PFPT - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Proofpoint Second Quarter 2020 Earnings Results Conference Call. This call is being recorded. At this time, I would like to hand the conference over to Mr. Jason Starr, Vice President, Investor Relations. Please go ahead.

Jason Starr

Lisa. Thanks, welcome quarter and earnings Proofpoint's to afternoon, XXXX second call. Good market for be that quarter, the Investor a Relations discussing on we'll our is the of we this which copy our after section release Today the press results second available afternoon, the detailed issued website. of close in

the Financial Gary of Steele, on and Paul Officer. Board; the Auvil, Chief Executive me Joining Chief Proofpoint's call are Proofpoint's Chairman Officer and

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

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

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

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

Gary Steele

call to for like I'd Jason. the Thanks, on joining thank us today. everyone

pleased the highlight momentum product We were pleased as Broker Defense and mandates ARR The to current our well evidenced Awareness App prospects ITM Threat importance or for the all Insider on quarter robust metrics Proofpoint's which EFD year security are resonating CASB, with our e-mail win our our emerging will The renewal from and compliance our excited rate quite the visibility to in Overall and cybersecurity with the over Security above or for our into and our services. We of to as demand in or threat results, strong to continued Training rates, expectations was work-from-home are bundles. also our unique Cloud customers and with guidance active demand environment security very Management alike solutions. as for favorable emerging second remains raise with at our high maintain and competitive our Email shortly. our services by products XX%. our is and increasingly strong continue approach as quarter Fraud continued like offerings ongoing or people-centric performance environment an landscape people-centric Security PSAT came detail and we traction services Paul in compliance

During maintaining the to productivity I'm thank overall world their and our our work that customer COVID-XX world-class hard around crisis, support our never the better. I'd engagement priority levels our with base high for the readiness continued operational our our our health time. this to and and remain of dedication has been teams to and throughout safety top challenging report protect employees, to remains overall while customers. our continue pleased like

to As remain around security to the reach unique and the are employees. traditional Proofpoint's of the making not In shifted security controls many the their from efforts other has are that network beyond realizing people and approach teams often words, employees world compliance protect security users perimeter safeguard new on-premise end for environment they sensitive interact their infrastructure enterprises in the people-centric increasingly with. work-from-home perimeter and team's enterprise even effectively a cybersecurity more relevant individual the data traditional to

remains in specific as sophisticated FBI, seen and at have trick unwitting other no or since they partners. the for for a moving into delivery these is numbers, them malicious often malware last payroll worldwide, impersonation the primary location information, e-mail of capital attacks. aggressively extremely to forms known or threat or shipping detect months, account e-mail attack XXXX. billion actors payloads compromise $XX more instructions A accounts these launching e-mail basis reason effective these malicious e-mail legitimate employees hosting as are we XX for are supply spook for sending that According to method messages staggering the the an difficult primary wire and more all, to users including but changing towards chain carry in for a to payment we've over resulted of June of corporate losses equipment -- takeovers through also the While as move method of also compromise attack the account aggressively see in them e-mail business

competitors adequate in their these investments, isolation, And comparison, a has comprehensive of also made keep particularly the them reinforces, attack, our Email Defense struggle threatscape, made Our changing result. unique CASB and advancing have set rapidly and capabilities update new security, our many detect years. to as provides protect not to fail over investments web methods better further visibility. By Fraud own often intelligence the in to a up email since often of Proofpoint of of customers and us with, threat world-class many controls

detection. detection machine-learning and map detection on while example CASB intelligence inbound For and CASB post feeds models malicious security and phish threats, for e-mail email attacker infrastructure enables from and accounts compromised us compromised from behavior our log our into threat our improve account to

Proofpoint our Additionally, Protection suite, of our isolation, provides another of Email line yet defense. combination with

is ones in disgruntled be that the their of face from is to information daily that Beyond the who the being or those organization world-class threat unknowingly employees protection, indeed not in to need leaders access. or their visibility that understand, also And targeted, also are threat as handled security enterprises only actors malicious, simply the may by appropriately, that of negligent, whether the risk meet also individuals sensitivity but can being increasingly compromised activities. resources loss and information data

to through Insider This delivered visibility, actionable customers lightweight Threat into the through now delivering With technology that server, provide is insights on-premise a communicates ObserveIT runs this our sensor real-time incidents, the through service our last gained acquisition year, back Management potential and offering. of complementary and to endpoint our teams on security user and investigate additional alerts able a which to Proofpoint by is prevent central detect, threat empowers activity. insider

the visibility employees we on of in As QX. into ITM their remote search generated mandates resulting a last discussed interest handful added work-from-home our solid wins quarter's in have companies for as additional capabilities in call, customer

sensors loss As data and communicate cloud of to option released and cloud-based in version highly June, we seamlessly the analytics instead endpoint recently activity, server. scalable collection protect, in which re-imagines information. data information. customers organizations centralized their fundamentally broader of on-premise integrates should critical response accelerated most DLP across and also announced, and enterprise the This element we infrastructure redirect to This end-point which incident, data a of solution threat the leads foundational our or offering, this store e-mail, and the cloud directly to new cloud-based interaction the our how protection forthcoming capability ITM visibility unified and is across user enables DLP

trying a and context example Threat of believe attacks. We security just the Management a historically from will it's the because currently other could of CASB figure be to negligent critical functionality. on-premise are $X and get shouldn't places in The malicious ongoing of people-based solutions industry our a and only not expect appropriate. should creates to potential to end whether the data innovation are and also an billion, in cloud the to to what people-centric data-centric it of deployed our classify an by compared shortcoming content classification, and protect users revealed just across view sensitive their user. in represents more We that the and to great third threat market to away and but launch people-centric platform effectively. Enterprise or and motion, DLP and finally be. be DLP provide doesn't but also the excess opportunity problem not to changer, rest of legacy user opportunity rapidly users compliance customers solve where much approach, it enterprises solution our an another information has this doing and and -- DLP enterprise use Data DLP behavior comprehensive problem walk their taken The be out integrated cloud-native moves game when to with quarter. protect when compromised a a mission that at represents With with data it Insider has able it up including

