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© 2013 Websense, Inc. All rights reserved. February 26, 2013 WEBSENSE FINANCIAL ANALYST DAY ©2013 Websense, Inc. Agenda TIME SPEAKER TOPIC 9:00 John McCormack, CEO Executing the TRITON Strategy 9:45 Russ Dietz, CTO Technology Leadership 10:15 break 10:30 John McCormack, CEO TRITON Security Alliance 10:45 Jason Clark, CISO Lamont Orange, Sr. Director, Information Security The Customer Perspective 11:15 Mike Newman, CFO Financial Strategy 11:45 pick up lunches 12:00 Q&A ©2013 Websense, Inc. Page 2

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Transcript of Fad final print

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© 2013 Websense, Inc. All rights reserved.

February 26, 2013

WEBSENSE FINANCIAL ANALYST DAY

©2013 Websense, Inc.

Agenda

TIME SPEAKER TOPIC

9:00 John McCormack, CEO Executing the TRITON Strategy

9:45 Russ Dietz, CTO Technology Leadership

10:15 break

10:30 John McCormack, CEO TRITON Security Alliance

10:45 Jason Clark, CISO

Lamont Orange, Sr. Director, Information Security The Customer Perspective

11:15 Mike Newman, CFO Financial Strategy

11:45 pick up lunches

12:00 Q&A

©2013 Websense, Inc. Page 2

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© 2013 Websense, Inc. All rights reserved.

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.

©2013 Websense, Inc. Page 3

Key Takeaways

• PROVE IT – We have the world’s best hybrid security

technology and we will prove it

• Invest in Sales Coverage – Sales capacity to expand

$625 million install base and win new customer

accounts

• Leverage Security Ecosystem – Expands our

addressable markets and our growth opportunities

©2013 Websense, Inc. Page 4

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© 2013 Websense, Inc. All rights reserved.

11,000 TRITON Customers…

...AND GROWING

21% TRITON GROWTH

TRITON BILLINGS $233M

©2013 Websense, Inc. Page 5

Executing the TRITON Strategy

Technology Leadership

TRITON Security Alliance

The Customer Perspective

Financial Strategy

©2013 Websense, Inc. Page 6

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© 2013 Websense, Inc. All rights reserved.

The TRITON Company Profile

11,000 TRITON CUSTOMERS NEW CUSTOMER SUCCESS

• Double-digit billings growth

each quarter of 2012

• Over 1,700 new customers in

2012

• 50%+ growth in new logo deals

over $100K in 2012

TRITON SECURITY ALLIANCE

• F5 Networks

• VMware

• Citrix

• Microsoft

• IBM

• Facebook

• And more…

RECOGNITION & ACHIEVEMENTS

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

Web Security:

2012 Overall Market Share Leader

2013 NOMINATIONS

7 Nominations: RSA 2013

7 Nominations: Infosecurity Europe 2013

Vendor with most nominations

• TRITON products represent

60% of install base value

• TRITON product retention

15-20% higher than legacy

©2013 Websense, Inc.

ADVANCED threat detection

mechanisms

COMPREHENSIVE protection of network

communication channels

& endpoints

Key Differentiators

WHY customers

choose

EASE of integration with

existing network

FLEXIBLE deployment

options

TRACK &

PROTECT data ON or OFF

network

©2013 Websense, Inc. Page 8

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© 2013 Websense, Inc. All rights reserved.

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

©2013 Websense, Inc. Page 9

The TRITON Cloud Security Advantage

TRITON Delivery Cloud

• Over 1B Web requests per day

• Processing over 1B emails/month

• Delivering over 400TB interactive

data per month; 99.99% availability

• Stopping nearly 1M malware

infections per day

THREATSEEKER Intelligence Cloud

• Analytic updates every 1.9 sec

• Over 600% increase in unique

threats detected in 2012

©2013 Websense, Inc. Page 10

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Initiatives for Sustained Growth

2014 & BEYOND

TALENT

EXECUTE 2013 PLAN

STRENGTHEN ECOSYSTEM

Sales investment

Multiple insertion points

Aggressive marketing

Customer success

Multi-year sustained

growth

Extending the

TRITON platform

Enhancing our trusted

advisor skills

Advanced training of

partner community

Create pull to amplify

our push

Strategic engagement

in the next generation

IT environment Page 11

2013

V - SERIES APPLIANCES

On-Premise TRITON

Cloud-Enabled

TRITON Legacy Filtering

TRITON ENTERPRISE

New Insertion Capability Expands Opportunity

6%

40% 32%

22% ACE-IN-THE-CLOUD

SPEAR-PHISHING APT

WSG THREAT*VISION

*Represents percent of software install base on each product segment Page 12

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$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 Addressable Market

$5.9B

$6.4B

(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

2013 2014

Investing in Field Sales and Channel Capacity

Developed Markets Growth Economies New Territories • 70 50 Enterprise Accounts • Support 20+% growth • e.g., Korea, Chile, etc.

