PFPT - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Proofpoint Third 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.

You may begin.

Jason Starr

Thanks, James. to quarter welcome earnings and afternoon, Proofpoint's XXXX third call. Good

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

or is the These we it or provided as done believe unless of release the it no as filing as to make call. information These factors to forward-looking result through we'll to more differ important the such Risk XX, XX-Q. future detailed could Of call, October events. statements our and this also risk X-K. reiterate is regarding of Form caption update a risk under the and of course to results financial Proofpoint's through materially. policy assumptions We contained on nor the press that events fully Form recent the including adjust obligation forward-looking financial in the a to XXXX. also neither a guidance a that you press SEC, factors with company, future conference During on today's to uncertainties caution date, actual today's reasonable these of Proofpoint's release most new cause call, filings public which material of Factors We be performance the statements are future note, are are subject based consider statements this in and disclosure, on risks undertake

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

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

Gary L. Steele

drive our demonstrating I'd our report our margins. free with Jason. to another strategy expanding that pleased attractive we cash for to today. call of paired joining quarter, I'm excellent metrics and Thanks, us flow financial growth, on thank the like beating had on everyone ongoing guidance to all

the ongoing by migration our continuing to compliance strong, overall business cloud, platform, the cloud rapidly for Our next-generation momentum evolving threat security the and remains and landscape. the driven demand

to organization's are every a while security, greatest infiltrate when As employees organization's they people, we've shared also increasingly attackers every And on are to it calls, target prior asset, weakness. infrastructure, greatest our comes company. not

capabilities, protected, scope whether that using content, venues. of are sensitive they to approaches enterprise ensure exploit e-mail, they a The over applications capable enables the or to data, unable sufficiently the where malicious their solution data cybersecurity cloud, to tradecraft XX% to sensitive Since evolve protect platform combined to employee with their innovate to And to This crucial to and their whether that or for targets to a embrace employees, enterprises enterprise chain their innovation. secure. This broad in targeted and cloud not with the protect beyond to of endpoint. critical customers, people-centric must point provide when strategy are continue more supply as to applications, files legacy begin lack coverage, of especially firewall, compliance and experience the traditional with effectively a and foundation to social move approach the of rapidly company-owned this behind interact actors requires critical a and has compressive not is are their intelligence whenever security the every an order people. firewall e-mail, remains human become breadth threat defense more evolving a of our their they bad attacks full and As many landscape, threat operating real-time shares focus a with people-centric an for spans and solutions true vector and including entry this systems employee SaaS due is the enterprises brand. given vulnerability, their

and actors malicious can as increasingly other through are forms as on to circumvent internal bad the which vulnerabilities today's human The often malware and of their cloud the well targeted fact, use compromised of including attacks multiple exploit or URLs designed gain. controls of of techniques for documents weaponized deception as delivery through to In achieve financial cost be of Office these emails, objectives, as or such spoofed evade domains services use detection such accounts look-alike all XXX, material. user

controls of in the example, the prevent across compromise importance that companies each $X collectively, effective spoofed cyber a manipulated and laws. securities account to new were either minimum losses Securities federal nearly and vast that training fraud, of victims be it companies industries internal that recovered. issued internal Exchange nine and business order majority never focused maintain risks these report lost For million communications, that last to of warning and of and and or disclosed multiple publicly-traded lost week, fraud a they these with of implementing was controls $XXX the of takeovers. the investigation cyber-related just of email compliance Commission conducting enhanced This attacks, It a through the about investigation, or million on were

account has attacker login hacks in actors, bad system the as masquerading fraudulent then credentials opportunity requests by outright nearly logs attacking the company a in to significant account As control a into July, a cause and seen into and we number by where the its or and earnings in customers, employees, user's vendors affected noted increase his we've call Office our the employee. throughout them is with XXX harm of malicious the Once chain attacker fulfilling and triggering internally. ransomware unlimited legitimate established, takeovers malware supply

recently Defense, introduced detect Account CAD, and Cloud compromises. Our or remediate can organizations these help

impact takeovers. e-mail we all account IMD, TAP Defense of Protection Internal detect of the content Mail have malicious internally, sent our applies of mitigating our an recently Additionally, of and further enhanced capabilities which solution, to or version introduced

(sic) many As "moderate than innovation". Email Build commitment agree email Security the hallmark investment culture Email which years recent and nearly to years, over [How requires further noted an our research to more, development of Proofpoint's been in significant We ever Architecture], for innovation a analysts report How security more titled and sustained Build has our Gartner Effective Architecture our demonstrated to couldn't a in XX scaling business. of an by Effective is and

Response Response and users; transportation added XXX,XXX and Fortune TAP, XXX,XXX TAP, a purchased turning Targeted a that of Attack continues threat firm results Protection, the real engineering third a to company and XX,XXX users. Protection to Threat Protection wins and including an Defense, contributor number Protection, of TAP this IMD estate our We and Threat Fortune noteworthy users; Email our business. XXX the of for key XXX our Now, company during growth or some logistics TAP or a our our services Response solutions, for quarter, and Threat be EFD that TAP, important quarter, suite of that Fortune to advanced Fraud Protection, including purchased XXX for operating offering, had

Microsoft threat Beyond added a the migration transition XXX catalyst Privacy Protection, long-term landscape, and EFD to these security automation in to companies TAP, broader a – in users; XXX,XXX as Fortune for for Threat requirements appliances Fortune XXX a continues legacy be the part as full Proofpoint a rely demand Office Protection, airline included purchased that our we particular XX,XXX Examples ongoing and on-premise suite of of TAP to helping shift solve for company that XXX Threat and this quarter XXX and XXX,XXX the Privacy and healthcare Protection, Office compliance and on-premise of of drive company infrastructure the Response cloud where part to is the solutions that the cloud. deals security for to TAP, existing users. won on global displays as process purchased business that cannot users; Response

demonstrate compared as Microsoft Office effectively XXX of products also baseline part to We security strength when of Proofpoint's by to solutions bundle. the provided continue their the

Response saw with Microsoft long-term Proofpoint Response a Overall, a and and Office large by a already wholly-owned rates decided QX, quarter Threat XXX for with that XX%. environment to Protection, included purchased Threat to Response XXXX capabilities of Privacy, remains Threat Wombat that the and was privately-owned company XX,XXX security security customer And their financial demonstrating purchased coupled and world-class Protection, and had who provider manufacturer that third TAP existing new their favorable that recurring fact, Protection, we services for purchased commitment competitive in customers and these contracts also that revenue X,XXX Examples record terms TAP for high Protection, users. Proofpoint of executing customers, remains health continue XX,XXX an users; for subsidiary to users; increase we above XXXX Threat win upgrade maker a new insurance Privacy users; subsequently multi-year and to of in customers, driven we XX,XXX XX,XXX Response rate users; EFD TAP their TAP, automobile In a apparel the Protection, purchased company Response experience had a during for TAP, the that and Global and that XXX importantly, Threat insurance purchased quarter a Fortune Proofpoint. in solution. renewal for upgrading a an Global to moved prepaid

success to also the our add-on our growth are which with quarter. ongoing this sales, of pleased contributed We nicely

