Exhibit 99.1
Imperva Announces Third Quarter 2018 Financial Results
• | Total revenue of $91.6 million, up 9% year-over-year |
• | Billings of $106.5 million, up 16% year-over-year |
• | GAAP operating income of $0.5 million;Non-GAAP operating income of $14.7 million |
• | Generated $32.2 million in operating cash flow and $30.0 million in free cash flow |
Redwood Shores, Calif. – October 31 , 2018 –Imperva, Inc. (NASDAQ: IMPV), a leading global provider ofbest-in-class cybersecurity solutions on premises, in the cloud, and across hybrid environments, announced today financial results for the third quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights
• | Revenue: Total revenue was $91.6 million, a year-over-year increase of 9%. Total Services revenue was $68.4 million, a year-over-year increase of 19%. |
• | Billings: Billings in the quarter were $106.5 million, a year-over-year increase of 16%. |
• | Operating Income (Loss): GAAP operating income was $0.5 million for the third quarter, improved from a loss of $(0.2) million during the third quarter in 2017. Non-GAAP operating income for the third quarter was $14.7 million, up 29% from a non-GAAP operating income of $11.4 million during the same period in 2017. |
• | Net Income (Loss): GAAP net income was $1.1 million, or $0.03 per share based on 35.7 million weighted average diluted shares outstanding. This compares to net loss of $(0.4) million, or $(0.01) per share based on 33.9 million weighted average diluted shares outstanding in the third quarter of 2017. |
Non-GAAP net income was $15.3 million, or $0.43 per share based on 35.7 million weighted average diluted shares outstanding. This compares to anon-GAAP net income of $11.2 million, or $0.33 per share based on 34.4 million weighted average diluted shares outstanding in the third quarter of 2017.
• | Balance Sheet and Cash Flow: As of September 30, 2018, Imperva had cash, cash equivalents and investments of $304.4 million and no debt. Total deferred revenue was $191.8 million, an increase of 35% compared to $142.3 million as of September 30, 2017. Total deferred revenue for the third quarter of 2018 includes $2.3 million of deferred revenue balances acquired from business combinations during the period. |
The company generated $32.2 million in cash flow from operations, compared to $25.5 million in the third quarter of 2017. The company generated $30.0 million in free cash flow (cash flow from operations less capital expenditures) for the quarter, compared to $22.2 million during the third quarter of 2017.
As previously disclosed, the Company has adopted ASC 606 under the modified retrospective method effective January 1, 2018. The accounting impact on revenue, expenses and income has been provided in the tables included in this press release.
A reconciliation of GAAP tonon-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading“Non-GAAP Financial Measures.”
No Quarterly Conference Call
Due to the previously announced definitive agreement to be acquired by leading private equity technology investment firm Thoma Bravo, LLC, Imperva does not plan to host an earnings conference call to discuss third quarter 2018 financial results.
Non-GAAP Financial Measures
Imperva reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP). To supplement the Imperva unaudited condensed consolidated financial statements presented in accordance with GAAP, Imperva uses certainnon-GAAP measures of financial performance. The presentation of thesenon-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 fromnon-GAAP financial measures used by other companies. In addition, thesenon-GAAP measures have limitations in that they do not reflect all of the amounts associated with the results of Imperva operations as determined in accordance with GAAP.
Thenon-GAAP financial measures used by Imperva include billings, or revenue plus the change in deferred revenue, net of acquired deferred revenue during the period plus any adjustment to the deferred revenue balance due to adoption of the new revenue recognition standard; free cash flow, or cash provided by operating activities less capital expenditures; andnon-GAAP operating income (loss);non-GAAP net income (loss); andnon-GAAP basic and diluted loss per share. Thesenon-GAAP financial measures exclude stock-based compensation, acquisition- and disposition-related expenses, amortization of purchased intangibles, restructuring andnon-routine consulting expenses related to our restructuring and strategy, facilities exit costs, gain on sale of business, provision for income taxes on sale of business and the amount of legal settlements from the Imperva unaudited condensed consolidated statement of operations.
For a description of these items, including the reasons why management adjusts for them, and reconciliations of historicalnon-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled “Use ofNon-GAAP Financial Information” as well as the related tables that precede it. Imperva may consider whether other significantnon-routine items that arise in the future should also be excluded in calculating thenon-GAAP financial measures it uses.