©2013 Websense, Inc. Page 14

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© 2013 Websense, Inc. All rights reserved.

The Three Pillars of our PROVE-IT Initiative

TRITON STOPS MORE THREATS, WE CAN PROVE IT Page 15

Threats Stopped Across 2.2M Live Web Samples

Page 16

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© 2013 Websense, Inc. All rights reserved.

Threat Assessment Scope

©2013 Websense, Inc. Page 17

Executing the TRITON Strategy

Technology Leadership

TRITON Security Alliance

The Customer Perspective

Financial Strategy

©2013 Websense, Inc. Page 18

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Transformation of IT Security

DMZ

AV IDS FW PROXY URL FILTER

Storage PCs People Applications People BYOD

Storage Applications Internet

IPS NGFW

DLP WEB SECURITY

ANTI-MALWARE

Private

Cloud Public

Cloud

TODAY

Web Server

People

Data

NG

DMZ

Consumer

Internet

TOMORROW

OU

TS

IDE

IN

SID

E

Verizon Breach Report - Compromised Assets Involving IP Theft

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© 2013 Websense, Inc. All rights reserved.

TRITON STOPS MORE THREATS. WE CAN PROVE IT.

Technology Leadership

Russ Dietz, CTO

Page 21

Infiltration is an Architectural Problem

EMAIL

GATEWAY

PROXY ANTI

MALWARE

ANTI

VIRUS

DATA LOSS

PREVENTION

©2013 Websense, Inc. Page 22

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PERSISTENT - Threat Protection Architecture

ADVANCED

PERSISTENT

THREATS

Threats

Data

Web

Message

©2013 Websense, Inc.

Complete Threat Protection – TRITON Architecture

GLOBAL THREAT

AWARENESS

REAL-TIME

THREAT DETECTION

PROTECTION &

DEPLOYMENT

PERSISTENT

VISIBILITY

©2013 Websense, Inc. Page 24

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THREATSEEKER – Detection Evolution

THREAT AWARENESS & EDUCATION

ACTIVE PROTECTION

APT MITIGATION

GLOBAL THREAT

AWARENESS

REAL-TIME

THREAT DETECTION

©2013 Websense, Inc. Page 25

TRITON Architecture – Protection Evolution

ENDPOINT PROTECTION

• Any OS

• Any Browser

• Anywhere

MOBILE SECURITY

ADVANCED THREAT DEFENSES PROTECTION &

DEPLOYMENT

PERSISTENT

VISIBILITY

OVERLAYS CURRENT

DEFENSES

©2013 Websense, Inc. Page 26

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© 2013 Websense, Inc. All rights reserved.

Full content analysis Web, Message & Data

Encrypted visibility & prevent criminal encryption

Safe & Scalable content sandboxing

Recognize legitimate data

Validate Identities Double check TRUST

Block known compromised… Evolve…

beyond attacks

Unique, Patented, TRITON Architecture…

ADVANCED PERSISTENT THREATS

BLOCKED

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Impact on Real Protection – Today & Going Forward…

INFORMATION TECHNOLOGY & ATTACK SURFACE LANDSCAPES

EVOLVING

CYBER WARFARE ADVANCING

TECHNOLOGY

THREATS & PREDATORS ARE LONG-TERM & BUSINESS DRIVEN

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© 2013 Websense, Inc. All rights reserved.

TRITON & THREATSEEKER MOMENTUM

UNIQUE INTELLECTUAL PROPERTY

INDUSTRY LEADING PROGRESS

THE FUTURE… TODAY

©2013 Websense, Inc. Page 29

Executing the TRITON Strategy

Technology Leadership

TRITON Security Alliance

The Customer Perspective

Financial Strategy

©2013 Websense, Inc. Page 30

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Web

Websense – F5 Strategic Partnership

COMMON SECURITY SERVICES & POLICY MANAGEMENT

2014

TODAY 2014

People

People

People

Web

Web Application

Server Farm

Page 31

TRITON Security Alliance

• IMPERVA

• MICROSOFT

• HP ARCSIGHT

• IBM QRADAR

• ARUBA

• JUNIPER NETWORKS

• AEROHIVE

• FACEBOOK

• WORDPRESS

• F5 NETWORKS

• VMWARE Page 32

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© 2013 Websense, Inc. All rights reserved.

