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Proofpoint Inc. reported solid results for third-quarter 2018 wherein both the top and the bottom lines came in better than expected. This apart, Proofpoint witnessed significant year-over-year improvement on both counts.
The company reported non-GAAP earnings of 40 cents, recording an impressive year-over-year jump of 60%. Earnings also outpaced the Zacks Consensus Estimate of 28 cents.
Proofpoint reported total revenues of $184.2 million, up 37% year over year, mainly driven by customer additions, improved add-on-sales and strong renewal rate. The company’s revenues also surpassed the Zacks Consensus Estimate of $181.7 million.
Top-Line Details
Total billings during the quarter climbed 33% year over year to $221.4 million. Also, renewal rates remained well more than 90% during the reported quarter.
Subscription revenues (98.5% of total revenues) during the quarter came in at $181.5 million, up 39.1% from the year-ago quarter. Hardware and services revenues (1.5%) declined 1.7% year over year to $2.7 million.
On the basis of solutions, revenues from Advanced Threat (75%), which includes Targeted Attack Protection or TAP offering, grew 39% from the year-ago quarter and Compliance revenues (25%) rose 32% year over year.
The company expects Compliance revenues to keep up its momentum as the bigger archiving deals in the pipeline continue to mature.
The company’s Targeted Attack Protection or TAP offering continues to be a key growth driver, which is evident from the company’s notable wins this quarter.
Management notes that robust demand for the company’s next-generation SaaS-based security and compliance platform, ongoing transition to the cloud, particularly to Microsoft’s (MSFT - Free Report) Office 365 and the rapidly growing threat landscape to be the key growth drivers.
Management mentioned that the new offerings have expanded the total addressable market by more than $5 billion and are proving to be a key growth catalyst. Emerging products, which contributed more than 30% of the total new and add-on businesses closed during the quarter, continue to surpass the rest of its product portfolio. The growth was led by strong demand for Email Fraud Defense and Threat Response.
Moreover, Proofpoint's Archiving solution also demonstrated strong growth this quarter, driven by customer interest and new features such as supervision, e-discovery analytics and Analytic Visualization, in sectors particularly financial services and healthcare.
The company is also witnessing good demand for CAD, CASB and internal mail defense offering, which is attributed to an increasing number of Office 365 account takeovers. The company’s browser isolation solution is also doing well, which is evident from the several wins in the quarter.
Additionally, partnerships with Palo Alto Networks (PANW - Free Report) , CyberArk (CYBR - Free Report) , Imperva and Splunk are driving key wins for the company.
The company extended its presence in new markets such as Italy, the Nordics, and Spain. Notably, revenues from international business, representing 19% of total revenues, grew 51% year over year.
However, the company expects growth in the international market to decline going forward as growth in international sales capacity has been lower than expected over the course of the year.
Proofpoint, Inc. Price, Consensus and EPS Surprise
Non-GAAP gross profit advanced 37.2% from the year-ago quarter to $144.3 million, primarily driven by higher sales. Non-GAAP gross margin improved 20 basis points (bps) year over year to 78.3% on the back of strong revenues.
Total non-GAAP operating expenses flared up 36% year over year to $121.7 million, while as a percentage of revenues, it declined 30 bps to 66.1%. Slower hiring trends in international operations and lower R&D spending coupled with the exclusion of certain costs associated with the decommissioning of legacy SaaS cloud system drove results.
Proofpoint’s non-GAAP operating income for the quarter increased 43.7% to $22.7 million. Non-GAAP operating margin expanded 60 bps to 12.3%.
Balance Sheet & Cash Flow
Proofpoint exited the quarter with cash and cash equivalents, and short-term investments of approximately $190.4 million compared with the previous-quarter balance of $134.1 million.
During the reported quarter, the company generated operating cash flow of $64.7 million. Free cash flow for the quarter came in at $58.2 million.
Guidance
For the fourth quarter, Proofpoint anticipates revenues of $191-193 million and billings between $266.5 million and $268.5 million. Many multiyear deals are expected to be renewed in the fourth quarter.
Non-GAAP gross margin is estimated to be 78%, driven by cost synergies from the shift toward new generation SaaS cloud system and operating discipline. The company expects non-GAAP earnings in the range of 33-36 cents.
Free cash flow is forecast in the range of $43-$45 million while capital expenditure will likely be $7 million in the fourth quarter.
The company revised its full-year 2018 projections, wherein it raised revenue and non-GAAP earnings expectations. Proofpoint now expects revenues of $709.5-$711.5 million, up from $705-$709 million predicted earlier.
Billings are expected to be $872-$874 million compared with $870-$874 million projected earlier.
Similarly, non-GAAP earnings per share are now anticipated in the band of $1.29-$1.32, up from the previous guidance of $1.12-$1.19.
The company raised non-GAAP gross margin target to 78% compared with 77% projected earlier for 2018.
Free cash flow for the year is now expected in the range of $149.6–$151.6 million, up from $148-$150 million predicted earlier. Capital expenditure is likely to be approximately $30 million.
The company also provided guidance for fiscal 2019. Revenues are expected to be in the range of $870 million to $874 million.
The company expects the inorganic revenue contributions in 2018 to lead to challenging year-over-year comparison in 2019. The company anticipates additional headwinds in the coming year from ASC 606 and the Cloudmark business. With no contribution from the Cloudmark OEM business, the first quarter of 2019 will witness a relatively low year-over-year growth rate, adds management.
Proofpoint currently carries a Zacks Rank #4 (Sell).