Imperva believes that thesenon-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the performance of Imperva by excluding certain items that may not be indicative of the company’s core business, operating results or future outlook. Imperva management uses, and believes that investors benefit from referring to, thesenon-GAAP financial measures in assessing operating results of Imperva, as well as when planning, forecasting and analyzing future periods. Thesenon-GAAP financial measures also facilitate comparisons of the performance of Imperva to prior periods.
About Imperva
Imperva® is a leading cybersecurity company that deliversbest-in-class solutions to protect data and applications – wherever they reside –on-premises, in the cloud, and across hybrid environments. The company’s Incapsula, SecureSphere, and CounterBreach product lines help organizations protect websites, applications, APIs, and databases from cyberattacks while ensuring compliance. Imperva innovates using data, analytics, and insights from our experts and our community to deliver simple, effective and enduring solutions that protect our customers from cybercriminals. Learn more at www.imperva.com, our blog, or Twitter.
© 2018 Imperva, Inc. All rights reserved. Imperva, the Imperva logo, CounterBreach, Incapsula, SecureSphere, ThreatRadar, Camouflage along with its design and Prevoty are trademarks of Imperva, Inc. and its subsidiaries.
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IMPERVA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share data)
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net revenue: | ||||||||||||||||
Products and license | $ | 23,241 | $ | 26,627 | $ | 62,971 | $ | 66,217 | ||||||||
Services | 68,392 | 57,265 | 197,706 | 164,418 | ||||||||||||
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Total net revenue | 91,633 | 83,892 | 260,677 | 230,635 | ||||||||||||
Cost of revenue: (1) (4) | ||||||||||||||||
Products and license | 1,985 | 1,883 | 5,623 | 5,638 | ||||||||||||
Services | 16,997 | 14,684 | 49,634 | 41,455 | ||||||||||||
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Total cost of revenue | 18,982 | 16,567 | 55,257 | 47,093 | ||||||||||||
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Gross profit | 72,651 | 67,325 | 205,420 | 183,542 | ||||||||||||
Operating expenses: (1) (4) | ||||||||||||||||
Research and development | 18,618 | 15,515 | 56,219 | 47,493 | ||||||||||||
Sales and marketing (2) | 39,051 | 38,245 | 119,098 | 111,757 | ||||||||||||
General and administrative (3) (5) | 13,872 | 13,645 | 41,789 | 39,556 | ||||||||||||
Restructuring charges | — | — | 2,551 | 667 | ||||||||||||
Amortization of acquired intangible assets | 644 | 133 | 908 | 582 | ||||||||||||
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Total operating expenses | 72,185 | 67,538 | 220,565 | 200,055 | ||||||||||||
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Income (loss) from operations | 466 | (213 | ) | (15,145 | ) | (16,513 | ) | |||||||||
Gain on sale of business | — | — | — | 35,871 | ||||||||||||
Other income, net | 1,034 | 567 | 2,983 | 633 | ||||||||||||
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Income (loss) before provision for income taxes | 1,500 | 354 | (12,162 | ) | 19,991 | |||||||||||
Provision for income taxes (3) | 442 | 724 | 19,620 | 768 | ||||||||||||
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Net (loss) income | $ | 1,058 | $ | (370 | ) | $ | (31,782 | ) | $ | 19,223 | ||||||
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Net (loss) income per share of common stock stockholders, basic | $ | 0.03 | $ | (0.01 | ) | $ | (0.91 | ) | $ | 0.57 | ||||||
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Net (loss) income per share of common stock stockholders, diluted | $ | 0.03 | $ | (0.01 | ) | $ | (0.91 | ) | $ | 0.56 | ||||||
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Shares used in computing earnings per share of common stock, basic | 35,066 | 33,907 | 34,782 | 33,590 | ||||||||||||
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Shares used in computing earnings per share of common stock, diluted | 35,745 | 33,907 | 34,782 | 34,118 | ||||||||||||
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(1) Stock-based compensation expense as included in above: | ||||||||||||||||
