||
Net income |
$ | 3,029 | $ | 1,015 | ||||
Net income per common share, basic |
$ | 0.09 | $ | 0.03 | ||||
Net income per common share, diluted |
$ | 0.08 | $ | 0.03 | ||||
Shares used in computing basic net income per common share |
34,380 | 32,685 | ||||||
Shares used in computing diluted net income per common share |
36,854 | 35,249 | ||||||
(1) | Stock-based compensation expense as included in above |
Cost of maintenance revenues |
$ | 140 | $ | 80 | ||||
Cost of services revenues |
103 | 33 | ||||||
Research and development |
846 | 429 | ||||||
Sales and marketing |
1,177 | 612 | ||||||
General and administrative |
1,213 | 776 |
ARCSIGHT, INC.
Consolidated Statement of Operations
(GAAP to Non-GAAP Reconciliation)
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statement of Operations
(GAAP to Non-GAAP Reconciliation)
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended | ||||||||
July 31, | July 31, | |||||||
2010 | 2009 | |||||||
GAAP operating income |
$ | 4,949 | $ | 1,655 | ||||
Plus: |
||||||||
a) Stock-based expenses |
3,479 | 1,930 | ||||||
b) Amortization of intangibles |
106 | 222 | ||||||
Non-GAAP operating income |
$ | 8,534 | $ | 3,807 | ||||
GAAP net income |
$ | 3,029 | $ | 1,015 | ||||
Plus: |
||||||||
a) Stock-based expenses |
3,479 | 1,930 | ||||||
b) Amortization of intangibles |
106 | 222 | ||||||
Non-GAAP net income |
$ | 6,614 | $ | 3,167 | ||||
GAAP net income per common share, basic |
$ | 0.09 | $ | 0.03 | ||||
Plus: |
||||||||
a) Stock-based expenses |
0.10 | 0.06 | ||||||
b) Amortization of intangibles |
| 0.01 | ||||||
Non-GAAP net income, basic |
$ | 0.19 | $ | 0.10 | ||||
Non-GAAP net income, diluted |
$ | 0.18 | $ | 0.09 | ||||
Shares used in computing basic net income per common share |
34,380 | 32,685 | ||||||
Shares used in computing diluted net income per common share |
36,854 | 35,249 | ||||||
Use of Non-GAAP Financial Information
In addition to the reasons stated above, which are generally applicable to each of the items
ArcSight excludes from its non-GAAP financial measures, ArcSight believes it is appropriate to
exclude certain items for the following reasons:
Amortization of Intangibles. When analyzing the operating performance of an acquired entity,
ArcSight management focuses on the total return provided by the investment (i.e., operating profit
generated from the acquired entity as compared to the purchase price paid) without taking into
consideration any allocations made for accounting purposes. Because the purchase price for an
acquisition necessarily reflects the accounting value assigned to intangible assets (including
acquired in-process technology and goodwill), when analyzing the operating performance of an
acquisition in subsequent periods, ArcSight management excludes the GAAP impact of the amortization
of acquired intangible assets to its financial results. ArcSight believes that such an approach is
useful in understanding the long-term return provided by an acquisition and that investors benefit
from a supplemental non-GAAP financial measure that excludes the accounting amortization expense
associated with acquired intangible assets.
In addition, in accordance with GAAP, ArcSight generally recognizes expenses for
internally-developed intangible assets as they are incurred until technological feasibility is
reached, notwithstanding the potential future benefit such assets may provide. Unlike internally
developed intangible assets, however, and also in accordance with GAAP, ArcSight generally
capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the
useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired
in-process technology, which is expensed immediately, as required under GAAP). As a result of their
GAAP treatment, there is an inherent lack of comparability between the financial performance of
internally developed intangible assets and acquired intangible assets. Accordingly, ArcSight
believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP
financial measure that excludes the amortization of acquired intangibles.
Stock-Based Compensation. When evaluating the performance of its consolidated results, ArcSight
does not consider stock-based compensation charges. Likewise, the ArcSight management team excludes
stock-based compensation expense from its operating plans. In contrast, the ArcSight management
team is held accountable for cash-based compensation and such amounts are included in its operating
plans. Further, when considering the impact of equity award grants, ArcSight places a greater
emphasis on overall stockholder dilution rather than the accounting charges associated with such
grants.
ArcSight believes it is useful to provide a non-GAAP financial measure that excludes stock-based
compensation in order to better understand the long-term performance of its business.