Proofpoint, Inc.
PROOFPOINT INC (Form: 8-K, Received: 04/20/2017 16:13:57)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

Form 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):   April 20, 2017

 


 

Proofpoint, Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-35506

 

51-041486

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

892 Ross Drive,
Sunnyvale CA

 

94089

(Address of principal executive offices)

 

(Zip Code)

 

(408) 517-4710

(Registrant’s telephone number, including area code)

 

 

(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company    o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

 

 

 



 

Item 2.02                    Results of Operations and Financial Condition.

 

On April 20, 2017, Proofpoint, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended March 31, 2017.

 

The information in this Current Report on Form 8-K and Exhibit 99.1 attached hereto (the “ 2.02 Information ”) are being furnished pursuant to Item 2.02 of Form 8-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or otherwise subject to the liabilities of that section, nor will the 2.02 Information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01                    Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.

 

Exhibit Title

 

 

 

99.1

 

Press release of Proofpoint, Inc. announcing earnings results, dated April 20, 2017.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Proofpoint, Inc.

 

 

Date: April 20, 2017

By:

/s/ Paul Auvil

 

 

Paul Auvil

 

 

Chief Financial Officer

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Exhibit Title

 

 

 

99.1

 

Press release of Proofpoint, Inc. announcing earnings results, dated April 20, 2017.

 

4


Exhibit 99.1

 

 

Proofpoint Announces First Quarter 2017 Financial Results

 

·                        Total revenue of $113.3 million, up 43% year-over-year

·                        Billings of $137.4 million, up 40% year-over-year

·                        GAAP EPS of $(0.59) per share, Non-GAAP EPS of $0.12 per share

·                        Generated operating cash flow of $40.5 million and free cash flow of $28.2 million

·                        Increasing FY17 billings, revenue, profitability, and free cash flow guidance

 

SUNNYVALE, Calif., — April 20, 2017 — Proofpoint, Inc. (NASDAQ: PFPT), a leading next-generation security and compliance company, today announced financial results for the first quarter ended March 31, 2017.

 

“Our strong first quarter results benefitted from continuing trends that included the overall threat landscape, the transition to the cloud, and enterprise customers driving vendor consolidation around Proofpoint’s best-of-breed cloud-based security platform,” stated Gary Steele, chief executive officer of Proofpoint.  “Our ability to exceed expectations was also driven by robust new and add-on activity, traction with new emerging products, and consistently high renewal rates.  I believe that our ongoing commitment to innovation and our proven capability in handling today’s advanced security threats positions the company to grow market share around the world for the remainder of the year and beyond.”

 

First Quarter 2017 Financial Highlights

 

·                   Revenue : Total revenue for the first quarter of 2017 was $113.3 million, an increase of 43%, compared to $79.0 million for the first quarter of 2016.

 

·                   Billings : Total billings were $137.4 million for the first quarter of 2017, an increase of 40%, compared to $98.3 million for the first quarter of 2016.

 

·                   Gross Profit: GAAP gross profit for the first quarter of 2017 was $80.9 million compared to $54.2 million for the first quarter of 2016.  Non-GAAP gross profit for the first quarter of 2017 was $86.9 million compared to $58.3 million for the first quarter of 2016.  GAAP gross margin for the first quarter of 2017 was 71% compared to 69% for the first quarter of 2016.  Non-GAAP gross margin was 77% for the first quarter of 2017 compared to 74% for the first quarter of 2016.

 

·                   Operating Income (Loss) : GAAP operating loss for the first quarter of 2017 was $(18.0) million compared to a loss of $(25.6) million for the first quarter of 2016.  Non-GAAP operating profit for the first quarter of 2017 was $7.1 million compared to an operating loss of $(2.5) million for the first quarter of 2016.

 

·                   Net Income (Loss): GAAP net loss for the first quarter of 2017 was $(25.5) million, or $(0.59) per share, based on 43.2 million weighted average shares outstanding.  This compares to a GAAP net loss of $(31.7) million, or $(0.77) per share, based on 41.1 million weighted average shares outstanding for the first quarter of 2016.

 



 

Non-GAAP net profit for the first quarter of 2017 was $5.5 million, or $0.12 per share, based on 46.7 million weighted average diluted shares outstanding.  This compares to a non-GAAP net loss of $(3.5) million, or $(0.09) per share, based on 41.1 million weighted average diluted shares outstanding for the first quarter of 2016.  Non-GAAP earnings per share for the first quarter of 2017 excluded the approximately 8.0 million shares associated with the company’s convertible notes since the “If-Converted” threshold during the period was not achieved.