in the Specifically, our demand encouraged for are by we ongoing products. very strength emerging

the meaningfully the demand quarter, us growth. led of emerging offerings past, an have the are of source enterprise product saw our is particular. and our offerings, to which good holistically problem. new important way and defense the our demand new mentioned of cloud Defense methods growth advantage CASB differentiator enable the address They CAD, Response the and by they of portfolio proving important business Fraud unmatched XXX provide TAM uniquely XX% total as as this have our for given mail by these earlier, in defend we also The rest of the of to an strong and products Email in continues during competition as and competing to competitive over account for As add-on be from and that the increasing by billion, when in outpace Also $X in expanded internal over across also Threat we contributed Office an excellent closed social vectors number takeovers, marketplace. and all noted serve a email, of attack early

for is added over well for CASB, Response, Fortune in our XXX Finally, wins firm solution as a XXX,XXX of Threat that emerging consulting the XX,XXX wins A added and quarter. QX XX,XXX added and firm trending in XXX with Fortune included: that users; and isolation the browser key insurance that EFD management EFD Continuity, Global Global company users; added XX,XXX for browser consulting Wombat several few isolation browser that Proofpoint's company product for users; well added pharmaceutical insurance a EFD company for and and Digital users. EFD XXXX a isolation that a XXXX Risk, XX,XXX Continuity users; a

the customer not dramatically final end-user solid CLEAR, recently centers integration business Email we're the compliance Wombat interest Response issues. particular, momentum management some increasing seeing and some our been has synergies segment growth driven Response announced reduces by and across products, but security In through commentary automates another on excellent the operation integration on In of recorded is and archiving we the product said, our the well, Threat and emerging aspects That For in all roadmap integration quarter solution. our general, service and of our between the incremental products these good such of time progressing as complete. of see Closed-Loop phishing by Analysis or with reports which base. spent

believe Proofpoint We As features on-premise to such customer services noted strong seeing regulated in particularly Visualization, this mandates. are in whom as most products, opportunity attractive and solutions our longer Analytics of legacy the healthcare to Supervision, that as competitors, many new an these required interest these customers where have eDiscovery, financial were area a contrast quarter, we last regulatory archiving such the creating to innovation to verticals our in in term stands meet convert neglected of solution. their and

third a financial Risk for and non-profit added and with a healthcare XXX to continues a Wombat Archive and that XX,XXX company insurance the added quarter XX,XXX users; firm Security pipeline Digital users; Our XX,XXX services for including Archive, that Supervision users. in added company Supervision deals XXXX converting for Fortune that Awareness Social and several Archive strengthen Fortune

partnership, a that detected recently or and with respond ecosystem we Threat TAP identity this of environment. customers leading partnership Okta, for for our their options our we we a Turning the enterprise. announced access management new provider automatically TRAP attacks independent in enhanced Auto-Pull Response partnerships, enable to to phishing to technology Through

customer's the joint email we up user step TRAP all as Specifically, customers the user's a call when up user. team. being both to authentication a can of this automatically security reduce manual on will risk any well to compromised for TAP account work on This clean requiring that API that phishing sees part that without as use to the clicked enable Okta's URL, of

been CyberArk, our forward technology the this positive We early, in partnerships Networks, has providing avenue also we wins additional into with very important Imperva, quarters of the look the these Palo our to While contributed and customer into ahead. excited about channel noted still that of remain integration feedback Alto and on updates and new rest resellers. a an number as I've already to expanding Splunk, represent reach

further in abroad of and year-over-year continue results progress pleased also to grew expansion make business, We represented international towards total XX% and XX% are our with which the revenue.

hiring and expect planned improve U.S. international next we markets least quarter and energy the While financial closed that consulting a to and, decline presence supplies for that that such XX,XXX over Italy, added growth we result, TAP the users. in been Spain, included global XX,XXX the than a rates at EFD Defense for deals the Protection, in Protection, capacity Threat for our of has XXX,XXX Notable users; firm execution X,XXX have and our new growth TAP, the Response as Global several TRAP of the quarters sales for Threat as our we added of international terms outside EFD, year services a Nordics, Mail expanded a in during users; that sales firm course while XX,XXX of over XXXX for a Global for distributor purchased users; a added state-owned Global users; manufacturing and that XXXX Internal purchased EFD and XXXX company Response office company slower

to leadership Paul, an over some share update turning regarding I changes. to Before want

pursue to was to other Klaus the depth in on I'd and our succession step bring Oestermann company of brought additional to leadership to planning. broader opportunities. First, decided that down context long-term to announce also has like Klaus the

tenure, search succession CEO well role. during that term step from with to it became did shorter him serving it no has near in in ambitions and a next his he past down interests. Klaus this plans contributions leave leading Proofpoint role keen a and his I of a to over for his to has plan. Since he the and the expectations his I a together CEO to decided him wish Proofpoint, thank clear my With I not as in his better for role several have future. in align mind, fits As worked his continue months, that interest want

after team Blake Sales am decision excellent announce to lead I of of of means reporting early fine-tuning of an made and the me. we in prior to the across his Salle search, without in sales in us a around an experience to our Blake the hit has can that external pool qualified Worldwide tenure Worldwide potential uniquely Blake's as go-to-market Executive team, his Vice Americas cloud joined the enhancing company team to Sales unexpected the currently XX% world lead leadership job the while the pleased the around existing the represents global Worldwide of role. Second, new model promote our XXXX count sales of disruption world. He over made learning our to any Sales bolstering curve he of President extensive lead head terms done have security that organization. candidates, the him in risk that ground with running or operations ranks –

new As like Head various participation his Manish that conferences, Officer you know a Sarin, of at I'd him many position. point, accepted him of We'd our contribution to as investor has Development, who met Corporate years like and for of role many in pre-IPO as his part to Exabeam everyone Chief let company. final thank a well of the Financial in wish his

soon. We for to replacement to have his search expect and this role started fill

QX So very we results. pleased summary, our are with strong in

market to With turn Paul. addressable compliance me approach let billion opportunity are it well share is $XX our further in years. over the gain in to we positioned the people-centric and we resonating capitalize to that, believe to on and unique over total cybersecurity coming Our customers with

Paul R. Auvil

ASC effects and, very acquisitions the and quarter were Billings in with third year-over-year the XX% of reported the the guidance million, We our up and of revenues, had $XXX.X $XXX.X our for guidance Thanks, were million recent Note here cash to XX% and $XXX quarter for million. August the QX. linearity flow during organic an rate Revenue $XXX adjusting which strong of we boost increase of range above income, this XXX, of impact our quarter. particular, growth a well for million, that our XX% approximately year-over-year as of million Gary. served to operating end to July pleased underlying $XXX million. as high $XXX was range the and net results totaled in above

