Attached files

file filename
8-K - EARNINGS RELEASE 8-K - IMPERVA INCimpv-8k_20170504.htm

Exhibit 99.1

Imperva Announces First Quarter 2017 Financial Results

Total revenue of $72.3 million, up 21% year‑over‑year

Services revenue growth of 35% was driven by the 64% year-over-year increase in subscription revenue

Combined product and subscription revenue increased 25% year‑over‑year

GAAP operating loss of $11.7 million; Non-GAAP operating income of $3.1 million

Generated free cash flow of $16.5 million

Increasing FY17 revenue and profitability guidance

 

 

Redwood Shores, Calif. – May 4, 2017Imperva, Inc. (NASDAQ: IMPV), committed to protecting business‑critical data and applications in the cloud and on‑premises, today announced financial results for the first quarter ended March 31, 2017.

 

“Our first quarter results exceeded our guidance, and were primarily driven by the ongoing demand of our best of breed application security and data security platform,” stated Anthony Bettencourt, President and Chief Executive Officer of Imperva. “During the quarter, we were particularly pleased with our ability to generate record free cash flow, as well as improved profitability highlighting our continued commitment to growth, operational efficiency and cost controls. Looking forward, the underlying strength of Imperva’s technology positions the company to gain market share globally.”

 

First Quarter 2017 Financial Highlights

 

Revenue: Total revenue for the first quarter of 2017 was $72.3 million, an increase of 21% compared to $59.8 million in the first quarter of 2016. Within total revenue, product revenue was $19.6 million, compared to $20.8 million in the same period last year. Services revenue increased 35% year‑over‑year to $52.7 million and accounted for 73% of total revenue. Within services revenue, overall subscription revenue grew 64% to $27.3 million, compared to the first quarter of 2016. Combined product and subscription revenue was $46.8 million, an increase of 25% compared to $37.5 million in the first quarter of 2016.

 

Operating Profit (Loss): GAAP operating loss was $(11.7) million for the first quarter compared to a loss of $(24.2) million during the first quarter in 2016. NonGAAP operating income for the first quarter was $3.1 million, compared to a non-GAAP operating loss of $(8.2) million during the same period in 2016.

 

Net Profit (Loss): GAAP net income for the first quarter was $23.1 million, or $0.68 per share based on 33.8 million weighted average diluted shares outstanding. This compares to net loss of $(24.0) million, or $(0.75) per share based on 31.8 million weighted average shares outstanding in the first quarter of 2016. GAAP net income during the first quarter of 2017 included a $35.9 million gain related to the sale of Skyfence.

NonGAAP net income for the first quarter of 2017 was $3.0 million, or $0.09 per share based on 33.8 million weighted average diluted shares outstanding and excluding the gain related to the sale of Skyfence. This compares to a nonGAAP net loss of $(8.0) million,


or $(0.25) per share based on 31.8 million weighted average shares outstanding in the first quarter of 2016.

 

A reconciliation of GAAP to non‑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.”

 

Balance Sheet and Cash Flow: As of March 31, 2017, Imperva had cash, cash equivalents and investments of $312.8 million and no debt. Total deferred revenue was $125.1 million compared to $108.1 million as of March 31, 2016. Short‑term deferred revenue of $101.0 million increased 23% compared to $82.1 million as of March 31, 2016.

 

The company generated $18.5 million in net cash from operations for the first quarter of 2017, compared with generating $6.0 million in the first quarter of 2016. The company generated $16.5 million in free cash flow (cash flows from operating activities, less capital expenditures) for the quarter compared to generating $2.6 million during the first quarter of 2016.

 

First Quarter Operating Highlights

 

During the first quarter of 2017, Imperva booked 142 deals with a value over $100,000, an increase of 20% compared to 118 in the first quarter of 2016.

 

During the first quarter of 2017, Imperva added 143 new customers compared to 163 during the first quarter of 2016. Imperva now has over 5,400 customers in more than 100 countries around the world.

 

Imperva announced Imperva FlexProtect to give customers access to both Imperva SecureSphere and Imperva Incapsula within a single subscription agreement.

 

Imperva announced that its Web Application Firewall (WAF) solutions, SecureSphere WAF and Incapsula WAF, won the Trust Award for best Web Application Solutions at the SC Awards 2017.

