PFPT - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Proofpoint's Second Quarter 2018 Earnings Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jason Starr, Vice President-Investor Relations. ahead. go Please

Jason Starr

and call. afternoon Proofpoint's quarter second Thanks. welcome earnings XXXX Good to

Joining that Gary Oestermann, today Executive call Paul me the on Financial Chief are Chief Officer; Investor website. a discussing which Chairman copy the Officer. release the Auvil, is in Proofpoint's Relations and the our Officer after available our announced of Steele, be Board; issued market the President Klaus Proofpoint's Operating and and Chief Proofpoint's section of of We'll press on results was close today,

information as filing Of be result are obligation These to we to believe adjust is such disclosure, undertake date, as as these today's XXXX. of assumptions events important you or note, today's policy make cause update During could future the it to call, statements company material this that statements a of based course to which caution is that July uncertainties actual filings performance Proofpoint's release new to contained of the results including forward-looking provided X-K. no risks through not call. events. or we'll statements are the the and on subject of XX, Form more forward-looking a or to reasonable future risk We regarding future conference differ this are financial public a Proofpoint's press the under the We our the a on also fully and recent risk XX-K. materially. detailed on in through guidance with the These financial Factors of reiterate call, release in and factors done caption unless Form it SEC, most Risk also factors press consider

today's as all to consider you from, reference are non-GAAP of reasons Proofpoint's forth XXX are press and like non-GAAP release. XXXX, A of intended everyone present call. under financial results, not periods measures items January earnings prior that the our to also adopted non-GAAP in remind exclude our measures be as measures reconciliation and call press discussed both today's on revised we'll why financials performance. standard. we to retrospective a uses a isolation of to I in have considered Also, ASC comparisons today's in accounting set would list to with release. Additionally, non-GAAP or measures GAAP number company in accordance to we of superior a these These such, the These in for, measures as financial non-GAAP and method. XXX GAAP GAAP on when as retrospective to the the substitute as today's of all included encourage ASC release X, are And outlined analyzing and measures our full made the in

to call So said, with over I'll that the Gary. turn

Gary L. Steele

Thanks, thank Operating our Jason. to like for start us Chief like by Oestermann, and I'd call joining I'd Klaus announced to President everyone recently today. on welcoming Officer. the

Klaus and aptitude, our business. and turn before key results. executive to in all driving which continues international board experienced combination comments to will $X initial I saw an a our brings expand make the the like add to leadership overall in the rich long-term As opportunity of our of extending capacity quickly revenue In growth I of and growth product call to knowledge particular, to billion review contribute and experience, grow support channel leadership company to objectives. I'd the towards to some in overall Klaus an beyond, QX over

Klaus Oestermann

Thanks, Gary, everyone. good and afternoon,

to strategy in and team, While Proofpoint's the the pleasure capabilities been tremendous better our it's to to working, seen throughout is channel look role, potential I'm business, I globe. innovation in at the investment organization. drive out excited still in a how many in the true the meet meeting international and we product see amplify momentum, while our forward sense great clearly to first my in you scale I'm look the month opportunity a success footprint that around I here get operations, in the of we when months expand of community marketplace. a particularly help ahead. And our customer be

Gary L. Steele

Thanks, the to It's you Klaus. and to team. working the with continue have growth in business. I'm looking on to you forward to great drive innovation

platform, report another compliance metrics, to evolving by to SaaS-based cloud with again on back next-generation strong landscape. migration the beating ongoing the So for and I'm and turn that, had driven quarter, quarter. all our security let's to the that rapidly threat key the pleased we demand continuing the

threat the And these same. are as cyber launch to low, vulnerabilities. high. to barrier Cyber behind which attacks to criminals be human organizations while These is extremely largely individuals. don't attacks credential expensive motivations entry and factor often malware constantly such the is infrastructure-based readily money, the While and exploits to techniques accessible remain to landscape socially compromise email exploits follow require or through the quite cost changing, the advanced spoofing, be today breached engineered opposed can the can as phishing

and FBI fact, $XX alone. stolen email account business globally reported XXXX, since through the has email In recently over that compromise billion late been compromise attacks

that attacks, are invest these security targeted focused. bad motivated in, often attractive through network to largely actors highly to financial innovate this and and Given are defenses slipping endpoint execute continue model,

traditional migrate the and enterprise methods cloud, only new enterprises increasingly expected continues to to to compute business applications compromise and the blur of to is grow. As workloads exposure this perimeter

developed defeat attack Proofpoint's for employees, paired employees intelligence To attacker affected of tactic, compares FireLayers enterprises targeted, visibility, vulnerable. their into And helps email enables their threats the who credentials way by as now unprecedented and rather organizations nearly most announced cybersecurity, availability this to further threat with another deployed applications. who a that Office multifactor organization the aren't then XXX what cover XXX critical and companies malicious unlimited the masquerading internally who insight In receive they actor, have this technologies these the pose and/or systems then in This an most are single while into a steps for then how know peers. of VIPs, these detect have very that to is and unique manner, of entry protection Defense people to the login which email, their VIPs now is cloud gain established, Account security receive solution very we to the that individuals. take and prime CASB our people cyber organization corporate visibility service, communications, systems threat Proofpoint's very important visibility, and or our Note fulfilling models the new Proofpoint was the controls enterprises opportunity requests. pioneered organization. team that industry score legitimate to a even help social tricking these harm being and ones cause to recently most additional protect data which people, organization's which rich Armed acquisition. the can fact, account And, monitor financial VAPs. data hacking access to that point our because compromises. employee. people-centric protect all This they always more the aren't of targeted vision their loss Cloud has attained but attacked combination With customers example fraudulent timely But great innovative targets by Office including company who yet within media or through developed VAPs. and authentication through this sensitive the to remediate sign-on and business threats. the content latter often of With fact, and that to increase across the of with and forms and in have are, companies of realize the and few criminals because an be by another and threats, VAPs can based employees. this science better time highly has have far risk important their compromise in