 

·                   Cash and Cash Flow : As of March 31, 2017, Proofpoint had cash, cash equivalents, and short term investments of $412.9 million.  The company generated $40.5 million in net cash from operations for the first quarter of 2017 compared to $17.4 million during the first quarter of 2016.  The company’s free cash flow for the quarter was $28.2 million compared to $9.6 million for the first quarter of 2016.

 

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.”

 

“Strong customer demand for our services paired with solid execution by the team resulted in revenue and billings growth of 43% and 40%, respectively,” stated Paul Auvil, chief financial officer of Proofpoint.  “During the quarter, we were particularly pleased with our ability to again nearly triple free cash flow while at the same time driving exceptional top line growth.”

 

First Quarter and Recent Business Highlights:

 

·                   Won Best Email Security and Best Regulatory Compliance in 2017 SC Awards.

 

·                   Launched Digital Risk Defense, the industry’s first integrated phishing and fraud defense solution across critical digital channels, to provide visibility and address threats outside of the traditional security infrastructure of companies.

 

Financial Outlook

 

As of April 20, 2017, Proofpoint is providing guidance for its second quarter and increasing full year 2017 guidance as follows:

 

·                   Second Quarter 2017 Guidance : Total revenue is expected to be in the range of $118.0 million to $120.0 million.  Billings are expected to be in the range of $141.0 million to $143.0 million.  GAAP net loss is expected to be in the range of $(26.9) million to $(30.1) million, or $(0.61) to $(0.69) per share, based on approximately 43.8 million weighted average diluted shares outstanding.  Non-GAAP net income is expected to be in the range of $5.0 to $6.0 million, or $0.11 to $0.13 per share, using 54.8 million weighted average diluted shares outstanding, and adding back the $1.1 million in cash interest expense as prescribed under the “If-Converted” method.  Free cash flow is expected to be in the range of $11.0 million to $12.0 million.

 

·                   Full Year 2017 Guidance : Total revenue is expected to be in the range of $496.0 million to $500.0 million.  Billings are expected to be in the range of $619.0 million to $623.0 million.  GAAP net loss is expected to be in the range of $(109.2) million to $(117.6) million, or $(2.48) to $(2.67)

 



 

per share, based on approximately 44.0 million weighted average diluted shares outstanding.  Non-GAAP net income is expected to be in the range of $26.5 million to $28.5 million, or $0.56 to $0.59 per share, using 55.3 million weighted average diluted shares outstanding, and adding back the $4.2 million in cash interest expense as prescribed under the “If-Converted” method.  Free cash flow is expected to be in the range of $98.0 million to $106.0 million, which assumes capital expenditures of $40.0 million to $42.0 million for the full year.

 

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 first quarter ended March 31, 2017.  To access this call, dial (888) 262-8795 for the U.S. or Canada and (913) 312-0715 for international callers with conference ID #2005458.  A live webcast of the conference call will be accessible from the Investors section of Proofpoint’s website at investors.proofpoint.com, and a recording will be archived and accessible at investors.proofpoint.com.  An audio replay of this conference call will also be available through May 4, 2017, by dialing (844) 512-2921 for the U.S. or Canada or (412) 317-6671 for international callers, and entering passcode #2005458.

 

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 Annual Report on Form 10-K for the year ended December 31, 2016, 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, 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, and non-cash interest expense related to the convertible debt discount and issuance costs for the convertible debt offering.

 

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
March 31,

 

 

 

2017

 

2016

 

Revenue:

 

 

 

 

 

Subscription

 

$

110,925

 

$

77,397

 

Hardware and services

 

2,325

 

1,606

 

Total revenue

 

113,250

 

79,003

 

Cost of revenue: (1)(2)

 

 

 

 

 

Subscription

 

28,321

 

21,682

 

Hardware and services

 

4,055

 

3,142

 

Total cost of revenue

 

32,376

 

24,824

 

Gross profit

 

80,874

 

54,179

 

Operating expense: (1)(2)

 

 

 

 

 

Research and development

 

29,606

 

22,653

 

Sales and marketing

 

58,732

 

46,523

 

General and administrative

 

10,487

 

10,604

 

Total operating expense

 

98,825

 

79,780

 

Operating loss

 

(17,951

)

(25,601

)

Interest expense

 

(5,966

)

(5,800

)

Other (expense) income, net

 

(129

)

2

 

Loss before provision for income taxes

 

(24,046

)

(31,399

)

Provision for income taxes

 

(1,434

)

(257

)

Net loss

 