Cost of revenue | $ | 2,072 | $ | 1,343 | $ | 4,789 | $ | 4,015 | ||||||||
Research and development | 2,354 | 2,584 | 7,299 | 9,912 | ||||||||||||
Sales and marketing | 3,989 | 3,850 | 11,034 | 11,016 | ||||||||||||
General and administrative | 3,566 | 3,694 | 14,809 | 10,970 | ||||||||||||
Restructuring charges | — | — | — | 675 | ||||||||||||
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Total stock-based compensation expense | $ | 11,981 | $ | 11,471 | $ | 37,931 | $ | 36,588 | ||||||||
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(2)Non-routine consulting related to our restructuring and strategy as included in above: | ||||||||||||||||
Sales and marketing | $ | — | $ | — | $ | 1,700 | $ | — | ||||||||
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$ | — | $ | — | $ | 1,700 | $ | — | |||||||||
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(3) Acquisition related expense as included in above: | ||||||||||||||||
General and administrative | $ | 1,075 | $ | — | $ | 1,315 | $ | 1,082 | ||||||||
Provision for income taxes on sales of business | — | — | — | 901 | ||||||||||||
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$ | 1,075 | $ | — | $ | 1,315 | $ | 1,983 | |||||||||
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(4) Legal Settlements | ||||||||||||||||
Cost of revenue | $ | — | $ | — | $ | 120 | $ | — | ||||||||
Research and development | — | — | — | — | ||||||||||||
Sales and marketing | $ | — | — | $ | 1,292 | — | ||||||||||
General and administrative | $ | — | — | $ | 981 | — | ||||||||||
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$ | — | $ | — | $ | 2,393 | $ | — | |||||||||
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(5) Facilities exit costs as included in above: | ||||||||||||||||
General and administrative | $ | 559 | $ | — | $ | 559 | $ | — | ||||||||
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$ | 559 | $ | — | $ | 559 | $ | — | |||||||||
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IMPERVA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 155,932 | $ | 192,538 | ||||
Short-term investments | 148,487 | 166,993 | ||||||
Restricted cash | 30 | 52 | ||||||
Accounts receivable, net | 68,261 | 75,535 | ||||||
Deferred costs, current | 6,647 | — | ||||||
Inventory | 189 | 617 | ||||||
Prepaid expenses and other current assets | 9,191 | 14,894 | ||||||
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Total current assets | 388,737 | 450,629 | ||||||
Property and equipment, net | 22,600 | 25,407 | ||||||
Goodwill | 149,445 | 36,389 | ||||||
Acquired intangible assets, net | 14,376 | 3,184 | ||||||
Severance pay fund | 5,799 | 6,554 | ||||||
Restricted cash | 2,603 | 2,284 | ||||||
Deferred tax assets | 995 | 2,022 | ||||||
Other assets includingnon-current deferred costs | 21,388 | 1,593 | ||||||
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TOTAL ASSETS | $ | 605,943 | $ | 528,062 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 5,372 | $ | 5,869 | ||||
Income taxes | 8,916 | 319 | ||||||
Accrued compensation and benefits | 23,422 | 22,913 | ||||||
Accrued and other current liabilities | 15,327 | 11,098 | ||||||
Deferred revenue | 137,814 | 126,174 | ||||||
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Total current liabilities | 190,851 | 166,373 | ||||||
Long-term accrued severance pay | 6,564 | 7,238 | ||||||
Othernon-current liabilities | 12,887 | 6,253 | ||||||
Deferred revenue | 54,022 | 33,081 | ||||||
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TOTAL LIABILITIES | 264,324 | 212,945 | ||||||
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Commitments and Contingencies | ||||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Common stock | 3 | 3 | ||||||
Additionalpaid-in capital | 612,249 | 572,106 | ||||||
Accumulated deficit | (268,846 | ) | (256,537 | ) | ||||
Accumulated other comprehensive loss | (1,787 | ) | (455 | ) | ||||
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TOTAL STOCKHOLDERS’ EQUITY | 341,619 | 315,117 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 605,943 | $ | 528,062 | ||||
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IMPERVA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended September 30 | ||||||||
2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (31,782 | ) | $ | 19,223 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 8,709 | 7,780 | ||||||
