PFPT - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen and welcome to the Proofpoint First Quarter 2019 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 of Investor Relations. Please go ahead.

Jason Starr

Thanks, Keith. to quarter welcome earnings and afternoon, Proofpoint's XXXX first 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 closed 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-K. future detailed could Of call, April 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

forth all non-GAAP why considered on substitute the results, non-GAAP intended our are today's for, GAAP measures will to and be both these not to or in measures items of measures A measures set release. uses in present we as press call. when analyzing These company a encourage non-GAAP our performance. isolation consider Additionally, and reasons reconciliation financial of non-GAAP the you in Proofpoint's These are release. a number list to of measures to GAAP exclude included non-GAAP superior we a measures GAAP today's and from,

to addition investor and to as section also encourage in such reading routinely events, our Finally, filings, oriented we of and we information to post release financial the SEC website@investors.proofpoint.com press other it. monitor as news materials investors relevant webcasts, our presentations filings, and investors

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

Gary Steele

plan of revenue expanding sum discipline. success reflecting calls, attractive paired in delivered growth revenue for start today. highlighting a XX margin free the our everyone us revenues bottom we've by of We're and growth free year XX Thanks, another and a translate the flow results. quarter of top call team with delivering pleased to Jason. QX thank expectations operating of like on rule prior with was consistent well revenue. the further with for million cash yet our $XXX.X I'd exceptional ahead XX% very the a to results solid Under equal free line and joining on through our quarter shared strong And to XX% to the cash of line flow execution growth. nicely cash million that representing $XX.X which of annual cashflow were free framework flow financial QX ahead our combines driving margin

remains The security environment cloud and remains customers our strong, cybersecurity momentum demand rates, to Our landscape. as products driven XX%. unique high compliance rate, visibility our robust generation next continued and the competitive demand evolving platform. migration our to overall with ongoing threat win resonating into is the which and approach for and alike, business our centric for emerging above by favorable our the prospects evidenced nicely remained rapidly worldclass people cloud our renewal and The by

migration aren't world landscape. actors are of communications such the end-users in becomes aware Threat and which new them and takeovers, employees terms accelerate gap, venues unwitting data credential and very companies opportunity, people theft, VIPs this creates data and around to protect provides people VIPs content perimeter attack fact enterprises organizations target they're the know and attractive of very far are applications, monitor threat the they're because but most brand latter a As VAPs, engineered of damage. the in attacks, The the thereby keenly into account while workloads, of gap these access. that can often harm, significant loss, VAPs unprotected and very can or And permeable exploit defending be or in socially few they an and exposing always an organization's as through to important their financial and traditional from the more important who realize enterprise sensitive cloud.

security adopting our excellence approach become an security cloud email, and across teams and cyber uniquely suite around Proofpoint broadening As email world. it deliver product in intelligence based security combining has people by for a threat our a to to the web is result, And properties. imperative positioned with

with security method by class with include their relevance teams and information awareness most into enable which to security who controls how and can is globally actor, all phishing for the training visibility organization more to security increased better additional and construct which as targeted These world of attack their teams exceptional this and Proofpoint peers. This to employees. Beyond of them targeted threat this customers, implement to adaptive control being through our delivers we that deep arm conducting has simulation security their actionable might data protection industry provide mature customers in compares our to posture. unique threat a our insights

to deal partners deploy browser technology final to threats isolation multifactor secure step to one implement authentication. of as capabilities might or advanced provide web and customers better with against Our threat key our a engage

long-term rapidly and the operating be to the Proofpoint’s to quarter, our catalysts turning ongoing XXX and some suite are helping the dual demand threat the Office landscape to transition that to shift solutions. of ongoing key particularly Now full compliance the of for continued first cloud, security changing results during drive to Microsoft

investment purchased on-premise Defense of definition infrastructure. bank to TAP, Response that Threat multinational XX,XXX by existing PSAT, Intelligence cloud systems won fortune awareness challenge Threat or as and Threat TAP, this training migration Privacy, in and quarter Response a company security for cannot deals that part based EFD, Examples of this infrastructure we the Email included legacy wealth generation meet the purchased appliances Fortune Protection, XXX Threat utility EFD Proofpoint of TAP, for users. that Europe users. of for and new the A As on-premise Response, added management Fraud Office and threat Protection, XXX Protection, where intelligence and and users. A or XXX company XXX,XXX communications continuity media security XXX,XXX displaced

the Examples for XXX TAP to continue upgrade that that retailer X,XXX subsequently Office of had and when hospital Response also compared TAP, XX,XXX Proofpoint to with customers of moved large company Protection, Microsoft Protection solutions demonstrate Privacy, first PSAT during threat Response, effectively part security XXX purchased of We capabilities to manufacturing users. strength purchased EFD XXX users. products their added Fortune baseline to quarter their and decided EFD, the a system a XX,XXX the Office by and who security Threat bundles. PSAT Proofpoint’s as for provided Threat included intelligence Protection, TAP, and for Fortune healthcare users that A and XXX

years phishing been to Training ongoing capabilities. contributed or of opportunity and into year by we a are ahead. and nicely recurring we as to billion demand Security security customer add-on an for cultivate add-on the the our for that have Awareness We our led growth we PSAT. which the strong particular, hope and encouraged of Response, In awareness our strength Email sales our $X in ongoing with Note that simulation base, our our It revenue are now is pleased Proofpoints, acquisition products also Threat by since Wombat, which over success we rebranded emerging this well over in completed quarter. Defense, of demand represent annual sales the Fraud very

shows are security rate in on this, require result drive are opportunity link increasingly seen be as customers users with them. integration, attacks as Proofpoint defend of We in cybersecurity industry of and cyber remain is increasingly their this running segment that for real deployed the posture the attack by this their of interest actions quarters research as encouraged Officers the awareness and attraction training represents for attacks that organizations all are exposing human phishing the by can proven can conducting increasing and to unique to their progress. phishing yet their work our security threat main which past We’ve security overall weakest across a actual growth and our awareness be vast taking protection, with up by new decrease Security comprehensive successful. to seeing landscape. in these crucial despite targeting that to few to XX% in coupling their to to what realized have over reinforcing capability that this PSAT steps This strong they exciting area the is click this our latest simulated organizations vendors based their A regular attacks. on simulated and conducting, users by users from Chief better believe in an training people By the meaningful the the involvement raise core market. we're the another attractive important world them majority threat attacks are investments

