Q213 Investor Presentation

© 2013 Websense, Inc.

TRITON STOPS MORE THREATS. WE CAN PROVE IT.

Q2’13 Investor Presentation


GAAP to Non-GAAP Reconciliation During this presentation references to financial measures of Websense, Inc. (“Websense”) will include references to non-GAAP financial measures. Websense provides a reconciliation between GAAP and non-GAAP financial information on our website at www.Websense.com under “About Us” in the “Investors” section. www.investor.websense.com

Forward Looking Statements This presentation contains projections and other forward-looking statements regarding future events or the future financial performance of Websense, including future operating results. These projections and statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements. Please see Websense’s filings with the SEC, including its most recent filings on Form 10-K, for a discussion of important risk factors that could cause actual events or results to differ materially from those in the projections or other forward-looking statements.

http://www.investor.websense.com/


Agenda

Company overview

Aligned with modern security needs

Investing in sales coverage to drive growth

Attractive subscription-based business model


About Websense

• Market leader – Advanced web security, email security, mobile security and

data loss prevention (DLP) solutions

– Market share leader in content security

– Recognized by leading analysts

• Technology pioneer – 16 years classifying content and threats

– >180 patents granted or pending

– First to market with unified web/email/data security,

hybrid Cloud/on-premise, Threatseeker, ACE, Defensio

• Global presence – ~1,600 employees in more than 35 countries

– 4,000 resellers in 130 countries

– R&D on multiple continents

– Follow-the-sun technical support

– ~50% of revenue outside the U.S.

• Financial strength – Attractive business model with subscription revenues

of more than 90% in 2012

– 2012 annual billings of $369.5 million

Web Security Products:

2012 MarketScape Leader

2013 Content-Aware Data Loss Prevention MQ:

Leaders Quadrant

2012 Secure Email Gateway MQ:

Visionaries Quadrant

2012 Secure Web Gateway MQ:

Leaders Quadrant

2012 Email Content Security:

Leader, Forrester Wave

Best Web Content Management Product 2013

Best Regulatory Compliance Solution 2013

7 Nominations: Infosecurity Europe 2013

Vendor with most nominations

http://www.gartner.com/silentlocalechooser.jsp?locale=wcw


Websense Transformation

Vision

Sales and

Support

Data-centric

security

2006

Transaction to

Strategic

2010-2011 R&D

investment

2007-2011

TRITON solutions

Web filtering company ($750M market opportunity)

Content Security Leader (>$6B market opportunity)

Expanding

Sales Coverage

2012-2013

Sales Expansion


ACE-in-the-Cloud

Spear-Phishing

APT

WSG

Threat Scope

Mobile Security

On-Premise TRITON

Cloud-Enabled

TRITON Web

Security Suite

Web Filter

2013+

TRITON

Enterprise

Transition from Websense Legacy to TRITON

~ $335M

Software

Install Base ~ $250M

Software

Install Base

Upgrade cycle

began in

2H 2011 Upgrade cycle

began in

2009

In 2012, we sold $233 million of TRITON products, compared with $93 million

in 2009, for a CAGR of 36%.

~ $40M

Software

Install Base

TRITON Suites TRITON Products Legacy

~$80M Appliance Install Base


Increased Value of the Install Base

Legacy 40%

TRITON Products

53%

TRITON Suites 7%

2013

The quantity and quality of the install base continue to improve.