the threat our results second key quarter. secular demand and Now full for to that rapidly to the XXX solutions. Microsoft Office during turning changing in some to particular Proofpoint's to operating helping continue landscape and the to of be drive the are and compliance of cloud suite accelerating security transition trends key migration the The

and most to infrastructure on-premise to company continues by and had of protection users existing large and users. with The consumer email a teams challenges goods as the new vectors XXX,XXX As financial cloud the of one for our quarter generation systems the meet security protect transaction environment of solid largest XXX of another wins, infrastructure. including work-from-home and this XXX,XXX in reinforce definition security Fortune nearly we with a firm TAP important cannot new quarter

upgrade to security and Fortune services XX,XXX XXX and a company Office Fortune Defense that for to added bundles. TAP TAP to their security a part and to XXXX for users Examples Insider with strength users products the solutions protection XXX quarter and PX continue that of Threat consumer customers PX protection Email and a subsequently financial goods provided Office the for by manufacturing decided that had bundle company second a Fortune for the baseline compared XX,XXX included XXX Proofpoint's global users, expanded their of a XX,XXX insurer of bundle effectively XXX their moved that We purchased XX,XXX when a Management Microsoft as who capabilities purchased Fraud and during Proofpoint X,XXX demonstrate purchased added firm users health deployment.

very ongoing pleased total customer annual business Training, our for recurring Email are into XX% and Fraud emerging quarter quarter. this the our revenue sales closed Response growth and our led which also represented new our Threat products, Proofpoint during particular, by the contributed demand success again Defense, Insider of encouraged for Broker, the In with Threat one-third new in are yet add-on Cloud the we strength of approximately demand Security of by Management. We over strong which Security Awareness App add-on base,

channel. initiative emerging simplifying sales continue for bundles our that easier in it PX process and for the and our to importantly in products team through of these launch the greatly these offerings. also for customers to make multiple consume the the We need eliminating of cycles bundling our We sales selling capabilities believe set broad for make our PX of through progress support

and during In ability fact, purchasing pandemic expressed security have and our this. many vendors cited to operations simplify consolidate have help spend around the accomplish bundles' their to current customers strategic desire to their

in contributed our bundled effort products customer is QX nicely early While interest results to solid this again reflecting this approach. still

center PX XX,XXX that closed progress In upgraded Fortune upgraded for and bundles we XX,XXX food medical XX,XXX business, won are bundle seeing upgraded deals second university bundles. of company the purchased making customers healthcare users, bundle company XXX and and we that XXX the that for PX bundle a further midsized Examples PX healthcare a users, XX,XXX our the purchased bundle over during higher-end that fact, to quarter Fortune bundle that with companies users. from for to demand PX to PX the and included we and second a company PX XXX financial in for users, quarter. the In a are archiving Fortune several healthcare new XXX and our beverages customers the good

We deals that but related discussed several progress with the pipeline, push expected these quarter. are XXXX large in also make to are last into continue likely to still we COVID-XX due maturing to headwinds that our

had including this Response, Mail Okta, a quarter CASB, customers a purchased partnerships Palo PSAT wins XXXXXX ecosystem TAP, EFD, company protection our insurance expand drive family value users to Fortune technology continue and and several integrated best-in-class that solutions, Splunk. increase overall Alto purchased by a We integrations delivering Defense, market framework that that center pipeline Internal for of security and and XXX Our university our these CyberArk, and Threat including medical across were for to our users. reach Networks CrowdStrike, protection TAP by XX,XXX isolation an influenced

international our operations. to Turning

than PSAT being We that XX,XXX international IT against during COVID-XX total better for a that Europe increased added and for closed We made such and in a at our the the quarter, services notable and for Overall, and a company as: services and revenue recovery and retail protection manufacturer are of year-over-year. financial several TAP Global protection users; and protection communications TAP revenue in XX% purchased equipment to XXXX XXX,XXX progress global the assumptions May. encouraged XX,XXX XX% grew that company international back deals added XXXX Global users; users. appears

technology increased QX, over that we demand hold. we in for of region recover the so rest optimistic is fourth to somewhat as typical quarter, also As to the we takes international expect Europe in look to this industry, are our moderate XXXX, the the as in see

So, in enter momentum as QX our our strong the summary, with market we are XXXX. pleased very and results second half we

operating Our believe opportunity, and leading as turn the With franchise face gain and is that, our in roadmap with we’re positioned is the people to in our and of today, we headwind our driving investments very progressing well, secular exceptional build the the strong market and share its over the product strategy we COVID-XX making even trends centric cyber enforce security ahead. me well it to consolidation compliance [ph] years Paul. let coupled

Paul Auvil

Thanks, Gary.

the of future on of on-premises guidance sale triggering our revenue majority said, sale. subscription to provided the based $XXX was revenue standard the as May, deployed We results the our accelerated periods, and our are this not in business operating quarter benefited from were we it will of structure at all recognize customers by by on our approximately renew under That ASC of at all contract revenue time expected SaaS $X requirement XXX, similar revenue totaled above metric hence other was subscription time the $XXX that this believe the such, quite $XXX to XX% updated publicly companies. traded quarter, pleased guidance million recurring, that We of in and us when million. this solutions the considering particularly across that of that is driven results leader recurring of with a range for to compelling are guidance as that this these on apart up million Revenue revenue beat all our Note our and million, metrics. approximately which business. sets which XX% year-over-year our

just A continue ARR was energy lower our to given our during of the of to particular, more above by parts our and our particular no by million given result, layoffs the impacted serve base, that $XXX the headwinds XX% we from remained were ultimately which like we face XX% travel, such significantly that particularly longer those good a the industry, of value retail, which sectors guidance ARR the provide renewals were renewals. I In represent to would balance. current healthcare highlight quarter. our result solid, rate impacted as billings, QX While number crisis, that we on furloughs of of across renewal and pleased customer over collectively very