second some key results to turning the our Now, during of quarter. operating

Attack a number or XXX,XXX users; EFD, TAP EFD, Fortune that that noteworthy for Threat XXX Our added continue and Note our Weblife XXX,XXX including: TAP defense purchased or global retailer defense our Protection, including healthcare to for a company TAP, had professional of for for transportation quarter Wombat Threat to of Response growth that Protection services offering, a solution TAP, be a XX,XXX users; Protection, users. wins Fraud email a and and and Response browser XX,XXX suite that Advanced the business. We TAP important personal purchased that an a this for of Targeted contributor email healthcare large TAP Defense Privacy brought Email added provider TAP, Threat and personal multinational solutions, that of Protection added regional new users. users; result our provider XX,XXX and a Threat company market managed is to isolation and acquisition; personal as defense email Response,

broader EFD that Proofpoint's catalyst Examples manufacturing this to of users; security Microsoft legacy municipality the for Fortune the security solutions. Wombat and cloud is the and won demand EFD that ongoing users. purchased helping and where agency XXX particular a shift quarter awareness that migration X,XXX XX,XXX large long-term displaced advertising XXX transition landscape, on-premise Protection, Protection security part compliance Protection, XXX broader we Beyond to purchased and that Office the appliances users; company the X,XXX to to continues threat a Fortune TAP, of be purchased as a drive for Office in to TAP and XXXX a for for deals included: TAP and

existing during customer, and Protection remains Threat Note a and company, XX,XXX continues compared XX,XXX and that favorable competitive Proofpoint coupled exceed we CASB that who to high XX%. rates, that Office purchased included: part to acquisition CASB TAP, to Examples for of private Microsoft of world-class university a continue of from purchased effectively already XX,XXX EFD manufacturing We bundles. rate security to XXX quarter that with renewal to for environment Wombat Protection, services Protection TAP capabilities Office compliance XXXX a moved Response, win of solutions Fortune company Proofpoint our also for the a and and baseline the strength by and combination users. the users. capabilities their when with continue Overall, merged subsequently with upgrade FireLayers; experience is customers that technology Proofpoint's users; of Privacy, Proofpoint to decided purchased a second a TAP XXX the products demonstrate and provided their as consumer security Proofpoint

in very by ongoing strength for remain also We our encouraged emerging products. the demand

financial unmatched our also added over mentioned in wins A solution. purchased by QX methods As for they and product to the Digital a $X CASB of research of we've renowned our offerings growth. a competition important important portfolio university and mobile for enable an in source social Risk and outpace defend in EFD Italy products Response in total holistically these key Threat new large the excellent as that emerging have XX,XXX business to Proofpoint added our an way and contributing from and is company new services us to and closed – product an commercial cloud, users; over add-on that private They the from be enterprise uniquely hospital by contribution for bank billion few during added email, XX,XXX XXX are that expanded continues competitive our TAM of across of users; that The provide a the users; university a that vectors rest social of Fortune past, the emerging quarter. a proving included: non-profit differentiator. meaningfully the attack the XX,XXX advantage XX%

in customers driven in stands introduced saw recently an financial quarter, solution. healthcare. new of where to this with competitors, critical to of our We Archiving part as attractive contrast and many regulated most verticals our Proofpoint longer-term are encouraging believe most legacy our products features and particularly such whom features to have services on-premise convert the innovation We and that such their this in these strong creating solution neglected e-discovery also interest opportunity area analytics, in we've customer as these by supervision activity

a to our strengthen users. second Risk converting and pharmaceutical solution the continues pipeline quarter, a purchased company that with XXX including: large Protection, Digital TAP, XXXX and with Privacy insurance users; Archive company that XX,XXX Continuity in along Archive, and purchased Our supervision suite for for several deals Proofpoint Fortune Fortune XX,XXX

relationships ecosystem as our Alto CyberArk, very contributed already Networks, with to key to wins these excited remain Imperva and that noted. we Splunk, partners I've Turning the of about partnerships Palo these several

of conglomerate business ongoing to our international international the total grew which pleased still representing revenue. We benefits growth make expansion at also progress strong continue our XX% and was year-over-year, further roughly TAP towards Adjusting XX,XXX services abroad users. XX%. from added quarter Global and XX% added during users; acquisitions, a with are momentum closed in the our wealth recent for XXX,XXX XXX,XXX for that EFD that multinational the deals for company and financial Global a included international management for that firm Notable users; TAP EFD XXXX XXXX a added and TAP

As we won SME second during at Europe in the pleased Essentials Best quarter, quite year Awards announced that were Proofpoint Security XXXX. row the for SC we a Solution

results are Additionally, meaningful won in three results that the commitment We Security Best that Enterprise ever-shifting investments for as of awards delivers is further Security Best and threat it R&D to Proofpoint and also perilous view of awards our commended Email for landscape. these customers, Best the highly critical and Solution. confirmation Cloud in importance Solution Computing ongoing our Solution,

discussed to several into full underpins our offering. move with environment pleased next-generation all protection, threat been a hours we've this prior I'm single threat to customers June that our scale XX without , the past less the announce service new we in Targeted Attack in calls, developing than our platform that hitch. platform Finally as over have SaaS went production on Protection of early quarters, our

across attacks. from results average which two-plus for and phishing prospects I'd capabilities positive, the in alike. efficiency We've cross we release testing, our detection already been advanced corresponding decrease development, thank a traditional and work platform expected, with malicious also As the functional improvement hard training attempts the time of of the their in capabilities threat project this scanning further have our new targeted demonstrate for past exceptional team and malware, attachments, document like to years. seen on URLs, the deployment extremely customers the and believe superior will over measurable

objectives across tremendous business, the me gain to in billion Paul. a strong believe accomplished the over total years. year-to-date. I $XX over in we've our well-positioned it let With our financial that, summary, and given in seeing to continue And achieve to momentum we're the So, amount to we're XXXX market addressable share coming turn

