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"We are very pleased with our performance during the second quarter as demand for our integrated Security-as-a-Service platform remains robust and our high win rates continue to drive new customer momentum," stated
Steele continued, "We remain focused on investing additional resources to expand and enhance our sales organization. In addition, we are committed to further strengthen our research and development capabilities to drive innovation and market share gains evidenced by our recent launch of Proofpoint Targeted Attack Protection. Looking forward, we believe we are well positioned to maintain momentum during the second half of the year."
Second Quarter 2012 Financial Highlights
Second Quarter and Recent Business Highlights:
"Our execution was strong during the second quarter, as evidenced by our ability to exceed expectations from a revenue, billings and cash flow perspective," stated
Financial Outlook
As of
Quarterly Conference Call
About
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding the momentum in the company's business, future growth and future financial results. It is possible that future circumstances might differ from the assumptions on which such statements are based. Important factors that could cause results to differ materially from the statements herein include: the effect of general economic conditions; specific economic risks in different geographies and among different industries; failure to maintain or increase renewals and increased business from existing customers; uncertainties related to continued success in sales growth and market share gains; failure to convert sales opportunities into definitive customer agreements; risks associated with successful implementation of multiple integrated
software products and other product functionality; competition, particularly from larger companies with more resources than
Non-GAAP Financial Measures
We have provided in this release financial information that has not been prepared in accordance with GAAP. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures below. As previously mentioned, a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.
Non-GAAP gross profit. We define non-GAAP gross profit as GAAP gross profit plus stock-based compensation expense and the amortization of intangibles associated with acquisitions. We consider this non-GAAP financial measure to be a useful metric for management and investors because they exclude the effect of stock-based compensation expense and the amortization of intangibles associated with acquisitions so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP gross profit versus gross profit calculated in accordance with GAAP. Non-GAAP gross profit excludes stock-based compensation expense. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in our business. Stock-based compensation is an important part of our employees' compensation and impacts their performance. In addition, the components of the costs that we exclude in our calculation of non-GAAP gross profit may differ from the components that our peer companies exclude when they report their non-GAAP results. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP gross profit and evaluating non-GAAP gross profit together with gross profit calculated in accordance with GAAP.
Non-GAAP operating loss. We define non-GAAP operating loss as operating loss plus stock-based compensation expense and the amortization of intangibles associated with acquisitions. We consider this non-GAAP financial measure to be a useful metric for management and investors because they exclude the effect of stock-based compensation expense and the amortization of intangibles associated with acquisitions so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating loss versus operating loss calculated in accordance with GAAP. Non-GAAP operating loss excludes stock-based compensation expense. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in our business. Stock-based compensation is an important part of our employees' compensation and impacts their performance. In addition, the components of the costs that we exclude in our calculation of non-GAAP operating loss may differ from the components that our peer companies exclude when they report their non-GAAP results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating loss and evaluating non-GAAP operating loss together with operating loss calculated in accordance with GAAP.
Non-GAAP net loss. We define non-GAAP net loss as net loss plus stock-based compensation expense and the amortization of intangibles associated with acquisitions. We consider this non-GAAP financial measure to be useful metrics for management and investors for the same reasons that we use non-GAAP operating loss. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net loss the tax effects associated with stock-based compensation and the amortization of intangibles associated with acquisitions. We used a 4% percent effective tax rate to calculate non-GAAP net loss for the second quarter of 2012 and for the second quarter of 2011. We believe that a 4-8% effective tax rate range is a reasonable estimates of the near-term normalized tax rate under our current global operating structure. The same limitations described above regarding our use of non-GAAP operating loss also apply to our use of non-GAAP net loss.
Billings. We define billings as revenue recognized plus the change in deferred revenue from the beginning to the end of the period. We consider billings to be a useful metric for management and investors because billings drive deferred revenue, which is an important indicator of the health and visibility of our business, and has historically represented a majority of the quarterly revenue that we recognize. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. Billings include amounts that have not yet been recognized as revenue. We may also calculate billings in a manner that is different from peer companies that report similar financial measures. Management compensates for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with revenues calculated in accordance with GAAP.
Adjusted EBITDA. We define adjusted EBITDA as net loss, adjusted to exclude: depreciation, amortization of intangibles, interest income (expense), net, provision for income taxes, stock-based compensation, acquisition-related expense, other income, and other expense. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We use adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance. We do not place undue reliance on adjusted EBITDA as our only measures of operating performance. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using this non-GAAP financial measures, including that other companies may calculate these measures differently than we do, that they do not reflect our capital expenditures or future requirements for capital expenditures and that they do not reflect changes in, or cash requirements for, our working capital.
Free
Proofpoint, Inc.