Legacy 50%

TRITON Products

47%

TRITON Suites 3%

2012

$600M Software Install Base

$55M Hardware Install Base

$625M Software Install Base

$80M Hardware Install Base


Agenda

Company overview





TRITON Advanced Security

Threat Seeker

Network

Global SaaS

Infrastructure


2013: The Year of the TRITON Platform

Industry’s First

Real-Time

Web Security

Industry’s First

Hybrid Content

Security

Industry’s First

Integrated

Content Security

TRITON – The Best

Content Security Platform

Most Scalable

& Extensible Content

Security Solution

2009 2010 2011 2012 2013 and beyond


Solutions Feature Matrix

Web filter

and Web

Security

Suite

Web

Security

Gateway

Web

Security

Gateway

Anywhere

TRITON

Security

Gateway

Anywhere

TRITON

Enterprise

General availability 2000-2005 Q4 2008 Q2 2010 Q2 2011 Q2 2011

~List price per seat (@ 1,000 users) $15-30 $40 $50 $60 $70

Functionality

URL filtering X X X X X

Real-time Web Security X X X X

Web channel TruWeb™ DLP X X X

Email security X X

Email channel TruEmail™ DLP X X

Enterprise DLP X

Deployment options

Software-only X X

Appliance X (WSS) X X X X

Hybrid appliance/cloud service X X X


ADVANCED threat detection

mechanisms

COMPREHENSIVE protection of network

communication

channels

& endpoints

WHY customers

choose

EASE of integration

with existing

network

FLEXIBLE deployment

options

TRACK &

PROTECT data ON or OFF

network

Key Differentiators


Websense Addressable Market

$5.9B

$6.4B

2013 2014

(1) IDC "Worldwide Web Security 2012-2016 Forecast and 2011 Vendor Shares” (Doc #235515), by Phil Hochmuth, July 2012

(2) IDC "Worldwide Messaging Security 2012-2016 Forecast and 2011 Vendor Shares" (Doc #235544), by Phil Hochmuth, June 2012

(3) IDC, "Worldwide Data Loss Prevention 2012-2016 Forecast and 2011 Vendor Shares" (Doc #23657) by Phil Hochmuth. September 2012

(4) Infonetics Research, "Content Security Appliances, Software and SaaS Quarterly Worldwide Market Share and Forecasts: 3Q12", 11/27/12

$0

$1

$2

$3

$4

$5

$6

$7

$ B

illio

ns

Integrated Content Security Gateway

Data Loss Prevention

Email Security On Premise

Cloud Security (Web and Email)

Web Security Appliance

Web Security Software

Incremental opportunity with

TRITON products ~10% CAGR


Websense Prove It Initiative

TRITON STOPS MORE THREATS, WE CAN PROVE IT


TRITON Stops More Threats. We can Prove It.


Agenda

Company overview



Attractive subscription-based model


Sales Force Expansion Follows Transformation

The sales force investment is designed to drive both new customer acquisition and

install base upgrades – when we compete, we win.

2011 Focus on

Install Base Growth

2012 Drive Double-Digit

New Customer

Growth

2013 Drive Consistent

Execution on Both

Fronts


Economics of a Sales Team Investment

In first year, a new sales team generates more billings than expense,

with revenue outpacing costs in future periods.

YEAR 1

Billings

YEAR 2 YEAR 3

Billings

Fully

Loaded

Costs

Fully

Loaded

Costs

Fully

Loaded

Costs

Revenue

Billings


Expense Growth Will Follow Seasonal Patterns

-4%

0%

4%

8%

12%

16%

$40

$45

$50

$55

$60

$65

$70

Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13E Q3'13E Q4'13E

Se

qu

en

tial G

row

th

Mil

lio

ns

Non-GAAP Operating Expenses Sequential Growth

2013 sales expansion investment was front-loaded in Q4’12 and Q1’13.

2013

Impact of decline

in YoY billings

2012

Based on guidance provided 01/29/13.


$0

$0

$0

$1

$2

$3

2012 2013 2014+

Consistent Growth Drives Subscription Model

$369M $384M*

$400M+

*Midpoint of guidance provided 01/29/13

~200 Reps ~240 Reps 240+ Reps

Our investment in sales capacity will yield billings growth in 2013, with future ability to

drive billings growth through productivity improvements.

Productivity Per Rep

Install Base Billings

New Logo Billings


Agenda

Company overview





Expiration/renewal

Expansion of TRITON billings

drives improved customer

retention rates

Income statement Revenue follows billings

growth. In 2013, revenue is impacted by the continued recognition of deferred appliance revenue and costs.

Upgrade and “new logo” opportunities

Migration to TRITON and within the TRITON portfolio of products yields growth

Cash flow statement Cash flow from operations is expected to grow each quarter in 2013 on a year-over-year basis.

Subscription Model Dynamics

Billings (Non-GAAP)

Cash

Flow

Renewal/

Upgrade Revenue


$347.0 $362.9 $369.5

$374-394

$0

$100

$200

$300

$400

2010 2011 2012 2013E*

Mil

lio

ns

TRITON Non-TRITON

Total Billings (Non-GAAP)

TRITON billings growth drives overall growth and quality of the installed base.