of to discussed second we potential the to we continue XX% in see this As our COVID. below during call the impacts to half metric look May, due to as XXXX, quarters future of for dip related to modestly

impacted XXXX, in growth customers expect crisis at to quarter, time, improve we Great As rates as we over abates. these eventual eventually back Recession overall will employment similar from these return enabling last the stated the to for recovery an customers the the that

point saw will the year, in try duration for would the environment like likely to a I a expect under we the remain this the when during modest to quarter, remainder compared we billings, economic As while QX, regarding world. around note the companies final cash, pressure preserve current that to increase given of as

and basis, stands testament our quarter. performance. by Turning gross our in to efficiency publicly traded gross non-GAAP revenue our above global all performance with operations. for driven and the a profitability companies us operate a to we was cloud SaaS second total margin the XX%, puts This which On the primarily of as quartile top our strong expenses margin expectations

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

on performance-based have quarter accruals our stock On the in a $XX million from of based prior of non-cash reversal accordingly. reflected $XX that achieved included accrued we a stock these of related longer million But share in This with Moving loss impact the amounts of to range the target down basis, likely million million. expense based XX these no $XX crisis on result performance of second guidance $XX recorded awards. million, to based per gain statement. income believe been resulting updated will a metrics $X.XX totaling net and associated the non-GAAP We towards reported as guidance GAAP income our on targets been grants. that compensation reversed periods be these well have we above million the the hence or $XX for These progress shares. outstanding net

EPS our XX assumes Moving approximately based six the fully Non-GAAP above earnings share as for to range the in on shares. $X.XX $X.X applies million per The diluted due and per shares this share under $X.XX of on EPS. if-converted quarter million our guidance to of such was $X.XX back cash the method debt in convertible XXXX to associated instrument. conversion million and with notes adds just calculation interest

the end collections to accelerate flow, associated resulting of above driven helped cash flow quarter well strong million guidance by the corporate $XX $X million our with into in high was invested $X project. This been which of QX. improvements have flow of reimbursement was new billings range the we with to the headquarters cash of $XX operating generated in linearity some principally associated $XX capital expenditures for free QX in quarter terms second In cash in otherwise headquarters We tenant million, our included a breakeven million. during of would $XX which upside million million for collected our which that cash

we of to move So XXXX. our as back very a the guidance. with in different year, guidance May take that approach of for on let's opted pandemic, a this result that COVID-XX Recall to to

a revenues impact compared the during for potential guidance chose COVID-XX could our how providing year, absorbing and of traditional over to As second in over peaked $X.XXX we XX% impact first pandemic compared year. of to our $X.XX our to a economy reduction add-on the business. scenario return normalcy we in on the impact revenues the a the XXXX. add-on scenarios scenario that reduction global potentially the rest such quarter impact to of business continued based billion In the to our X% new we the that year, different as prior the gradual second the two where model take instead modeled the billion the In new of very pandemic of might absorbing crisis the as year, directions business outline the range with of entire and where meaningfully

resulting well-positioned economy. noted, already continued the uncertainty remains COVID-XX our the and As the business despite the from Gary global to impact pandemic recovery the regarding

standards world overall in of compared stabilize and environment current QX yet given to results. the around has While operating remains crisis the challenging our the markets normative operating many our to stronger-than-expected

we scenario and Our solid year. aspect dire outlook that for the our as the view pipeline suspending July second such of good no likely. our in we linearity here is are more And longer

guidance thoughtful provide in We the with pleased metrics raise to are given able a approach are a year all guidance. also current though to end range we top our traditional to how more to guidance being be of return we this the the on particularly for environment

to terms revenue an year. of for the increasing with approximately range to our guidance implies of are a billion In XX% $X.XXX for billion we annual XXXX, rate growth $X.XXX midpoint that

to We modestly when our XX%. of non-GAAP expect compared be guidance full improved margins year XXXX prior approximately to gross XX%

million are of we our a terms million translates $XXX using our approximately shares of $XXX to $XXX non-GAAP range range million. to per to net guidance to XX $X.XX range from to outstanding. This million million share $XX income, new In $X.XX prior of raising

for for interest year assumes approximately XX%. roughly of This $XX rate CNDI we $XX In depreciation XXXX, and under tax million rate income. terms $X of guidance expect million million of net to a the cash also in

of year, new and build-out ObserveIT the expense. tenant down opposed operating from $XX we the landlord. $XX of intellectual $XX This guidance million. the the cash capital our of associated tax $XX for property in that negotiated approximately $XXX statement with our million our with of our guidance acquisition headquarters cash assumes spending the is raising million. capital million the have from offset associated through as reimbursements form transfer as by which the million million. in against $XX we than to prior reimbursement be cash In to This cash partially a line netting range flow expectations of $XX are no This And for runs comprised spending of approximately we also of to of for million allowance down our the reminder approximately terms cash estimate an flow million, of flow $XXX this flow of updated free capital estimate estimate year with more now payment includes prior the to

Now, let's discuss specifically for our quarter. the outlook third financial

We expect for revenue outlook implies $XXX year. when of million, XX% and the our reflecting the to of note QX for a would revenue million final this $XXX growth for midpoint. between the at quarter range million I rate that to guidance year $XXX like and the XX% approximately viewed the in conjunction quarter year-over-year with of fourth full growth hence

particular. I year earlier, of actual we as to the roughly XXXX, and compared global decline had precipitated effect crisis add-on on for business customers on as roughly in an by more the As XX% by the new are in specifically, X% decline highly economy This some modeling and for its industries of our COVID-XX new revenue prior in general stifling operating has the currently noted impact creates and year. definition pressure business it in the relative on impacted relatively growth the add-on and

the arc of will in quarter the returns operating point would and growth environment Assuming XXXX. fourth out for across that with a reacceleration XXXX playing XXXX where of revenue growth to add-on an low year-over-year, our new our improved we business mark a expect

gross we third non-GAAP For roughly XX%. margin be expect to quarter,

of $X.XX $X.XX shares $XX $XX or million cash to than outstanding. per to non-GAAP This and expect of in be assumes fully a income $XX million million income diluted to count approximately million interest share net net XX share. and less million depreciation $X We

in of for be line. million which on million occurred expenditures which the to the $XX expected for year a fall that $XX flow with $XX expected larger this headquarters. roughly operating being given as And the CapEx million will cash result, flow the $XX to that improvement includes free full capital of California some reimbursement the quarter third million headquarters impact associated a partially here free a in million net of percentage flow the of impact expect phase with We $X of the is note approximately $XX as be by compared allowance new Though in new flow the million This quarter. significant will third the during delays $XX to QX. to $XX million QX is fourth our through the spending shelter-in-place step-up will reimbursement by into final is during Note used associated on that of leasehold a total construction earlier quarter. in the which fully cash orders cash million that offset spending project

