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Imperva Announces Fourth Quarter and Full Year 2015 Financial Results

February 3, 2016 4:05 PM

Fourth Quarter Highlights

REDWOOD SHORES, Calif.--(BUSINESS WIRE)-- Imperva, Inc. (NYSE: IMPV), committed to protecting business-critical data and applications in the cloud and on-premises, today announced financial results for the fourth quarter and full year ended December 31, 2015.

“The fourth quarter marked a strong finish to the year highlighted by our ability to achieve record product and subscription revenue,” stated Anthony Bettencourt, President and Chief Executive Officer of Imperva. “The combination of robust demand for our best-of-breed discovery, protection and compliance solutions and traction from our improved go-to-market strategy drove our record results during the year. Looking forward, we believe that Imperva is well positioned to maintain momentum in 2016 as we continue to help enterprises protect their business critical data and applications.”

Fourth Quarter 2015 Financial Highlights

Full Year 2015 Financial Highlights

Fourth Quarter and Recent Operating Highlights

Business Outlook

The following forward-looking statements reflect expectations as of February 3, 2016. Results may be materially different and could be affected by the factors detailed in this press release and in recent Imperva SEC filings.

First Quarter Expectations – Ending March 31, 2016

Imperva expects total revenue for the first quarter of 2016 to be in the range of $58.0 million to $60.0 million. The company expects in the first quarter of 2016 non-GAAP gross margins of approximately 78%. Further, Imperva expects in the first quarter of 2016 non-GAAP operating loss to be in the range of $(7.5) million to $(9.5) million and non-GAAP net loss to be in the range of $(8.5) million to $(10.5) million, or $(0.26) to $(0.32) per share based on approximately 32.4 million weighted average shares, which excludes stock-based compensation and amortization of purchased intangibles.

Full Year Expectations –Ending December 31, 2016

Imperva expects total revenue for 2016 to be in the range of $302.0 million to $307.0 million. Imperva expects 2016 non-GAAP gross margins of approximately 80%. Further, the company expects 2016 non-GAAP operating profit to be in the range of $7.0 million to $9.0 million and non-GAAP net profit to be in the range of $5.7 million to $7.7 million, or $0.17 to $0.23 per share based on approximately 33.5 million weighted average diluted shares, which excludes stock-based compensation and amortization of purchased intangibles. Imperva expects capital expenditures for the full year to be in the range of $18.0 million to $20.0 million. Finally, the company expects to generate positive cash flows from operations in 2016.

Quarterly Conference Call

Imperva will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review the company’s financial results for the fourth quarter and full year ended December 31, 2015. To access this call, dial (877) 718-5104 for the U.S. or Canada or (719) 325-4801 for international callers with conference ID #9284463. A live webcast of the conference call will be accessible from the investors page of the Imperva website at www.imperva.com, and a recording will be archived and accessible at www.imperva.com. An audio replay of this conference call will also be available through February 17, 2016, by dialing (877) 870-5176 for the U.S. and Canada, or (858) 384-5517 for international callers and entering passcode #9284463.

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 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 Imperva operations as determined in accordance with GAAP. The non-GAAP financial measures used by Imperva include historical non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP basic and diluted loss per share. These non-GAAP financial measures exclude stock-based compensation, amortization of purchased intangibles and acquisition-related expenses 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 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. Imperva 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.

Imperva believes that these non-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, these non-GAAP financial measures in assessing operating results of Imperva, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the performance of Imperva to prior periods.

Forward Looking Statements

This press release contains forward-looking statements, including without limitation those regarding the Imperva “Business Outlook” (“First Quarter Expectations – Ending March 31, 2016” and “Full Year Expectations – Ending December 31, 2016”); and the company’s belief related to its ability to maintain momentum in 2016; and the company’s belief that enterprises will continue to use Imperva products and services to protect their business critical data and applications. 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 demand for the company’s cyber security solutions may not increase or may decrease, including as a result of global macroeconomic conditions and other economic conditions that may reduce enterprise software or security spending generally; the risk that the company may not timely introduce new products or versions of its products and that such products may not be accepted by the market; the risk that competitors may be perceived by customers to offer greater value or to be better positioned to help handle cyber security threats and protect their businesses from major risk; the risk that existing customers may focus their additional cyber security spending on other technologies or addressing other risks; the risk that the company’s growth may be lower than anticipated; the risk that the markets that Imperva addresses may not grow as anticipated; and other risks detailed under the caption “Risk Factors” in the company’s Form 10-Q filed with the Securities and Exchange Commission, or the SEC, on November 5, 2015 and the company’s other SEC filings. You can obtain copies of the company’s SEC filings on the SEC’s website at www.sec.gov.

The foregoing information represents the company’s outlook only as of the date of this press release, and Imperva undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, new developments or otherwise.