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

For service two of a QX, trend is to $XXX.X record at We advance ended reversal choosing terms commitment the reflecting $XX in long-term roughly the three demonstrating adjustment the deferred duration in $XX impact these platform. million. to durations first and up customers for modest during in uptick duration full to $X.X an which million and this by further million the XX% recorded related rebound was balances, of million, of a half pay quarter This years by of an million. of quarter, in from year, short-term increasing their in items with sequentially low saw revenue our the reflected growing our $XX

of months period to the note results. it and that It and quality recorded X% worth to XXXX from in balance high essentially noting nine of cash actually the which our Hence year. consistent X.X% is lower XX% deferred with same the underscore flow long-term increase the the equals course is our that billings also And down over a deferred in was revenue total contribution deferred as total revenue, XX is to targeted XXXX, months of Our basis, over in deferred our XXXX. on XX long-term duration relative period long-term the the of of our year-to-date the same over our from of last represents of slightly total first billings, continues duration same range remains overall half revenues generation. the the free

XX% quarter, the threat of and segment our During and represented and grew revenues. advanced XX% XX% XX% grew segment represented revenues; compliance our third of year-over-year year-over-year

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

expectations, and non-GAAP the Turning was XX%, our with performance profitability driven to quarter. quarter, revenue for during by margin a primarily basis, in third strong on gross our the expenses total line our

the increased over quarter, expenses XX% $XXX.X XX% total During third period operating to the representing million, revenue. non-GAAP prior total of

growth less SaaS also planned, the earlier, slower was than lower in in sales by summer expected certain of R&D mentioned hiring trends benefited as our costs primarily operations to cloud driven of Gary hiring international well due the was slower elimination and and with spending from system. and As spending over the our months decommissioning legacy than associated

In we by in terms million, well of income driven of well above of both $XX non-GAAP guidance profitability quarter, $XX.X range and lower-than-expected both $XX the sales reported as million, net as million for the R&D. the to spending revenue outperformance

diluted Moving share, $X.XX. was that per the the fully on back non-GAAP to fully for if-converted to XX associated $X.XX to our per and convertible quarter. shares such as guidance of million for with range method cash adds applies uses EPS the calculation notes interest $XXX,XXX EPS, debt, Note $X.XX the and the diluted convertible in our share above earnings quarter

results. We on to is Computational additional count provide Estimates, these to loss GAAP Per Guidance a details outstanding. On a this have included third on in basis, recorded $XX.X resulting Earnings a share calculations or based in release section the per our topic, share in million of on Share $X.XX we shares which quarter entitled net based on the explain our and XX.X million differences intended used press for

XXXX which of X.X settled for million called stock. we convertible were common August, shares our As a reminder, in bonds,

count non-GAAP for full in year. and these will shares be both well EPS forward, included as as QX Going our the GAAP share

linearity capital of million cash $XX our above the of quarter million, the this In generated $XX.X over in Note, million reflected our due in DSOs, expenditures, better-than-expected flow lower in guidance of resulting well was in flow, to range is compared the I $X.X flow quarter. cash million terms we discussed million. operating earlier, $XX billings $XX.X performance the in of cash when that QX for free that invested previous to and quarter much to during and

guidance, office in seen XX-year lease the an to Sunnyvale here quarter for of in shifting we half this space Before XXXX. beginning the have X-K filed documenting you that may – second rather afternoon, second

a part bringing business While the other has without our modest do standards. well improvements our we financials in will we There facility here are have growth for tenant With than location we lease existing from when decade, compliance pleased the in current XXXX, a rent the in XXXX a XXXX. reflecting found to commuting current campus our our expect or to since be moved deposit employees. balance expires planned of location into Sunnyvale pattern office as from that surfaced have sheet any facility XXXX larger will invest our with few accommodate the outgrown impact back roughly item we that With the no blocks can transaction, this that in enabling of of to continue just coming to our $X.X the over scale in million. a in us XXXX, mind, our said, disrupting

in recent budget in expected companies as tenant We roughly Valley million. of cost to compared with improvement by Silicon projects expect moderate be $XX this an million to here other to years $XX many undertaken

increase outlook growth midpoint. slight currently financial the $XXX.X at the with a billings at million the the XX% of midpoint to to $XXX.X resulting expect be fourth million, starting We in to let's year-over-year quarter. Now, turn

on duration renew noted and buying with so results. are quarter's given multiyear trends, there seasonal QX that QX's in remains QX, we're and As expected assuming last several to billings call, deals consistent

range expect of million and of year-over-year $XXX the impact the Regarding $XXX growth when for growth at a million, to of acquisitions, our we XX% ASC outlook, revenue roughly XX% or adjusted XXX. a and midpoint, rate

just to XX%. fourth expect non-GAAP quarter We gross under be margin

tax depreciation XX.X an fourth or count $X.XX of expect share non-GAAP also and income And income outstanding. the to million of be to discrete during approximately fully to this We share. per $X.X items, million million assumes shares $X.XX provision, of a $XX.X $XX.X exclusive approximately million, quarter, quarter net $X.X of million, diluted

given into cash the cash been the have quarter, free flow, would otherwise in QX. that linearity of terms collections QX strong were In the accelerated expected during third

full billings to of for million with that million. the cash which flow rate cash midpoint our $X.X increase of in range. million expect terms XXXX. free full roughly fourth be flow million, $XX $X increasing to expect So year said, we expectations to million free QX for for translates $XX From quarter year capital of includes the of annual are represents we which an of an of of This the expenditures $XXX at full a to guidance growth and year the now perspective, range in billings midpoint our we the $XXX to XX% million, the be guidance

estimates to to compared from an million account we of of million $XXX.X with revenue growth raising a guidance XX% the the this at to of acquisitions $XXX $XXX.X recent we our underlying the guidance million, accounting, in transition $XXX new guidance to are range XXX roughly most organic estimate annual our associated ASC of for growth terms headwinds as rate million. In impact into When our taking the the conjunction is the full rate year XX%. to with that of recent midpoint

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

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

duration flow revenues rates mid million, $XXX.X year. guidance we that highlights note flow are range high-quality cash raising XX% capital increase recurring the of to of are assumes of for average This over free our business which important contract cash $XX XXXX million producing the of million year-over-year an billed teens with the that the expenditures based and full we our For and in over is XX% representing roughly to model an the to this cash on with flow, renewal generates. XX% to of a XX% revenue. low $XXX.X recurring It

share view outlook. secular stages early and While active cloud environment we're the favorable positioned in a business Overall, of and firmly would to well are move regarding like place. landscape in our preliminary strong competitive the our an with planning still the our process, XXXX of drivers the to I financial threat remains

the our components some to I to in current like share embedded results, our would in year. various our when factors initial guide mind, comparing keep Given XXXX XXXX to

the we basis, rates First, compare contributions strong over of see a given or our nine revenue emerging XX% recorded inorganic growth to on while year-over-year we growth core to near the reported months challenging year. have in a businesses, first continue products the set and at up XXXX that our performance the

creates on-premises remaining a points year. customers of ASC XX our to next nominal roughly cloud, continue the XXX basis Additionally, headwind to as migrate

acquisition that threat of rich protection. well, roughly from for XXX million access the mailboxes data under gaining our primary the As recall was driver the Cloudmark derived to intelligence

headwind of of relationships the the serving XXX XXXX, the as arc the XXXX, of in first with revenue of we Cloudmark's we to base, of biggest year. the across with rest in coupled approximately reduce across heading execute the shared, into which basis growth the negligible impact the all part results when revenue points course XXXX out the over have we've been facing As OEM