Our QX payment transfer. flow property cash with intellectual the free guidance ObserveIT includes associated the also aforementioned cash

for operating year and somewhat conclusion, our third that the we free we a to call ability that later environment, believe we we top strong we pleased remain positioned threats. the proven well challenging to outlook expect to results compliance our quarter horizons XXXX flow despite increasing with security visibility disciplined and in its built bottom-line longer well delivering and pandemic an to our into have execute not advanced in to a full despite today's be enterprises like final ahead, business. second drive to As the In this continue measured to year and continue on fiscal to defend time on ability initial growth have cash over against the margins note while the note able quarter quarterly the provide on guidance, would our do and given on been I provide year years guidance earnings the crisis, impact

of business, product set. with the a recurring environment, the our our XX% We or cash coming drivers, COVID-XX secular a favorable quarters coming revenues healthy crisis from strong free portion are better billion, over people-centric generation, $X well-positioned nearly competitive flow to a weather cash broad of and balance

help normal investments review upcoming the XX sell-side. targeted more score questions for to environment with in to returning expect Relations crisis with the eventually better schedule to a operating targeting uncertain period our we operating paradigm of than of quarter turn us stronger rule at emerge fees from this Jason XX over continue the it of We resolves and as now return our from to discipline a and ever the I Investor future. will before taking our to some point we goal the

Jason Starr

Thanks Paul.

get mention for with webcast heard an today's just calls service provider had to Before companies' multiple into that today. I've issue the I that call wanted

team going From a we Proofpoint's as we're website So, to D.A. September the marketing page Global as Internet Conference soon presentations language be from Investor from Relations Citi's management quarter a on will can everybody. quick at a transparency script call standpoint, Conference to or transcript will the today's be A these Xth try at and available and be in heads just Virtual too. webcast the standpoint investor third investors.proofpoint.com post the hopefully on Software presenting the Davidson's Technology the for of will to and up September as XX. made on

[Operator be Thank your We will now you we'll happy now. today. for sell-side take Instructions] analysts. time questions with from to Lisa? the take join our call our on And questions taking us to that

Operator

first you, sir. Piper Rob We'll Thank go to Sandler. Owens, [Operator Instructions]

Rob Owens

can Good afternoon guys. It's ask question. a good thing multipart I

the type with of does that this shake Symantec is I on go you're that's kind security? it solution Thanks. vendors is I through? DLP potentially been touch brings. And engaging little products dominated viewed separately? And as of those more what some that them hand email enterprise effectively of Or a market wanted in of bit historical a is know that where glove legacy Gary, and some can customers, honestly So with of to that there. Symantec a

Gary Steele

deliver can about DLP we people-centric where different Yes. excited category a differently We're in think opportunity we find whole that's one a many about the enterprise of historical very and we time customers believe taking of of vector there's around been Where this fundamentally the approach leverage customers to DLP. terms implementation is issues. use value helping and already that for incredible us single

I and tremendous solution that us We market. creates very ObserveIT. into early the DLP is on. that and with is bringing this opportunity us. the that always broadly that are So solution had a the enterprise and uniquely in momentum But being think in market all good positions underserved together super seeing success CASB we're for it think complete believe on big positive I a e-mail It's really indications something we've our

Rob Owens

Great. Thank you.

Operator

Next up Jonathan Baird. Ruykhaver, is

Jonathan Ruykhaver

guys. afternoon Good Yeah.

Regarding around we and second larger adoption the You into you PX solution move potentially just can about as talk the mentioned enterprise half. expectations? PX bundles, your

So perspective And I'm would driving you particular, what's what from in wondering on are be expecting? use-case just modular a any that expected color adoption helpful?

Gary Steele

I I focus hey, first there's you. foremost, Yes. say say and hear mean consolidation. to a I vendor would on would Jonathan good -- definite

very broadly also vendors, they beyond the operate looking some see savings, a having can particularly manage single but compliance people threat with with and of issues, the aperture different associated people way operating they're people And understand all get landscape e-mail, VIPs efficiencies threat where you're vendors, with So to if internal after. intact of look these that But but manage to and broadly are fewer and properties pane other looking a broader at that your what being capabilities see for the able being from these benefits across fewer side fewer and to of solutions. just a and to is are different glass Proofpoint's when all and cloud from be having are course incredible vendor case framework essentially delivered to security this remediate by you people-centric of actors who of and the manage in understand this compliance attacked. Proofpoint responsive who your there single having

playing very that these are these favorable it's things opportunities and way bundles. So a PX a PX sell to of our combination in larger toward all much

Paul Auvil

I to that's with And are they really are, CSOs COVID been deal the a about sales. really drive catalyst partners to for their strategic many want how in where became vendors who much key thinking and more it us pronounced help think bundle

Jonathan Ruykhaver

Okay. Thanks Helpful. guys.

