Proofpoint, Inc.
Feb 6, 2018

Proofpoint Announces Fourth Quarter and Full Year 2017 Financial Results

Fourth Quarter Highlights 

SUNNYVALE, Calif., Feb. 06, 2018 (GLOBE NEWSWIRE) -- Proofpoint, Inc. (NASDAQ:PFPT), a leading next-generation security and compliance company, today announced financial results for the fourth quarter and full year ended December 31, 2017.

"We were very pleased with our fourth quarter results, which marked a strong end to the year.  During 2017, we successfully executed our growth strategy and extended our leadership position, as evidenced by the ongoing robust add-on and renewal activity and increased penetration of the Fortune 1000," stated Gary Steele, chief executive officer of Proofpoint.  "We entered 2018 with strong momentum and are well-positioned to benefit from enterprise cloud migration as well as our unique visibility and insight into the threat landscape."

Fourth Quarter 2017 Financial Highlights

"We were very pleased with our fourth quarter results, which capped off another strong year for Proofpoint," stated Paul Auvil, chief financial officer of Proofpoint.  "During 2017, we delivered billings growth of 38%, revenue growth of 37%, and increased our free cash flow margin to approximately 21%, all of which represented significant progress toward our 2020 targets."

Full Year 2017 Financial Highlights

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial tables included in this press release.  An explanation of these measures and how they are calculated are also included below under the heading "Non-GAAP Financial Measures."

Fourth Quarter and Recent Business Highlights:

Financial Outlook
As of February 6, 2018, Proofpoint is providing guidance for its first quarter and increasing full year 2018 guidance as follows:

                       
2018 Guidance Comparison (in millions)
                      
  Guidance 10/19/17    Cloudmark Contribution 10/19/17 Guidance updated
for Cloudmark
    606
Impact
 10/19/17 Guidance updated for
Cloudmark & 606
   2/6/18 Guidance -
compliant with 606
 Change in midpoint
Billings $798 - $802   $20 - $25 $818 - $827   $0 $818 - $827   $828 - $833 + $8
Revenue $644 - $648   $20 - $25 $664 - $673   ($10) $654 - $663   $660 - $665 + $4
Non GAAP Net Income$50 - $54   $0 $50 - $54   $0 $50 - $54   $52 - $56 + $2
FCF $135   $0 $135   $0 $135   $138 - $140 + $4
                     
Capex Assumptions $45   $0 $45   $0 $45   $45 $0
Income Tax $2 - $3   $0 $2 - $3   $0  $2 - $3   $2 - $3  $0
                     

Quarterly Conference Call 

Proofpoint will host a conference call today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to review the company's financial results for the fourth quarter and full year ended December 31, 2017.  To access this call, dial (888) 394-8218 for the U.S. or Canada, or (323) 794-2149 for international callers, with conference ID #7316893.  A live webcast, and an archived recording of the conference call will be accessible from the Investors section of Proofpoint's website at investors.proofpoint.com.  An audio replay of this conference call will also be available through February 20, 2018, by dialing (844) 512-2921 for the U.S. or Canada or (412) 317-6671 for international callers, and entering passcode #7316893.

About Proofpoint, Inc.

Proofpoint Inc. (NASDAQ:PFPT) is a leading next-generation security and compliance company that provides cloud-based solutions to protect the way people work today. Proofpoint solutions enable organizations to protect their users from advanced attacks delivered via email, social media and mobile apps, protect the information their users create from advanced attacks and compliance risks, and respond quickly when incidents occur. More information is available at www.proofpoint.com.