we Cloudmark existing Gary that the over we to taking we on our as updated hiring is initiative of targets XX%, measured in particularly been start, initial market headwind our all comparison view baseline expansion in expected. than XXXX this growth our it to marginal good to a the the productivity of the high Finally, regarding rates full in providing on several made next plan backdrop, slower With when range basis from the that approach when guidance. XXX and of as approximately year the sales hires mentioned, new And we productivity. while from since in mind, and invest million the has $XXX the that we've substantial quarters, below against take team. somewhat for has of slowing does to XXXX, a thoughtful are pace a over our considered international plan investments factors in preliminary as further follows: Americas believe optimize or an of we And while the past our rate course growth delivered time aforementioned these quarters of are is XXXX, We been XXX over XXXX, place the couple views midpoint business. for go of the the to point additionally, the internal when capacity quota context to XXXX. revenue XXXX revenue ASC to reps million given our with difficult And reach we face $XXX coming

we range place growth the year-over-year the our purposes, and in headwinds growth be XX.X% the reported to with the fourth easier initial of of begin become For three in the for modeling year our expect subside. stronger taking quarter to as comparisons to first view, XX.X% these quarters

pleased billings, increase annual range outlook, billion an important exceed current we to based to report In terms representing select on we our an of to mark, with milestone, $X.XXX are of $X.XXX that XX%. $X billion a of the XXXX billion,

over of timing, in third step-up the with the this representing quarter expect the second the for by and year, year the modest a course one-third followed to recorded XX% we the in with pattern quarter the the billings fourth first roughly quarter of for the terms of a year In year. of similar total

down. first seasonal strong furthermore, yet performance in Regarding particular, quarter QX business as had recorded new compared And ramped to in during very business XXXX, to the quarter we terms of OEM the and be had add-on in a norms. Cloudmark

outlook drives new all the in the year's non-GAAP XX.X per regards $XX to range low to up decline income, we of of net year-over-year in which seasonal using with from will rate for typical course first $X.XX With contribution and the be year. there estimated Cloudmark for the to our quarter start million share from relatively -- performance this a normal more million OEM consider expect to And a business XXXX quarter, growth expect terms the add-on of for the during XXXX. midpoint of business, we of no of As or the growth a an we first $XX outstanding XX% $X.XX of diluted shares million year.

to We free to flow cash our is grow market. free Finally, approximately compelling to or making revenue, flow of believe to revenues. progress nearly key ongoing demonstrating year-over-year outlook expect XX.X% we particularly we're XX% toward in roughly the of by pursue $XXX this investments XXXX innovation our our cash currently that target XX% steady million to XX% opportunities the and given the commitment of

expenditures of we half. XX% XX% flow the years, our point generating to generated prior that and margins. to planning year half past we believe further million billion in our good just assumes XX% to provision insights with second tax $X This complete $XX expect channel, process approximately refine the an XXXX to Similar from of of in and additional million. exclusive the extended gain million of plan items capital guidance of As with of cash in the approximately flow of million, under be is income of million roughly $X.X but depreciation a to $X this potential forecast first this delivered continued as $XX cash revenue objective to and majority network $XX XXXX and our progress years, in discrete we XXXX starting demonstrates partners over our sales for we free

to I'd share that within about As model. like point XXXX, financial a seasonal few our a trends reminders final occur regarding

tends a in recognize First, as compared our from a to to roughly bonus. daily in initial payment with backward always well a for the our days has recognition Also specifically, the the to from as and as that our on of X%, step approximately recall revenue kickoff, existing a XX XX our in to income the only QX, quarter the respect revenue with cash lower cost recorded increases to first driven deferred over ASC well company the net the the sequentially revenue profitably result subscription our given as employ standard. for million is the the and a $XX.X equates flow first cost that approach revenue terms investments conservative the mind of which be quarter quarter associated as during operating sales scale. revenues million company's size methodology releasing sequential taxes, our year revenue XXX very non-GAAP More given XXXX bit significant first of revenue guidance, at in under QX first the that for decline marketing the during keep from growth to by payroll current first quarter timing and was seasonal side, is quarter in accounts. result of of in of Further, fourth a of business $X annual our includes to quarter outperformance sales accounting we subscription going

and what better than aligned QX increase in will QX we with likely year. the recorded course then our the our of lower investment in As now gradually profitability revenue over be levels, a the XXXX XXXX fit is

the would disciplined initial attractive of XXXX under our quarter. both in and of flow revenue I of XX proven our reflects a issued are this compliance found to dual conclusion, and well for under third like top operating afternoon. and comment, of a which Rule XX us companies. threats. for XX.X% free places Proofpoint cash of Rule our built A advanced disciplined enterprises cash believe figure execute all XXXX both considering delivering defend results to construct, When line nearly discussed margins, in of drive full positioned last bottom XX% the as XXXX revenue traded that that growth with continue XX driving quartile the continue it reconciliation the of outlook growth of prominently quarter hallmark which metric remain results flow publicly that further objectives release in final our of our in the cash year highlight margins collaborated non-GAAP and initial today's free for strong to guidance In free capability GAAP a Proofpoint's As to guidance top well and growth remains can operating strategy, this flow to and third we the against be SaaS on to we quarter and security increasing

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

Operator

question Thank Capital you. And today Matt we'll first Hedberg with take Markets. RBC from our

Matthew George Hedberg

ASC was Thanks from what think – Maybe for perspective. is a not XXXX. items that repeat headwind way in to of nature, (XX:XX) right would that on the The any one-time that out? you a some think they're in to the usual, sort Cloudmark i.e., any impact of what there And that guess then duration in guys. Paul, bill wondering sort Hey, kind of an about XXX thoughts and look Is of kind assumption helpful. Is of on that these has clarification And I'm to to embedded comment impact international if XXXX? questions these that call you for the into the very items for taking these of on lot hiring that on couple could also – on the XXXX. just as quick themselves thorough color my I me with questions. about just one-time early called premise seem way you it going duration, XXXX? that purposes.

Paul R. Auvil

really good Those are questions. all Yeah.

bit from pleased particular. slowness executing, Europe think I the impact internationally can tell terms current I out promise team a specifically. of breaking So, of amount of little not But in the we European hiring a with there, is tremendous we're the way and in that think there's we're you the and in and that

a worth slower numbers completed as by haven't calling as even planning out. hiring feeling in start again, was XXXX, plan been board, And at very quota our in officially journey that that's we we stages. And we but that is the so was fact, we stage, looked the capacity it's at impacting this approved our it overall the into our thought certainly early

largest there in color the yet market significant are share in many execute needs we'll are some customers And probably very enterprises in there. today. there we over of we demonstrate next for European have to the little Europe, U.S. the Europe additional of as think solutions provide significant closed, and some the market of as they as have the couple the them our is again, I very continue that quarters we So, that But

comments know on that of whether historically I question fit in duration, your as kind think want year, realm would our about the guide there? for to of So, kind pieces to the about you in we together. think we say I how have we've that other next guidance any it's the don't mid-teens. add operated that And Gary, and you

Gary L. Steele

No.

I it. think you covered

to the I board. we given people provide thoughtful think on that we're very we guidance it be also get want opportunity optimistic the to takes as timing but about international

Matthew George Hedberg

guys. Thanks, Sure.