Paul R. Auvil

Thanks, Gary.

about which reported greater to year and are accounting retrospective everyone this First, the detail in quarter With of for new Please pleased on these differences said, comparisons results since to comments results refer I'd very full of in the the standard, founding our we my that results ASC reporting quarter. impacts that method. from our the under which our of this XXX under remind in operating growth new with We're under this accounting standard. like for some back talk represented adopted being January last let's XXXX. our quarter quarter XXth our

year-over-year acquisitions, impact up to to updated XX% $XXX approximately rate totaled of updated recent $XXX for to million, XXX, range XX% revenue as of million. guidance our underlying above Note year-over-year range quarter million. of million $XXX.X our and for Billings were above growth $XXX.X adjusting million increase guidance the and quarter related an Second organic high-end second million, effects $XXX our of of for the $XXX as the that the was the quarter. well XX% the ASC

quarter's detail ASC of on As the of requires accounts as reflect XXX, quarter, well explained receivable metric under derivation activity to last our liability. right during any billings now as the in refund unbilled adjustments call,

the in of across nominally was total. operating was new, still and adjustment QX $XX.X the with million, items long-term historical of and growing than QX, deferred increasing is again sequentially, million by our renewal million. terms in XX $XX.X at add-on business these our This up in trend at only which Contract range to our of related revenue balances of million positive two the reflected million impact $X.X ended by a and $X.X XX $XXX.X short-term For quarter low-end to duration months. duration higher

XX% the of year-over-year second our revenue. represented quarter, During Advanced grew segment Threat XX% and

particularly recorded of impacts Our faced coupled pleased with revenue. expectations on year compliance a last some given a segment XX% year-over-year we growth segment XXX. grew We're revenues the quarter and results, earnings the professional that segment of with year-over-year, services past the represented consistent during difficult given second calls these comparison in that this XX% with one-time ASC during basis under that this outlined we

latter to near as the larger mature. term in expect at in continue the We in this the these growth remain segment levels to pipeline deals

profitability to quarter, driven total for strong second XX%, and our the which revenue expenses Turning performance. basis, a on was our margin our was above primarily by non-GAAP gross expectations,

capabilities period talent as primarily sales XX% the And R&D acquisition full quarter, here in and $XXX.X was spending our hiring by to with added sales second increased of resources note expenses along we offerings from both which contributed total amplify Wombat, prior-year million, our carrying the broaden first that quarter XX% our the During representing capacity. of to over deepen and product core expense our was in to non-GAAP growth QX. the served of build operating this operating revenue. driven spending total to both in Growth

reported profitability quarter, million driven well guidance $XX.X non-GAAP million, outperformance our In for terms the above we income our of net operating revenue of and continued by the of to $X discipline $X quarter. during range million,

in on XX.X We've our million quarter. "If-Converted" for fully EPS cash notes to count used per share loss intended quarter and totaling earnings million applies calculation that on our $XX.X On $X.XX fully interest resulting which million a Moving and explain shares we in estimates, $X.XX share, in outstanding. on such, additional back is debt and, convertible based non-GAAP basis, the range a calculations the shares to $X.XX. as topic this guidance onto diluted above recorded for convertible quarter the the second these net associated included adds $XXX,XXX with per on method differences share section share or GAAP entitled computational $X.XX earnings EPS, our the XX.X share of per the per press to details uses for based to provide Note release was the in the results. guidance diluted

terms and $XX resulting of in free $XX In we million invested operating of cash range million. for expenditures, in flow above million million $XX.X to $XX guidance the flow, $X.X cash in capital our million generated of flow cash quarter

to to XX% with third starting outlook million, to $XXX billings currently resulting growth the the turning expect Now our year-over-year of in we quarter; be midpoint. $XXX million financial at

$XXX range a to expect we million midpoint. XX% the outlook, revenue our growth at of $XXX million Regarding year-over-year or

XXX growth during our year to previous business standard, our adjusted points XX% and a quarter third as headwind We effective in contribute is on underlying calls, creates impact that new the results this roughly for based expect our for guidance recent with basis growth third said, acquisitions of of the mentioned ASC and, quarter. to this on rate the accounting roughly XXX the

quarter recent SaaS margin and non-GAAP third reflecting operating expect cost to to be system. the synergies our migration gained We gross XX.X%, approximately from discipline ongoing next-generation cloud

$X.XX million, assumes provision, during as "If-Converted" approximately cash items, million We be the a adding notes the quarterly depreciation expect exclusive $XXX,XXX income per diluted net million for back quarter, to of $X.X prescribed tax an share course, approximately to our $XX by of and share. $X.XX quarter $XX and the income This non-GAAP convertible of shares third interest discrete count expense $X.X of million to outstanding, method. of guidance million XX fully in or

now million. guidance of timing fourth roughly previous we of This of million full year XXXX identical combined the our our our From quarter the across quarters of million. will represents quarter which recorded annual cash when year guidance almost billings XXXX million to rate to from of expect for year the first the the and $XXX to a the range, and expenditures the $XXX guidance XX% capital billings free an quarters to $XX growth to $XXX provided million, that the midpoint cash of be $XX free of with Note flow, $XXX includes the of here third we're range million in be billings in $XX the actual for billings flow third increasing linearity four that million. at of full up the of perspective, linearity. our suggest two terms In expect guidance

the rate roughly compared of at absolute transition impact of the that account of million this creates guidance particularly rate and annual our terms full new Note with for a a XX%. into of for $XXX of the estimates year a the XXX In $XXX the in of revenue growth our to viewed with taking acquisitions year. midpoint of to of growth growth at roughly the revenues $XXX and $XXX standard, XX% we're for of an to latter associated guidance quarter in end year guidance guidance, an range conjunction this guidance range adjusted to XXX, full as the context is headwinds acquisitions organic XX% When the impact rate which over million the million. when of underlying roughly million recent difficult the our the recent million, for bit XX% at raising $XXX rate accounting implies the third from QX, most the ASC growth our ASC organic when midpoint of the here of of an to the compare

by of XXXX. greater growth amounts new on given accelerated rates the quarter based accounting which trend And terminating have last as to arc of As quarter's perpetual of practice and certain recorded new on recall these variability reminder, certain revenues some under standard, we their licensing, the a the in creates period. downward terms OEM recognized changed model Cloudmark standard on elements discontinuing mentioned the under that over any revenues in the of business agreements we and we've call, of quarter a

margins our year XX% XXXX and to of just be over XXXX non-GAAP within XX% range target We expect to full gross XX%.

