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Company Update: Forescout Enters Its Next Phase of Evolution

Forescout | October 27, 2022

Over the last two years since going private, Forescout has undergone a significant transformation. We are extremely proud of our 20+ year heritage as the world’s leading network access control provider, yet we knew that we had untapped potential. Decades of deep analysis of network admission protocols and requirements, the world’s largest repository of device classification data and a privileged position in the networks of Fortune 100 and government agencies, this was our starting point! As our customers’ needs evolved, we saw: the opportunity to deliver greater value and revolutionize the power of our data; the increasing need for real-time and continuous compliance to security controls; and the important need for our customers to automate cybersecurity policy enforcement and response to anomalies.

In March 2021, we asked Wael Mohamed, a cybersecurity veteran and investor recognized for his expertise in cloud security, M&A and global operations, to take the helm. Under his leadership, we have delivered several substantial technology upgrades, bringing the future management layer of our business to the cloud, and, most importantly, built a best-in-category device cloud with enhanced asset classification that creates an advanced warning network effect for our global customers, significantly enhancing our customer’s security posture. This has profound value and delivers massive improvements for our customers’ cyber defense.

Our transformation has not only been about technology. We were also modernizing our business operations. With the patience and support of our global customers and channel partners, we have largely completed a transition from a perpetual to recurring revenue model. This transition provides greater business visibility and sets us up well for the future, but we recognize it was not an easy transition. A ratable revenue model is table-stakes for all technology companies and we are proud of the hard work that was done to enable this outcome. We thank our customers for their loyalty and fortitude throughout this journey.

Some details on this important transition are as follows: before we went private, in 2019 49% of Forescout annual revenue was recurring in nature and we were not profitable. In 2022, we are on track to achieve 80% recurring revenue with accelerating annual growth, and we are profitable. We now have a modern, recurring revenue, growing, profitable, highly-visible business that is a critical part of our customer’s security platform managing network access for IT and IoT resources.

Forescout has never been more relevant than it is today in this perimeter-less world.

Pre- and post-connect network access control is key to the success of all other security controls. Continuous assessment of an asset’s compliance to policies, regulations and desired behaviors – particularly for assets where you can’t install security software or agents – is essential in this perimeter-less world. Forescout enables our customers to achieve a highly accurate and continuously updated asset inventory, at massive scale, through the most extensive and versatile techniques on the market. Our customers leverage these techniques to deeply analyze every network asset, instrumenting the network with active probes, passive sensors and the power of Forescout’s global device cloud. Security automation is a cornerstone of every security framework, Forescout is the leader in this category of cybersecurity around compliance and we will extend these capabilities to detection and response adjacencies.

Growth and development

In addition to the advancements we made organically in engineering and product development, we also successfully completed and are integrating two acquisitions that drive increased value for our customers. With the first acquisition of CyberMDX, announced in January 2022, we have fortified our leadership in the health care industry, increasing our ability to categorize and protect medical devices across the attack surface of the critical infrastructure of hospitals.

Our second acquisition from June 2022 of Cysiv has us very excited about our ability to deliver threat detection and response capabilities that will be second to none. With Cysiv, we enable threat detection and response for un-agentable and unmanageable devices on the corporate network. Our future roadmap in this area is robust and we look forward to bringing to life one of the most detailed and robust asset datasets in the industry to power CMDBs and SIEM tools with Forescout-discovered device data across our expansive ecosystem of technology vendors.

Tying it all together, we are pleased to hear the excitement from our customers and early adopters about our upcoming product releases. If we had one ask to our customers, it would be to get them to upgrade to the latest software versions of our portfolio as quickly as possible. As we continue to win new customers — brand names with global scale and reach — we are seeing the payoff of our development efforts and adoption projects in rapid, effective deployments.

The way forward

To continue the transformation of our organization, Wael Mohamed and the board agreed it’s the right time to start searching for a new leader to execute on what we started. Wael will be transitioning from his role as CEO to be a member of the Forescout Board of Directors and will continue to be an active investor and advisor in the company moving forward. All members of the Board and the wider leadership team at Forescout will be helping with the transition as we take the time to find the right successor for the next phase in our journey.

“When the opportunity arose to work side by side with Greg and the Advent and Crosspoint teams to help transform a good company like Forescout into a great cybersecurity company, I couldn’t pass it up and I committed to phase one of the journey. I am grateful to have been able to help the company navigate that difficult phase and prepare for a successful future. I look forward to partnering with the board and management team to fortify our company with a new, long-term leader from our industry at the helm.”
—Wael Mohamed, CEO, Forescout Technologies

“It has been a great honor to work with Wael and I am delighted he will continue to support us as we move to this next phase of our company growth. We have an incredible leadership team and dedicated, experienced and passionate employees who are driving real change for customers and partners around the world. I look forward to this next exciting stage in Forescout’s journey.”
—Greg Clark, Chairman of the Board, Forescout Technologies

Forescout, along with the rest of the cybersecurity and tech industry, must navigate an unsteady macroeconomic climate. The implications of this are just beginning to impact organizations, slowing sales and driving conservative behaviors. The full extent of the impact is unknown, and we must prepare for challenging operating conditions to exist in 2023 and potentially into 2024. Though we are in a strong position, like many companies in the technology industry today, we continue to optimize our cost base to prepare for difficult economic times over the next period to ensure the future success of Forescout. With a focus on executing our strategy, leveraging our critical position in the cybersecurity industry, and serving customers, along with operational discipline and efficiency, Forescout will weather the storm and create a company of great value.

We are thankful for the team and talent that has brought us to where we are today and we are excited about the opportunity ahead of us.

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