response. is plug-in and teams to example integrating broader security overburden A are to eliminates integration but the within only which If synergies all anyone customer else minutes. Threat malicious, are that threat on several resulted These official to the analysis it by features to suspicious email it that need of it not or end pressing that for capabilities features the clear this great report platform given Wombat mailbox loop and Wombat, in Response. the from expected in arm differentiation. user's enables from manual extracted users other additional focus then automation closed of interests our their be automatically analyzer them As the further message is investigation, received as email This is innovative has response have between thereby the valuable evaluated with Wombat’s freeing into matters. driving highly determined organization Proofpoint

selling platform into of the them acquire Finally, the with This our affording ability the its on into another and has of in consolidate which integrate resulted our over great compliance to an effective our services accelerating set broad to years acquisition done Proofpoint base, customer buying of wins. cloud already point several customers meaningful job effectively innovation solutions well-proven team family opportunity has and the example our at Wombat core that activity worldclass pace product security deliver to products. to Proofpoints, we and is their

our have Over the transactions expanded years, several also past total opportunity. market these significantly

the fact, when Gartner by products, exceed available for resulting in have we now based our $X alone market over that In total market our security X revenue estimates in in computer coupled other expanded emerging will with in excess available billion of XXXX and billion. billion market a awareness total $XX

be for excellent to of company meaningfully product QX that EFD the for XXX,XXX PSAT a continue XXX a product users, XXX total during the Fortune users new retailer on outpacing third of added closed emerging products added an key our that emerging for added in one of A XXX,XXX and the few Fortune included over that rest and quarter. technology EFD portfolio users. response growth XXX hospital Fortune a XXX,XXX add threat of source chain business contributing computer Our wins and

quarter digital social training or nice another solid solution, traction continued demand by driven offerings. security for of in yet and momentum recorded threat products segment compliance increase and archiving accelerating awareness with simulation growth our our Our with a risk

In fact, digital we've quarters, this are the seen now at encouraged segment's several with the momentum risk quite contributing our growth. which over past to products we're meaningfully

added that risk in multinational strengthen PSAT that archiving quarter, that XXX,XXX XX,XXX the that XX,XXX bank, a added continues converting that for users and A for including state PSAT and Threat purchased management XX,XXX for added for two investment company segment to hospital first Fortune PSAT this Response and in several respectively. users, with users, and the deals social pipeline wealth X,XXX a XXX financial XX,XXX and users holding users. for European added conglomerate digital banks Our system large Japanese

bundles our unique our last to shared or grown has we these steadily and XX As and channel. sales it sales importantly And that for quarter, portfolio cycles launch of simplifying easier our bundles for services team. greatly product a market and include these year for process our for make PX need was We key capabilities, eliminating consume PX, PX initiative for solution this broad our the the offerings. go believe our multiple to customers, the the

this level Splunk. PX bundled and pipeline, Palo to nicely technology These results While to excited early still entry increase drive customer CyberArk, with effort remain Networks, reach and the contributed interest market QX the our partnerships very continue with to products approach, Alto about this expand in reflecting bundle. value partnerships is solid overall our Okta, particularly We customers.

partners. largest this fact, by In one technology our influenced transaction was of quarter these

is the notable well continue some deals his of our expansion in as which represented executing revenue. international such business, we quarter TAP, based centric capitalize TAP results company international further organization Threat punctuated are XX% abroad to EFD XX% Threat a during total security for also make opportunity world. XX,XXX that quarters pleased for for web to that closed our the company by invest geographies users. with in and progress as open beverages continue We Overall, for and multinational on travel demand year-over-year in the grew Response order a burgeoning Protection, believe XX,XXX around and plan Response people users. international purchased to to and additional the purchased search and And that Protection, We the

So as results well in continue by and market summary, our momentum. to we our demonstrated QX strong execute

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

Paul Auvil

and quarter world. first million. Billings were pleased We're Gary. of Thanks up our work were million this million. pleased of in given considering the our our XX% operating million, end $XXX.X a XX% $XXX the results Revenue $XXX all QX when with around guidance for recorded teams with these above totaled $XXX.X the $XXX our the quite range particularly of above year-over-year quarter XXXX. to difficult million and the high hard many We million, of QX thanks year-over-year the compare, $XXX.X strong an guidance results range represented increase of with of to results, to

our any reflect quarter, as As accounts billings noted on requires prior adjustments derivation during to liability. calls, receivable metric the under refund activity ASC of of the unbilled as right XXX, well

related these to items two immaterial. QX, adjustment For the was

quarters quarter to XX underscore targeted by duration of terms generation. cash of was $XXX in and in ended increasing our the Our free with flow quarter middle $XX by quality the past million the duration consistent in months which trend up our million range $X.X is revenue sequentially further deferred of continues to of short-term long-term few to high the with and our This the at $X.X reflected million. balances, growing million, XX

note segment segment represented XX% our and grew year-over-year total our And from QX. in Threat Advanced Compliance on revenue. Please of that two XXXX, revenues terms QX our grew detail when year-over-year XX% bit XXXX revenue. represented to XX% from to of it our of is XX% on in In QX that sequentially factors during of January. of revenue a keep mind highlighted we more important Revenues call and analyzing

did which in given our to acceleration shorter ASC in is that than by resulted $X First, recognition QX. QX of two million the benefited revenue million, due revenue second, note not XXX, revenues the QX in $X QX the under of And QX. sequential here again methodology revenue to QX from decline in recur daily days