61%

39%

47%

53%

37%

63%

*Guidance range as of 04/25/13


TRITON Billings

TRITON solutions include the TRITON family of security gateways for web, email, mobile and data security (including related appliances and

technical support subscriptions), Websense Data Security Suite and cloud-based security solutions.

$34.4

$44.5 $45.3

$68.3

$49.0 $50.8 $49.4

$83.7

$54.7

45%

52% 54%

59% 61%

59% 61%

69%

67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13

% o

f To

tal B

illing

s

Mil

lio

ns

$ % of total billings


Lifetime Value of a TRITON Customer

Each sales cycle generates incremental customer purchases and strengthens

commitment to the TRITON security platform.

Customer off-cycle

unlocks product

upgrades or

expands coverage

At renewal:

• Unlock product

upgrades

• Renew for 1-3 years

• Refresh appliance

Customer has

strengthened

commitment to

TRITON architecture

TRITON customer

has higher renewal

rates of 85-90%

Customer signs

initial TRITON

transaction

(Typically 3-year

contract +

appliance)


$394.3 $393.0 $401.1

$424-434

-$50

$50

$150

$250

$350

$450

2010 2011 2012 2013E*

Mil

lio

ns

Software and Service Appliance OEM

Deferred Revenue

Growth in software and service billings drives increases in deferred revenue.

*Guidance range as of 04/25/13


Mix Shift Toward TRITON

Buying Patterns Remain Stable

Customers consistently make long term commitment to TRITON products.

2010 Billings

TRITON 39% / Legacy 61%

2013 Billings

TRITON ~70% / Legacy ~30%

25-29 months

Legacy

20-21 months 26-28 months

Legacy

19-20 months

Average Contract Duration

22-24 months

Average Contract Duration

24-26 months


Legacy 65%

TRITON Products

34%

TRITON Suites

1%

2012

Legacy 77%

TRITON Products

23%

2011

Improved Quality of Up-for-Renewal in 2013

The improved quality of the 2013 up-for-renewal subscriptions supports more

consistent billings growth opportunity.

Legacy 52%

TRITON Products

46%

TRITON Suites

2%

2013

© 2013 Websense, Inc. 29

Value Creation Priorities

Sustainable

growth

Cash flow and

profitability

Shareholder

value

Investing in sales

capacity to grow the

install base and new logo

billings

Excess US-based free

cash flow used for share

repurchases

Sales performance

Expense management

for growth

Billings Business Productivity Capital

Allocation

Deliver shareholder value

through top-line growth


TRITON STOPS MORE THREATS. WE CAN PROVE IT.

Q1’13 Financial Results

April 25, 2013


Billings Metrics

TRITON solutions include the TRITON family of security gateways for web, email, mobile and data security (including related appliances and

technical support subscriptions), Websense Data Security Suite and cloud-based security solutions.

Software and service $74.6 $74.9 0%

Appliance $6.0 $6.9 15%

Total billings $80.6 $81.8 2%

Billings by Product Category

TRITON $49.0 $54.7 11%

Non-TRITON $31.6 $27.1 -14%

Billings by Region

U.S. $37.5 $39.0 4%

International $43.1 $42.8 -1%

Contract Metrics

Number of customer transactions >$100k 121 144 19%

Average contract duration (months) 25.5 23.3 -9%

Q1'13$ in millions, except no. of transactions, average contract duration and

percentages $ % ∆Q1'12


Revenues and Deferred Revenue

1. Excludes pre-2011 appliance revenues.

2. Previously deferred.

On January 1, 2011, Websense was required to adopt Accounting Standards Update (ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU 2009-14

(Certain Revenue Arrangements that Include Software Elements), which require the immediate recognition of appliance revenues upon sale. Prior to January 1,

2011, the company recognized revenue and costs from appliance sales ratably according to the original subscription terms.