Operator

take We'll Davidson. D.A. next the today from Andrew Nowinski question

Andrew Nowinski

quarter. congrats and you a Thank on great

we So to our on we past. picked this tracker more published, Proofpoint on I just seen up e-mail we've than for maybe in ask wins wanted that the quarter

it you provide color rate this quarter Thanks. perhaps on your the could to relative if any internal wondering expectation? and quarter acquisition compared of local So I'm how to new last

Gary Steele

and I'll maybe Paul a start has comment.

with things good a we've the really And financial business that large One TAP off Symantec. core we mentioned coming in our services was of protection of That -- prepared saw deals firm. referenced that customer had large quarter. actually and a and very some the this remarks we was

think priority in a I broadly so we're being tailwind high they've see speaking, such seeing we from because e-mail our -- what rethinking are simply And this core -- and done. people traditionally

it So in tracker. that's why your that's it's why I the is I think think we've positioned and showing been well way – up

Paul Auvil

agree I anything have with that. don't add. I to Yes.

Andrew Nowinski

up much, very you work. guys. good the Thank Keep

Operator

Citi question. the Walter Pritchard of has next

Walter Pritchard

us you if a give color more bit could around. Wondering little Hi.

given seeing market some areas are benefit What consolidation into of other a environment. are seeing – makes into kind consolidation that are Thanks. are as talk especially PX you which You're the what and the PX? that seeing of most areas stand-alone areas And you there that? sense the bundles

Gary Steele

have I and is significant market would Walter fluid moved CASB. we've say, would the Yes. one Yes made primary areas very of around that requirements investments.

natural so about broader bundle. – include in And it a think component part is to just it's to natural a that

Walter Pritchard

it. others? Got Any

Gary Steele

as that obviously been the the And bundles buy adder Awareness and highlight lower done has Security the it primary compelling solution. the you would I there one. very to we've our it that work a with have rest the then natural integration of that Training make all in

Walter Pritchard

Thank you.

Operator

Next Jonathan up is Blair. William Ho,

Jonathan Ho

half in the of helping I understand and sort a some of helpful. one given particularly back headwinds bouncing you the around the some potentially pace look understand thing to maybe afternoon. be you're net expansion Thanks. was that see recovery? do good us the and back if what see Hi, wanted we dynamic headcounts the better there, bit year might that of the that guess, headwinds like little of seeing those Just and I of

Paul Auvil

Yes.

pattern start few impacting would during Gary say here company furloughs think were and a highly definitely I renewals back that the so leading back recover as level to and folks businesses and like. looks time the Most up do, move we'll output Jonathan, It we to I success. layoffs their of I'll just has our add. then know those the back original levels I then got employment things and will our in our takes levels the and they'll are hire you've probably Gary a and accordingly. of base, both installed these then accordingly. they former what some the eventually subscription impacted subscription industries, this values within that of great recession

that specifically as we we it with example, much to experience like doesn't in let's feel own our have half look be sort hope the here. way all our So say for it's those a would there'll regards XXXX, a with the work year, to anecdotal second of the said, travel-related for recovery recovery. services the I hard at a to of that little I But there's But through be all all tell but going sometimes second as half of industries better year. of

a surgeries retail lot Some on on an seem together. the a which those QX, Maybe elective brings a be providers. more that put But hold. parts already half elective get but how the better of second Healthcare been bit may the successful of back states increases. late then Again starting year of you've increase kind back maybe getting to in of mid let's now count new was rebound different of case with in we seen a activity. the of depending little with healthcare things into they be to to lockdowns lockdown, hope come headcount in see here resumed to

industry uplift to But some good of new So XX by add-on of if all I terms and XX probably bakes those think news then as it's going guess their the levels employment. would back online the in up will kind months in industry. over you that is come recurring will to of I pick it next companies to depend former

Gary Steele

thing add had that maybe the enterprise these believe not do I sustainability. large is about in good they companies long-term in world really come is These that headcount, feel to that have ever the companies not that are And reductions because back. only come back, Yes. SMB we are temporary what done these I'd companies may

time feel as ARR said, segments uplift versus over serve company people So we naturally sort we will rebound. it good think are the the given in which see I Paul into that basically world. just will will that that away, And we see a going of fundamentally a SMB built very be be

Jonathan Ho

Thank you.

Operator

Next up Winslow. Wells Phil Fargo from is

Richard Hilliker

acquisition. little if was and some little I competitive Phil. the talked double-click Hey, on This wondering consolidation my bit Q&A is earlier Rich your your a on in team. remarks Thanks bit for a in Hilliker rates. question. we logo about win taking there We for prepared vendor and can new

vendors. Thanks. Specifically, acquired against if you some can recently

Gary Steele

more? you sure I When make we're bit you vendors, want elaborate can said question. to acquired little a your recently answering

Paul Auvil

to Symantec? referring You're

Richard Hilliker

Yes, exactly. Yes.

Gary Steele

hard so to and have momentum. when we in And our a remarks. referenced of one of win bit win been our No We've rates the prepared that referenced frankly that increasing we of course rates good in frankly little things Yes. over positioning the were I protected. market our prepared high. I you have move. threat our we saw And remarks and environment. QX keeping you a with would feel really very about this I as our extremely think did well the I the say we steady across think market. landscape the a say agility good were if saw of threat the well we've didn't that that competitors in And the that seen time world, demonstrate COVID necessarily And And customers job our team -- ensuring up in other the our technical that can't

Richard Hilliker

Great. Thanks guys and congrats.

Operator

Goldman Sachs Essex Brian is of next.