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

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

was Our operating operating first non-GAAP over margin reflecting quarter income for XX%. an million, the $XX.X of

income. moving to net Now on

a Splunk net income calculating non-GAAP in under to non-GAAP First, in rate that and Palo are I'm directive measures is compliance to non-GAAP past if based businesses income. accordance of represents other X, these very Networks, follow generally quarter over we few income disclosure the conjunction GAAP Workday have pretax be XXX.XX. consistently and financial rate to Section years very light our years. note beginning apply milestone issued with non-GAAP on pretax Note by successful tax we earnings what with their a income pleased companies tax XXXX, a Alto net standard and basis on January of as on Under as to as the promising positive that estimated now non-GAAP were directive, all in quarter an such consecutive outlook that SEC come, to a derived their the moved they same reporting XXth became basis. effective this the believe interpretations a actually profitable In this this

income applying as carry not figures non-GAAP excluding solely XXXX, tax currently As to by our commensurate such, such, be in This is cash rate expense tax thereby level the items derivation non-GAAP to and non-GAAP rate should rate the included forwards tax a our non-GAAP range discrete income, using the expect XX%. amount. notional GAAP continue given estimated large tax balance years. pretax expense future, On all we our reducing income It for to GAAP earnings. U.S. non-GAAP requirement of that tax XXXX approximately flows. profitability basis, that impact loss beyond tax next we statement these U.S. the non-GAAP had have additional is this tax XX% calculated on this pretax valuation corresponding estimate our course our an non-GAAP to a foreseeable applied with under disclosure sheet is XX% our net over balance effective to that from our no of note will will our a potential that of And and rate material for an this incur looking purpose of income net of important for net several any expense calculation statement, or a we our operating we of estimate of allowance. We any that

said, Net $XX.X terms as last guidance of results to we tax with was income our C&DI quarter of by $X.X and net that expense historical under our quarter, non-GAAP noncash for backdrop That lower further in standard, methodology with pleased which million million a under included resulting press the net with a expected quite for million quarter. our guidance. consistent million, as the in table for guidance well quarter, differences and XX% under higher estimated today's $XX.X results are share, So a calculation our method. sales, release, rate with comporting $XX the an relates in our of the marketing standard, this additional highlights to our R&D. performance XXX.XX income income the both first our as range outperformance than this $XX driven the SEC's as results both tax $X.XX of our in million than or it per both significantly well spending revenue QX in from as We've of as

On GAAP non-GAAP quarter $X.XX recorded shares net earnings on quarter Under of per we a per our methodology our $XX.X based per of loss fully XXX.XX to outstanding. Under the was to historical guidance million on quarter basis, our XX.X $X.XX first on $X.XX share per $X.XX million the range share Moving non-GAAP a based for the earnings end $X.XX. million totaling $XX.X shares. nicely high or for EPS. above was for diluted share share reporting the

investments. of operating this financials. a that leases beginning of impact with million $XX statement Moving including also the $XXX equivalents like Accordingly, significant changed that to recorded cash sheet, and our with against this implemented new most to this reflecting accounting X now in balance standard million XXX, these ASC of leases. standard flows. assets most no we in most will to recording short-term cash new I'd of ended take has moment the leases we January that change income out our we the balance long-term the of on which as operating year, cash, capitalized Note known quarter point the have standard value The liabilities, new on the is be statement leases, accounting sheet. or the

rather and above in free in $X.X flow million expected, such flow, generated for free guidance in we our resulting million was to result of year better deploy first notably was some which and well was quarter workloads cash lines million quarter, our the we capital our cash year. million also as phishing strong the deploying range QX with and by own $XX providers partially capital of In some operating than to of $XX.X cloud in in $XX.X planned with regards the And of of terms for newer than the product invested projects days service the in particularly by infrastructure, some as cash bolstered to lower that expenditures, later flow and of collection then originally This to XX year. driven delivering security further guidance chose full our data shifted during spending XX% center simulation. somewhat expected billings training $XX million than

for previous indicated midpoint. hence represents guidance, expect year-over-year growth the in an our call we we $XXX with guide at billings January billings of on the XX.X% our the increase be year, to outlook, mid to that million be guidance total QX where XX% our resulting to $XXX from point. billings at million roughly of QX billings approximately turning starting in $XXX Now would million, This

we As in here Cloudmark's impact XXXX, a business. of down shouldering wind are OEM the of reminder, full the

of the growth increasing now are expect by to $X.XXX our guidance For $X midpoint the representing and at nearly billion of midpoint. full range the a XX% billion million billings we year, $X.XXX

roughly or of roughly billings year million a years purposes to QX in and or half million. we XX.X% occurring XX% over in occurring of of the total $XXX expect the total modeling second year, billings roughly with continue QX few pattern similar $XXX For past to

Turning guidance. to revenue

our or that growth above January of to midpoint increasing second are the expected the growth second in XX% quarter, For quarter we back XX.X% to the to $XXX a XX.X%. million year-over-year rate provided $XXX we nearly at we range where million the in guidance

range increasing full $XXX for our call. revenue guidance the and in by at For XX% ASC XX% million million, or million XXXX to represents when our growth $XXX year, XXX that to QX acceleration noted our the January on $X I we're takes the which nearly adjusting midpoint revenue year-over-year

of reported that expect continue revenue XX.X% which modeling million terms to In we mentioned, here the recall quarter was XX.X%. fourth to of quarter the creates to for I a just for we over quarter third XXXX similar XXX or the in the part second a acceleration range $X the driven coming quarter, discussed the of under performance half And expect in of very we the roughly ASC million. continue be fourth strong XX% of growth the effect in as year, the XXXX, growth rate $XXX just to by revenue challenging And our year-over-year XXXX of January, in fourth baseline in absent as in in year. a for roughly

and XX%. gross expect we over guidance, second gross annual terms to be non-GAAP margin margin In quarter just of

now million. our a $XXX.X noncash of of expense effectively non-GAAP XXX.XX, will in raising said, that approximately million reporting the year an Under in to guided a million the by to $XX net $XX.X of $X net methodology, we guidance of which apply we XX% adopting range. at January, are on Moving the we noncash in to expense of the million to income, midpoint income additional our range net That be full range income to to equates million $XX.X $XX million. guidance. to tax historical Today,

depreciation of As earnings an attributable methodology, share reporting computed million million the Note outstanding. the expense that such, tax $XX fully this historical million, $X.X million, updated tax additional million of or on our items year XX.X income roughly million of $XX of for the year based to $XX income million $XX under $X.XX and of exclusive million per $XX.X $X.XX in diluted as shares And is guidance to adjusting of provision capital for to assumes expenditures tax our which guidance million this approximately discrete $XX.X to method. noted includes potential calculation. XXX.XX noncash $XX.X income for

