In today's mailbox, from Todd Weller at Stifel Nicolaus:
Originally Posted by Ogle
WebSense Preannounces Positive 1Q09 Results; Reaffirms 2009 Billings, Rev; Maintain Hold
- Yesterday after the close, Websense preannounced positive 1Q09 results, with expected revenue and EPS ahead of estimates. Expected billings of $67 million were in line with our forecast.
- 1Q09 revenue is expected to be $86-$87 million, which compares to our estimate of $85.4 million and the consensus estimate of $84.7 million. EPS is expected to be $0.35-$0.38, ahead of our estimate and the consensus estimate of $0.30.
- Management indicated 1Q09 results reflect growing momentum for new web security products and growth in the number of enterprise customers. The company also indicated that both new business and add-on business grew meaningfully y/y and that investments in sales capacity are having immediate positive impacts on its billings pipeline.
- Websense reaffirmed its full year billings and revenue guidance of $365-$375 million and $342-$350 million, respectively. No revisions to operating margin or EPS were provided but the company messaged a likely upward revision. Additionally, strong operating cash flow performance in the quarter led the company to increase its full-year guidance to greater than $85 million.
- We believe these preliminary results from Websense are positive particularly given the gloom and doom surrounding the company as a result of concerns about the environment and the recent CFO departure.
- We maintain our Hold rating. While we have been more interested in the stock as a result of valuation, despite what looks to be a respectable 1Q09 performance, we believe the company will need to better demonstrate that it can execute on accelerating growth and that its investments in growth will yield attractive returns. Additionally, we continue to have concerns about potential increasing competition from McAfee via its Secure Computing acquisition.