$X.XX per assumes This of million approximately fully net $X.X $XX discrete share, or to of cash share. full XX.X to $X.X shares $XX approximately diluted year full we guidance As "If-Converted" million, $X prescribed to under to income $XX the to XXXX $XX.X method. back million million to approximately be in an a to million million $X.XX share per non-GAAP a million $XX.X count of $XX exclusive year of million income adding and $X and expect provision, million interest depreciation previous improvement as of million our expense guidance the or items, tax outstanding, $X.XX an result, from

For the flow, ability based XXXX full the guidance year. an This which $XXX companies, cash free the This free roughly compelling returns investors business that business GAAP to as only is our sum our million our security range and highlights be billed guidance low-teens important we raising SaaS considers to used XX our notion XX% high revenue. growth top a demonstrating greater to flow of with not this that or quality in and of demonstrates found duration margins half cash we're of flow evaluate or XX%, adding flow together attractive commitment to full in for companies, is our XX%, combination effectively cash XX% broader by the for cash third a that over Note and full drive two growth also guidance cash we way drive but recurring further on our year trade-off suggests of flow year model capital with the both flow renewal the that growth separates can the our figures XX% cash quality million line that that strong us release the to this with continue the expenditures producing our to XX% assumes for should between methodology, issued A the generates. rates quarter year. of revenue disciplined businesses. the XXXX SaaS $XX contract rates threshold with $XXX reconciliation afternoon. business. be approach the these Proofpoint and the the million revenues set free of this the above for flow model average from The well in classic the of by deliver of over and It revenue shareholders. an of highlighted cash for two majority well-run a note the cash the we're attractive the context flow and Rule of of SaaS increasingly metric second margin for to to in of execute to of this of non-GAAP recurring publically-traded of continues margins

has to for like Before over to our us time duration the of questions to would discussion. just would it in reduce call be taking themselves you the Thank today's for be today. to the to I chance join that one to take everyone a help turning that operator limit included on Operator? questions, request and question everyone ensure to to your with call happy And that, we now. our

Operator

Thank to you. We'll go Andrew Nowinski Jaffray. with Piper

Andrew James Nowinski

quarter. nice And on a congrats Thanks.

many launched you've solutions. the about new add-on acquisitions XX you've last Over made years, and four

you you So could the idea now across XXXX spend the base in all made. and if installed of is before what average per us what wondering was it just user back give that an I'm your acquisitions

Paul R. Auvil

that of you're imagine, thousands depending that, the variety those you whether a a of bank is out. for on maybe can broad on Oklahoma, or XXX Yeah, of state with we don't you're is there bank per is of Fortune what average terms got the in And a hundred actually regional in price example. of numbers part couple that's as of hundreds users put reason users a whether small user

that vertical you you. or about course, of a that effective those so, what across when healthcare all user price aren't then like retailer a have comparisons even start thinking And and, per institution or

that we don't because be data we found so, particularly helpful. track it And haven't actually frankly, quite to

is of two, you can at analyst we've improvement, products. have past this that Now, or talked number I more nice days, that customers tell of the in about terms seen what we've a three one,

three our when of have we with headway more. or of over almost first over half products two more single product. having so, literally, or roughly made well customers We our only XX% had a little the And customers whereas public, XX% of went customers significant and now

and business tell the with from we if you, add-on from we're a business So, the typical got new closed very very you sequentially, is of half look to that as driving us customers acquire and looking both another really helpful having when new broad line your many about quarters, point, to quarter-to-quarter a add-on about this this total door half in for new at is product that drove a and as way typical. the growth of net And in add-on. I we've as well And will business Andrew, quarter, came it's yet account.

fact, add-on you XX/XX look And at it top XXXX, stat, recurring the spot-on of for the of from for closed. in at first right we of and if new almost terms the on that that we're year, metric. revenue In that was half

purposely we new. of business where and add-on about our half sales installed execute comes to from from the to look base about comes So, half

Andrew James Nowinski

Thanks, Keep the great. Paul. good work. up That's

Paul R. Auvil

Thanks.

Operator

Thank We'll on Winslow you. continue Fargo. with Wells Philip to

Philip Winslow

a for also working to again. my taking Thanks lot with Klaus, Hey. question. you start And very excited

this in the or year anything this Just versus pricing a you'd look you even if and that half first just perspective of on wanted of out and call from year? to focus quarter at competition; pricing last competitive sort

Gary L. Steele

as as consistency same they out And the are last think taking we to Hey, incumbents. about Gary. pretty was when I at Phil. It's cloud, on-premise migrate large capabilities. look the year their thinking No, much customers the

Yes. was that consistent. very really And so

year no changes So, last from from this year. fundamental

Paul R. Auvil

categories, of is in look we've the look we with sizes the numbers of interesting at deal what's what consistent seen and were historical average of you quarter if one across bunch doing pretty kind very every bands number in measure the as carefully across deals quarter. of I'd And our think that thing is those each that here I a add then averages. that the analytics second of And the we're

Philip Winslow

Got Thanks, it. guys.