$XX in the will approach are XX% quarter noncash we said, income reporting our a equates income, to to million. adopting net net of which $XX expense of noncash a guiding million. of under million tax an XXX.XX, That we second apply For $X.X non-GAAP to additional expense range historical reporting, to our to

approximately tax method of As of second million $X.X such, the $XX.X on potential our million additional $X million, guidance outstanding. or capital and approximately assumes guidance XXX.XX. tax XX.X for approximately of fully expenditures of that income quarter shares share of computed to discrete this historical income depreciation exclusive for approximately $XX.X based this our million adjusting methodology, includes million to million $X.X and attributable $X.X expense an reporting provision in to Note is which QX tax million per of earnings $X.XX income $X.XX noncash items diluted $X under million,

flow, of cash of discussed in of call be delivered during we terms expected had annual our January, $XX cash as the approximately million. the in XX% to roughly flow our free year In first free or half

hence start first half the million contribution strong a of million $XX the second during million to end $XX $XX in now we quarter. Given expect and approximately QX, with the to

or of of revenue the at range to raising $XXX a we million For the XX% also free $XXX to million guidance our flow year, are cash midpoint. full

it For free particularly our is flow our compelling, the continued business pursue that the quarter. in flow and recurring we the scales. to of outlook in be are key modeling note build XXXX that half for cash the to the market of million innovation high giving cash third to as We with XX% flow delivered Also quality $XX second cash believe in this producing the the toward margins. cash which investments free ongoing to the like would flow can that XX% and highlights year, we opportunities duration average demonstrates approximately expect of progress mid-teens, this our to generate target I an contract commitment

I XX growth comment, both strategy this reflects metric driving XX% corroborated of We as it final of in a results in disciplined cash and the attractive top discussed construct, XX% further remains flow hallmark driving under the that attractive of and of in publicly revenue considering terms of companies. our When free a As strategy dual rule for traded Proofpoint’s places our objectives prominently for revenue would all SaaS quartile to last a XX free outlook guidance of under highlight remain free to growth of like of growth operating is cash XXXX the XX flow. revenue cash in of XXXX and rule quarter. margins, flow, figure which committed our and which us

cash we quarter of excess landscape. margins operating workloads top driving next rule conclusion, growth margins line years, free flow new add increasing to severity cash trends defend in threat regarding and In So line migration well mid-XXs drive built strong while think advanced well, today's the on our as execute the base, ongoing about XX metric compliance believe capability in opportunity installed and a our customers continue into ever-expanding cloud remains to of enterprises the we in that maintaining we and and to the can security our results the throughout secular of the to XX%, our against proven combined the growth bottom selling world mid-XXs. over revenue to opportunity add-on several content We given while with free the continue threats. flow with Proofpoint significant the the by strong ongoing the of positioned maintain and to first in believe delivering disciplined

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

Operator

first our Franchi Melissa take We'll Stanley. Morgan from Instructions] [Operator question with you. Thank

Melissa Franchi

the loaded. talked about Paul, Thanks backend sharpest that sequential decline starting that’s in with Great. And start you but historically. question you've backend in my the QX loaded business decline. for that we've A quarter, the know in this roll the billings just growth if the quarter-on-quarter it Cloudmark factors business? had business you at seen that drove any was And off, more just are growth Paul. were taking the I are what that driving question. becoming sequential QX look to or to And sequential there more then other then factors that

Paul Auvil

think say we'd we that's and I No, would calls. guidance And at couple as pleased past framework beat overall I for as a question. always do. first great we provided what I'm is that the quarter Yes. in and this And we've we a discussed of the with that the look other the

there couple are are things fundamentally of As we that scale a true.

and close to software, around of new in a do in of and all, we of in business the majority businesses, quarter. and fourth add-on the First the enterprise particularly like year half tend most SaaS both second and our

the after as year you of in the as half year, and gets the imagine, can so compounds after year, the in space particular. in year second concentrated that renewals fourth more quarter And more

So billings of actually compare renewable what change with when sequential see amount in by the business. businesses being first billings our this performance our booked big you quarter quarter the performance, you fourth is

actual of our it remarks, It has to over the tend QX overall with to first business, so quarter that the quarter. to as fourth do rate And mentioned timing in and as well continues his prepared we And new close do XX%. a nothing of add-on of to health lot course, renewal has to Gary compared the renewals. during do the just business be less the with

And billings so it's fourth combination first next factors those quarter quarter of the and a decline that one in year of the caused of this sequential year. the between two

Melissa Franchi

Thank you much. Very helpful. so

Paul Auvil

Thanks.

Operator

our Jaffray. take We'll with next Nowinski Piper from question Andrew

Andrew Nowinski

I quarter. question to want Great, a the bundles. a and ask on thank you great on congrats

that solid products You actually mentioned And looks Wombat. was specifically like that entry-level of it your number in contains a PX there including interest bundle.

an So per average to relative I did quarters? was wondering, increase quarter user this in prior the you spend see

Paul Auvil

can't in we with that bundle our modest to basic spend. that as And Wombat. have PX offer was there point Yes, your well better includes protection small and as a threat capabilities of advanced we version bundling increase good, best

version good the so the in is included PX bundle. And

modestly. certainly lift so did just it So ever help ASPs the

booked Just during to new be of in in interest quarter. a represents fairly the of and sale the clear, uptick nice of the while we it's our amount terms still see did the bundles small add-on in and overall and PX bundle business QX, a

team and initial and feel indicates to with are interest So of like we that point seeing traction we're sales our channel this customers. customers bundles starting

percentage be And over evolves year. a the see to of and the as business that event of of that arc so we overall add-on close the rest the new interesting it'll how

Andrew Nowinski

you. Thank Great.