Executing the TRITON Strategy

Technology Leadership

TRITON Security Alliance

The Customer Perspective

Financial Strategy

©2013 Websense, Inc. Page 33

Needs Driving the Demand for the Best Security

©2013 Websense, Inc. Page 34

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35% 65%

Didn’t Give CredentialsGave Credentials

0% 25% 50% 75% 100%

Location

Outside CompanyInside Company

Real World Phishing Test – Typical Results

15% 85%

Didn’t Click LinkClicked Link

29% 71%

Not Opened EmailOpened Email

• CEO and

executive teams

are being

targeted

• Spear-Phishing

is the most

common tactic of

the bad guys to

get a door open

inside a company

• Most companies

do not have a

defense today

Real Example of Spear-Phishing in Action

URL SANDBOXED:

http://webdefence.global.blackspider.com/urlwrap/?q=AXicY

3RmuMjNwHBHhYGhKKfS0CJJr7ioTC83MTMnOT-

vpCg_Ry85P5ehyNDTLTArOMrA2NDSwoAhOTknMy_VZ

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Spear-Phishing Attempt Blocked

Only way to successfully

protect is to leverage the

cloud to inspect /sandbox

the dangers in real-time

when the email recipient

clicks on the malicious link

©2013 Websense, Inc. Page 37

Innovative Approach in Reaching Customers

Innovating how we reach / engage with CISOs

• Building trusted advisor relationships

• Driving community best practices

Driving Results

• Growth of $100K+ deals

• Turning CISOs into evangelists

Websense CISO Team

100+ Years of Experience

Websense

Sales Force Global CISOs

©2013 Websense, Inc. Page 38

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© 2013 Websense, Inc. All rights reserved.

Ways We Prove It

©2013 Websense, Inc. Page 39

Lamont Orange – CISO Charter Communications

• Uncovered compromised

network

• Significant operational

efficiencies realized

• Strong vision for current

and future security needs

©2013 Websense, Inc. Page 40

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© 2013 Websense, Inc. All rights reserved.

Future Perspective

• A strategic tool for CISO

• Trusted advisor for security

intelligence and analysis

security

• Thought leader

(proven technology, process

and strategies)

©2013 Websense, Inc. Page 41

Executing the TRITON Strategy

Technology Leadership

TRITON Security Alliance

The Customer Perspective

Financial Strategy

©2013 Websense, Inc. Page 42

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© 2013 Websense, Inc. All rights reserved.

TRITON STOPS MORE THREATS. WE CAN PROVE IT.

Financial Strategy

Mike Newman, CFO

Page 43

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.

©2013 Websense, Inc. Page 44

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© 2013 Websense, Inc. All rights reserved.

ACE-in-the-Cloud

Spear-Phishing

APT

WSG

Threat*Vision

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

©2013 Websense, Inc. Page 45

TRITON Cloud Opportunity

Addition of Cloud capabilities provides upgrade value within TRITON product set.

Cloud-Enabled TRITON

Web Security Gateway Anywhere

Email Security Gateway Anywhere

Cloud Web Security

Cloud Email Security

On-Premise TRITON

Web Security Gateway

Email Security Gateway

Data Security

~ $200M

~ $135M

~$70M Appliance Install Base

TRITON Products

~$335M Software Install Base

©2013 Websense, Inc. Page 46

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© 2013 Websense, Inc. All rights reserved.

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

©2013 Websense, Inc. Page 47

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)

©2013 Websense, Inc. Page 48

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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. Page 49

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 ©2013 Websense, Inc. Page 50

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© 2013 Websense, Inc. All rights reserved.

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

©2013 Websense, Inc. Page 51

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

Se

qu

en

tial G

row

th

Millio

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.

©2013 Websense, Inc. Page 52

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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

Billings

YEAR 3

Billings

Fully

Loaded

Costs

Fully

Loaded

Costs

Fully

Loaded

Costs

REVENUE

©2013 Websense, Inc. Page 53

$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

©2013 Websense, Inc. Page 54

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Operating Model Trends

2012 2013 Target

Billings TRITON 63% TRITON ~70% TRITON >80%

Billings-based operating

margins 21.8% 17-20% 24-26%

Revenue-based operating

margins (Non-GAAP) 19.3% 11-13% >20%

Operating cash flow $48.9M $66-76M Increasing with billings-based

EBITDA

Billings operating margins will improve as the sales expansion generates billings growth.

©2013 Websense, Inc. Page 55

Billing-Based Operating Model

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

2012A

Guidance

2013

Long Term

Target Model

Mix as a % of Billings

Software and Services % 92% 92-93% 90-92%

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

Costs as a % of Billings

Software COGS (incl OEM) 12.4% 11-12%

Hardware COGS 38.8% 44-45%

Total COGS 14.4% 15-16% 14-15%

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%

Operating Margin 21.8% 17-20% 24-26%

©2013 Websense, Inc. Page 56

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© 2013 Websense, Inc. All rights reserved.

Key Takeaways

• PROVE IT – We have the world’s best hybrid security

technology and we will prove it

• Invest in Sales Coverage – Sales capacity to expand

$625 million install base and win new customer

accounts

• Leverage Security Ecosystem – Expands our

addressable markets and our growth opportunities

©2013 Websense, Inc. Page 57

Q&A

Page 58