Stock-based compensation | 37,931 | 36,588 | ||||||
Amortization of deferred costs | 3,864 | — | ||||||
Amortization of acquired intangibles | 908 | 582 | ||||||
Loss on disposals | — | 48 | ||||||
Amortization of premiums/accretion of discounts on short-term investments | 163 | 56 | ||||||
Gain on sale of business | — | (35,871 | ) | |||||
Facilities exit costs | 559 | — | ||||||
Other | 668 | (1,090 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 8,741 | 2,767 | ||||||
Inventory | 355 | 61 | ||||||
Deferred costs | (14,541 | ) | — | |||||
Prepaid expenses and other assets | 558 | (794 | ) | |||||
Accounts payable | (653 | ) | (628 | ) | ||||
Income taxes | 8,597 | 707 | ||||||
Accrued compensation and benefits | 509 | 3,981 | ||||||
Accrued and other liabilities | 9,033 | 4,229 | ||||||
Severance pay (net) | 81 | 256 | ||||||
Deferred revenue | 33,848 | 13,253 | ||||||
Deferred tax assets | 1,027 | (1,682 | ) | |||||
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Net cash provided by operating activities | 68,575 | 49,466 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from sales/maturities of short-term investments | 71,736 | 66,463 | ||||||
Purchase of short-term investments | (53,339 | ) | (91,878 | ) | ||||
Proceeds from sale of business | — | 35,015 | ||||||
Receipt of cash in escrow from sale of business | 5,000 | — | ||||||
Acquisitions, net of cash acquired | (123,507 | ) | — | |||||
Net purchases of property and equipment | (5,724 | ) | (9,835 | ) | ||||
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Net cash used in investing activities | (105,834 | ) | (235 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock, net of repurchases | 10,799 | 14,790 | ||||||
Shares withheld for tax withholding on vesting of restricted stock units | (9,151 | ) | (8,217 | ) | ||||
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Net cash provided by financing activities | 1,648 | 6,573 | ||||||
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Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (698 | ) | 1,090 | |||||
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NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (36,309 | ) | 56,894 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | 194,874 | 109,295 | ||||||
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | 158,565 | $ | 166,189 | ||||
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IMPERVA, INC. AND SUBSIDIARIES
Topic 606 Adoption Financial Impact
(In thousands, except per share data)
(Unaudited)
Three months ended September 30, 2018 | Nine months ended September 30, 2018 | |||||||||||||||||||||||
As reported | Adjustments | Balances without adoption of Topic 606 | As reported | Adjustments | Balances without adoption of Topic 606 | |||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Products and license | $ | 23,241 | $ | (2,768 | ) | $ | 20,473 | $ | 62,971 | $ | (5,778 | ) | $ | 57,193 | ||||||||||
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Services: | ||||||||||||||||||||||||
Subscriptions | 38,519 | (378 | ) | 38,141 | 109,956 | (352 | ) | 109,604 | ||||||||||||||||
Maintenance and Support | 25,219 | (967 | ) | 24,252 | 75,393 | (2,365 | ) | 73,028 | ||||||||||||||||
Professional services and training | 4,654 | 72 | 4,726 | 12,357 | 258 | 12,615 | ||||||||||||||||||
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Total services | 68,392 | (1,273 | ) | 67,119 | 197,706 | (2,459 | ) | 195,247 | ||||||||||||||||
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Total net revenue | 91,633 | (4,041 | ) | 87,592 | 260,677 | (8,237 | ) | 252,440 | ||||||||||||||||
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Operating expenses: | ||||||||||||||||||||||||
Sales and marketing | 39,051 | 2,882 | 41,933 | 119,098 | 10,677 | 129,775 | ||||||||||||||||||
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Income (loss) from operations | 466 | (6,923 | ) | (6,457 | ) | (15,145 | ) | (18,914 | ) | (34,059 | ) | |||||||||||||
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Net (loss) income | $ | 1,058 | $ | (6,923 | ) | $ | (5,865 | ) | $ | (31,782 | ) | $ | (18,914 | ) | $ | (50,696 | ) | |||||||