Operator

Anne you. Susquehanna Group Thank question. Financial with Meisner our has

Anne M. Meisner

invoice that billings are durations? year different, both Hi. Thanks you in Can bit made underpinning and Last about taking contract that QX the from the like that assumption assumptions I normalized we to it question. as QX? just quarter, question the relates you quick quarter. guidance for Paul, your guess, durations direct for for my this Anything a and bit sounds a saw invoice it a you. talk

Paul R. Auvil

question. Yeah. That's good a

in come So, an nominally. saw QX low all-time and, durations were QX, only them up we in

at the the range when to assuming at kind year, of think low provided both the quarter. third so, I of guidance and continue durations of half look we just that I as end we're And the for about stay second our that fourth the

Anne M. Meisner

Thank perfect. Okay, you.

Operator

Thank you. Alex ahead. go with Henderson Needham. Please

Alex Henderson

hoping Great. going the was about third we're the talk could you as bit into Thank the you fed marketplace, quarter. a in much. very segment particularly I little

and FedRAMP, long you does that to when take contribution will up a You've on just think Thanks. do play that for to how that growth? as gotten so out show approval the it meaningful

Gary L. Steele

work to Yeah. the line cloud with that a product solutions. see fundamental broad making playing Great our TAP investments well. adoption The fed year we adoption of success doing, and not FedRAMP are question. our certified we're We remainder certified. in about do in have of and, threat of is is the created that specifically out ago the here and have broad is part markets started the quite or beginning be Those commercial We landscape for us trends yet Protection There complex. obviously, today. so FedRAMP as line product

success and across federal good that broadly not us. in fiscal, we've as in fiscal. of an opportunity state will think The We we're vertical And not where is more thing making other we federal as out the local in while I a threat quarter well. We will would see that do believe next see the QX the lot going, investments internationally current huge got some play the we've that be do say U.S. government we important so one had investments for a

for a over vertical fiscal huge QX think, but don't big important an government time, be us, expect will we close. so And

Alex Henderson

the by turn, done be TAP Would next the year's? next

Gary L. Steele

yes. Yes,

Alex Henderson

Great. Thank you.

Gary L. Steele

Thanks.

Operator

We'll you. Thank Talanian ISI. with go Ken to Evercore

Kenneth Talanian

Hi, for us associated scale you sense and give remainder larger guys. taking your the the Could Thanks year? progress deals archiving the in the for the for pipeline question. a from of

Gary L. Steele

Sure.

close. non-cloud build pipeline the indicated as we we we is prior QX, us. a innovation favorably vendors, vendors. happening nice opportunity. continues the noted incumbent in to great across remarks, long-term see in lot saw and, for to We evolve of prepared we That And a see think our we've of couple on a As there the don't market deals calls, continue

we the this difficult, good close, optimistic segment. but very very about forecast those particular we when So, I deals is think very exactly will long-term remain feel about It to opportunity. however,

Kenneth Talanian

Thank you. Great.

Operator

Melissa comes question next from Our Stanley. Morgan Franchi with

Melissa Franchi

you I a creating more expectations the give bit a about effectively could leadership, on motion. taking for now wondering if then talk maybe just rationale Gary, I'm this changes question. just given and the sort for the new role Thanks you scale, have color any guess for or Great. sales my Gary. go-to-market high level question at that just if of any COO little could wondering you in

Gary L. Steele

no, viewed bring just wealth for is years. the the that drive capacity remarks, the something that business the leadership experience business. X, the leg as as help next And over XX in I course X, we growth the of Klaus would in of Yeah, we to scale on prepared think critical growth of and opportunity brings additional indicated a the in next

grew notice, great has perspective international the be If brings instrumental the leg of think helping in outside on up market, you Klaus of Europe, next I that drove U.S. and and didn't a us will lot a growth in perspective

of strong aligned about From a and well view, – we work to running and half. Those sales have a a leaders we're for have point QX EMEA. So, very theater and extremely very second strong today feel U.S. we that. had we Klaus APAC, great we obviously, individuals excited

the feel have. is search strength that a for we will underway looking that's But both leaders We candidates. look Sales. well-positioned a to given worldwide and of of the theater VP continue at we There external internal

Melissa Franchi

Okay. very Thank you much.

Operator

Trebnick We'll on Catharine Dougherty. continue to with

Catharine Trebnick

talk could about the Thanks. the thanks Oh, you taking your carriers the opportunities for and with Gary, MSSPs? question.

Gary L. Steele

You bet.

interest you the your That over interesting with as we've to yet has is opportunity another by channel good but now, represents market led we've a is about the And point, growing or the So, have talked some do acquisition, from it's what What obviously, for relatively just MSSPs, time. as it well early can through there element community. Cloudmark we all opportunity. slower, say about oftentimes Cloudmark within to we're is though, those early had a business. of somewhat been relationships are MSSPs carriers. aware, footprint the grow the continue carrier to lot optimistic would owned channel I MSSPs and and by are company of

Catharine Trebnick

All right, thanks.

Gary L. Steele

You bet.

Operator

Our next question Pritchard comes Citi. Walter with from

Walter H. Pritchard

for a Hi, Paul. question

seasonality, your there market QX typical a be little anything is little billings the stronger. on be than pipeline might in the or lighter in a Is driving your it maybe Just and year would that seems like feels QX a that?