Q1'12 $ % ∆

Software and service $82.0 $80.1 -2%

Current period appliance1 $5.8 $6.5 12%

Pre-2011 appliance2 $1.7 $0.8 -53%

Total appliance $7.5 $7.3 -3%

Total revenues $89.5 $87.5 -2%

Software and service $375.9 $390.9 4%

Appliance $8.2 $4.5 -45%

Total deferred revenue $384.1 $395.4 3%

Q1'13

Revenues ($ in millions, except percentages)

Deferred Revenue ($ in millions, except percentages)


Revenue-based Operating Models

1. Excludes pre-2011 appliance revenues.

2. Previously deferred.

On January 1, 2011, Websense was required to adopt Accounting Standards Update (ASU) 2009-13 (Multiple Deliverable Revenue Arrangements) and ASU 2009-14

(Certain Revenue Arrangements that Include Software Elements), which require the immediate recognition of appliance revenues upon sale. Prior to January 1,

2011, the company recognized revenue and costs from appliance sales ratably according to the original subscription terms.

Q1'12 Q1'13

Software and service 91.6% 91.6%

Current period appliance1 6.5% 7.4%

Pre-2011 appliance2 1.9% 0.9%

Total appliance 8.4% 8.4%

Total GAAP revenues 100.0% 100.0%

GAAP Margins

Gross profit margin % 84.2% 83.6%

Operating expenses % 72.2% 79.6%

Operating margin % 12.0% 4.0%

Non-GAAP Margins

Non-GAAP gross profit margin % 85.2% 83.9%

Non-GAAP operating expenses % 65.3% 72.5%

Non-GAAP operating margin % 19.9% 11.4%

Revenues


Billings-based Operating Models (Non-GAAP)

Operating model as a percent of billings, excluding appliance costs associated

with pre-2011 appliance sales.

1. Excludes previously deferred appliance costs of $0.8 million in Q1’12 and $0.3 million in Q1’13 associated with pre-2011 appliance sales.

Q1'12 Q1'13

Software and service billings 92.6% 91.6%

Appliance billings 7.4% 8.4%

Total billings 100.0% 100.0%

Non-GAAP Gross Profit Margin

Gross margin software and service % 86.5% 85.1%

Gross margin appliance %1 59.2% 62.1%

Billings gross margin %1 84.5% 83.2%

Non-GAAP Operating Expense and Margin

Sales and marketing % 44.4% 49.5%

Research & development % 17.4% 19.0%

General & administrative % 10.8% 9.1%

Total expenses % 72.5% 77.6%

Billings non-GAAP operating margin %1 11.9% 5.6%

Billings Mix


Balance Sheet Highlights

1. Excludes deferred revenue from pre-2011 appliance sales.

$ millions, except DSO and percentages Q1'12 Q1'13 $ Chg % Chg

Cash and receivables

Cash and cash equivalents (excluding restricted cash)

Accounts receivable $61.9 $57.9 ($4.0) -6%

Days billings outstanding (DSO) 69 days 64 days

Deferred revenues

Current deferred revenue $242.4 $242.0 ($0.4) 0%

Long term deferred revenue $141.7 $153.4 $11.7 8%

Total deferred revenue $384.1 $395.4 $11.3 3%

Deferred software and service revenue1 $375.9 $390.8 $14.9 4%

Borrowings

Balance on revolving credit facility $68.0 $68.0 $0.0 0%

Y/Y Comparison

$70.3 $83.7 $13.4 19%


Cash Flow Highlights

1. Free cash flow = cash flow from operations less purchases of property, plant, and equipment.

2. Cash taxes and interest paid are included in cash flow from operations.

$ in millions Q1'12 $ ∆

Cash flow from operations

Net income ($1.8) $2.8 $4.6

Adjustments to reconcile net income to net cash

provided by operating activities $9.9 $10.4 $0.5

Changes in operating assets and liabilities $14.3 $16.0 $1.8

Net cash provided by operating activities $22.4 $29.2 $6.9

Free cash flow

Purchase of property and equipment ($2.8) ($2.9) ($0.1)

Free cash flow 1 $19.6 $26.3 $6.8

Financing cash flows

Borrowings (repayments), net ($5.0) $0.0 $5.0

Purchase of treasury stock ($20.5) ($5.1) $15.4

Supplemental cash flow disclosures2

Cash taxes paid (net of refunds) $3.0 $1.1 ($1.9)

Interest paid $0.6 $0.5 ($0.1)