$

(25,480

)

$

(31,656

)

Net loss per share, basic and diluted

 

$

(0.59

)

$

(0.77

)

Weighted average shares outstanding, basic and diluted

 

43,230

 

41,093

 

 


(1)  Includes stock-based compensation expense as follows:

 

 

 

 

 

Cost of subscription revenue

 

$

2,376

 

$

1,638

 

Cost of hardware and services revenue

 

439

 

353

 

Research and development

 

7,050

 

5,602

 

Sales and marketing

 

7,897

 

6,818

 

General and administrative

 

4,612

 

4,072

 

Total stock-based compensation expense

 

$

22,374

 

$

18,483

 

(2)  Includes intangible amortization expense as follows:

 

 

 

 

 

Cost of subscription revenue

 

$

3,188

 

$

2,117

 

Research and development

 

15

 

15

 

Sales and marketing

 

967

 

1,273

 

Total intangible amortization expense

 

$

4,170

 

$

3,405

 

 



 

Proofpoint, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2017

 

2016

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

381,862

 

$

345,426

 

Short-term investments

 

31,015

 

51,325

 

Accounts receivable, net

 

62,443

 

72,951

 

Inventory

 

472

 

598

 

Deferred product costs

 

1,749

 

1,829

 

Deferred commissions

 

18,513

 

21,168

 

Prepaid expenses and other current assets

 

13,372

 

17,498

 

Total current assets

 

509,426

 

510,795

 

Property and equipment, net

 

58,404

 

52,523

 

Deferred product costs

 

299

 

310

 

Goodwill

 

167,270

 

167,270

 

Intangible assets, net

 

57,538

 

61,708

 

Long-term deferred commissions

 

4,479

 

4,496

 

Other assets

 

10,542

 

4,558

 

Total assets

 

$

807,958

 

$

801,660

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

12,068

 

$

15,297

 

Accrued liabilities

 

37,071

 

50,765

 

Capital lease obligations

 

32

 

32

 

Deferred rent

 

484

 

409

 

Deferred revenue

 

277,069

 

259,109

 

Total current liabilities

 

326,724

 

325,612

 

Convertible senior notes

 

371,941

 

366,541

 

Long-term capital lease obligations

 

83

 

91

 

Long-term deferred rent

 

2,630

 

2,413

 

Other long-term liabilities

 

10,552

 

9,008

 

Long-term deferred revenue

 

59,300

 

53,072

 

Total liabilities

 

771,230

 

756,737

 

Stockholders’ equity

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized; 43,623 and 43,015 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively

 

4

 

4

 

Additional paid-in capital

 

532,314

 

514,034

 

Accumulated other comprehensive loss

 

(3

)

(7

)

Accumulated deficit

 

(495,587

)

(469,108

)

Total stockholders’ equity

 

36,728

 

44,923

 

Total liabilities and stockholders’ equity

 

$

807,958

 

$

801,660

 

 



 

Proofpoint, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2017

 

2016

 

Cash flows from operating activities

 

 

 

 

 

Net loss

 

$

(25,480

)

$

(31,656

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

9,299

 

7,236

 

Loss on disposal of property and equipment

 

11

 

189

 

Amortization of investment premiums, net of accretion of purchase discounts

 

48

 

50

 

Recovery of doubtful accounts

 

(9

)

(17

)

Stock-based compensation

 

22,374

 

18,483

 

Change in fair value of contingent consideration

 

(1,446

)

 

Amortization of debt issuance costs and accretion of debt discount

 

5,404

 

5,096

 

Foreign currency transaction loss (gain)

 

142

 

(224

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

10,450

 

(879

)

Inventory

 

126

 

(96

)

Deferred products costs

 

91

 

164

 

Deferred commissions

 

2,671

 

1,481

 

Prepaid expenses

 

(848

)

(257

)

Other current assets

 

344

 

56

 

Deferred income taxes

 

(2,355

)

(126

)

Long-term assets

 

(3,900

)

3

 

Accounts payable

 

(1,585

)

1,472

 

Accrued liabilities

 

651

 

(2,868

)

Deferred rent

 

292

 

9

 

Deferred revenue

 

24,189

 

19,302

 

Net cash provided by operating activities

 

40,469

 

17,418

 

Cash flows from investing activities

 

 

 

 

 

Proceeds from sales and maturities of short-term investments

 

32,922

 

54,639

 

Purchase of short-term investments

 

(12,655

)

(26,980

)

Purchase of property and equipment

 

(12,251

)

(7,838

)

Receipts from escrow account

 

2,566

 