Paul R. Auvil

Not beared in I noted really. highlighting. thought because script just I the just it

our quarter full originally. quarter for buying customers subscription XXX speaks obviously is the course, quarter. just even just the and then the if each year plus Given fact date of to you quarters points focus the linearity that year, every by an as it in of number, subscription base renew the quarter the of the fourth literally same a that, provided four quarter that billings by because, And this basis the model, the at they of definition fourth and amongst for a that XXXX, guidance continues broader which nature is XXXX. on in just I for implies brought or linearity basically business, same third for a And, emphasis there then the in on minus look customer

And so, just across the activity year. compared the three this the in other of to significant drives activity it spike really fourth quarters quarter

year you will QX laid guide similar. for now what lineup based anything on way outside we as absent see for work the and we QX the for likely top very and So, it XXXX, QX on of expected, implied the again, in right prior the into them QX, linearity out the numbers and guide our delivered as look

Walter H. Pritchard

you. Great. Thank

Operator

with Capital Matt Markets. go to Hedberg We'll RBC

Matthew George Hedberg

a terms Gary, from it Office in change in as have of in taking my of deployment terms for a noticed are as we catalyst, your you And acting base? the Thanks in Microsoft competitor? of where question. anything a XXX

Gary L. Steele

Yeah. questions. couple great A things. of No,

lot we are seen implementing. in meaning, see lots are interesting, There in that that Office there's really way stage customers stage of – customers in they they're we've is an the one, a either a all motion, few very or from there. of So, it's planning of perspective, XXX

And like And timeframe. at regulated plans But five-year so categories. would financial today. some to even form plans a to it's get majority vast the think some the highly those to in have I and the hard three And institutions I really plan are untangle more to estimate those point. of of customers say come cloud provision building

I for opportunity is last catalyst has the think of So cloud window us. to this going for a a broad us for period long, of of long And that time. to move five-plus-year

the on capabilities uptake as In no or saw in In our Office solution. and period, uptake script, Microsoft overall of terms Microsoft, capabilities saw part we high efficacy customers the over Microsoft. the second XXX the we of selecting our for of terms of going a question, base in noted by in your provided change competitiveness to very we

the feel And continue business our growth foreseeable in broad this drive that good, we catalyst quite for so again, will future. to

Matthew George Hedberg

Thanks, Gary.

Gary L. Steele

You bet.

Operator

And Gabriela Borges with Goldman Sachs. Please go ahead.

Gabriela Borges

of XXX won. some Either afternoon. remind you us, a the guys or benchmark at Thanks. have maybe security my displacements on Can on that email your Gary always piece higher gain measure Good of Paul, And some the on good think an question. Office us how the level, share there. and give for about how Great. for do update Thanks you you you detail taking have land specific and you the stack? runway

Paul R. Auvil

and I to a a that little their well then understand see revisit we both customers Office rates the we XXX a is base are running XXX many want the it's I those exactly actually and have security that, how installed remarks would Office that. across Yeah, positive customers to as win every – to back to for Gary as it's say track solution, hard our after. to we even prepared to decision having speaking, we stat earlier, go we're of choose continue move What the as described as don't some that high where generally come quarter. I made articulate email very think who real in to customers seeing hard

much very what when really they that and to they works that cloud from realize meet in favor later the first migration bring something to we setup don't they need properly either decide our that protect overall, Proofpoint as move people get the or measure with Microsoft enterprise. to capabilities So, in of the the directly when the view

Gary L. Steele

XXX to Yeah, that and goes opportunity. customer as We every just view here. Office one an other incredible point

accounts right So, customers what I system days, road XX migration script, our I whether last opportunity means them day, customer that to we compromised the did had know something. them the lot spend have XXX new do and the time And every single area help. raising and, that Office do. them middle get in with that using of get is those it's not is their in for every noted of customers this to we compromised putting in And email just against a accounts and attackers more over they or met on their that opportunity us literally in And aggressively fact, we day. they're get as hands after the to creating single every there of yet Proofpoint. basically

Gabriela Borges

Makes sense. you. Thank

Gary L. Steele

Thanks.

Operator

Wedbush. Steve We'll continue Koenig to with

Steve R. Koenig

for Hi, my taking question. gentlemen. Thanks

deals consultative? and these missionary as well. some (XX:XX) are side, understand and fee-driven or Account little greenfield, are a competitive you're Defense they are already winning Maybe product the replacement, Cloud bit, and are on Just so they more us help CASB or some

Gary L. Steele

market that young, relatively bit everything. it's a little of Steve, is so

course noted is likely the of to that compromised us the the I that drive of all allowed are deals then last in the that particular had would days we form what say, opportunity. CASB customers So accounts over XX broader some

and that solve it do people created uniquely in the to we And differentiation, it adoption and it able so. created cycle to because help needed were rapid sales unique so, created problem, acceleration

enthusiastic decision a problem, because decision. make think early to where have might seen Account we they and some people Cloud are of this solution about purchased. to turnover Defense what there's made an we're fully that do folks amount people I weren't a But committed lot it. have a of yet incredibly So still to And have have fix they it's urgent; simply trying

Steve R. Koenig

Great. it. Thanks, Got Gary.

Gary L. Steele

Steve. Thanks, Sure.

Operator

seeing be very I Macquarie. guys sales Thanks. Sarah Macquarie of Sarah what with Great. an go you Hindlian another from - in terms we Please Proofpoint are And in you integration Mimecast Inc. team? Thank where do in update to team Capital would Hindlian just ahead. much. with terms get they from quickly, (USA), of to then you're upstream. the Wombat the given really the one more market of seem moving love desirous

Gary L. Steele

Yeah, two great questions.

much So with Mimecast, it's same. pretty the been

really love and to size I obviously up-market. there is see average remarks, still – much well. at move $XX,XXX seen We think deal they'd larger. look in prior but sales still gone We do deals, is quite aspirationally if than around win their their attempting quarters. nothing prepared it's much, see different we've has to you ours them Wombat, integration With bigger respect to

quarter have We had a have oiled We'll together. pretty pipeline. well operating machine to and see. optimistic We've Still of about early. now, one we're pretty

that see about to opportunity the to Wombat. have but high plays we'll value And that technical all really we with be of integration value to customers. good that feel the of so, we And out, see how

the is Sarah (USA), - Awesome. Macquarie Inc. value Hindlian So Thank Capital proposition you. working.

Gary L. Steele

Thanks.