 

Imperva announced the release of Imperva SecureSphere File Firewall v12 with real-time deception technology designed to detect ransomware and to prevent it from encrypting enterprise data.

Business Outlook

The following forward‑looking statements reflect expectations as of May 4, 2017. Results may be materially different and could be affected by the factors detailed in this press release and in recent Imperva SEC filings.

Second Quarter Expectations – Ending June 30, 2017

Imperva expects total revenue for the second quarter of 2017 to be in the range of $73.0 million to $75.0 million. The company expects in the second quarter of 2017 non‑GAAP gross margins of approximately 80%. Further, Imperva expects in the second quarter of 2017 non‑GAAP operating income to be in the range of $2.0 million to $2.6 million and non‑GAAP net income to be in the


range of $1.4 million to $2.0 million, or $0.04 to $0.06 per share based on approximately 34.2 million weighted diluted average shares.

Full Year Expectations –Ending December 31, 2017

Imperva expects total revenue for 2017 to be in the range of $319.8 million to $322.8 million. Imperva expects 2017 non‑GAAP gross margins of approximately 80%. Further, the company expects 2017 non‑GAAP operating income to be in the range of $21.6 million to $23.2 million and non‑GAAP net income to be in the range of $14.5 million to $16.1 million, or $0.42 to $0.47 per share based on approximately 34.5 million weighted average diluted shares. Imperva expects capital expenditures for the full year to be in the range of $15.0 million to $20.0 million. Finally, the company expects to generate positive cash flows from operations in 2017.

No reconciliation of forward-looking GAAP to non-GAAP financial measures has been provided in this press release. An explanation is included below under the heading “Non GAAP Financial Measures.”

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 companys financial results for the first quarter ended March 31, 2017. To access the conference call, dial (888) 240-9352 for the U.S. or Canada or (913) 312-0940 for international callers with conference ID # 2296737. The webcast will be available live on the Investors section of the company’s website at www.imperva.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 May 4, 2017 until 8:59 p.m. Pacific Time on May 18, 2017, by dialing (844) 512-2921 for the U.S. or Canada or (412) 317-6671 for international callers, and entering passcode # 2296737. In addition, an archived webcast will be available on the Investors section of the company’s website at www.imperva.com.

NonGAAP 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 nonGAAP measures of financial performance. The presentation of these nonGAAP 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 nonGAAP financial measures used by other companies. In addition, these nonGAAP 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 nonGAAP financial measures used by Imperva include historical and forward-looking nonGAAP operating income (loss), non-GAAP net income (loss) and nonGAAP basic and diluted loss per share and forward-looking non-GAAP gross margin. These nonGAAP financial measures exclude stockbased compensation, acquisition- and disposition-related expenses, amortization of purchased intangibles and restructuring costs 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 historical nonGAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled “Use of NonGAAP Financial Information” as well as the related tables that precede it. Imperva may consider whether


other significant nonrecurring items that arise in the future should also be excluded in calculating the nonGAAP 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 nonGAAP financial measures in assessing operating results of Imperva, as well as when planning, forecasting and analyzing future periods. These nonGAAP financial measures also facilitate comparisons of the performance of Imperva to prior periods.

Imperva does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to unavailability of information needed to calculate reconciling items and due to variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, Imperva does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for items such as stockbased compensation, acquisition- and disposition-related expenses and restructuring costs, which are inherently difficult to predict with reasonable accuracy. Stock-based compensation expense, for example, is difficult to estimate because it depends on the company’s future hiring and retention needs, as well as the future fair market value of the company’s common stock, all of which are difficult to predict and subject to constant change. In addition, for purposes of setting annual guidance, it would be difficult to quantify stock-based compensation expense for the year with reasonable accuracy in the current quarter. As a result, the company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the company’s outlook.