Paul R. Auvil

Thanks.

Operator

from hear we'll with Winslow Wells Phil Fargo. Next,

Gary L. Steele

there? you on out Are you mute? Phil,

Operator

Mr. you're depress speakerphone, using a handset. mute pick Winslow, or function your your up if

Jason Starr

Want caller, to go to our next James?

Operator

Certainly. Andrew Nowinski with We'll hear Jaffray. from Piper

Andrew James Nowinski

record would revenue in headwinds fairly seemed understand which I'm largest understand the is like first to recurring you role. your I'd Manish catalyst, Thanks the acquisitions boomerang hiring the insignificant. and headwinds struggling new my your slowdown lot. comments to wins, to from given the cited described the All because I issues. on a right. and international I XXXX you But your guidance his the guess Then, extend growth, on think congratulations single Microsoft from I

of the just you give size opportunity installed can on base us seeing? the Microsoft maybe more remaining color So you're within that the any

Paul R. Auvil

can me first in. Well, your then jump Gary let and address question,

for additional think obviously, sales up aren't Keep compare. a got quite we inorganic tough bigger top that in transparent that you've revenue bit the so and the issue is of I organizations quarters inorganically, a But and think added. us the the that revenue we pretty that year, we been about. put mind reflect (XX:XX) very the creates function which year-over-year I yeah, we've big added several step line of prints over some been So, that's up to scaling first

it XX% scaling quite So, of the tough But you the sales of with the look today as delivering. and ongoing that at organically growth we the continues again, to growth business pretty as you've the and a the rate its got to rates are the first in QX. year-over-year year when quarters we're compares XX% several QX, it way the compared at pleased we to delivered organization exists look execution, as contribute result, QX in

with that this is quite actually So, all said, we think reasonable.

business on organic more the in of you adding initial an actually XXXX, XXXX it in and you is guide in If again, that here add-on basis, XXXX. our guide look XXXX compare than with at, we're the amount new initial adding and business

whether So add some with more... backdrop, don't as to want all Gary, you I know that

Gary L. Steele

It's time. We both did your the Europe Yeah. true across Microsoft-based and we catalyst that U.S. changing. seeing that using a customers don't a growth quarter in remains the see so move Andrew, long in and is company. have to for opportunity a capabilities phenomenal think place for that and broad trend point, Proofpoint. to think were we the We that

Andrew James Nowinski

a Thanks lot.

Operator

from next question Our comes Melissa Morgan Franchi Stanley. with

Anjelo D. Austria

the about hires. wanted in the quarter? we any how just expectations productivity, changes with productivity to question. the sales taking trend Anjelo did the for you sales product material is new your the sales with ask, in line for Austria leadership, in And This of Broadly, just Thanks go-to-market? in as should a broadly Hi. productivity sales Melissa. mentioned I expectations new expect just

Gary L. Steele

ahead. Go

Paul R. Auvil

at usual. say, team where through their we're separate would on look thinking whole say Yeah. go I going and But, coming of the that not the a terms was to team analysis sales our about overall productivity only planning there's what execution in year ensuring the expectations, as better work we for the delivered there that on as in Americas that employees I doing place, productivity numbers are in we we how margin folks. some already on and the do new finding And we're new we're team. adding but is get that's think again, I as in around that need the we're we is we bringing to that that

key in And to so, a yeah, things pursue want are couple that we regard. of that there go

is thoughtful accounts we're that down we're is enablement One about thinking breaking another handling folks which territories are and more those really people go they handle. adding we're should making as sure so effectively. those can about improving more of for we how new execute which how And new hires

think that those in be last over there's to both we looked at pattern of year, certainly I the as areas. done the work

we particular. fix, And a that's borrow to (XX:XX) fiddle so, those bit we hiring for want for it's as to team not drive time us something in a and it's dials additional the complex some then going how to work through decide U.S. exactly little in but the

Gary L. Steele

Blake Yeah. to things And phenomenal promotion understands XX months. strategic been He the company more regarding I think he's organization. He the question your Blake changes our one for Salle, about go-to-market with the products. in the our of with knows of is

hit running. really And the fine-tuning. modifications have so to view I the he ability any ground that makes would as he does

to drive we We getting Two enablement good the drive just That's of process – on so top on are productivity. of every we faster. hiring and we're one drive channel can always So, get the focus focus growth And broader we three how will opportunity is think hiring programs there's the people indicated, do over we board with numbers do and key how channel. year. the ensure to refine Paul on one our the for we is areas coming more receptivity can very seeing the that of as be channel obviously of Blake to do quarter.

super excited we're about So, Blake.

phenomenal of the enthusiastic. is energy I brings think role. and to job a incredibly the amount he He

a to XX us help growth will think drive years. over that the I next world-class he to leader be X

Anjelo D. Austria

much. helpful. very you Super Thank Great.

Gary L. Steele

Thanks.

Operator

hear we'll Alex Next, from Henderson Needham. with

Alex Henderson

from in was wondering people on-premise if conversion then, on-prem. penetrating have email second, a is of just think metrics. And little the you change from about you we I system market heavily seen – field? still terms any where One conditions is two that's are bit for the could in I Thanks. talk in pricing the

Paul R. Auvil

moving and briefly their and can of journey in talk Gary Office the little the to status speak could about customers pricing, cloud-based e-mail a bit I generally. XXX of So, then

of pricing, I'm every at looking third base. the in those it I overly say existing not for fact, certain Gary nice you And do indicates the analysis as terms and of QX-QX, well just in again to as change that, I and yeah, in and quarter. no it yeah, can from environment segments, given net to installed quarter, to So accounts, But ever-so the and significant we as competitive execution, in quarter, really numbers. to so any tell data for apply improvement. benign any new a can product would modest maybe But an terms about, I an as sure I view weight in up be, more sets talked go general, out opportunity reasonably us continues close add-on the both statistical we customers some drive user

Gary L. Steele

to innings. with then, a respect still move environment and And in the Yeah. to transition relatively an cloud cloud environment, from we're to on-premise early the the

environment experience. and And the aren't and that and XXX Office in all takes or do Suite relatively We're to is the the time from implemented. lot from There's Microsoft probably the numbers had success stat fourth and that While required we're those cloud. come G Google while momentum, early. has get great sometimes whole third great that of inning of to customers Microsoft, the work customers that on-prem a still

to be five that So, for opportunity view capturing cloud on-prem us years. customers we to with three moving of from to

So, from as move customers to here to runway on-prem to capture a very cloud. nice share continue there's

Alex Henderson

the that you to that think still Would is to from on-prem just that innings converting mind moved market percentage cloud? versus the of you has

Gary L. Steele

Yeah.

If give you you let your a – backdrop, answer I'll me question. so

a our had so which financial lot when we've of services, So, we the again look in large do on at very largest work and look much vertical. We we're where market, focused we opportunities, is enterprise. at

of like actually services large very, You to those few financial customers, cloud-based moved very look at a have environment. accounts very,

that. part their not intention there full to They're there's do It's think of I yet. roadmap.

seeing going there And we at qualitative and that looks I years so, in way. point. now, are reasonable less, a we're portion to not XX% some a when think There's have from XX%, It to just be XX guessing this still done you're here XX% have the yet.