Brian Essex

frequent upsell count more Hi, quantify very to they And then renewal come on renewal impact up to way contract quantify basis? potential a duration. quarter? that for question. with of in could basis, the Thank more that you the obviously if frequent afternoon. bit contracts rates you that's there been Is to opportunity lift able regard attach for any an taking comment a good have when you much on I maybe wondering a in the for was on as little any

Gary Steele

Yes. It's hard to quantify.

somewhat billings longer the does a seen of and put any at looked duration put been number point, by go otherwise we've that. we but haven't would million we put bit that with eight but exact an little you But contraction it's last billings have like. gration, shorter to hard hence out on a numbers your always for back have our for And of look obviously We result a recorded a definition, into number as and specific were higher transcripts the $XXX what of Clearly there, years. number. a headwind advocates pleased might to duration with the

actually for reason compensation that shorter Our plan's the contracts. duration team the is not sales doing on And twofold. focus longer

it's differently rather you fourth to and by as third you a a the customer upgrading you fifth customer drive ultimately on where XX% contracts you a And well I'd those year XX% that the add-on shorter discount selling or rather to one contract, of year get flow just it renewing I'd cash your shorter if not or point discount an you terms. give or revenue just single-year or those a in a our we or we of simply said touch have do duration one can standard. of point, go generate one-year which more typically bundles discount be sale deal and give a same product. less prepaid on after kind is the income larger industry whether First, do duration create contract net new three-year because profitability, more

near-term flow some we shareholders is impact in billings more long And stream creates obviously like moving a for so, the over it time. run significant to actually duration. There shorter but to cash

Brian Essex

a lot very Thanks sense. That makes much.

Gary Steele

Thanks.

Operator

Alex is Henderson, next questioner The Needham.

Alex Henderson

of that very training little And particular of it you you, could granularity growth give your training business. what of scale Thanks. around bit within Thank has hoping the of personnel kind of up a business? you the What seeing are much. kind I to? gotten was segment more side us rate security

Paul Auvil

good seen and start may really our product. Gary We've want Awareness Training Yes. chime with in. I'll Security success to

of We've it to each rebranded now through to the you called Defence it As company small quarter. which and each quarter. and called probably familiar, Europe to of into content The recurring contributors Security but bring that Awareness last additional picked We added in consistently top pleased it revenue we closed We really a capability XXXX quarter Wombat. one add-on platform. a Proofpoint acquisition continues new are company we up acquisition Works back be the an the were Training to in some

well So continue sure or as another it's of recent an with large build We companies knows invest most in they large as the some strategy important for adopt the enterprise, it's the a critical the both identify acquisition really a road. two it's think to part acquisition area where a Pittsburgh team of need the we be area point primarily and making to there them organically threats nearly overall may at educating developers paradigm who defense of your defending important all how understand and you your part small. employees out know-how is and overall look what or like to that down

The specific reasonable which you separately frequently a we've break with all a a as imagine. as sold out products that We revenues. of And think, business reported grown I the been naturally with So bundle as other has is it don't division it's part with performance. said pleased can scale. externally with

that a in say Training Security generally equation it If the third our portfolio. pleased I you are you're protection our of buying But nicely would see will. really that that is Awareness buying capability very our we threat if piece our and and fits advanced customers together natural with capability

Gary Steele

a products differentiation our some there's sector bringing demonstrable this we from of Simulation differentiated that would just these with lot has in I Training. done add very independent fact that interesting core having the the of Awareness Yes. benefits strategically, feel very Then integration we're Pishing together. from the together come companies and we've Security like two well our and

so market. independent well to we really positioned players think relative this we're And particular in

Alex Henderson

much. Thank helpful. very very Its you

Operator

Hindlian-Bowler we'll go to Next Sarah Macquarie.

Sarah Hindlian-Bowler

up And follow-up to you you're really guys come duration you there needle? on bit Great. more need Gary bit little you it the Thank over. quarter going comments to is and to me, just Paul. that surprise a can move this they it. a down. What Paul were think but which to a for you guiding drill down you is so the I much were of appreciate know just for I on international. a you them Gary do then continue to

Paul Auvil

Yes.

start that had financial daring services Fed's banks shoveling the to we the well. rate one this useful I in you space that look primarily quarter basically can money where I'll to and Sarah. think we a I something it. in were as which into duration do at seeing modest So that's uptick current I interest to with environment degree as in a vaults was in the as the of But the is, was imagine the thing the And the say companies fact them would retrospect it clear it surprise and me this.

things a to prepay useful and XX% the X-year with do of is One do your get Proofpoint. discount to

you as ever one quarter. And the proved have quarter-to-quarter. With so segments the than financial behaviors I know of higher into week-to-week month-to-month somewhat is exactly in a result that would for to as particular Proofpoint to have what anticipated will said duration important services say which be hard going it's

we're that see set a at and surprised for we'll modeling third quarter. plays duration in is second third an until fourth for out. expectations positively how for for of uptick year just so we and the But now to we'll want And saw half the be level see see what I lower quarter in more purposes with maybe now that the we then, assuming And QX. consistent

Gary Steele

with very the Sarah And were to pleased results. we international with respect

we very The as growth seeing of several that could -- begins carries that team could years we which the one was business to out QX be as catalyst a second we're and that XX% next were be happy in through we broader quarter we with So think our that participation in half. think the thing like interesting APAC the grow momentum over feel well.

good the We we're international. feel right track. feel really we like on So about

Sarah Hindlian-Bowler

very it. appreciate Awesome Thank you much guys.

Operator

Gray Up BTIG. is next Powell,

Gray Powell

they're just taking if Thanks much certain the or with pace sounds -- user up per just you spending against on they sort they did a I'm to of what a spending that how I of Okay, $XXX when is spending it what's up. customer great. uplift for then a typical with the sort correctly. Proofpoint? wins Like that Symantec Symantec, that want end question. $XXX so follow-up price make does Or like of switch product see? Symantec over, the Maybe picking like hearing uplift? absolutely does And

Gary Steele

definitely obviously, Symantec. of like for in paying. across about winning. the had Fortune dollar in momentum what two happened security transferring dollar the customer them see will the get No we're had of to in seen Xx We the we good to When hard But question. email Great uptick core Yes. very customers put been what our very we've work a of into feel three where sort base. an companies referenced much will good sales script. broad switches, in kinds bundle or which dollars McAfee really someone XXX We've then us traditionally transition, ultimately team we or they the and sort it's

even or PX bundle. a that? bundle do trying them move to bundle we do into how like we're So PX a Well a

Security like that up bring things Training including the we're adding So other products. Awareness price and