Forward Looking Statements

This press release contains forwardlooking statements, including without limitation those regarding the Imperva “Business Outlook” (“Second Quarter Expectations – Ending June 30, 2017” and “Full Year Expectations – Ending December 31, 2017”); the company’s intentions regarding growth, operational efficiency and cost controls; and the company’s beliefs and expectations regarding the continuing strength of its technology and ability to gain market share globally. 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: 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 or customer perceptions about the necessity or reliability of solutions such as ours; the company’s sales expectations for large customers may not materialize in a particular quarter or at all; the company may not timely introduce new products or services or versions of its products or services and such products or services may not be accepted by the market or may have defects, errors, outages or failures; 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; existing customers may focus their additional cyber security spending on other technologies or addressing other risks; the company’s growth may be lower than anticipated; the markets that the company addresses may not grow as anticipated; the company may not be able to achieve the anticipated operational efficiencies and other benefits of the restructuring initiative; and other risks


detailed under the caption Risk Factors in the companys Form 10K filed with the Securities and Exchange Commission, or the SEC, on February 27, 2017 and the companys other SEC filings. You can obtain copies of the companys SEC filings on the SECs 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 forwardlooking statements, whether as a result of new information, new developments or otherwise.

About Imperva

Imperva® (NASDAQ: IMPV) is a leading provider of cyber security solutions that protect business-critical data and applications. The company’s SecureSphere, CounterBreach, and Incapsula 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 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.

 

© 2017 Imperva, Inc. All rights reserved. Imperva, the Imperva logo, SecureSphere, CounterBreach, Incapsula, and Camouflage along with its design are trademarks of Imperva, Inc. and its subsidiaries.

###


IMPERVA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(On a GAAP basis)

(In thousands, except per share data)

(Unaudited)

 

 

 

Three months ended

March 31,

 

 

 

2017

 

 

2016

 

Net revenue:

 

 

 

 

 

 

 

 

Products and license

 

$

19,578

 

 

$

20,841

 

Services

 

 

52,730

 

 

 

38,932

 

Total net revenue

 

 

72,308

 

 

 

59,773

 

 

 

 

 

 

 

 

 

 

Cost of revenue(1):

 

 

 

 

 

 

 

 

Products and license

 

 

1,932

 

 

 

2,184

 

Services

 

 

13,020

 

 

 

10,784

 

Total cost of revenue

 

 

14,952

 

 

 

12,968

 

Gross profit

 

 

57,356

 

 

 

46,805

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

17,450

 

 

 

16,019

 

Sales and marketing

 

 

37,124

 

 

 

40,740

 

General and administrative (2)

 

 

13,536

 

 

 

13,886

 

Restructuring

 

 

667

 

 

 

-

 

Amortization of acquired intangible assets

 

 

317

 

 

 

352

 

Total operating expenses

 

 

69,094

 

 

 

70,997

 

Loss from operations

 

 

(11,738

)

 

 

(24,192

)

Gain on sale of business

 

 

35,871

 

 

 

-

 

Other expense, net

 

 

(92

)

 

 

83

 

Income (Loss) before provision for income taxes

 

 

24,041

 

 

 

(24,109

)

Provision for income taxes (2)

 

 

958

 

 

 

(102

)

Net income (loss)

 

$

23,083

 

 

$

(24,007

)

Net income (loss) per share of common stock stockholders, basic

 

$

0.70

 

 

$

(0.75

)

Net income (loss) per share of common stock stockholders, diluted

 

$

0.68

 

 

$

(0.75

)

Shares used in computing net loss per share of common stock, basic

 

 

33,207

 

 

 

31,843

 

Shares used in computing net loss per share of common stock, diluted

 

 

33,771

 

 

 

31,843

 

 

 

 

 

 

 

 

 

 

(1) Stock-based compensation expense as included in above:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

1,269

 

 

 

1,393

 

Research and development

 

 

4,768

 

 

 

4,249

 

Sales and marketing

 

 

3,465

 

 

 

5,094

 

General and administrative

 

 

3,432

 

 

 

4,919

 

     Total stock-based compensation expense

 

$

12,934

 

 

$

15,655

 

 

 

 

 

 

 

 

 

 

(2) Acquisition- and disposition-related expense as included in above:

 

 

 

 

 

 

 

 

General and administrative

 

 

925

 

 

 

0

 

Provision for income taxes on sale of business

 

 

901

 

 

 

0

 

     Total acquisition- and disposition-related expense

 

$

1,826

 

 

$

 

 

 



IMPERVA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

March 31,

2017

 

 

December 31,

2016

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

136,318

 

