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Proofpoint's (PFPT) Q2 Earnings and Revenues Top Estimates

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Proofpoint Inc. (PFPT - Free Report) reported second-quarter 2020 non-GAAP earnings of 51 cents per share, which beat the Zacks Consensus Estimate by 30.8%. Moreover, the figure increased 24.4% year over year.

Revenues came in at $258.4 million in the second quarter, which beat the consensus mark of $253 and increased 20.5% year over year.

This upside can be attributed to strong demand for its next-generation cloud security and compliance platform, ongoing migration to the cloud, solid international growth, and high renewal rates.

Proofpoint, Inc. Price, Consensus and EPS Surprise Proofpoint, Inc. Price, Consensus and EPS Surprise

Proofpoint, Inc. price-consensus-eps-surprise-chart | Proofpoint, Inc. Quote

Top Line Details

Total billings during the quarter grew 8% year over year to $250 million.

Subscription revenues came in at $254.9 million, up 20.9% from the year-ago quarter. However, hardware and service revenues decreased 3% year over year to $3.5 million.

The company has stopped reporting results for its advanced threat and compliance-oriented products as it believes the data is not informative in terms of measuring business performance.

Proofpoint continues to expand globally. Its international business grew 28% year over year, accounting for 21% of total revenues in the June-end quarter.

Operating Details

Non-GAAP gross profit climbed 22.5% from the year-ago quarter to $207.5 million. Non-GAAP gross margin expanded 100 basis points (bps) to 74% on impressive revenue performance.

Proofpoint’s non-GAAP operating income rose 45.1% to $41.2 million.

Balance Sheet & Cash Flow

As of Jun 30, 2020, the company’s cash, cash equivalents and short-term investments were $973.3 million compared with $946 million as of Mar 31, 2020.

The company generated operating cash flow of $30.6 million compared with the $92.2 million reported in the previous quarter. Free cash flow was $18.8 million compared with the prior quarter’s $79.8 million.

Guidance

Proofpoint updated its 2020 revenue guidance. The company now expects revenues of $1.035-$1.037 billion, up from the previous projection of $1.005-$1.030 billion.

Non-GAAP gross margin projection increased to 80% from 79%.

Non-GAAP earnings per share are anticipated in the band of $1.64-$1.70, higher than its previous guidance of $1.41-$1.46.

Free cash flow is estimated in the range of $130-$140 million, up from the prior forecast of $85-$135 million.

Capital expenditures are now expected to be approximately $75 million, down from the $94 million projected earlier.

For the third quarter, Proofpoint anticipates revenues of $260-$262 million.

Non-GAAP gross margin is estimated to be 80%. Non-GAAP earnings per share are anticipated in the band of 37-40 cents.

Free cash flow is estimated in the range of $16 million to $21 million.

Capital expenditures are expected to be approximately $25 million for the ongoing quarter, including $16 million for building Proofpoint’s new headquarters.

Zacks Rank and Key Picks

Currently, Proofpoint carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Dropbox (DBX - Free Report) , Zoom Video Communications (ZM - Free Report) and Analog Devices (ADI - Free Report) . While both Dropbox and Zoom sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Dropbox, Zoom and Analog Devices is currently pegged at 32.5%, 25%, and 13.3%, respectively.

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