Condensed Consolidated Statements of Operations
(On a GAAP basis)
(In thousands, except per share amounts)
(Unaudited)
Six
Three Months Ended Months Ended
June 30, June 30,
---------------------- ----------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
Revenue:
Subscription $ 24,750 $ 17,663 $ 48,019 $ 33,740
Hardware and services 1,193 2,217 2,543 4,921
---------- ---------- ---------- ----------
Total revenue 25,943 19,880 50,562 38,661
Cost of revenue:(1)(2)
Subscription 7,236 5,801 14,447 11,617
Hardware and services 1,134 1,530 2,303 3,113
---------- ---------- ---------- ----------
Total cost of revenue 8,370 7,331 16,750 14,730
---------- ---------- ---------- ----------
Gross profit 17,573 12,549 33,812 23,931
Operating expense:(1)(2)
Research and development 6,224 4,881 12,105 9,822
Sales and marketing 13,450 9,846 25,625 19,291
General and
administrative 2,964 2,092 5,730 4,140
---------- ---------- ---------- ----------
Total operating expense 22,638 16,819 43,460 33,253
---------- ---------- ---------- ----------
Operating loss (5,065) (4,270) (9,648) (9,322)
Interest expense, net (43) (112) (103) (188)
Other income (expense), net (178) 94 (209) 243
---------- ---------- ---------- ----------
Loss before provision for
income taxes (5,286) (4,288) (9,960) (9,267)
Provision for income taxes (232) (30) (311) (136)
---------- ---------- ---------- ----------
Net loss $ (5,518) $ (4,318) $ (10,271) $ (9,403)
========== ========== ========== ==========
Net loss per share, basic
and diluted $ (0.21) $ (1.10) $ (0.65) $ (2.43)
---------- ---------- ---------- ----------
Weighted average shares
outstanding, basic and
diluted 26,195 3,909 15,907 3,871
---------- ---------- ---------- ----------
(1) Includes stock-based
compensation expense
as follows:
Cost of subscription
revenue $ 109 $ 107 $ 238 $ 205
Cost of hardware and
services revenue 15 6 26 13
Research and
development 485 283 907 561
Sales and marketing 820 478 1,471 907
General and
administrative 506 239 794 484
---------- ---------- ---------- ----------
Total stock-based
compensation
expense $ 1,935 $ 1,113 $ 3,436 $ 2,170
========== ========== ========== ==========
(2) Includes intangible
amortization expense
as follows:
Cost of subscription
revenue $ 1,019 $ 935 $ 2,119 $ 1,860
Research and
development 7 -- 15 --
Sales and marketing 146 141 317 484
---------- ---------- ---------- ----------
Total intangible
amortization
expense $ 1,172 $ 1,076 $ 2,451 $ 2,344
========== ========== ========== ==========
Proofpoint, Inc.
Condensed Consolidated Balance Sheets
(On a GAAP basis)
(In thousands, except per share amounts)
(Unaudited)
June 30, December 31,
2012 2011
------------- -------------
Assets
Current assets
Cash and cash equivalents $ 46,157 $ 9,767
Short-term investments 35,197 2,947
Accounts receivable, net 12,237 15,789
Inventory 506 729
Deferred product costs, current 1,526 1,803
Prepaid expenses and other current assets 2,867 2,556
------------- -------------
Total current assets 98,490 33,591
Property and equipment, net 7,472 7,353
Deferred product costs, noncurrent 495 987
Goodwill 18,557 18,557
Intangible assets, net 3,738 6,189
Other noncurrent assets 249 1,275
------------- -------------
Total assets $ 129,001 $ 67,952
============= =============
Liabilities, Convertible Preferred Stock and
Stockholders' Deficit
Current liabilities
Accounts payable $ 2,121 $ 3,504
Accrued liabilities 9,623 10,061
Notes payable and lease obligations 1,650 467
Deferred rent 512 517
Deferred revenue 54,184 52,836
------------- -------------
Total current liabilities 68,090 67,385
Notes payable and lease obligations,
noncurrent 3,147 4,514
Other long term liabilities, noncurrent 252 85
Deferred revenue, noncurrent 21,722 23,404
------------- -------------
Total liabilities 93,211 95,388
------------- -------------
Convertible preferred stock, $0.0001 par
value; no shares authorized, issued and
outstanding as of June 30, 2012 and 39,424
shares authorized, 38,942 shares issued and
outstanding at December 31, 2011 , net of
issuance costs and liquidation preference of
$110,338 -- 109,911
------------- -------------
Stockholders' deficit
Preferred stock, $0.0001 par value; 5,000
shares authorized; no shares issued and
outstanding at June 30, 2012 ; no shares
authorized, issued and outstanding at
December 31, 2011 -- --
------------- -------------
Common stock, $0.0001 par value; 200,000 and
71,400 shares authorized at June 30, 2012
and December 31, 2011 , respectively; 31,795
and 4,961 shares issued and outstanding at
June 30, 2012 and December 31, 2011 ,
respectively 4 1
Additional paid-in capital 208,188 24,773
Accumulated other comprehensive loss (12) (3)
Accumulated deficit (172,390) (162,118)
------------- -------------
Total stockholders' deficit 35,790 (137,347)
------------- -------------
Total liabilities, convertible preferred
stock, and stockholders' deficit $ 129,001 $ 67,952
============= =============
Proofpoint, Inc.