Paul Auvil

Thanks.

Operator

take Winslow Wells our from Fargo. with question next We'll Phil

Phil Winslow

taking in feeling wonder for how in just a sales strong if you then my sales about to business. Thanks. just focus want and an update year. I also just particularly Congrats on productivity productivity hiring the start could Thanks productivity, question. on provide in international the trends international? I you're to on and the

Gary Steele

will in EMEA continued we've with seeing expansion seen good feel we region the We've we North perspective. seen our the international rate we that alignment deals path overall about, we're do to what in continued continue of America. an productivity we've the we in posted feel The we on closed to was we open What is within – growth Yes, align healthy, territories that sales results new come about quite much specifically. that. good from very when

And so we've there. we path opportunity great feel got great like and a

Paul Auvil

good team. new overall had quarter into think, Yes. hiring talent the we another hiring, of And I

that to in, you looking where rest well that with growth Europe activity hiring as But You're international always we're the best operations. as of can. in and curve both drive came the as pleased

And so about the we as feel year of we team we think with where the about for now, globally. later part driving where we're stand good toward the

Phil Winslow

thanks. Great,

Operator

Matt our from Hedberg with next Capital take Markets. RBC We’ll question

Matt Hedberg

of been time for some on you quite your XXX comes remarks of pipeline in of thanks non-Office relative Gary, can a Office you've taking my for us again. just a or Hey percentage sort customers. Office big wondering curious customers XXX, some I'm bullish guys, to prepared with question. XXX of out new and you help funnel it what to that called running from how is as business sort

Gary Steele

Yes, it's interesting.

see form the in I across when so single numbers. I rough plan we actually in with two they're a or most you everyone's building different of look process at of conservative say but our be building point they've migration, got different year every do enterprise But of kind they're XX% out is and organizations, where they're would to state. a some business that even of plan the probably move. around a may think today, a or Office plans XXX and or

this there. continues an we're believe of the halfway us important years. So for fundamentally over we here. This – is catalyst be left not opportunity still that of several lots course the to There's even next

Matt Hedberg

All lot. right, thanks a

Operator

go next with Capital Markets. We'll Rob KeyBanc to Owens

Rob Owens

question Great. And federal reporting sites. start thanks a It based good of to off the quarter’s for appear taking that some guys. my would the on

just in archiving two, the highlight begs what market your that guys seeing Thanks. the one, are question. here? Number opportunity. think And number I So federal you

Gary Steele

Sure.

a in for respect us continue federal that to several business. continues we to thing encouraging enthusiastic that is way this for opportunity now noted then and one adopt side, favorable be seeing past competitive continues And really we're in of discussion as to it's thing opportunity. archiving move as respect archiving federal with there opportunity The to with the us years, a continue core be our remarks, we And about move So, the out that over hearing prepared there's becoming landscape agencies. kind think the of to to we a platform. creates been to cloud I of great agents business, us. the really for within And broader the the federal on while more

Rob Owens

Paul. Great. Thanks. Hi

Paul Auvil

Hi.

Operator

We’ll to Blair. Ho go with Jonathan next William

Jonathan Ho

Hi, the good invest sort a to you in the understand and outperformance Thanks. able of to were you drove bit level in little QX? I guys afternoon. just What wanted your to flow better. expecting were cash at

Gary Steele

collecting within good a of productivity wasn't ended and there balance the one particular with, of a we effect. collections large It was AR we the obviously the that year combination quarter, some with Yes, combined business that spending a is collected. of for in the kind different variety of start everybody's to and kind marketing, just And sales, the across getting R&D, then the year. always started engine of, drive first somewhat quarter areas lower build

training but And providers the some year. and including a of then in that of or we've our strategically what moves to as service had CapEx to in couple I because projects rather my bit a of out that the some of then trade. had capabilities, usual, we we wasn't saves a more bit own deficit decided simulation, in a planning. are it conservative areas built-in little were course, it an in defer And to into of that that centers. business, part decided tactically build are as us so course, of later the on in our than drive a numbers there lower spending out And little OpEx fairly that of that just cloud phishing newer compliance we lower build And our think issue more to bit than data CapEx,

Paul Auvil

next to can question. you go on Keith, our

Operator

Alex from Henderson, is question Next Needham.

Alex Henderson

timeline? the what a go-to-market, other Microsoft, to hoping is your could I around that on change in packages a competitive very seeing if others, it. result price you like about was or terms to bit that of variable what And like sense context the does Great. as Agari, look any Thank front, a their you you're there's win some would give how little or been rates Cisco action much. talk MIME, or what impact give the us competitive from of of in activities looking selling it any change

Paul Auvil

simulation. a a the of variety solution, Wombat seeing What impact of PX moving our actually is and on compliance up, are bit other training bundles. out values what value, capabilities, deal you is be Yes, that phish we're I tell and Gary TRAP sizes further and we color little earlier more the as conversation can and the and I'll built as general. more added I Defense But in TAP mean, Fraud protection let provide the Email overall competitors we've some on you'll that on

that you And average up we're new competition is our over deal seeing couple we not in the so competitors value would where I that years. of bit but color. moving specifically of don't those deal We any a to that know is were provide don't generally I Gary, as whether compared last comment other probably we're want fact, a say closing overly change to value on

Gary Steele

very us Microsoft for for we capabilities continues of business No. demonstrate we saw movement because this their growth when remarks over it we to efficacy the this in And the The that talk we core value we very win noted catalyst to delivers. the in We about clearly to the the be our that important run high be I various continued one is our basic cloud, for to the thing broad good can that we're a very in our we see Microsoft, no folks solutions. and rates reiterate into would prepared that that market. across look and fundamentally Microsoft able change deliver in

no buy probably respect EOP, fundamentally As capabilities: efficacy change years solution. enterprise with that's online they introduced anything aware, XXX that was of protection We've then XXXX Office they ATP solution, and with seen one, ago, which that'll to introduced June free you be four offer you of two in their originally security the core when are that.