And of So, to that excited broad a be work that and done. about lot shift. we're opportunity

Alex Henderson

you. Thank

Operator

with Winslow our has next Fargo question. Phil Wells

Philip Winslow

hear of of kind of can the the just sales target can was do actually me are you give Hi. anything productivity, front. the there? you of color that could mean Hopefully, can the sales run of on just sort kind on things put new previous logos, towards anything you right that what this of got guys Is I U.S. a Thanks. guess time. upsell, thinking productivity there I that to about rate? on this in your particularly that question you're kind sort kind and back now

Paul R. Auvil

Yeah.

we're people very up Phil, of on and and hired in investing One broad then something is, product newly this it's are much the taking easiest speed getting obvious, line. that to them things,

One is things we're the around there. So, a there's on area enablement. working broad of couple

how new do person who the just fully of line the company and that to customer. make effective in front a to is simply So, broad a means them you product understand get

place and something put that we now. We up to and have is half it's in broad quarter program drive a basically ramping a and ago, really a that,

easy we it's The products at bundles, bringing customer. a which product doing, it's digest a is of we're digest address other easy complexity rep, also in getting to but sales helps the more so for thing think we're our together broad for a to affected line

speed both we very think meaningful productivity. think selling work on get a will process, things of have specific we So, up the those simplifying doing overall to wrapped to and are impact

Philip Winslow

think of the going mean behind to thought is expectation would second seeing sort that from Got would the hiring? we reacceleration of is half the assuming half the reaccelerate improves? forward? into Or of you saw, productivity in levels in process XXXX I return levels purely it. sort how second And XXXX? of you that productivity our Is of reacceleration also the expect the just of then, previously

Paul R. Auvil

numbers really more of in contributions So, about as about at clear, putting it's prior as and that up. you to guidance, the that growth in the QX look talked QX, be that we'll growth in weighing year year-over-year improvements the rates, rates numbers because in our we've be seeing baseline high the overhang inorganic associated in the with

there improvement as I numbers reflect re-accelerate that So current with all that. the think baseline room step-up XXXX for in hiring productivity, said, and doesn't but that outlook is the in we for see

Philip Winslow

Got it. Thanks, guys.

Paul R. Auvil

Yeah. Thanks, Phil.

Operator

to Jonathan move with We'll Ruykhaver Baird. R.W. on

Jonathan B. Ruykhaver

afternoon. Hey, guys. Good

Gary L. Steele

Hey.

Jonathan B. Ruykhaver

to fiscal the emerging deceleration TAP this in products that organic a hitting build there? are mature maturity? both reflection growth And take offset then sort those is to set, growth just the maturing at of, will Protection looking products, Can I'm for regarding curious lower fiscal scaled products or just scale that just fastest talk the and from you to are of the about and XXXX. products which XXXX

Paul R. Auvil

Yes.

products sold nice into pickup up particular course, seen acquisition, all, a pace. saw particularly, leading in last are But, that, that that scratching significant the that's was of one as driving I cycle enterprise sale our products as waned a picking we continues of a company have would, more TAP things our more you as install years that to time. several over base. the of question. we of But that kind add-on to over for new factor good at, the account say we off. has So, really first of as the the of emerging growth And and where sort in contributor of our

talked calls, pick up positioned are we thing mind we always products deal, we we off. feel the Protection well growth in cycle But as other and emerging prior overall, again, So, almost it's to both to that the close think is, where on about a new keep leaves TAP. like TAP net when

we the be average TAP element per the we net the very of that continues also customers of not account part an that we business four, course, two see to drive becoming So, important just three, price more products sale. new more emerging in as of initial and now year five a are win user ASP, And, that acquisition. of buying but per important products how and in

the net about, talked and So, products add-on business seeing we wane, we closed the of has a current cycle to the it as the is, in that XX% and emerging of absolutely but were started TAP are new we that quarter.

comes of good how very add-on as natural contributing to TAP kind completion. the about feel the emerging businesses we to cycle So, is a

Jonathan B. Ruykhaver

guys. All Okay. Good, understood. right. Thanks,

Paul R. Auvil

Thanks.

Operator

Next, Capital we'll from KeyBanc hear Owens with Markets. Rob

Rob Owens

not of a so it slowing kind is at and This and for on velocity, best. little look a for and you've function Thanks getting one got only up of at sequentially of also this but Great. played TAP my especially maybe an look taking would in incremental to But we I'll one's ACV you address as billings what that at rate, could of just handcuffed try the that question. of you're makes Feeling relative But my you last of If that that billings. Paul. here kind we bit so before. with it has I billings the do you need short-term – we if you're component why point, attach answered much what call understand unbilled question, deceleration front. out seeing kind that some short-term did there, you kind question

accurate, we're behind with portion guess it, completely some slowing them seeing So there's the we're maybe I would some but where there. not unbilled accounting

Paul R. Auvil

Yeah. a as think in of talked And the first the go if you longer. But year. back the look if through, I in here year-to-date percentage percentage at that the script little you I basis, of a in of here durations And durations went increase total just QX, the couple a on then, XXXX, actually that's had a the kind we of in quarters things to bit were in very is short deferred year-to-date, the one of X%. that long-term of billings sense very somewhere we about that

XX% revenue bit the where little the a deferred of deferred was long-term XXXX. at as at of identical actually prior almost at it about total QX, the and end well end it's of So, down of in to QX X.X% here from the year, sits

people in run think drove commitments duration platform the three a but wanting commitment course, our creates deals executed we for with for of the And that platform demonstrates we pleased larger don't see, over of did been then, handful not consider I we've the long-term products a from to and then solution driving to that just installed same ahead of up that balance. revenue But additional multiyear third one compliance we We our story just an security So, the year arc this e-mail base. the and XXXX but generally XXXX. three-quarters to go across aggregate the the to about, that that is paid time, move overall, quarter as longer to in with we're it here running We technology. advance security our a year that talked duration at that. as have it year of drive deferred to adding just customers people-centric essentially

Rob Owens

Thanks.

Paul R. Auvil

Thanks.

Operator

from hear with Talanian Evercore we'll ISI. Ken Next,

Kenneth Talanian

you're Hi, for have wondering looking sense for XXXX give the into last XXXX at what into year the you versus taking could guys. much Thanks question. pipeline pipeline? how us time you I this visibility if was a

Paul R. Auvil

Yeah.

relatively deferred back XX%. is It short-term which percentage about at is just you to comment deferred, it's it's to revenue overall what the So, ties bit right? Rob, by made definition, the a little XX% long-term similar, look of I if Meaning, is deferred.

creates that good say of course at we have of at the here look mind our start is into the the essentially then we the strong that change quarter early which some in saw keep that the as visibility us the And step start our setup year. is, in in as it year, end we the in already for after of XXXX. And again, fourth each worked strong about XXXX of that the XXXX. transaction, to our we feel in going course, gives a net XXXX then But of October kind we out closed, closed closing what So, thing, through Cloudmark very of compares, I first, into then XXXX. year-over-year of then over going we baked setup complexity to reasonably The that guide for the quarter closing prior a one when would I then, course, transaction. of function had and early is this Wombat But dependency way October, XXXX. revenues we business of there's are similar

Kenneth Talanian

Great. Thanks very much.