Condensed Consolidated Statements of Cash Flows
(On a GAAP basis)
(In thousands)
(Unaudited)
Six Months Ended
June 30,
--------------------------
2012 2011
------------ ------------
Cash flows from operating activities
Net loss $ (10,271) $ (9,403)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 4,499 3,788
Stock-based compensation 3,436 2,170
Change in fair value of warranty liability -- (66)
Change in fair value of contingent earn-outs -- 161
Changes in assets and liabilities:
Accounts receivable 3,552 1,014
Inventory 223 (60)
Deferred products costs 768 1,706
Prepaid expenses and other current assets (311) (509)
Noncurrent assets 59 166
Accounts payable (1,296) 374
Accrued liabilities 790 (964)
Deferred rent (5) 177
Deferred revenue (334) 2,069
------------ ------------
Net cash provided by operating
activities 1,110 623
------------ ------------
Cash flows from investing activities
Proceeds from sales and maturities of short-
term investments 2,939 411
Purchase of short term investments (35,198) (5,081)
Acquisitions of business (net of cash
acquired) -- (2,136)
Purchase of property and equipment, net (2,443) (160)
------------ ------------
Net cash used in investing activities (34,702) (6,966)
------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock, net of
repurchases 1,761 418
Proceeds from initial public offering, net of
offering costs 68,405 --
Proceeds of equipment financing loans -- 1,728
Repayments of equipment financing loans (184) (138)
------------ ------------
Net cash provided by financing
activities 69,982 2,008
------------ ------------
Net increase (decrease) in cash and cash
equivalents 36,390 (4,335)
Cash and cash equivalents
Beginning of period 9,767 12,087
------------ ------------
End of period $ 46,157 $ 7,752
============ ============
Reconciliation of Non-GAAP Measures
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
GAAP gross profit $ 17,573 $ 12,549 $ 33,812 $ 23,931
Plus Adjustments:
Stock-based compensation
expense 124 113 264 218
Intangible amortization
expense 1,019 935 2,119 1,860
---------- ---------- ---------- ----------
Non-GAAP gross profit 18,716 13,597 36,195 26,009
---------- ---------- ---------- ----------
GAAP operating loss (5,065) (4,270) (9,648) (9,322)
Plus:
Stock-based compensation
expense 1,935 1,113 3,436 2,170
Intangible amortization
expense 1,172 1,076 2,451 2,344
Non-recurring acquisition
expense - 28 3 28
---------- ---------- ---------- ----------
Non-GAAP operating loss (1,958) (2,053) (3,758) (4,780)
---------- ---------- ---------- ----------
GAAP net loss (5,518) (4,318) (10,271) (9,403)
Plus:
Stock-based compensation
expense 1,935 1,113 3,436 2,170
Intangible amortization
expense 1,172 1,076 2,451 2,344
Non-recurring acquisition
expense - 28 3 28
---------- ---------- ---------- ----------
Non-GAAP net loss $ (2,411) $ (2,101) $ (4,381) $ (4,861)
---------- ---------- ---------- ----------
Weighted average shares
outstanding, basic and
diluted 26,195 3,909 15,907 3,871
Plus:
Additional weighted average
shares giving effect to
initial public offering and
conversion of convertible
preferred stock at the
beginning of the period 4,094 19,567 11,834 19,567
---------- ---------- ---------- ----------
Shares used in computing
Non-GAAP net loss per
share, basic and diluted 30,289 23,476 27,741 23,438
---------- ---------- ---------- ----------
Non-GAAP net loss, basic and
diluted $ (0.08) $ (0.09) $ (0.16) $ (0.21)
Reconciliation of Net Loss to Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
Net loss $ (5,518) $ (4,318) $ (10,271) $ (9,403)
Depreciation 1,032 757 2,048 1,444
Amortization of Intangible
Assets 1,172 1,076 2,451 2,344
Interest expense, net 43 112 103 188
Provision for Income Taxes 232 30 311 136
---------- ---------- ---------- ----------
EBITDA $ (3,039) $ (2,343) $ (5,358) $ (5,291)
---------- ---------- ---------- ----------
Stock Based Compensation $ 1,935 $ 1,113 $ 3,436 $ 2,170
Acquisition Related Expenses - 28 3 28
Other Income (10) (78) (11) (138)
Other Expense 189 (16) 220 (105)
---------- ---------- ---------- ----------
Adjusted EBITDA $ (925) $ (1,296) $ (1,710) $ (3,336)
---------- ---------- ---------- ----------
Reconciliation of Total Revenue to Billings
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
Total Revenue $ 25,943 $ 19,880 $ 50,562 $ 38,661
Deferred Revenue
Ending 75,906 71,170 75,906 71,170
Beginning 75,503 69,472 76,240 69,101
---------- ---------- ---------- ----------
Net Change 403 1,698 (334) 2,069
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Billings $ 26,346 $ 21,578 $ 50,228 $ 40,730
---------- ---------- ---------- ----------
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Media Contact:Orlando De Bruce Proofpoint, Inc. 408-338-6870 odebruce@proofpoint.com Investor Contact:Seth Potter ICR forProofpoint, Inc. 646-277-1230 seth.potter@icrinc.com
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