Proofpoint is a trademark or registered trademark of Proofpoint, Inc. in the U.S. and other countries. All other trademarks contained herein are the property of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding momentum in the company's business, market position, win rates and renewal rates, 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: failure to maintain or increase renewals and increased business from existing customers and failure to generate increased business through existing or new channel partner relationships; 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 Proofpoint; risks related to new target markets, new product introductions and innovation and market acceptance thereof; the ability to attract and retain key personnel; potential changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; the time it takes new sales personnel to become fully productive; unforeseen delays in developing new technologies and the uncertain market acceptance of new products or features; technological changes that make Proofpoint's products and services less competitive; security breaches, which could affect our brand; the costs of litigation; the impact of changes in foreign currency exchange rates; the effect of general economic conditions, including as a result of specific economic risks in different geographies and among different industries; risks related to integrating the employees, customers and technologies of acquired businesses; assumption of unknown liabilities from acquisitions; ability to retain customers of acquired entities; and the other risk factors set forth from time to time in our filings with the SEC, including our Quarterly Report on Form 10-Q for the three months ended September 30, 2017, and the other reports we file with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from our investor relations department.  All forward-looking statements herein reflect our opinions only as of the date of this release, and Proofpoint undertakes no obligation, and expressly disclaims any obligation, to update forward-looking statements herein in light of new information or future events.

Computational Guidance on Earnings Per Share Estimates

Accounting principles require that EPS be computed based on the weighted average shares outstanding ("basic"), and also assuming the issuance of potentially issuable shares (such as those subject to stock options, convertible notes, etc.) if those potentially issuable shares would reduce EPS ("diluted").

The number of shares related to options and similar instruments included in diluted EPS is based on the "Treasury Stock Method" prescribed in Financial Accounting Standards Board ("FASB") ASC Topic 260, Earnings Per Share ("FASB ASC Topic 260"). This method assumes a theoretical repurchase of shares using the proceeds of the respective stock option exercise at a price equal to the issuer's average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of diluted EPS in respect of stock options and similar instruments is dependent on this average stock price and will increase as the average stock price increases.

The number of shares includable in the calculation of diluted EPS in respect of convertible senior notes is based on the "If Converted" method prescribed in FASB ASC Topic 260. This method assumes the conversion or exchange of these securities for shares of common stock. In determining if convertible securities are dilutive, the interest savings (net of tax) subsequent to an assumed conversion are added back to net earnings. The shares related to a convertible security are included in diluted EPS only if EPS as otherwise calculated is greater than the interest savings, net of tax, divided by the shares issuable upon exercise or conversion of the instrument. Accordingly, the calculation of diluted EPS for these instruments is dependent on the level of net earnings. Each series of convertible securities is considered individually and in sequence, starting with the series having the lowest incremental earnings per share, to determine if its effect is dilutive or anti-dilutive.

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 and gross margin. We define non-GAAP gross profit as GAAP gross profit, adjusted to exclude stock-based compensation expense and the amortization of intangibles associated with acquisitions. We define non-GAAP gross margin as non-GAAP gross profit divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of non-cash charges that can fluctuate for Proofpoint, based on timing of equity award grants and the size, timing and purchase price allocation of 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 and non-GAAP gross margin versus gross profit and gross margin, in each case, calculated in accordance with GAAP. For example, 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 and non-GAAP gross margin 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 non-GAAP gross margin and evaluating non-GAAP gross profit and non-GAAP gross margin together with gross profit and gross margin calculated in accordance with GAAP.

Non-GAAP operating loss. We define non-GAAP operating loss as operating loss, adjusted to exclude stock-based compensation expense and the amortization of intangibles and costs associated with acquisitions and litigation. Costs associated with acquisitions include legal, accounting, and other professional fees, as well as changes in the fair value of contingent consideration obligations. 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 and costs associated with acquisitions and litigation 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. For example, as noted above, non-GAAP operating loss excludes stock-based compensation expense. 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, and some of these items are cash-based. 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, adjusted to exclude stock-based compensation expense, amortization of intangibles, costs associated with acquisitions and litigation, non-cash interest expense related to the convertible debt discount and issuance costs for the convertible debt offering, loss on conversion of convertible debt, and tax effects associated with these items. We consider this non-GAAP financial measure to be a useful metric 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 also exclude from non-GAAP net loss the tax effects associated with stock-based compensation and the amortization of intangibles and costs associated with acquisitions and litigation, non-cash interest expense related to the convertible debt discount and issuance costs for the convertible debt offering, and loss on conversion of convertible debt.