environment the remain MIME, high. the trying a Agari, tiny, haven't say win continue high the to just just on win would obviously fundamental changed. see rates percentage stable. basis, any companies, With nothing I tiny very We overall stayed I to very extremely competitive seen so in market, think We up. then our And smaller them lower we and rates has you see of be aspirationally our of end them an our deals. mentioned And there. at really to move tiny, respect shift they’re

Alex Henderson

much. very you Thank helpful. Very

Operator

Pritchard Citi. Walter to next Go with

Walter Pritchard

how past, on do bullish. more fits feels here of it attribute sustainable traction I'm It really bit too, you like be? starts your that increased And what you is that to archiving. My little commentary the the question like and wondering a sounds is had getting in Thanks. accelerating. business and the you've there on view

Paul Auvil

of seen have of be the or have point of with basis Veritas looking supporters the I Proofpoint positive nice on for and of customers Enterprise over investment I Micro break hope that up started for some solutions sustained are And and on long and been Focus we'll And we're our longstanding, starting alternatives. think there, time. the view continued incumbent on see opportunity this think they're behalf because it market in many very think the giving that Yes, see market players whether just growth is I period diminished to we consistency a that of a Vault.

bullish feel we summarize, opportunities surrounding about very to So the archiving.

Operator

take Gabriela question Borges from our We'll with Sachs. next Goldman

Gabriela Borges

you. thank and afternoon Good

how areas customer messaging change the for on thinking For does approach are how to do guys you Gary, to? move get a of free Thanks. budget different security company? average up, Global much customers you email think budget access towards that And or about people-centric are XXXX side, the or the more budgets growing at

Paul Auvil

Yes. associated of With things think broader the what towards there's threats changed socially people. these risk the has targeted engineered respect I awareness that are budget, to with is

more dollars I'm better about, defend putting towards people. do so security. email thinking about I thinking And are They're not how my companies

that making they're number that and And have or hard so set projects, we a fast they're are looks taking better of these spending but seeing together more a it's to like, difference. don't capabilities prioritizing increases money different defend a their in because approaches spend they're bring people. and I what

drive working We the and are specific that out people-centric noted an like continued their adaptive delivering and and opportunity better the driving but people drive side, more area insight today expected, them what of and there's company. lots controls by these opportunity security understand helping who we people that and the controls. Well, demand targeted then not only posture we're giving that think I And example those exactly in that secure will but maturity training for more giving more can that. security that's individuals. organizations for also better of their visibility, the then is is do On we we're Proofpoint more that is helping

Gabriela Borges

you. That’s helpful. Thank

Operator

Evercore next Ken go Talanian with We’ll to ISI.

Ken Talanian

being the taking compared know you seeing versus renewal you've how XX%, retention was I for the Thanks net comment you're I above rate rate quarters? if your the wondering Hi. could but previous in question. about talked that's and on trends

Paul Auvil

this basis that, sales revenue the Yes. them run did recurring we what And look this no-nonsense all We assign keep. percentage to rate don't those quarter, did and we calculate delivered our Obviously renewal I lose results what quarter on The well the this tell we business literally of run it renewal actually business of we that's then did we them add-on and of and deliver couldn't the that we we for and quota it up so close. what is. is what's you way we notion on metrics. expect we the what that out separately of percentage team with of new the as to at

So we're know useful unfortunately sort of view I as what the I is. a can't there. give it you We evaluating don't the number the that's of a don't business. as literally operational number metric health

Ken Talanian

you. Thank Okay.

Paul Auvil

Yes.

Operator

Sarah Hindlian to Macquarie. next go We’ll with

Sarah Hindlian

a you just mix little bulk acceleration billings half assume renewal more into talk the your me about is the of back guidance? in bit of guidance. confidence Paul, how All about wind the base, weighs could Can expressed Thank what's hoping down magnitude year really taking impact Cloudmark. that my help down right, QX and the for was and the of me of Was into in which second ask you guide? of drill Actually, let you remainder so the half I the you the the it great. on of I question. much [indiscernible] you

Paul Auvil

Yes.

see OEM a the OEM significant year. again, revenue greatly course then over Cloudmark part So tapering arc the more associated in business we first Cloudmark from perspective, of with of is revenues was the impact of the we more that where of impact had because the year the that

again in in fourth the felt Later the quarter the almost deployment of ASC overall The did was here while to prepared in and in was this the OEM revenue XXX under starting the both year-over-year we issue and in just as scheme well QX is really today, took biggest the with impact methodology, still a to of, the growth have on on more here. it because the call So revenue, remarks that subscription accounting in the mentioned we revenue you've acceleration OEM QX the some the standard. greatly dollars Cloudmark year already as January From majority of got even perspective, indiscernible numbers. Cloudmark where billings that regards revenue it's prescribed business, we business though customer's several of period that the is is million a wane.

not the bit of the margin much them year part billings that get through by half On driving base, of impacts the really a the that the a as we've factor it's installed with time the by first you out. Proofpoint secular year. the timing a renewal to in But of larger it second quarter trends laid little affects

Operator

the Moskovitch Greg Securities. to Mizuho going next We're with

Mike Baroukh

Can you taking for on Thanks for Yeah. us Hi Greg. the question. update M&A right Guys. This approaching on how just now? is Mike you're

Gary Steele

Sure. This is Gary.

So, we framework. we opportunities value look for people create can under continue centric where more we think to the

point evaluate remain So, M&A. extend many, footprint a optimistic we'll adaptive We and disciplined approach thoughtful that more we find about some think we about opportunities at something, et many opportunities. controls, We're our cetera. will that and might active but, to be

Operator

our We'll Oppenheimer. from take Eyal with next question Shaul

Shaul Eyal

on it the hand. was legacy of doubt, a Congrats Proofpoint displacement of without solid Maybe of big still guys. on by results. picture Thank type driven strategy one Good set been, the the question. you. is both Historically providers has

that On change of How rather, providers? the opportunities any legacy is it in other be thinking Greenfield displacement hand, it more plenty of it? a about nowadays of those Greenfield opportunities. Are could or is you we respect, seeing more

Gary Steele

are we’re we're like Yes, someone forms organizations awareness And to Protection, bought made emerging example, for the those Email Threat no, that it Greenfield think when a switch Greenfield in cloud and that of to core just we're many many doing in hasn’t products, Microsoft a there and then displacing I out opportunity. are yet they've to moved third cloud might the of displacement, various or markets training if core and the move either where the example, our provider. on-premise haven't appliances organizations, taking for be security first party

the the oftentimes in emerging time of displacement it's So a in it's just products, XX% core Greenfield.