About Imperva

Imperva® (NYSE: IMPV) is a leading provider of cyber security solutions that protect business-critical data and applications. The company’s SecureSphere, Incapsula and Skyfence product lines enable organizations to discover assets and risks, protect information wherever it lives – in the cloud and on-premises – and comply with regulations. The Imperva Application Defense Center, a research team comprised of some of the world’s leading experts in data and application security, continually enhances Imperva products with up-to-the minute threat intelligence, and publishes reports that provide insight and guidance on the latest threats and how to mitigate them. Imperva is headquartered in Redwood Shores, California. Learn more: www.imperva.com, our blog, on Twitter.

© 2016 Imperva, Inc. All rights reserved. Imperva, the Imperva logo, SecureSphere, Incapsula and Skyfence are trademarks of Imperva, Inc. and its subsidiaries.

IMPERVA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
Dec 31 Dec 31 Dec 31 Dec 31
2015 2014 2015 2014
Net revenue:
Products and license $ 36,113 $ 26,100 $ 107,563 $ 74,299
Services 36,601 25,277 126,735 89,711
Total net revenue 72,714 51,377 234,298 164,010
Cost of revenue(1, 2):
Products and license 3,412 3,142 10,947 9,248
Services 10,383 7,154 36,633 27,335
Total cost of revenue 13,795 10,296 47,580 36,583
Gross profit 58,919 41,081 186,718 127,427
Operating expenses(1, 2):
Research and development 14,403 11,014 53,376 43,052
Sales and marketing 39,162 31,429 136,292 106,382
General and administrative 10,659 9,486 43,440 34,499
Amortization of purchased intangibles 352 352 1,408 1,269
Total operating expenses 64,576 52,281 234,516 185,202
Loss from operations (5,657) (11,200) (47,798) (57,775)
Other income (expense), net (189) 101 (402) (220)
Loss before provision for income taxes (5,846) (11,099) (48,200) (57,995)
Provision for income taxes (65) 1,397 682 1,181
Net loss (5,781) (12,496) (48,882) (59,176)
Add: Loss attributable to noncontrolling interest - - - 213
Net loss attributable to Imperva, Inc. stockholders $ (5,781) $ (12,496) $ (48,882) $ (58,963)
Net loss per share of common stock attributable to
Imperva, Inc. stockholders, basic and diluted $ (0.18) $ (0.48) $ (1.64) $ (2.28)
Shares used in computing net loss per share of
common stock, basic and diluted 31,393 26,177 29,849 25,806
(1) Stock-based compensation expense as included in above:
Cost of revenue $ 1,149 $ 586 $ 3,862 $ 2,058
Research and development 3,709 2,464 13,831 8,799
Sales and marketing 3,893 4,189 16,717 13,558
General and administrative 3,412 3,928 16,554 12,858
Total stock-based compensation expense $ 12,163 $ 11,167 $ 50,964 $ 37,273
(2) Acquisition-related expense as included in above:
Cost of revenue $ - $ - $ - $ 156
General and administrative - - - 1,243
Total acquisition-related expense $ - $ - $ - $ 1,399
IMPERVA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
As of As of
Dec 31 Dec 31
2015 2014
Assets
Current assets:
Cash and cash equivalents $ 168,252 $ 68,096
Short-term investments 96,555 41,624
Restricted cash, current 79 62
Accounts receivable, net 61,051 47,446
Inventory 815 259
Deferred tax assets - 408
Prepaid expenses and other current assets 7,965 3,927
Total current assets 334,717 161,822
Property and equipment, net 12,164 7,618
Goodwill 34,972 34,972
Purchased intangible assets, net 7,991 9,399
Severance pay fund 4,530 3,980
Restricted cash 1,665 1,665
Deferred tax assets 588 329
Other assets 1,042 860
Total assets $ 397,669 $ 220,645
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 6,870 $ 5,376
Accrued compensation and benefits 20,259 15,749
Accrued and other current liabilities 14,170 6,376
Deferred revenue 79,132 56,077
Total current liabilities 120,431 83,578
Other liabilities 4,515 10,408
Deferred revenue 27,525 25,098
Accrued severance pay 4,884 4,318
Total liabilities 157,355 123,402
Stockholders’ equity:
Common stock 3 2
Additional paid-in capital 448,182 256,388
Accumulated deficit (206,540) (157,658)
Accumulated other comprehensive loss (1,331) (1,489)
Total Imperva, Inc. stockholders’ equity 240,314 97,243
Noncontrolling interest - -
Total stockholders’ equity 240,314 97,243
Total liabilities and stockholders’ equity $ 397,669 $ 220,645
IMPERVA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the Twelve Months Ended
Dec 31 Dec 31
2015 2014
Cash flows from operating activities:
Net loss $ (48,882) $ (59,176)
Adjustments to reconcile net loss to net cash provided by(used in) operating activities:
Depreciation and amortization 4,551 3,578
Stock-based compensation 50,964 37,273
Amortization of acquired intangible assets 1,408 1,269
Amortization of premiums/accretion of discountson short-term investments 496 416
Allowance for doubtful accounts 1,223 (195)