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Net (loss) income per share of common stock stockholders, basic and diluted | $ | 0.03 | $ | (0.17 | ) | $ | (0.91 | ) | $ | (1.46 | ) | |||||||||||||
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IMPERVA, INC. AND SUBSIDIARIES
Reconciliation of GAAP toNon-GAAP Measures
(In thousands, except per share data)
(Unaudited)
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
GAAP operating income (loss) | $ | 466 | $ | (213 | ) | $ | (15,145 | ) | $ | (16,513 | ) | |||||
Plus: | ||||||||||||||||
Stock-based compensation expense | 11,981 | 11,471 | 37,931 | 35,913 | ||||||||||||
Acquisition- and disposition-related expense | 1,075 | — | 1,315 | 1,082 | ||||||||||||
Restructuring | — | — | 2,551 | 667 | ||||||||||||
Facilities exit costs | 559 | — | 559 | — | ||||||||||||
Legal settlement | — | — | 2,393 | — | ||||||||||||
Non-routine consulting related to our restructuring and strategy | — | — | 1,700 | — | ||||||||||||
Amortization of purchased intangibles | 644 | 133 | 908 | 582 | ||||||||||||
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Non-GAAP operating income | $ | 14,725 | $ | 11,391 | $ | 32,212 | $ | 21,731 | ||||||||
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GAAP net income (loss) | $ | 1,058 | $ | (370 | ) | $ | (31,782 | ) | $ | 19,223 | ||||||
Plus: | ||||||||||||||||
Stock-based compensation expense | 11,981 | 11,471 | 37,931 | 35,913 | ||||||||||||
Acquisition- and disposition-related expense | 1,075 | — | 1,315 | 1,082 | ||||||||||||
Restructuring | — | — | 2,551 | 667 | ||||||||||||
Non-routine consulting related to our restructuring and strategy | — | — | 1,700 | — | ||||||||||||
Legal settlement | — | — | 2,393 | — | ||||||||||||
Facilities exit costs | 559 | — | 559 | — | ||||||||||||
Amortization of purchased intangibles | 644 | 133 | 908 | 582 | ||||||||||||
Gain on sale of business | — | — | — | (35,871 | ) | |||||||||||
Provision for income taxes on sale of business | — | — | — | 901 | ||||||||||||
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Non-GAAP net income | $ | 15,317 | $ | 11,234 | $ | 15,575 | $ | 22,497 | ||||||||
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Weighted average shares outstanding, basic | 35,066 | 33,907 | 34,782 | 33,590 | ||||||||||||
Weighted average shares outstanding, diluted | 35,745 | 34,430 | 35,407 | 34,118 | ||||||||||||
Non-GAAP net income, basic | $ | 0.44 | $ | 0.33 | $ | 0.45 | $ | 0.67 | ||||||||
Non-GAAP net income, diluted | $ | 0.43 | $ | 0.33 | $ | 0.44 | $ | 0.66 |
IMPERVA, INC. AND SUBSIDIARIES
Billings
(In thousands)
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Total revenue | $ | 91,633 | $ | 83,892 | $ | 260,677 | $ | 230,635 | ||||||||
Change in deferred revenue | 17,185 | 8,121 | 32,581 | 11,800 | ||||||||||||
Adjustment for acquired deferred revenue | (2,295 | ) | — | (2,295 | ) | — | ||||||||||
Deferred revenue adjustment due to adoption of the new revenue recognition standard | — | — | 3,562 | — | ||||||||||||
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Billings | $ | 106,523 | $ | 92,013 | $ | 294,525 | $ | 242,435 | ||||||||
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IMPERVA, INC. AND SUBSIDIARIES
Reconciliation of Free Cash Flow
(In thousands)
(Unaudited)
Nine months ended September 30 | ||||||||
2018 | 2017 | |||||||
Net cash provided by operating activities | $ | 68,575 | $ | 49,466 | ||||
Less: | ||||||||
Net purchases of property and equipment | (5,724 | ) | (9,835 | ) | ||||
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Total free cash generated | $ | 62,851 | $ | 39,631 | ||||
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Use ofNon-GAAP Financial Information
In addition to the reasons stated under“Non-GAAP Financial Measures” above, which are generally applicable to each of the items Imperva excludes from itsnon-GAAP financial measures, Imperva believes it is appropriate to exclude or give effect to certain items for the following reasons:
Stock-based Compensation. When evaluating the performance of its consolidated results, Imperva does not consider stock-based compensation expense. Likewise, the Imperva management team excludes stock-based compensation expense from its operating plans. In contrast, the Imperva 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, Imperva places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants.