Operator

Suppiger Securities. with comes Our next JMP question Erik from

Erik L. Suppiger

taking Yes. the Thanks for question.

and your Your add-on new of products, were XX% they newer over emerging you of products, the your business, business. said

is a rounding a or to was that contributor? that a Can you're consistent last issue amount think comment with you what in bit seeing? that continuing Is as quarter. I just of little a terms grow

Gary L. Steele

the these how sales in later more with, different products. we drive really at an the company maybe provide emerging it's to then, completed for both both the up just fully to XX% was deals, as new on differentiation prospect, from and team customers, nice good if new of is every into you deal our net getting sales felt net of their two that's quite nice look just different course, And probably like cohort news year. it, it, contributions as of let year the all at compliance account the platform. others. pleased expanding not security fiscal grow decision are CASB as in a little Yeah, let – certainly team size. to not a a needless say, ready additional a customer just installed entire little are well sales helping base, your Wombat emerging being make solve to really full to in you Great, it's to. of we have we're great that as of we've getting not and about products is you offerings problem on. benchmark or training. that those and quarter, one will, way are you a in to me performance, some email once business; contributor. But the our in executing. that sales name that seeing work them When me around job stand if the list add-on get some ways continuing initial well or in We that There the It's January doing terms to that where And to in including than then as for speed is out a year, terms as of a But downstream. the color full that add our very goes engage value for We'll call speak add-on as sale products of prospect plenty with stats the us talk other we over to

emerging executing. how really category the So we're is products pleased with

Erik L. Suppiger

out in are there's of three that? one standing you ones? or terms If Can within that share which contribution two

Gary L. Steele

Two it are the our two note could would of I actually and think solutions Email prepared I or EFD. Yeah, Defense, in that you remarks. Fraud see

customers solution going a journey. amount that authentication. people Just really email We're spoofing the for to email on through find driving is of helping

delivering very we important security been where resonated doing. popular. the of So two then attach those highly we're to really see And and deals solution, is that's incredibly automation that set of level days, in think we're high these have Threat teams I a that Response our a

that can made it the the and customer You in examples. we see just remarks

of You'll see those often transaction. part the noted as

Erik L. Suppiger

Thank good. you. Very

Operator

Arete Research. with go Colville Patrick Please ahead.

Patrick E. Colville

Asia keep you accelerate welcome momentum it? and in to Europe likely Hi, the there. possible, aboard. pull in or on maybe you, ask I to Can Klaus, even are if the what up levers that

Klaus Oestermann

Yes.

And Europe, we look And opened long of successful the at leverage in if in been And strong definitely markets growing quarter Italy APAC, think expanding a for and look in heard and in Japan. like capacity us you up add that Nordics. that plenty as more continuation you start that I last give existing markets, and geo there, and we opening there's for of I up at think we've the where more if UK Germany room time. it's presence the efforts you a well. as ANZ will

Patrick E. Colville

Got it.

Okay, thank you so much.

Klaus Oestermann

Thanks, Patrick.

Operator

We'll William Jonathan continue Blair. with to Ho

Jonathan F. Ho

that now difference Hi, product customers to suite sort set good maybe the offer is much wanted you're to some in of with the you've afternoon. be solutions broadened fuller relative past. a just making that core like when of the just offering, to to able engaging I of how understand, the

Just want to your thought there? process get a sense around

Gary L. Steele

couple things, of a Yeah, Jonathan.

So one is, making strategic. it's us more

those in in we're seeing vendors critical a of making consolidating theme more theme and one continue strategic. us security today to is towards growth that It's this spend we is the capturing we're basically seeing the to many XXXX and customers. elevating one of the us, So more spend things long-term consolidation and us drive business. as it that Fortune of we're of think help great And

So of strategic has line advantage for significant the breadth a the us. been product

Paul R. Auvil

a this able provide are I And is truly really beyond with, that. like things not to it's it's entry company whether thing and but repositories the enterprise broader it's something and able first actors something points points understanding be social I the threat security what really different the to world-class enterprises, and having violation those on the toward our all people provide is it's foremost in to your also it's need content that reflection whether SaaS employees customers that the to security are than box that's that think the exists of Workday, enterprise, important engaging applications, that Dropbox, them. And whether or increasingly that the just for content compliance have people-centric resonates data with cloud, the and for email all up service problem out pick evolution much across I'd or Yeah. for isn't points into to that overall. all They their whether firewall, is that on being of you, compliance add, are this security every sitting very

this Gary understanding very prepared see his people attacked And resonates in that so, on broader understand we opportunity people notion VIPs combined VAPs going as that can talked all the just the helping able particularly after, they the not with are, who the how being but enterprise to manage of help That the that with idea remarks, of an that marketplace. the serve so be population. really to customers in about focused or

think of couple about think we evolution really that think have make a I investment will we tight made customers next this our as off of a and difference already G&A. spend the over So resonating has this traded in execution in that drive very R&D a years. really quite still, against that unique frankly, we is helped we've platform It with big

Operator

We'll continue Deutsche to Powell Bank. [Gray] (sic) Gary with

Gray Wilson Powell

for question. Thanks taking the Great.

I'm follow-up few I I sure want because not understood Walter's So question fully ago a to answer. minutes the just on from

implies QX? Thanks. a QX. be growth accelerating main would in for just guidance year accelerates from by seasonality, and full rates like I driver decent the understand what year-over-year So in but QX amount that growth the billings linearity

Gary L. Steele

that are we ago, So both several go course years, combination deals of of deals deals that three did it's do were Yes, and deals, year. were one remember back did had two that things, a you years but we it's years, right? of we if the historical we've multiyear that lots –

of So fourth QX you've this are And, the coming kind renewal then last normal behaviors the the fourth that end compared renewals stacks and around quarter of up what a at natural kind business we all add-on just enterprises and the year in new to terms year. close course, expect the our other budget of to see planning multiyear quarter where got the combination got that in that in some year. of of QX base on you've of would that flush that in spending in we to of of engage