Paul Auvil

Yes.

recurring balance see other business think thing I'd a between new and is, good add-on drives business the the I to add revenue. we continue the

Well, that email on when engagement to training is the do which net new So sell or capabilities. question Ken on really we've can of posture. into the sell value I good the initial for should around add value. Greenfield see one ongoing this I of product in expanded going is metric, renewed We just mentioned reconsider touched product asked base. sales line some have his security else later. plus team our something then the don't and ready the new creates really back points maybe combination of It of have and a earlier. half them retention again, awareness we in to security these as a existing particularly about customer comes the markets, defense about the Gary into as broader and And interesting as think entry their reason, selling Wombat they part fraud new and is like from customers weren't that where products add-on installed whatever the business, new. email Again, come and productivity more things, new of add-on We business

really and liked additional So features the we line product regard. that these in

Operator

Guggenheim to next Imtiaz go Partners. Koujalgi We'll with

Imtiaz Koujalgi

question my bit a quarter linearity quarter. that thanks bit DSO end went was usual. the a Hey It a if quite taking I this loaded like in guys, about comment the back your quarter. up for had the more Any of question. looks on

Paul Auvil

the between fattish. and think I QX Actually DSOs roughly are QX

most accordingly. the month quarters quarter. that balance of example, for past we've So, And in Nothing when tech deals of cycle, close a find several in Like we stronger AR would And will was similar seen I the was in different linearity we've collect March. the to in month But companies, much your your in hence the first you you within quarters. drive quarter to the that that linearity the that point, other month linearity that last the won't March, buying that the quarter from very do up of the fine. there's seen. say

Imtiaz Koujalgi

you. Thank

Operator

to Koenig, go Securities. We'll Wedbush next Steve

Steve Koenig

year. taking start Gentlemen, my a Hi the thanks on to question. for Congrats good

and term just maybe of short some visibility at So on steady market, wise while term, And challenges and are cash pretty you you. you guide as flow long had Eddie gets is kind in and the look that the behind execution you us is great guys short the are, Maybe us M&A side manic a execution just XX% of revenue have term about the alternatively built tell M&A are your stock. your depressive growth last margin, that help free or that guide for maybe the understand of mid, little middle term, additive that longer of year into mid-XX% bit. revenue kind on confidence

Paul Auvil

Yeah.

of one I four consistently things. delivering beat point we all of of guidance year the is always thing the out couple quarters a over to that raises. people about for So course One to year, while liked the your point last last

teams, feel hiring we like us. hiring, be slowdown never felt love good there. where a against we'd of on a made like quite that like then So yes, talk the to bit but you out to exactly be the Americas, with in on were in you'd put we regards feel bit we're in to we that of, where which right executed, of running we've did into did an little put everything we and And said, now, the hires of about progress international for we like street. a mostly behind our the get top we issue productivity That we're which new that a we we we

and the I contribution, scale. enter as in foresee us when – we So good don't And of we're revenue M&A. had that see better set in the about really to was at the us context XX% top that we of flow, longer meaningfully acquisition line $XXX parameters growth I considering I sorts the in have stand here larger where I'm anyway, year our, this term that a look about operate as to it can do April, so think free the some inorganic just would that feel in we your a we we're up. any part but not we R&D obviously term that notion mid-XXs a deals with ruling question company be cash for deliver that If probably Certainly, value then to would over will model of expect reality. normal to at those numbers to be were the, driving million the additional customers businesses doing great out, that our I we'd of the kind this deals the smaller likely from of additive. do looking of isn't any is make be of we'll under. context acquisitions compliment in that that a that would which near it don't of material year, doing perspective. within well revenue or

Gary Steele

other And to to that one with growth Blake. billion good that structure very a is period. sales feel continue to that X long view the change and organization, over Steve, term to place The about thing under that get can drive think I that really very of is year I we've us scalable billion last longer will beyond. I like a one that enable a put point. in new leadership in feel happened And

so organization. felt I up really that the about set think we've good

Operator

to good Dougherty. Trebnick, Catharine We’ll next

Catharine Trebnick

much, Thanks for you. of an moving opportunities – our providers those XXX online you cloud and archiving there. taking with based had Thank more back a system to not a seeing XXX some that that mentioned, trend my getting Office question, to investing Office as are players have archiving, you're but looking are the you to also legacy

Gary Steele

Office to the makes from take route obvious, all into as that's and The a great organizations but archive. really one point XXX, it Catharine. on-premise environment is, Yes, sound an it back thing it going that's may XXX no move to on to absolutely premise data Office sense an

associated makes And really so and no management cost the with the sense. that

well. Office us archiving unique the side of that a security the not XXX only world, opportunity on broad creates disruption the as supports in So

demand on So archiving of the what the seeing part yeah, profile definitely side. we're that's for

Operator

go Stifel. Well, with Talpaz Gur to next

Gur Talpaz

what great. Okay, about in Threat the general the lot Demisto space my program Gary you Thanks to have for of differentiation we're Response in for How Alto. that very some a your taken acquisitions the talk taking Where you. like used marks. are some are in we have value talk used happened, approach specific else is product winning cases. focused earlier high been out Can you you of great Hey that Palo is Yeah, you by have where deals of versus relevant about Thank approach think to of organizations. and in and question. security do your there? of particularly the that business of question. cases And in noted extreme automate we no, happening these

abuse just So, in the talked about clear. as prepared And mailbox. it's of remarks, really we something think called it

security reporting they're specific on how something, cases automate organizations of so So automate them, right are creates focused and reports you anytime think noise with now, that all someone anything used the these value that that willing what that I are pursue. an for given really do associated to lack event? can resources And they

So, a to sore is platform based to win approach be not deal. broad every our go

how is them for key drive had security some create we value haven't approach specific the for used past. by other do that of giving automation, automation the they Our security cases organizations tools for level in

And So heard just, everything we're you've fits why else included and in with we're it winning so that's that's examples. very why it we're naturally many selling.