Imperva excludes stock-based compensation expense from itsnon-GAAP financial measures primarily because it does not consider such expense as part of its ongoing operating results when assessing the performance of its business, and the exclusion of the expense facilitates the comparison of current period results with results from prior periods.
Amortization of Purchased Intangibles. When analyzing the operating performance of an acquired entity, Imperva’s 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 technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, Imperva’s management excludes the GAAP impact of acquired intangible assets to its financial results. Imperva believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplementalnon-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.
In addition, in accordance with GAAP, Imperva generally recognizes expense 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, Imperva 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, 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, Imperva believes it is useful to provide, as a supplement to its GAAP operating results, anon-GAAP financial measure that excludes the amortization of acquired intangibles.
Acquisition and Disposition-related Expense, Gain on Sale of Business, and Provision for Income Taxes on Sale of Business. Imperva completed the acquisition of Prevoty on August 9, 2018 and on October 10, 2018 announced that it had entered into a definitive agreement to be acquired by Thoma Bravo, LLC. During the first quarter of 2017 Imperva completed the disposition of the Skyfence business. Imperva incurred legal, accounting, advisory and other transaction-related expense in connection with these transactions and excluded the associated acquisition and disposition-related expenses from itsnon-GAAP financial measures because they are not representative of ongoing operating costs. Imperva also excluded the gain on the sale of the Skyfence business and the related tax effects given that such gain and the associated taxes are not representative of Imperva’s ongoing operations. Imperva does not acquire or dispose of businesses on a predictable cycle and the expenses, gains (if any) and the associated taxes from these transactions vary significantly and are unique to each transaction. Imperva records acquisition- and disposition-related expense as operating expense when
incurred and the gain on sale of business and provision for income taxes associated with the sale were recorded at the time the Skyfence transaction closed. As a result, when they occur, these expenses, gains and taxes affect comparability from period to period and Imperva believes that investors benefit from asupplemental non-GAAP financial measure that excludes these expenses, gains and taxes to facilitate the comparison of current period results with the results from prior periods.
Facility Exit Costs.In September 2018, Imperva exited and subleased a portion of its facilities located in Redwood Shores, California and recorded charges in connection with the exit. These charges are not representative of ongoing costs to the business as they were part of a site consolidation plan that has been completed and is not expected to recur. As a result, these charges are being excluded to provide investors with a more comparable measure of costs associated with ongoing operations.
Restructuring Charges and Related Non-routine Consulting Expenses. Imperva undertook a restructuring plan in the fourth quarter of 2016 and recorded restructuring charges in connection with the plan during the first quarter of 2017, substantially all of which were related to stock-based compensation expense associated with accelerated vesting of equity awards for certain terminated employees. Imperva undertook a separate restructuring plan in the first quarter of 2018, and recorded restructuring charges in connection with the plan related to cash severance payments. Imperva also incurrednon-routine consulting fees and expenses related to developing the restructuring plan and company strategy. In contrast to cost-reduction initiatives that are part of ongoing operations, the restructuring plan and the consulting fees that went into developing the plan resulted in severance and consulting costs that we believe are not representative of ongoing operating costs. Imperva has excluded the expense associated with these activities to provide investors with a more comparable measure of costs associated with ongoing operations.
Legal Settlements. During the second quarter of 2018, Imperva entered into an agreement in principle to settle two class action lawsuits and accrued the amounts of the settlements, which remain subject to court approvals, among other conditions prior to being funded. When planning and evaluating the performance of its consolidated results, Imperva does not consider the amount of legal settlements it was required to recognize in the second quarter of 2018 as representative of ongoing operating costs due to the unusual andone-time nature of the charges. Imperva will recognize charges related to in-period settlement activities for future periods, and does not expect to exclude such charges from its non-GAAP financial measures.
Billings.Imperva believes billings provide management and investors with important information about the health of the business particularly as sales of subscription and support services and related renewals grow.
Free Cash Flow. Imperva considers free cash flow to be a profitability and liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures.
Investor Relations Contact Information
Sunil Shah
650.832.6852
IR@imperva.com
Sunil.Shah@imperva.com