In order to provide a complete picture of our recurring core business operating results, we also compute the tax effect of the adjustments used in determining our non-GAAP results by calculating an adjusted tax provision which considers the current and deferred tax impact of the adjustments.  The adjusted tax provision reflects all of the relevant impacts of the adjustments, inclusive of those items that have an impact to the effective tax rate, current provision and deferred provision.  As a result of the varying impacts of each item, the effective tax rate for the adjusted tax provision will vary period over period as compared to the GAAP tax provision. The adjusted tax provision is then compared to the GAAP tax provision, and the difference is reflected as "income tax benefit (expense)" in the reconciliation between GAAP net loss/income and Non-GAAP net loss/income.

Billings. We define billings as revenue recognized plus the change in deferred revenue from the beginning to the end of the period, but excluding additions to deferred revenue from acquisitions. 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, but exclude additions to deferred revenue from acquisitions. We may also calculate billings in a manner that is different from other 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.

Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparisons of our operating results to competitors' operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating our company is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and in the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" section of our quarterly and annual reports filed with the SEC.

  
Proofpoint, Inc. 
Consolidated Statements of Operations 
(In thousands, except per share amounts) 
(Unaudited) 
             
    Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 
     2017   2016   2017   2016  
Revenue:           
Subscription   $  142,366  $  104,082  $  503,257  $  365,960  
Hardware and services     3,032    2,723    12,032    9,536  
Total revenue     145,398    106,805    515,289    375,496  
Cost of revenue:(1)(2)           
Subscription     35,937     25,849    125,832    94,716   
Hardware and services     4,561    3,982    17,546    13,877  
Total cost of revenue     40,498    29,831    143,378    108,593  
Gross profit     104,900     76,974    371,911    266,903   
Operating expense:(1)(2)           
Research and development     35,414    27,772    129,803    98,506  
Sales and marketing     69,133    54,550    258,837    201,204  
General and administrative     16,512    10,778    52,735    52,774  
Total operating expense     121,059    93,100    441,375    352,484  
Operating loss     (16,159)   (16,126)   (69,464)   (85,581) 
Interest expense     (8,050)   (6,009)    (25,597)   (23,538) 
Other (expense) income, net     (110)   (575)    774    (1,103) 
Loss before income taxes      (24,319)   (22,710)   (94,287)    (110,222) 
Benefit from (provision for) income taxes     13,360    (174)   9,950    (986) 
Net loss   $  (10,959) $  (22,884) $  (84,337) $  (111,208) 
Net loss per share, basic and diluted   $  (0.24) $  (0.54) $  (1.91) $  (2.66) 
Weighted average shares outstanding, basic and diluted     45,424    42,616    44,258    41,859  
            
(1)  Includes stock‑based compensation expense as follows:           
Cost of subscription revenue   $  2,520   $  1,988  $  10,635  $  7,427  
Cost of hardware and services revenue      492     374     1,893     1,494  
Research and development      7,991     6,844      30,588     24,342  
Sales and marketing      8,892     7,897     33,962     28,607  
General and administrative      5,350     4,439     20,382     16,826  
   Total stock-based compensation expense   $  25,245  $  21,542  $  97,460  $  78,696  
(2)  Includes intangible amortization expense as follows:           
Cost of subscription revenue    $  4,945  $  2,965  $  14,512  $  9,423  
Research and development     15    15     60     60  
Sales and marketing     1,143    1,000     3,934     4,938  
   Total intangible amortization expense   $  6,103  $  3,980  $  18,506  $  14,421  
            

 

  
Proofpoint, Inc. 
Consolidated Balance Sheets 
(In thousands, except per share amounts) 
(Unaudited) 
     