Gray Powell

Got, actually very helpful. Thank very much. you

Operator

Erik Next up Securities. Suppiger is JMP

Erik Suppiger

which secondly might that long-term just therefore can creating you bit coming additional just off, seen think them have curious Office can business any any accelerated First during pandemic upside the to has you the realized -- any little to pandemic talk that And from pandemic you? do opportunities targets? you've efficiencies whether create a you in I'm anticipate business Do XXX? acceleration then margin passes for and you once continue about you

Gary Steele

then has couple and start of I'll probably a Paul comments.

just to be momentum a and there continued more more in been work-from-home pre-pandemic, pressure the our us environment. do seen of XXX and more rethink of that think as growth of capabilities what that a I us contributor has in momentum pandemic of we that's importance also their and XXX direction. and COVID this I there So get cloud. is strategy with we've people visibility script think and for think finally the We've the are respect -- Office continued be I things raise to customers the believe as in a seen to during are cloud number movement a will with on to long I that it Office noted time will for put

need I it's you know customers a e-mail they think with respect -- employees users everything with to the to protect their solution. that good sitting at home

we whole again off managing to noted our also So network, users at solution We've doing, Insider are Threat companies the because how set seen have that's want I think been a what in you a data. of they're corporate as interest those more users positive. Management understand home,

to And think, see even we And uptick COVID because think, in subsides, so the as is we've importance the it in are continue can seen posture. the frankly, I interest. momentum seeing people value of I overall this deliver we security what and

So I don't slowdown demand. anticipate in a

for visibility I Paul? you any think we're kind just raising of period. of that the add this customers during the Would to we that do work

Paul Auvil

No.

question everyone pandemic home pandemic to from so. future. working how to having the that operating of things of emerge people the other foreseeable just operating I the I offices. our that we're that will at stage. believe the said, with the of which are from very in business. that I the profile of today don't change think is the believe a this we power expect in I it to that as the related case, in middle of business doing pretty we is how other the terms working for we run as part in we would Obviously, together in say But much much continue

virtual working zero heading the everyone the from the right very of the under forward budgets bringing home. high it's back running camaraderie at make has via meetings. where longer want safe whatever we to they've that and now. as remarkably the reason suspect normal and have while salespeople for people I benefits over much Unless stretch customers power productivity same to together look remained working that's where still we'll that they behavior this were the are teams well continue executives people in and into back that's to of so to we meet of ways the roughly get to our we'll out. decided when come happen, been of And while a activities our be obviously, no I travel roof Unless see. just We just with our teams office back a working and travel But Zoom or decisions see think around. change I what Again themselves when

some obviously impacts So this. have any short-term again, result I been the to our spending profile. as there don't model in to long-term But our a business see of changes

Erik Suppiger

Thank you. Very good.

Operator

RBC We'll now Matt go Hedberg, Capital to Markets.

Matt Hedberg

questions. Good good I if Thanks you terms expand that hear. morning, you on in which wondering can was guys. Paul for a the taking of noted pace I'm to linearity, really my good on sort bit the pipeline of all what build are the watching. it's of also business. this the And rate pipeline comment assumptions through probably and maybe we're close it's assume but strong, uncertainty

Paul Auvil

Yes.

the and people It's need working that in be are what good second I and to quarter threat on so that and has very customers protected. concern to. part the very, heightened was linearity a linearity might the is the prospects been specifically there with as sure related both far properly think QX they attribute here home, about I environment in good me think well. do hard of for understanding from make to

the our little a part on I favor. So average. the behavior, on of that a it urgency in buying our margin maybe obviously customers it wouldn't C more more vigilance but tips But on things call in creates a change probably and little

that the guidance felt think good the provided. I I about the that obviously, said, entering that context all in think quarter, we with So pipeline we the of

close any rates changed haven't We though. assumptions around

see would in are we've what thus second to in seen and following the kind expect close least we or at what of pattern rates I think our that's far our QX. quarter traditional

out usual doesn't see actually So a than sales go the customers it's other course bit of get little team in to the person. business and as

all that. in interactions at almost were pleased some results to together here to effectively good And of really seems how came fairly half. again, stage. our So for our this the are hopeful with paradigm have virtual and second But transitioned solid QX we

Matt Hedberg

Excellent. Thanks.

Operator

up Hamza Morgan Fodderwala, Next is Stanley.

Hamza Fodderwala

my question. taking for Thanks guys. Hi,

a had guys secure you CrowdStrike go-to-market well give some integration Okta, work. foresee that as from bit the Can and a as color you made Just that a to there. remote on standpoint, standpoint, involves you one to of Netskope that with recent with additional as partnership quick little more what an benefits the

Gary Steele

partners this We've do to success on Yeah. technical and very integrations mission good CrowdStrike with been we've we've with – been recently critical had most Okta. and with

And opportunity zero just the sense. of this ton to of in bring it along all so framework trust a made came when a together

we're with to each of these market. channel work then again, And broad that so power we give And leveraging lift joint bringing vendors. partners vendors that with think we've some activities these organizations. us well doing as bringing it the marketing in these as out – Then, technical across the been market this with the

Hamza Fodderwala

you. Thank

Operator

next. Capital Northland of is Chokshi Nehal Markets

Nehal Chokshi

include Paul you. beginning talked XXX script the guidance And that there? ASC acceleration? an ASC happened Can just forward – the just what acceleration. benefit your a from Thank on the Yeah. double-click XXX of about does then you you at that clarify

Paul Auvil

end be couple – actually closes. upgrades the fact of you're relatively actually it of that accounting the new is the if it's capability that updates new value regular when the require on-premise to And customer accelerating of subscription over not in course, product then vendor the deployed see the you'll effect new sure for that the Even, and time, subscription that of roughly and I'm in it but have from years. period this you doesn't business, into again. on-premise XX% deployed if and renews you up can by a of when last stage, same later, a at order standard, enable recurring familiar under deal year Yeah.

unexpectedly, what happy and own who some ended don't is we in which little creating you revenue some accelerated the customers perfectly because have fine so more some we're center your data TAC do to run want period. And – if private chose It mind on-premise up did your to to we deploy in of cloud build it that.