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Proofpoint (PFPT) Q3 Earnings Surpass Estimates, Surge Y/Y
Proofpoint Inc. reported solid results for third-quarter 2018 wherein both the top and the bottom lines came in better than expected. This apart, Proofpoint witnessed significant year-over-year improvement on both counts.
The company reported non-GAAP earnings of 40 cents, recording an impressive year-over-year jump of 60%. Earnings also outpaced the Zacks Consensus Estimate of 28 cents.
Proofpoint reported total revenues of $184.2 million, up 37% year over year, mainly driven by customer additions, improved add-on-sales and strong renewal rate. The company’s revenues also surpassed the Zacks Consensus Estimate of $181.7 million.
Top-Line Details
Total billings during the quarter climbed 33% year over year to $221.4 million. Also, renewal rates remained well more than 90% during the reported quarter.
Subscription revenues (98.5% of total revenues) during the quarter came in at $181.5 million, up 39.1% from the year-ago quarter. Hardware and services revenues (1.5%) declined 1.7% year over year to $2.7 million.
On the basis of solutions, revenues from Advanced Threat (75%), which includes Targeted Attack Protection or TAP offering, grew 39% from the year-ago quarter and Compliance revenues (25%) rose 32% year over year.
The company expects Compliance revenues to keep up its momentum as the bigger archiving deals in the pipeline continue to mature.
The company’s Targeted Attack Protection or TAP offering continues to be a key growth driver, which is evident from the company’s notable wins this quarter.
Management notes that robust demand for the company’s next-generation SaaS-based security and compliance platform, ongoing transition to the cloud, particularly to Microsoft’s (MSFT - Free Report) Office 365 and the rapidly growing threat landscape to be the key growth drivers.
Management mentioned that the new offerings have expanded the total addressable market by more than $5 billion and are proving to be a key growth catalyst. Emerging products, which contributed more than 30% of the total new and add-on businesses closed during the quarter, continue to surpass the rest of its product portfolio. The growth was led by strong demand for Email Fraud Defense and Threat Response.
Moreover, Proofpoint's Archiving solution also demonstrated strong growth this quarter, driven by customer interest and new features such as supervision, e-discovery analytics and Analytic Visualization, in sectors particularly financial services and healthcare.
The company is also witnessing good demand for CAD, CASB and internal mail defense offering, which is attributed to an increasing number of Office 365 account takeovers. The company’s browser isolation solution is also doing well, which is evident from the several wins in the quarter.
Additionally, partnerships with Palo Alto Networks (PANW - Free Report) , CyberArk (CYBR - Free Report) , Imperva and Splunk are driving key wins for the company.
The company extended its presence in new markets such as Italy, the Nordics, and Spain. Notably, revenues from international business, representing 19% of total revenues, grew 51% year over year.
However, the company expects growth in the international market to decline going forward as growth in international sales capacity has been lower than expected over the course of the year.
Proofpoint, Inc. Price, Consensus and EPS Surprise
Proofpoint, Inc. Price, Consensus and EPS Surprise | Proofpoint, Inc. Quote
Operating Details
Non-GAAP gross profit advanced 37.2% from the year-ago quarter to $144.3 million, primarily driven by higher sales. Non-GAAP gross margin improved 20 basis points (bps) year over year to 78.3% on the back of strong revenues.
Total non-GAAP operating expenses flared up 36% year over year to $121.7 million, while as a percentage of revenues, it declined 30 bps to 66.1%. Slower hiring trends in international operations and lower R&D spending coupled with the exclusion of certain costs associated with the decommissioning of legacy SaaS cloud system drove results.
Proofpoint’s non-GAAP operating income for the quarter increased 43.7% to $22.7 million. Non-GAAP operating margin expanded 60 bps to 12.3%.
Balance Sheet & Cash Flow
Proofpoint exited the quarter with cash and cash equivalents, and short-term investments of approximately $190.4 million compared with the previous-quarter balance of $134.1 million.
During the reported quarter, the company generated operating cash flow of $64.7 million. Free cash flow for the quarter came in at $58.2 million.
Guidance
For the fourth quarter, Proofpoint anticipates revenues of $191-193 million and billings between $266.5 million and $268.5 million. Many multiyear deals are expected to be renewed in the fourth quarter.
Non-GAAP gross margin is estimated to be 78%, driven by cost synergies from the shift toward new generation SaaS cloud system and operating discipline. The company expects non-GAAP earnings in the range of 33-36 cents.
Free cash flow is forecast in the range of $43-$45 million while capital expenditure will likely be $7 million in the fourth quarter.
The company revised its full-year 2018 projections, wherein it raised revenue and non-GAAP earnings expectations. Proofpoint now expects revenues of $709.5-$711.5 million, up from $705-$709 million predicted earlier.
Billings are expected to be $872-$874 million compared with $870-$874 million projected earlier.
Similarly, non-GAAP earnings per share are now anticipated in the band of $1.29-$1.32, up from the previous guidance of $1.12-$1.19.
The company raised non-GAAP gross margin target to 78% compared with 77% projected earlier for 2018.
Free cash flow for the year is now expected in the range of $149.6–$151.6 million, up from $148-$150 million predicted earlier. Capital expenditure is likely to be approximately $30 million.
The company also provided guidance for fiscal 2019. Revenues are expected to be in the range of $870 million to $874 million.
The company expects the inorganic revenue contributions in 2018 to lead to challenging year-over-year comparison in 2019. The company anticipates additional headwinds in the coming year from ASC 606 and the Cloudmark business. With no contribution from the Cloudmark OEM business, the first quarter of 2019 will witness a relatively low year-over-year growth rate, adds management.
Proofpoint currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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