So combination all things. of it's a those

Gray Wilson Powell

you. Thank helpful. that's Okay,

Operator

We'll Eyal go Oppenheimer. to with Shaul

Shaul Eyal

my taking on Thank question. you. afternoon, level one. Congrats the for Good guys. Hi. thanks and quarter High

the third quarter XXXX I'm actually that of guys security You were to saw GDPR, or second amongst heading the XXXX, of actually half I companies, the first imagine, some back would positive do some of that see of GDPR the quarters? for as you you us next about the sort impact. few tell What a affairs tailwind and spending Thank you. about can state

Paul R. Auvil

reported the chime we Gary thing let and I'll if go think it been everything make I regarding that notional became actually Yeah. in. we a But within issue potentially an pretty back would've could talked broadly I longer opportunity one want GDPR, to about about sure, in Europe, since we've of never seen quarters actually a direct the term, of in people the consistent letting we while in business that felt be think we that know was our result GDPR any GDPR mandate.

do could GDPR be it buy we we we compliance that security to could you possibility GDPR suggest signs capabilities, of So think would that. with see business are us, world-class specific yet think that there that anything have that placed, while should that and we think do for accelerate a

you with add to that a So little want said, bit? Gary,

Gary L. Steele

of only over that from do solid we security hasn't for thing that we organizations And GDPR years, a think the to we believe response. episodic several the security front European do on Yes, think reiterate stronger benefit And posture, to that seen the that we've will and are course need been capabilities believe as I we we'll fundamentally would the that that highlighting Paul described, where it critical benefit over time. posture. that I is, a the any take offering short-term is do But we're some that. next thing much

be it quarters but So we nothing short-term. in a will as the unfold, tailwind coming the think

Shaul Eyal

Thank you.

Operator

we'll And go Gur to Talpaz Stifel. with

Gur Yehudah Talpaz

the phase Great. Thanks did can that in you term see you question. taking forward or yourself if my or the I of here the guess would still more something firmly opportunistic here? pop you for liked? kind question appetite going for digestive up you about is, talk Paul near And Gary, M&A be do

Paul R. Auvil

about Manish not the possibilities. take thinking a why and which indication on that an he call not vacation, But take let shouldn't pondering actually We always M&A is is you we're today. as that

of as this early them last we've told were value to make and full like and think of I some time shared rapid to getting we with people from want year, we year kind announced and sure we deals people succession when that them. we three those that take we integrated digest

planning planned to in the in near in successful the kind believe, and of if we kind worth we'd don't it. is were engineering look it's can sized survey But we at that teams very we we small moderately it hey, one that companies, do and the many culture, there things tech anything you, I of to continue continue with opportunities, but do second strong of have be even mind, here, and term half something a doing a think don't was we might of in like, possibility to doing, their have the landscape element but companies feel I year. term So that the near continue whereas the anything horizon. of tell Proofpoint

on not the about innovation have are a have we that just interesting going all companies of that been and really to invented much What's work the founded to is great So sorts things that that cycles on, engineering pursue. get culture great there it's that bandwidth there and people our the other philosophy. is fact here very don't

And see welcome the so, delivering doing acquisition to extent something really we're what that and of excited our cloud platform, can teams find get and the is think those those we to people to that relevant executed interesting are people we team. one that to in

opportunities. look to continuing are for we those so, And

anything out And here want there? things the and so, now to how play between the you end see add we'll Gary, of year.

Gary L. Steele

No.

Gur Yehudah Talpaz

guys. Thanks, helpful. That's

Paul R. Auvil

Yes, thanks.

Operator

Thank from you. Ladies and Klasell gentlemen, our final Northland question Tim with Securities. comes

Tyler Wood

Proofpoint how Wood products? Tim seeing Wombat Tyler on question. specifically Thanks are Post-acquisition, existing commonly this actually. our is you taking customers Yeah, for on taking other for

Gary L. Steele

Yeah, that's that. early a great question. It's answer too to

QX, an first quarter selling. So while customer of it's our capabilities a in of Wombat we Proofpoint noted example full only buying

but remain optimistic ton of have we that, about don't yet. we a So proof

keep we'll on that you one. tuned, updated stay So

Operator

like over conference turn you. remarks. And Thank closing the this additional Steele time, Gary to for at to or I'd back any

Gary L. Steele

today. for as enter much. the to We take on the just us the Great. XXXX. progress, so circuits talking joining about and we coming seeing call so excited well-positioned Thanks many we're you today. and much look joining want to moment call on months. of on and our forward everyone second believe in thank a half I We're us the conference you Thanks to of we for next the

Operator

conference. you and ladies that for today's Thank And participation. again you. does your conclude all Thank gentlemen,

may You now disconnect.

Jason Starr	Proofpoint, Inc.
Gary L. Steele	Proofpoint, Inc.
Klaus Oestermann	Proofpoint, Inc.
Paul R. Auvil	Proofpoint, Inc.
Andrew James Nowinski	Piper Jaffray & Co.
Philip Winslow	Wells Fargo Securities LLC
Anne M. Meisner	Susquehanna Financial Group LLLP
Alex Henderson	Needham & Co. LLC
Kenneth Talanian	Evercore ISI
Melissa Franchi	Morgan Stanley & Co. LLC
Catharine Trebnick	Dougherty & Co. LLC
Walter H. Pritchard	Citigroup Global Markets, Inc.
Matthew George Hedberg	RBC Capital Markets LLC
Gabriela Borges	Goldman Sachs & Co. LLC
Steve R. Koenig	Wedbush Securities, Inc.
Sarah Hindlian	Macquarie Capital (NYSE:USA), Inc.
Erik L. Suppiger	JMP Securities LLC
Patrick E. Colville	Arete Research Services LLP
Jonathan F. Ho	William Blair & Co. LLC
Gray Wilson Powell	Deutsche Bank Securities, Inc.
Shaul Eyal	Oppenheimer & Co., Inc.
Gur Yehudah Talpaz	Stifel, Nicolaus & Co., Inc.
Tyler Wood	Northland Securities, Inc.

Proofpoint (PFPT) 26 Jul 182018 Q2 Earnings call transcript