Excess tax benefits from share-based compensation (165) (385)
Changes in operating assets and liabilities:
Accounts receivable, net (14,828) (2,805)
Inventory (1,056) 253
Prepaid expenses and other assets (4,220) 409
Accounts payable 977 1,150
Accrued compensation and benefits 4,510 2,630
Accrued and other liabilities 3,242 1,847
Severance pay, net 16 93
Deferred revenue 25,482 18,123
Deferred tax assets 149 (354)
Net cash provided by operating activities 23,867 4,126
Cash flows from investing activities:
Purchase of short-term investments (89,626) (33,267)
Proceeds from sales/maturities of short-term investments 33,948 29,821
Acquisitions, net of cash acquired - (12,083)
Net purchases of property and equipment (8,080) (5,621)
Change in restricted cash (17) (441)
Net cash used in investing activities (63,775) (21,591)
Cash flows from financing activities:
Proceeds from follow-on public offering, net of offering costs 127,853 -
Proceeds from issuance of common stock, net of repurchases 23,524 10,546
Excess tax benefits from share-based compensation 165 385
Shares withheld for tax withholding on vesting of restricted stock units (11,464) (2,074)
Net cash provided by financing activities 140,078 8,857
Effect of exchange rate changes on cash and cash equivalents (14) -
Net increase (decrease) in cash and cash equivalents 100,156 (8,608)
Cash and cash equivalents at beginning of period 68,096 76,704
Cash and cash equivalents at end of period $ 168,252 $ 68,096
IMPERVA, INC. AND SUBSIDIARIES
(Reconciliation of GAAP to Non-GAAP Measures)
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
Dec 31 Dec 31 Dec 31 Dec 31
2015 2014 2015 2014
GAAP operating loss $ (5,657) $ (11,200) $ (47,798) $ (57,775)
Plus:
Stock-based compensation expense 12,163 11,167 50,964 37,273
Acquisition-related expense - - - 1,399
Amortization of purchased intangibles 352 352 1,408 1,269
Non-GAAP operating income (loss) $ 6,858 $ 319 $ 4,574 $ (17,834)
GAAP net loss attributable to Imperva, Inc. stockholders $ (5,781) $ (12,496) $ (48,882) $ (58,963)
Plus:
Stock-based compensation expense 12,163 11,167 50,964 37,273
Acquisition-related expense - - - 1,399
Amortization of purchased intangibles 352 352 1,408 1,269
Non-GAAP net income (loss) $ 6,734 $ (977) $ 3,490 $ (19,022)
Weighted average basic shares outstanding 31,393 26,177 29,849 25,806
Weighted average diluted shares outstanding 32,889 26,177 31,619 25,806
Non-GAAP net income (loss), basic $ 0.21 $ (0.04) $ 0.12 $ (0.74)
Non-GAAP net income (loss), diluted $ 0.20 $ (0.04) $ 0.11 $ (0.74)
IMPERVA, INC. AND SUBSIDIARIES
(Reconciliation of Free Cash Flow)
(In thousands)
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
Dec 31 Dec 31 Dec 31 Dec 31
2015 2014 2015 2014
Net cash provided by operating activities $ 8,679 $ 5,213 $ 23,867 $ 4,126
Less:
Net purchases of property and equipment (4,042) (1,927) (8,080) (5,621)
Total free cash generated (used) $ 4,637 $ 3,286 $ 15,787 $ (1,495)

Use of Non-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 its non-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 charges. 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.

Acquisition-Related Charges: GAAP requires expenses to be recognized for various types of events associated with a business acquisition, such as legal, accounting, advisory and other deal related expenses. These expenses vary significantly and are unique to each transaction. Additionally, Imperva does not acquire businesses on a predictable cycle. Imperva records these acquisition and other transaction costs as operating expenses when they are incurred. Imperva believes that these acquisition and other transaction costs affect comparability from period to period and that investors benefit from a supplemental non-GAAP financial measure that excludes these expenses.

Imperva excludes stock-based compensation and acquisition-related charges from its non-GAAP financial measures primarily because they are expenses that it does not consider part of ongoing operating results when assessing the performance of its business, and the exclusion of these expenses facilitates the comparison of results and business outlook for future periods with results for prior periods in order to better understand the long term performance of its business.

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 supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.

In addition, in accordance with GAAP, Imperva 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, 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, a non-GAAP financial measure that excludes the amortization of acquired intangibles.

Investor Relations

For Imperva

Seth Potter, 646-277-1230

[email protected]

[email protected]

Source: Imperva, Inc.

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