 December 31, December 31, 
  2017   2016  
Assets    
Current assets:    
Cash and cash equivalents 286,072  345,426  
Short-term investments  45,526    51,325  
Accounts receivable, net  109,325    72,951  
Inventory  730    598  
Deferred product costs  1,541     1,829  
Deferred commissions  27,144    21,168  
Prepaid expenses and other current assets  18,669    17,498  
Total current assets  489,007    510,795  
Property and equipment, net  73,617    52,523  
Deferred product costs  259    310  
Goodwill  297,704    167,270  
Intangible assets, net  95,602    61,708  
Long-term deferred commissions  5,811    4,496  
Other assets  12,813    4,558  
Total assets$  974,813  $  801,660  
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable$  12,271  $  15,297  
Accrued liabilities  63,926    50,765  
Capital lease obligations  34    32  
Deferred rent  586    409  
Deferred revenue  381,915    259,109  
Total current liabilities  458,732    325,612  
Convertible senior notes  197,858    366,541  
Long-term capital lease obligations  55    91  
Long-term deferred rent  4,102    2,413  
Other long-term liabilities  11,069    9,008   
Long-term deferred revenue  69,873    53,072   
Total liabilities  741,689    756,737  
Stockholders' equity    
Common stock, $0.0001 par value; 200,000 shares authorized; 50,325 and 43,015 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively  5    4  
Additional paid-in capital  787,572    514,034  
Accumulated other comprehensive loss  (9)   (7) 
Accumulated deficit  (554,444)   (469,108) 
Total stockholders' equity  233,124    44,923  
Total liabilities and stockholders' equity $  974,813  $  801,660  
     

 

 
Proofpoint, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
        
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
   2017   2016    2017   2016 
Cash flows from operating activities       
Net loss$  (10,959) $  (22,884) $  (84,337) $  (111,208)
Adjustments to reconcile net loss to net cash provided by operating activities:       
Depreciation and amortization  12,812    8,839    42,098    31,552 
Stock‑based compensation  25,245    21,542    97,460    78,696 
Change in fair value of contingent consideration   264    (669)   (1,533)   (669)
Amortization of debt issuance costs and accretion of debt discount  5,353    5,326    21,789    20,842 
Amortization of deferred commissions  9,923    8,886    36,865    33,147 
Loss on conversion of convertible notes  2,641     -     2,696    -  
Deferred income taxes  (14,122)   8    (15,953)   119 
Other  118    688    (348)    1,170 
Changes in assets and liabilities:       
Accounts receivable  (14,963)   (3,868)   (33,538)   (18,737)
Inventory  (273)   (168)   (132)   (113)
Deferred products costs  148    (2)   338    402 
Deferred commissions  (15,944)    (12,114)   (44,157)   (36,009 )
Prepaid expenses  186    (191)   (1,663)   (2,660)
Other current assets  (451 )   (1,933)   (139)   (1,472)
Long-term assets  9    911    (3,429)   959 
Accounts payable   266    1,365    (1,648)   4,271 
Accrued liabilities  (1,601)   3,465    13,943    6,398 
Deferred rent  683    395    1,867    292 
Deferred revenue  43,181     31,642    123,507    87,255  
Net cash provided by operating activities  42,516    41,238    153,686    94,235 
Cash flows from investing activities       
Proceeds from maturities of short-term investments  23,753    20,343    102,556    123,405 
Purchase of short-term investments  (25,645)   (33,453)   (96,741)   (114,686)
Purchase of property and equipment  (12,202)   (8,880)   (46,958)   (34,407)
Payment to escrow account  -     -     -     (9,645)
Receipts from escrow account  950    260    6,066    260 
Acquisitions of business, net of cash acquired  (155,350)   (45,768)   (155,350)   (54,119)
Net cash used in investing activities  (168,494)   (67,498)   (190,427)   (89,192)
Cash flows from financing activities       
Proceeds from issuance of common stock  8,797     6,633    25,725    21,779 
Withholding taxes related to restricted stock net share settlement  (11,584)    (8,573)   (42,823)   (25,588)
Repayments of equipment loans and capital lease obligations  (9)   (8)    (34)   (32)
Repayment of convertible notes  (14)   -     (14)   -  
Holdback payments for prior acquisitions  -     -     -     (1,397)
Contingent consideration payment  (950)   -     (6,066)   -  
Net cash used in financing activities  (3,760)   (1,948)   (23,212)   (5,238)
Effect of exchange rate changes on cash, cash equivalents and restricted cash  41    (509)   1,076    (545)
Net decrease in cash, cash equivalents and restricted cash  (129,697)   (28,717)   (58,877)   (740)
Cash, cash equivalents and restricted cash       
Beginning of period  416,357    374,254    345,537    346,277 
End of period$  286,660  $  345,537  $  286,660  $  345,537 
        