 

$

107,343

 

Short-term investments

 

 

176,494

 

 

 

153,749

 

Restricted cash

 

 

72

 

 

 

68

 

Accounts receivable, net

 

 

44,882

 

 

 

62,571

 

Inventory

 

 

496

 

 

 

590

 

Prepaid expenses and other current assets

 

 

10,804

 

 

 

7,922

 

Total current assets

 

 

369,066

 

 

 

332,243

 

Property and equipment, net

 

 

22,465

 

 

 

21,496

 

Goodwill

 

 

36,389

 

 

 

37,448

 

Acquired intangible assets, net

 

 

3,581

 

 

 

8,393

 

Severance pay fund

 

 

5,773

 

 

 

5,070

 

Restricted cash

 

 

1,898

 

 

 

1,884

 

Deferred tax assets

 

 

1,460

 

 

 

1,220

 

Other assets

 

 

6,094

 

 

 

1,065

 

TOTAL ASSETS

 

$

446,726

 

 

$

408,819

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,047

 

 

$

5,529

 

Accrued compensation and benefits

 

 

19,981

 

 

 

20,840

 

Accrued and other current liabilities

 

 

9,979

 

 

 

7,683

 

Deferred revenue

 

 

100,971

 

 

 

104,042

 

Total current liabilities

 

 

134,978

 

 

 

138,094

 

Other liabilities

 

 

7,932

 

 

 

6,637

 

Deferred revenue

 

 

24,178

 

 

 

26,429

 

Accrued severance pay

 

 

6,694

 

 

 

5,696

 

TOTAL LIABILITIES

 

 

173,782

 

 

 

176,856

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

528,985

 

 

 

510,257

 

Accumulated deficit

 

 

(256,323

)

 

 

(276,819

)

Accumulated other comprehensive loss

 

 

279

 

 

 

(1,478

)

TOTAL STOCKHOLDERS' EQUITY

 

 

272,944

 

 

 

231,963

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

446,726

 

 

$

408,819

 

 



IMPERVA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three months ended March 31

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

23,083

 

 

$

(24,007

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,376

 

 

 

1,308

 

Stock-based compensation

 

 

13,610

 

 

 

15,655

 

Amortization of acquired intangibles

 

 

317

 

 

 

352

 

Gain on disposal of business

 

 

(35,871

)

 

 

-

 

Amortization of premiums/accretion of discounts on short-term investments

 

 

(91

)

 

 

136

 

Excess tax benefits from share-based compensation

 

 

-

 

 

 

4

 

Other

 

 

(646

)

 

 

(172

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

17,689

 

 

 

17,481

 

Inventory

 

 

110

 

 

 

(45

)

Prepaid expenses and other assets

 

 

(910

)

 

 

(809

)

Accounts payable

 

 

(804

)

 

 

(2,302

)

Accrued compensation and benefits

 

 

2,265

 

 

 

(3,064

)

Accrued and other liabilities

 

 

1,169

 

 

 

(169

)

Severance pay (net)

 

 

295

 

 

 

311

 

Deferred revenue

 

 

(3,869

)

 

 

1,398

 

Deferred tax assets

 

 

(227

)

 

 

(95

)

Net cash provided by operating activities

 

 

18,496

 

 

 

5,982

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sales/maturities of short-term investments

 

 

28,521

 

 

 

22,909

 

Proceeds from sale of assets

 

 

35,015

 

 

 

-

 

Purchase of short-term investments

 

 

(51,130

)

 

 

(26,285

)

Net purchases of property and equipment

 

 

(1,949

)

 

 

(3,426

)

Change in restricted cash

 

 

(18

)

 

 

10

 

Net cash provided by (used in) investing activities

 

 

10,439

 

 

 

(6,792

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Settlement of holdback liability

 

 

-

 

 

 

(7,157

)

Proceeds from issuance of common stock, net of repurchases

 

 

4,026

 

 

 

590

 

Shares withheld for tax withholding on vesting of restricted stock units

 

 

(4,632

)

 

 

(2,352

)

Excess tax benefits from share-based compensation

 

 

-

 

 

 

(4

)

Net cash used by financing activities

 

 

(606

)

 

 

(8,923

)