overall end month as normally subscription month imagine, revenue were near pleased very ultimately But amount the in ultimately then that up of it's the can a XX% we little we June a of got end of while business So day XXX, being if would of June, close the June I'll really gets in in and the with because contract the if that we in last business XX-month under with deal quarter. second I of period of expect, it closed, a you on of than the subscription taken recognized the June second quarter. ASC and in recognized it even and closes larger

that course So the revenue out for unexpected the $X million And then is pulls period. future of revenues that that step-up second of that quarter. in of result had we

negative think four, again year about this divide quarter and of $X revenues for our you actually and million QX year, periods, $XXX,XXX would to and and if it impact guidance a again, So by next and QX QX be a our of of reflects QX which it's the subsequent all that. of

as of So bit a takeaway next QX, benefit a a in XXX result. in nominal then nominal it here is a and quarters the four created actually

Nehal Chokshi

Excellent. Thank you very much.

Operator

Next Stifel is up Talpaz. Gur from

Gur Talpaz

my you appetite taking M&A question. looking? for Thanks current be might Gary, for you about the environment in and Great. can Okay. the talk where ultimately

Gary Steele

Sure.

create We where opportunities explore with people-centric continue economic And adjacency drive we tight solution. currently there that is that focus we with extend or can this finding view. a that can have looking customers, that M&A the everything where in for – that basically, value we more market to interesting us value current extends customers value for more really fits something our the

all And decline while a haven't would significant so through we that. in see private more And thought at company we we we look that M&A opportunities seen lens. values had

to disciplined. and be explore super going will super we how so we're find. But and be, look see continue to what continue opportunities, at it disciplined we to continue And we in to

Gur Talpaz

you. Thank Great.

Operator

Koujalgi, is Taz Guggenheim from question next Our Partners.

Taz Koujalgi

some question it macro? down Hey, have the that's business more that and was you full be the it Can down my year should is that about said guys. what the and give improves Thanks add-on you're QX? question. implying for for And expecting. X% the new color guide QX in for you your momentum taking what a year Paul, I on

Paul Auvil

didn't break out. I that Yeah.

The an has in quarters for the – on about little the a that the So impact revenue, it's you just of obviously it's reflected down guide. bit but overall see X%. year, for timing

the second that hopeful industry, number is no luck you we albeit at that where to and almost see as year. I often of but imagine, number, this not with year how account only as Those way from with our new that maybe we're lower in focus add-on layoffs. highly little dollars product that because But and NARR out. or the markets. current those of pandemic can teams deliver So, we're customers acquisition There's a well Yes, more plays renewals because those installed impacted new on that we're closing we'll we for fact much spend business the obviously, the either think impacted half sales value, uniformly, in we getting have have in not the furloughs even on of industries. for base, somewhat XX% the of bit that get prior back to

able level. So we're at I'm deliver actually this quite pleased a NARR that to number

affected we in now. right those industries businesses the Given and the dynamics see

Taz Koujalgi

it. Got Thanks.

Operator

of We'll now America. Daniel Bank go Bartusm to

Daniel Bartus

Hey, would been products Thank is might of any give Gary be doing. well and indeed Networks maybe with Meta guys. can too. if curious VPNs in it existing for rate me sense I'm discuss if integrate your then can here. you the recently. has how squeezing you it which And you. size just there's Paul replacing or growth for that us Thanks great

Gary Steele

a on focused but interest that overall really good feel amount there, this and seeing CASB providing great we're to really work access broader early No talks do Gartner question. solution our and augments CASB capabilities position. solution within a development integration and interesting reasonable Meta Yes. with SASE demand good and We that we some about. about that fits framework overall early competitive how of There's

Paul Auvil

revenues like within We out haven't kind or things of broken the explicitly cohort products. any stats emerging the that of on

Daniel Bartus

guys. Thanks you. Got

Operator

last comes Lee, question Fu our from Yi today And Oppenheimer.

Yi Fu Lee

of [indiscernible] light wondering together if the the congrats economics Thanks. you alliance. I Thank other on the sale question with is you one was explain questions execution vendors? for alliances. these how My in go-to-market split Paul when quick about taking gents. could Seen some wins, or great guys Gary And because of you pandemic.

Gary Steele

Yes.

resell products, -- ours. terms partners. much they in news the very don't their the all we of share resell So same It's economics, the we is channel good don't

solutions and piece the some reseller quote combination together And of the that in or of to other Proofpoint the accordingly. our put the the question. we to often a So channel includes partners together kit and customer will then, sell course, bundled solutions distributor the

lot benefit obviously, so of us for there's of a cooperating. all And

partner So if we'll we vice well the versa. an more involved benefit opportunity that channel bring we to where encourage find in, the and of other them partners or do one could as and we'll think

Alto lot common of Networks very win is in to of working big lot value ago. And to arm-in-arm which similar first go the collaborating. power and in area Palo work, it's how you have foray years business there's a a this jointly. relationship a there's So When in our working together enemy,

pretty helping And seen And I newer potentially in drive with could business we've I road. down of for think to that these think us meaningful the the some pleased we're play from role results a early so partnerships.

Yi Fu Lee

Thank on color. again the you congrats for contribution. the And solid

Gary Steele

Thanks.

Operator

the additional remarks. And that does Gary I'll today. for question-and-answer to Steele session the hand or closing conclude back any conference

Gary Steele

the also today. approach to QX cybersecurity with remained results virtually Great. returns pleased for drive you and shareholders, crisis. and health, joining progress continued supporting through health while call as all talking we We on look on and good seeing Thank with I positioned circuit the wish well want to believe our of press we to conference and take a very you you so attractive our our the We're everyone our next compliance our people-centric moment call for and and to we've We this thank of much. many this us employees forward to safety our customers. forward on you to quarter.

Operator

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

disconnect. now may You

Proofpoint (PFPT) 30 Jul 202020 Q2 Earnings call transcript