 

 
Reconciliation of Non-GAAP Measures
(In thousands, except per share amounts)
(Unaudited)
         
  Three Months Ended   Twelve Months Ended 
  December 31,   December 31, 
  2017   2016   2017   2016 
        
GAAP gross profit$  104,900  $  76,974  $  371,911  $  266,903 
GAAP gross margin 72%  72%  72%  71%
Plus:       
Stock-based compensation expense   3,012     2,362     12,528     8,921 
Intangible amortization expense   4,945     2,965     14,512     9,423 
Non-GAAP gross profit   112,857     82,301     398,951     285,247 
Non-GAAP gross margin 78%  77%  77%  76%
        
GAAP operating loss (16,159)  (16,126)  (69,464)  (85,581)
Plus:       
Stock-based compensation expense   25,245     21,542     97,460     78,696 
Intangible amortization expense   6,103     3,980     18,506     14,421 
Acquisition-related expenses   1,429     494     (381)    1,080 
Litigation-related expenses   -     9     -     12,950 
Non-GAAP operating income   16,618     9,899     46,121     21,566 
        
GAAP net loss  (10,959)  (22,884)  (84,337)  (111,208)
Plus:       
Stock-based compensation expense 25,245   21,542   97,460   78,696 
Intangible amortization expense   6,103   3,980     18,506   14,421 
Acquisition-related expenses   1,429     494     (381)    1,080 
Litigation-related expenses   -      9     -     12,950 
Interest expense - debt discount and issuance costs   5,353     5,326     21,789     20,842 
Loss on conversion of convertible notes   2,641     -     2,696     - 
Income tax (income) expense (1)   (14,349)    26     (13,678)    99 
Non-GAAP net income$  15,463  $  8,493  $  42,055  $  16,880 
Add interest expense of convertible senior notes, net of tax (2)   950     1,060     4,123     - 
Numerator for non-GAAP EPS calculation$  16,413  $  9,553  $  46,178  $  16,880 
Non-GAAP net income per share - diluted$  0.29  $  0.18  $  0.83  $  0.37 
         
GAAP weighted-average shares used to compute net loss per share, diluted   45,424     42,616     44,258     41,859 
Dilutive effect of convertible senior notes (2)   7,462     7,989     7,848     -  
Dilutive effect of employee equity incentive plan awards (3)   2,938     3,802     3,288     3,908 
Non-GAAP weighted-average shares used to compute net income per share, diluted   55,824     54,407     55,394      45,767 
        
(1) Due to the full valuation allowance on the Company's U.S. deferred tax assets, there were no tax effects associated with the non-GAAP adjustments for stock-based compensation expense, costs associated with acquisitions and litigations, loss on conversion of convertible notes, and non-cash interest expense related to the debt discount and issuance costs for the convertible notes. Only GAAP deferred tax expenses or benefits related to the amortization of intangibles and deferred tax benefits related to changes in the Company's valuation allowance resulting from business acquisitions were excluded from the non-GAAP income tax expense. The Non-GAAP income tax for the three months and year ended December 31, 2017, excluded $12,345 of deferred tax benefits related to changes to the Company's deferred tax valuation allowance due to the businesses acquired in the 4th quarter of 2017, and $2,024 of deferred tax benefits related to the impact of the Tax Cuts and Jobs Act of 2017 on certain intangible assets. 
 
(2) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible senior notes. There was no add-back of interest expense or additional dilutive shares related to the convertible senior notes where the effect was anti-dilutive.
 