Q1'13


Q2 2013 Outlook

$ in millions, except per share and percentages

GAAP

Revenues $89.9 $86 - $89 -4% - -1%

Cash flow from operations $9.9 $9 - $11

Capital expenditures $3.3

Weighted average diluted shares 37.5

Non-GAAP

Software and service billings % 91.8% 92% - 93%

Appliance billings % 8.2% 7% - 8%

Total billings $85.4 $86.5 - $91.5 1% - 7%

Non-GAAP gross profit margin 84.6%

Non-GAAP operating margin 20.8% 9% - 12%

Billings non-GAAP operating margin %1 17.5% 9% - 14%

Diluted non-GAAP EPS $0.39 $0.17 - $0.21 -56% - -46%

Non-GAAP tax rate 19.0% 19.0%

(as of 04/25/13)

~ 83%

~ $4

~ 37

Q2'12

Actual

Q2'13 Guidance

Range Y/Y Chg


2013 Outlook

$ in millions, except per share and percentages

GAAP

Revenues $361.5 $351 - $361 -3% - 0%

Cash flow from operations $48.9 $66 - $76

Capital expenditures $12.5 $15 - $17

Weighted average diluted shares 37.5

Non-GAAP Revenue Based

Non-GAAP gross profit margin 84.6%

Non-GAAP operating margin 19.3% 11% - 13%

Diluted non-GAAP EPS $1.46 $0.78 - $0.93 -47% - -36%

Non-GAAP tax rate 19.0%

Non-GAAP Billings Based

Software and service billings % 92.3% 92% - 93%

Appliance billings % 7.7% 7% - 8%

Total billings $369.5 $374 - $394 1% - 7%

Billings operating margin 21.8% 17% - 20%

2012

Actual

2013 Guidance

(as of 04/25/13)

Range Y/Y Chg

~37

~83%

19.0%


Billings-based Operating Model

1. Based on non-GAAP expenses, excluding deferred appliance expenses associated with pre-2011 appliance sales.

2012AGuidance

2013

Billings Billings

Billings Mix

Software and services % 92.3% 92% - 93% 90% - 92%

Hardware % 7.7% 7% - 8% 7% - 9%

Sales and marketing % 38.4% 37% - 38%

Research and development % 15.8% 14% - 15%

General and administrative % 9.6% 7.5% - 8.5%

Operating expense 63.8% 65% - 67% 59% - 62%

Billings non-GAAP operating margin %1

21.8% 17% - 20% 24% - 26%

Long-term Target

Model

Billings

Costs as a % of Billings

Our long-term vision is to grow billings with margin improvement over time.


Billings-based Operating Model

1. Based on non-GAAP expenses, excluding deferred appliance expenses associated with pre-2011 appliance sales.

2012 2013 2012 2013 2012 2013 2012 2013

Total billings ($ in millions) $ 80.6 $ 81.8 $ 85.4 $ 81.5 $ 122.0

Billings Mix

Software and service 92.6% 91.6% 91.8% 91.5% 92.9%

Current period appliance 7.4% 8.4% 8.2% 8.5% 7.1%

Non-GAAP Gross Profit Margin %1

Software and service gross margin % 86.5% 85.1% 86.7% 85.4% 90.5%

Appliance gross margin % 59.2% 62.1% 61.3% 60.7% 62.9%

Billings gross margin % 84.5% 83.2% 84.6% 83.3% 88.6%

Sales and marketing % 44.4% 49.5% 39.8% 40.0% 32.3%

Research and development % 17.4% 19.0% 17.0% 18.0% 12.6%

General and administrative % 10.8% 9.1% 10.3% 10.5% 7.7%

Total expenses 72.6% 77.6% 67.1% 68.6% 52.6%

Billings non-GAAP operating margin %1

11.9% 5.6% 17.5% 14.8% 36.0%

Q1 Q2 Q3 Q4

Non-GAAP Operating Expenses and Income %


2013 Guidance Assumptions as of 04/25/13

Exchange Rates

Q1 Q2 Q3 Q4

~% Billings

(expected)

Guidance

Assumption 2012 2013 2012 2013 2012 2013 2012 2013

GBP

Euro

~12%

~12%

$1.52

$1.28

$1.59

$1.33

$1.55

$1.32

$1.58

$1.27

$1.58

$1.25

$1.61

$1.30

Currency impact on

financial results

Weaker dollar relative to the prior period increases billings and expenses; stronger dollar relative to prior

periods decreases billings and expenses.

Deferred revenue primarily denominated in US dollars.

Q213 Investor Presentation

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