Operator

with Gabriela next from Sachs. Borges Our Goldman comes question

Gabriela Borges

force been Paul, ramping the two, consistency of the Good and lot three question. for productivity the afternoon. taking how about Gary sales thought sales and for of or my a expanding have Thanks over there's last Either force. the years you'll

is less? for that's last ask question it Thanks. of maybe versus that the just years? delta the gets couple you in Paul, or quarters better productivity Are what assuming my think changed driving guidance? gets productivity for same So the XXXX three a question you stays what do in prior exclusively marginal in you And assuming or are fiscal to

Paul R. Auvil

think And then, plan the proven. We question we're Yeah, we more first. that Gary around obviously And we aren't it's we're driving answer little bit always improvements. with to in when detail. improvements, that assumptions in But while we can let productivity our improvements make for assume consistent me year. prudent don't seeing jump relatively for don't planning, that's current a to do what

just at XXXX. as shared what So productivity that reflects the you we seen XXXX, year-to-date levels look roughly we've consistent that are it here guidance with in for

Gary L. Steele

put place only now thing past. hiring place in the broad We they're the Yeah. people the require structure scale the I number of different, we're have Gabriela, line, just product in is one think more rep And effort. then, that effort. have that work than the in required we that enablement takes we've the so a line, to to support us today clearly broader adjust new it sales structure And product the for broadened more help

years that the combination the productivity, pretty two those give improve with hire those we And can three of so, rep different two about, we or talked ago and new are years are the are two ago. things things enablement broad bundling this us confidence that Those today from that straightforward. but

Gabriela Borges

you. helpful. That's Thank

Operator

Gregg Our from with will and next come Company. Moskowitz Cowen question

Gregg Moskowitz

it why it were Can the would on very Was you Thank you to? expecting guys. that overseas helpful. capacity more require? less hasn't instance, was For there it the challenging much, on sales you talent Any you internally? color Okay. have there as should to focus find than perhaps elaborate good afternoon, and be there ramped been

Gary L. Steele

things. of couple a it's think I

put needs that have So, one I like is numbers get just the Europe then, and but longer. much of things there's bigger, is and two, is – different And natural notice as these numbers. bigger that hiring a discipline we've periods things, be tend place, to as the level something which in it now required in think that to gotten you focus,

and a tends time had to so, impact little And actually time in things longer have both Europe, us. productivity – those an on of to

Gregg Moskowitz

Thank Okay. you.

Operator

Next, we'll Securities. Suppiger with from hear Erik JMP

Erik Suppiger

question. my taking for Thanks

give particular. thoughts didn't is in us if it You to the Can you comment on an fiscal contribution Wombat how and for XXXX? progressing in your update that changes any on had acquisition

Gary L. Steele

Yeah.

So in. I'll dive

seen. incredibly the results by were with well in has early as been integration that U.S. received good So, the we has demand customers. Europe we've both pleased The we across we've the done been very technical healthy. The script, very noted that we're seeing the and

very have anything extremely to-date. finish are optimistic. Do made So, we some have Paul? add, progress we've We good still you work integration to up, but to

Paul R. Auvil

think don't so. No, I

it. we're about think I very excited

picked up team nicely. that Pittsburgh, integration along done think that the in the think our between through I along be we seems think team we've executing in I global acquisition, that sales I moving to and a and team sales team nice an is clip, done broader

feel little to I our will a XXXX, to at but look it's tell. we that as meaningful So, business line product potentially, early contributor a be

Erik Suppiger

you. Thank

Operator

hear Steve Koenig from Wedbush. We'll with now

Steve R. Koenig

that overachievement posting, something have. in have your do model Hi, XX the cash think for – guys Is terms seeing ask I'd if gentlemen. the to channel free that's productivity like to where just you you about taking flow are much. And for engage sustainable say of sustainable? questions. can you that guys new about the in Rule been what pipe? And they makes years? field about I as ask I'd that very of fiscal in that modeling, in Thanks XXXX, like the beyond there we their go, out partner as our in to may, you opportunities Thanks all also is my I guys in trend

Gary L. Steele

start with question, channel I'll Steve. productivity

I customers. easier to channel the just we And indicated to products drive that for very that our digest by things as and that on sell to efforts adoption us products. of in we've the the it is around in other the of partners existing but channel partners encouraged one continued globe level make we seeing regional broadly we're one with we our of motion our underway, So, is seen want the are The a business it one their go-to-market interesting of interest to of then opportunity questions, enabling working of have Proofpoint. the bundling greater more for and by for are some lot easier them make for simply all in

we think are channel. in and we're what So, the about interest from I very enthusiasm level seeing an excited

were got think with in we and then a we the good looking think Our the we've metrics into very channel. about encouraged channel very as for so positive, and XXXX, QX QX trajectory we're

Paul R. Auvil

XX at Rule at around your combined the Rule revenue To is clear, of which growth. the business Yeah. XX% And is metric, companies cash excited organic think the we're literally I on we're traded. in growth free our at top for early XX year, guide's this obviously, about quartile XX%, question, of step of XX%, be that And on sitting to revenue with that percentage. little all flow down a while our SaaS are publicly what we're bit

So, we statistic, early that the going impressive year. this think pretty into a our particularly guide that's frankly quite is

the of business fact up scale that rates larger, business mechanics got with that to we model nature allows rate, it, growth XX% high see guided we But the about inevitably consistently XX% a your putting operate an overall said, with nicely the us question gets as So, we much But haven't maturity can renewal revenue is specifically bit we and as cash as bigger a about our our all the think we we what XXXX, happens recurring of the be of at that as ongoing in the to able believe, mature to beyond be challenging that. flow I get beyond think that business. tell bigger you, scale. very (XX:XX:XX) we should we've above business, to very

Steve R. Koenig

lot, Thanks Great. guys. a

Gary L. Steele

Steve. Thanks,

Operator

Next, we'll Securities. from Klasell Tim Northland with hear

Tim Klasell

had initial to with Obviously, question for what could emerging guide that has Yeah. thinking My three guys. in will beginning will the Hey, year, would And leading products. that the or point to Wombat to do the next your When you at towards? what some that charge? Thank look get next we products you. that's most growth If you two pick show be traction. year out group, be? are you

Paul R. Auvil

And impressed. question. One great Defense three Yeah, of in Email we've in to Response Fraud is, Threat things. then, I remarks we're but on its if in, prepared Tim, momentum have at two very quarters the would done point Wombat, that phenomenally full first selling, and incredibly you early noted been we look our well. today,

think emerging really think that products and interesting we So, growth as XXXX beyond. deliver those about we three