(3) The Company uses the treasury method to compute the dilutive effect of employee equity incentive plan awards.
 
        
Reconciliation of Total Revenue to Billings
(In thousands)
(Unaudited)
        
  Three Months Ended   Twelve Months Ended 
  December 31,   December 31, 
   2017   2016    2017   2016 
        
Total revenue$  145,398  $  106,805  $  515,289  $  375,496 
        
Deferred revenue       
Ending   451,788     312,181     451,788     312,181 
Beginning   392,506     280,539     312,181     223,726 
Net Change   59,282     31,642      139,607     88,455 
Less:       
Deferred revenue contributed by acquisitions   (16,100)    -      (16,100)    (1,200)
Billings$  188,580  $  138,447  $  638,796  $  462,751 
        

 

        
Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
(In thousands)
(Unaudited)
        
  Three Months Ended    Twelve Months Ended 
  December 31,   December 31, 
  2017   2016   2017   2016 
        
GAAP cash flows provided by operating activities$  42,516  $  41,238  $  153,686  $  94,235 
Less:       
Purchases of property and equipment   (12,202)    (8,880)    (46,958)    (34,407)
Non-GAAP free cash flows$  30,314  $  32,358  $  106,728  $  59,828 
        

 

             
Revenue by Solution 
(In thousands) 
(Unaudited) 
              
  Three Months Ended  
 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 
             
Protection and Advanced Threat$  111,405 $  101,434 $  90,376 $  84,480 $  78,698 $  72,664 
Archiving, Privacy and Governance   33,993    32,878    31,953    28,770     28,107    27,120 
Total revenue$  145,398 $  134,312 $  122,329 $  113,250 $  106,805 $  99,784 
             

 

     
Reconciliation of Non-GAAP Measures to Guidance
(In millions, except per share amount)
(Unaudited)
     
   Three Months Ending   Year Ending 
   March 31,   December 31, 
  2018 2018
      
Total revenue $149 - $151 $660 - $665
     
GAAP gross profit 103.6 - 105.4 469.6 - 474.0
GAAP gross margin 70% 71%
Plus:    
Stock-based compensation expense 4.5 - 4.3 19.0 - 18.5
Intangible amortization expense 5.1 19.6
Non-GAAP gross profit 113.2 - 114.8 508.2 - 512.1
Non-GAAP gross margin 76% 77%
     
GAAP net loss $(33.9) - $(31.0) $(117.6) - $(111.1)
Plus:     
Stock-based compensation expense 31.0 - 29.5 130.0- 128.0
Intangible amortization expense 6.9 26.0
Acquisition-related expenses 0.8 - 0.6 0.8 - 0.6
Interest expense - debt discount and issuance costs 3.1 - 3.0 12.5 - 12.4
Income tax expense  0.1 - 0.0   0.3 - 0.1 
Non-GAAP net income  $8.0 - $9.0   $52.0 - $56.0 
Add interest expense of convertible senior notes, net of tax (if dilutive) 0.4 1.7
Numerator for non-GAAP EPS calculation  $8.4 - $9.4   $53.7 - $57.7 
Non-GAAP net income per share - diluted  $0.15 - $0.17   $0.95 - $1.02 
Non-GAAP weighted-average shares used to compute net income per share, diluted 56.1  56.6
     
     
   Three Months Ending   Year Ending 
   March 31,   December 31, 
  2018 2018
     
GAAP cash flows provided by operating activities  $32.0 - $34.0   $183.0 - $185.0 
Less:    
Purchases of property and equipment (10.0) (45.0)
Non-GAAP free cash flows  $22.0 - $24.0   $138.0 - $140.0 
     


  
Media Contact
Kristy Campbell
Proofpoint, Inc.
408-517-4710
kcampbell@proofpoint.com
 
  
Investor Contacts
Jason Starr
Proofpoint, Inc.
408-585-4351
jstarr@proofpoint.com
Seth Potter
ICR for Proofpoint, Inc.
646-277-1230
seth.potter@icrinc.com

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Source: Proofpoint, Inc.

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