Effect of exchange rate changes on cash and cash equivalents

 

 

646

 

 

 

172

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

28,975

 

 

 

(9,561

)

CASH AND CASH EQUIVALENTS - Beginning of period

 

 

107,343

 

 

 

168,252

 

CASH AND CASH EQUIVALENTS - End of period

 

$

136,318

 

 

$

158,691

 

 


IMPERVA, INC. AND SUBSIDIARIES

(Reconciliation of GAAP to Non-GAAP Measures)

(In thousands, except per share amounts)

(Unaudited)

 

 

2017

 

 

2016

 

GAAP operating loss

$

(11,738

)

 

 

(24,192

)

Plus:

 

 

 

 

 

 

 

      Stock-based compensation expense

 

12,934

 

 

 

15,655

 

      Acquisition- and disposition-related expense

 

925

 

 

 

-

 

      Restructuring

 

667

 

 

 

-

 

      Amortization of purchased intangibles

 

317

 

 

 

352

 

Non-GAAP operating income (loss)

$

3,105

 

 

 

(8,185

)

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Imperva, Inc. stockholders

$

23,083

 

 

 

(24,007

)

Plus:

 

 

 

 

 

 

 

      Stock-based compensation expense

 

12,934

 

 

 

15,655

 

      Acquisition- and disposition-related expense

 

925

 

 

 

-

 

      Restructuring

 

667

 

 

 

-

 

      Amortization of purchased intangibles

 

317

 

 

 

352

 

      Gain on sale of business

 

(35,871

)

 

 

-

 

      Provision for income taxes on sale of business

 

901

 

 

 

-

 

Non-GAAP net income (loss)

$

2,956

 

 

 

(8,000

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

33,207

 

 

 

31,843

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, diluted

 

33,771

 

 

 

31,843

 

 

 

 

 

 

 

 

 

Non-GAAP net income (loss), basic

$

0.09

 

 

$

(0.25

)

 

 

 

 

 

 

 

 

Non-GAAP net income (loss), diluted

$

0.09

 

 

$

(0.25

)

 

IMPERVA, INC. AND SUBSIDIARIES

(Reconciliation of Free Cash Flow)

(In thousands)

(Unaudited)

 

 

Three months ended March 31

 

 

2016

 

 

2015

 

Net cash provided by operating activities

$

18,496

 

 

$

5,982

 

Less:

 

 

 

 

 

 

 

      Net purchases of property and equipment

 

(1,949

)

 

 

(3,426

)

Total free cash generated

$

16,547

 

 

$

2,556

 

 



Use of NonGAAP 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 nonGAAP financial measures, Imperva believes it is appropriate to exclude or give effect to certain items for the following reasons:

StockBased Compensation. When evaluating the performance of its consolidated results, Imperva does not consider stockbased compensation expense. Likewise, the Imperva management team excludes stockbased compensation expense from its operating plans. In contrast, the Imperva management team is held accountable for cashbased 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 its nonGAAP 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 supplemental non‑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, a non‑GAAP financial measure that excludes the amortization of acquired intangibles.

 

Acquisition and Disposition-related Charges; Gain on Sale of Business; and Provision for Income Taxes on Sale of Business. Imperva completed an acquisition during the fourth quarter of 2016 and completed the sale of the Skyfence business during the first quarter of 2017. Imperva incurred legal, accounting, advisory and other transaction-related expense in connection with these transactions. Imperva has excluded these acquisition- and disposition-related expenses from its non-GAAP financial measures because they are not representative of ongoing operating costs.


Imperva also has 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 a supplemental 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.

Restructuring Charges. Imperva undertook a restructuring plan in the fourth quarter of 2016 and recorded additional 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. In contrast to cost-reduction initiatives that are part of ongoing operations, the restructuring plan resulted in one-time severance costs that are not representative of ongoing operating costs. Because the restructuring plan was incremental to the operating activities of Imperva’s core business, Imperva has excluded the expense associated with the restructuring from its non-GAAP financial measures to facilitate the comparison of current period results with the results from prior periods.

 

Investor Relations Contact Information

Kim Janssen

650.832.6897

kim.janssen@imperva.com

 

Seth Potter

646.277.1230

IR@imperva.com

Seth.Potter@icrinc.com