Gary L. Steele

we've into the along e-mail space given then cloud compliance. intelligence can XXXX unique there's think it's elements in on we can late our CASB that seen And more then some that and and the that for integrations nice a add, I early. can the deliver our do XXXX the else into some capabilities one I'd no and uptick what deep threat threat but thing tied coming do between effect, offering, things of very that probably And with we CASB and

not today couple access big the opportunity a kick and little you cycle, of hot underappreciated that of that another is for will we believe Proofpoint nicely CASB in that growth see it's terms probably there, several example, quite topic but know, one over and very I year bear, in next early platform platform differentiated a that we things I we've that is measured or bring that had around capabilities and few may so, opportunity which the product management in in combination years we've capabilities quite a we think think while I some the companies, inevitably and now. to the I adoptions are other other growth a think, And next delivering good that these next over to identity e-mail bringing But about think really cloud is that can and executing these and for be of threat venues, built years. them cloud is quite of two, the over interesting for

Tim Klasell

where meaningful a be then, on our been at great. a priced quick very early, fair checks. that it's I could follow-on. a CAD, we've meaningful? not know hearing could And but is or you. Okay, that that of point channel just just be it bit Thank

Gary L. Steele

absolutely of be one we've had full we've meaningful. And that had pervasive of one compromised So, it can surrounding accounts. tremendous selling, full in issues the interest CAD, With quarter quarter of because selling.

head you're tackling really what so, this we're accounts as vendor it's think to huge that's and a in I And problem the the it relates on. today marketplace out is Tim, only hearing problem compromised

growth, one we're note CAD this. deliver one didn't And that's those so, products into going of I as quarter because long-term to

problem people have, so, is while trajectory It's super the awesome one and that a this we're absolutely optimistic. in. just And looks quarter

Tim Klasell

Thank you, guys. good. Sounds

Gary L. Steele

Thanks.

Operator

Gray next Bank has Powell with question. our Deutsche

Gray Wilson Powell

Great. Thanks.

the the I touched Proofpoint So legacy on and think want contribution within you XXXX I growth maybe it on make this you organic your of I just XXXX – sure correctly. to guys versus – understand acquisitions guidance? were but both the before How think we should and in Wombat from other billings business

Paul R. Auvil

Yeah.

inorganic organic So, and billings. haven't the we in broken out really

comment that. the again, But organization production our like it's fact underlying to little So, come the a hard would well. feel sales back that I officially continues to and on we output execute of to

earlier, go question is, team, to bit essentially going has makes then initial into which that think in and the XXXX is our to which ability I little the in growth, point look like at I at our our a the larger than look our of you comment total we that expecting XXXX, that we growth the in by their in component speak XXXX, we're driven inorganic if is business of feel a the growth XXXX. no in sales organic asking, guide you're back of is, made the and which deliver, you team bring I'd you it again, number essentially the that scale setup XXXX to good think fact got we've all around and

QX that XXXX. need But sales the Proofpoint capacity do we we broader core there. in billings set, output drive on of well the think both team obviously to so, set quite complete from then to overall, And we'll and our product the products as well and capacity as that up they're selling emerging

Gray Wilson Powell

Okay.

expecting make understand, billings what to on absolute XXXX So, came just sure I come an you are more in to basis, organically in than dollar XXXX? in

Paul R. Auvil

Yes. absolutely. Yeah,

Gray Wilson Powell

Okay.

Operator

Catharine Next, we'll Trebnick hear Dougherty. with from

Catharine Trebnick

on Thank taking was leadership going question. you of in chief – part quarter enablement? And you percent tweak do with the strategy a question. or sales from organization, you sales to this the your for my forward the bringing a the change plan in What channel? Could of with two-part revenue Thanks. channel the it's help to

Paul R. Auvil

Yeah, two great questions.

is the answering been So, to leadership opportunity questions, And we we've the chief, way touched second XX%. in channel the other earlier the on of And to over your is we channel. theater business about of – drive senior the feel channel feel terms noted as more by one related business driving through through to channel I in question channel. excited the

So, and as well U.S. a theater the senior leader Europe Pacific. in leader in we have in Asia senior as theater we have

So, really hire driving the given channel. we've leader global got good to it is we'd that what a that is people unlikely local channel

Blake a been think is in we're and done. on I served work very channel appointment, focus With driving have. productivity work, organization So, the foundational that's in Blake leveraging the that the the already we well Salle's

like there's feel very we of So, good and in trajectory opportunity front us there.

Catharine Trebnick

all Thanks, All right. the Manish. and best to

Gary L. Steele

Thanks.

Operator

from hear Patrick Research. Arete we'll Next, Colville with

Patrick E. Colville

my all are the the taking OEM on OEM out relationships, going guys phasing I phase Can the Thanks Cloudmark to of relationships? just for double-check, out question. you

Gary L. Steele

and intellectual as and people it sense broader because our line, intelligence competitors phasing to We're to threat property. in Cloudmark to have marketplace they who so Yes. enable access all out, other make them we product didn't the were and obviously, all the competitors view Proofpoint to

Patrick E. Colville

so Do just out mentioned Got headwinds headwinds FY XXX headwinds. bps double the mind to they XXXX you you it. just the And and XX can I bps you what revenues, were? check, pointed clarifying

Gary L. Steele

Yes.

point becomes a headwind to evolution upfront of ASC And recognized basis of on-premise XXX as that on-premise do, customers recognized ongoing were So was Proofpoint moving the ratably. related they still to cloud. revenue XX the the for an are subscription who revenue customers, customer that's our

as one there there you so, a priori versus headwind is revenues from comparing in And year period. convert the future to a recognized other

no from but And business. that's that. the the business. of OEM our So And fact And surprise it's originally not their then, the that actually getting platform, here. element we are Cloudmark, the plan declining, growth we was on acquisition is just that was any only this as again not at eliminating intended, time that think there's I with even shared the Cloudmark

Patrick E. Colville

you Thank Okay. much. so

Gary L. Steele

Thanks, Yeah. Patrick.

Operator

final question Talpaz will Gur with come Our Stifel. from

Gur Yehudah Talpaz

me in. you for Thank squeezing Okay.

if you. do the acquired wake about XXXX, you think of going you forward? versus M&A in have and set doing idea how And more product think Just do Manish's what you how recently? look you what Thank fill into the departure, digesting acquisitions to about you out the more

Paul R. Auvil

Yeah.

what remain M&A. no to feel do thinking we anything, with that. will pursue company, and M&A in are absence, we enthusiastic looking to the opportunities next. of had we might great various but urgency about we've constantly We history be So, Manish's potential and at of success in about continue the the Even

to existing products basically bring XXXX, can to that opportunities we we about we the extend think have. company we As challenges at where great customers, the value look and complement

past we'll we are We into that the of for the just something profile that in things transformational. not the looking we're replacement brought and short-term. for large confident kind have company We're the a in same and looking Manish of for

Gur Yehudah Talpaz

Okay. Thank you.

Paul R. Auvil

bet. You

Operator

for Gary today's That conference now turn over remarks. question-and-answer any the closing or I'll session. Proofpoint's will to CEO, conclude additional Steele,

Gary L. Steele

talking for today. much us we a attention call today. just we on our conference quarter. as positioned Thanks the and begin so everyone to the call for continued moment to many and joining shift pleased thank and operating excited progress plan. in our to the take forward and to of We with We're next joining results, the well you are seeing Thanks. believe look you I about wanted QX our us to our XXXX circuit in on

Operator

call. That Thank for does conference conclude today's you participation. your

You may now disconnect.

Proofpoint (PFPT) 26 Oct 182018 Q3 Earnings call transcript