Operator

next America to Bartus Merrill Lynch. of Bank go We’ll with Daniel

Daniel Bartus

Or this fully of as still bottles then half? that or go is second be really should for value deals? and the and PX is guys Thanks there and growing Thanks. back slow seems point you precedence the move then I to source to to [indiscernible] average guys. into a PX the this And ramped is we want turning just taking new upside under -- approach? Hey, question. would any in me of

Gary Steele

Yes.

I've So, we to years. bundle introduced own bundles, had product its our that for say been included for mind quite and look was one said as TRAP we bundle when I some then those keep that at bundling as three. in for another time. before would we TAP actually line, Protection And we've example thing is

And Proofpoint relevance our speak we sales a of to We very it so include of just vision right stickier or really it's early to opposed But that over more there's as far to increasing security. really broader and bundles do of is So, customers seeing not deal decided help drive will believe result. it's again, early good time indicators interest. new broaden that larger channel to them things the related by the as now. to team, the products do email our the make number inheritantly customers. to we're some ultimately what But sizes people-centric

several points in it'll good we QX, So, be quarters out there. promising from to think next But were the data felt how over things I interesting early indicator. see play

Operator

Deutsche go to We'll next Gray with Powell Bank.

Gray Powell

Thanks question. Great. taking the for

the revenue growth piece, and at So, compliance revenue. there's side. between in parts I QX If there the know I look guess, QX I sequential that much just wasn't on moving some compliance

think the Wombat So, skewed the Thanks. we organic the given business that should year-over-year acquisition? comparisons how by growth about that in

Gary Steele

Yes.

prepared things in are I to remarks. So, keep couple a in the that mind mentioned there

got the with compliance revenue million the You got quarter. days headwind. quarter-over-quarter of $X we daily then, partially And in having you've as that fewer since revenue was And acceleration, in got that a both the two which course, have XXX associated segment. recognition, ASC you've deceleration

results the way we about feel the they and come together. good overall, So

see of the the but provided healthy advanced performance year, and quarter threat. out we for as at also of compliance expect we look we think I the ongoing that guidance, the remainder second segment the you'll

whatever a sales our of So, is, we and the feel I is company never everybody I like various when target is care bought out to They sales have customers this, And revenue need really what resonating with perspective team the from teams sells. we it don't to I'd the badly go recurring the team hit. but to remind to and in them development want that say the always we sell. net all

a quarter, that Wombat might for one really top is customers. important be So thing of mind

our addition Email Protection for TAP and increasingly come product Defense. will to demand and suspect Another ongoing customers be forefront the I line of those. the isolation it CASB in to might minds, quarter that Fraud browser and course, of

as much being reporting is to to a between that free margins required is, long as as the a and profitability we growth the us billings, relative always cash we larger own The So, our it's flow we're net delivering provide us segments, it's as we're it look big or of scales. that while internal our and provide can. around the meeting reality deal importantly, revenue growth, exceeding guidance both not really company, to at regarding that of as want targets segment business result a and as color we

Operator

to next Patrick Arete go We'll Research. Colville with

Patrick Colville

beat quarter, right, much me very about your guidance I in. guidance? revenue you've your lifted of $X the just squeezing you year, Can for by So the million. by guidance. apart pick you your midpoint million for Thank revenue in if And I'm the versus $X

the beat start had very half? this come a the are how So, nice about more a year, given to confident second you that quarter, you being healthy

Paul Auvil

by We full million. actually raised Sure. year $X

of rule for free and core combination cash a raised in actually in So, driving business described. terms baseline little we us, in of compelling. higher the good of metric think that sitting And the revenue feel now bit here Delivering than you flow. more And we're we're quite April, I what growth XX at scale. we is

And execution so some three we of half year we want months reevaluate get another belt our to under and the our there. as work get then through way here, second the

Operator

JMP. is final Erik with from Suppiger Our question

Erik Suppiger

in. me fitting for Thanks Yeah.

at the Or of year-over-year bifurcation? and just given you loaded? making – gets that at can year, prioritize a causing in billings like what for Just linearity is the here it or Should half as north to the kind is seasonality that is the the of second through XX% linearity about looks think looking orders factors in you of so the back-end billings the half the of we growth, growth but of it the first you've the year year growth. your a being mid-teens few is, the

Gary Steele

Yes.

if timing relatively QX, the So delivered QX, in you last XXXX. the of similar of QX just look at billings as and it's here a in reminder, as pattern QX year, a

close that the this natural is half in new of notion that given higher tends to year, And renewals company concentration business the we of it be and a the fact combined with well. in as as back ongoing add-on of so, the year any

So, ordinary. there's of nothing really out the

have the bigger of being and second we scale, as year. half more get the distorted of in terms a in higher we more delivered Just and effect the and billings higher

similar example, for Salesforce, activity. like companies in a they billings pattern larger got You've overall have their

it's nothing frankly So, more really that. quite than

Operator

this today's gentlemen, concludes and ladies And session. question-and-answer

like For to conference Gary turn closing remarks, over I'd ahead. the back to Mr. Please Steele. go

Gary Steele

take look next to quarter. We We're for call the our circuit today. many remain to very shareholders, attractive our people-centric so approach with Great. conference moment a seeing believe Thanks I pleased about want you today. and thank, joining for to on drive you call well of to to forward the on excited on continued for to the positioned joining our everyone, much us QX returns and talking this our results us progress and we cybersecurity. with

Operator

appreciate Ladies We your and conference. concludes gentlemen, this participation. today's

Proofpoint (PFPT) 25 Apr 192019 Q1 Earnings call transcript