 

Net cash provided by investing activities

 

10,582

 

19,821

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issuance of common stock

 

2,325

 

1,872

 

Withholding taxes related to restricted stock net share settlement

 

(14,510

)

(6,698

)

Repayments of equipment loans and capital lease obligations

 

(8

)

(8

)

Holdback payments for prior acquisitions

 

 

(1,397

)

Contingent consideration payment

 

(2,566

)

 

Net cash used in financing activities

 

(14,759

)

(6,231

)

Effect of exchange rate changes on cash and cash equivalents

 

144

 

228

 

Net increase in cash and cash equivalents

 

36,436

 

31,236

 

Cash and cash equivalents

 

 

 

 

 

Beginning of period

 

345,426

 

346,205

 

End of period

 

$

381,862

 

$

377,441

 

 



 

Reconciliation of Non-GAAP Measures

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

GAAP gross profit

 

$

80,874

 

$

54,179

 

GAAP gross margin

 

71

%

69

%

Plus:

 

 

 

 

 

Stock-based compensation expense

 

2,815

 

1,991

 

Intangible amortization expense

 

3,188

 

2,117

 

Non-GAAP gross profit

 

86,877

 

58,287

 

Non-GAAP gross margin

 

77

%

74

%

 

 

 

 

 

 

GAAP operating loss

 

(17,951

)

(25,601

)

Plus:

 

 

 

 

 

Stock-based compensation expense

 

22,374

 

18,483

 

Intangible amortization expense

 

4,170

 

3,405

 

Acquisition-related expenses

 

(1,470

)

4

 

Litigation-related expenses

 

 

1,195

 

Non-GAAP operating income (loss)

 

7,123

 

(2,514

)

 

 

 

 

 

 

GAAP net loss

 

(25,480

)

(31,656

)

Plus:

 

 

 

 

 

Stock-based compensation expense

 

22,374

 

18,483

 

Intangible amortization expense

 

4,170

 

3,405

 

Acquisition-related expenses

 

(1,470

)

4

 

Litigation-related expenses

 

 

1,195

 

Interest expense - debt discount and issuance costs

 

5,404

 

5,096

 

Income tax benefit (expense)

 

508

 

(22

)

Non-GAAP net income (loss)

 

$

5,506

 

$

(3,495

)

Add interest expense of convertible senior notes, net of tax (1)

 

 

 

Numerator for non-GAAP EPS calculation

 

$

5,506

 

$

(3,495

)

Non-GAAP net income (loss) per share - diluted

 

$

0.12

 

$

(0.09

)

 

 

 

 

 

 

GAAP weighted-average shares used to compute net loss per share, diluted

 

43,230

 

41,093

 

Dilutive effect of convertible senior notes (1)

 

 

 

Dilutive effect of employee equity incentive plan awards (2)

 

3,458

 

 

Non-GAAP weighted-average shares used to compute net income (loss) per share, diluted

 

46,688

 

41,093

 

 


(1) 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.

 

(2) 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

 

 

 

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

Total revenue

 

$

113,250

 

$

79,003

 

 

 

 

 

 

 

Deferred revenue

 

 

 

 

 

Ending

 

336,369

 

243,028

 

Beginning

 

312,181

 

223,726

 

Net Change

 

24,188

 

19,302

 

Less:

 

 

 

 

 

Deferred revenue contributed by acquisitions

 

 

 

Billings

 

$

137,438

 

$

98,305

 

 

Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

GAAP cash flows provided by operating activities

 

$

40,469

 

$

17,418

 

Less:

 

 

 

 

 

Purchases of property and equipment

 

(12,251

)

(7,838

)

Non-GAAP free cash flows

 

$

28,218

 

$

9,580

 

 

Revenue by Solution

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2017

 

December 31,
2016

 

September 30,
2016

 

June 30, 2016

 

March 31, 2016

 

December 31,
2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Protection and Advanced Threat

 

$

84,480

 

$

78,698

 

$

72,664

 

$

64,797

 

$

56,462

 

$

53,544

 

Archiving, Privacy and Governance

 

28,770

 

28,107

 

27,120

 

25,107

 

22,541

 

21,395

 

Total revenue

 

$

113,250

 

$

106,805

 

$

99,784

 

$

89,904

 

$

79,003

 

$

74,939

 

 



 

Reconciliation of Non-GAAP Measures to Guidance

(In millions, except per share amount)

(Unaudited)

 

 

 

Three Months Ending

 

Year Ending

 

 

 

June 30,

 

December 31,

 

 

 

2017

 

2017

 

 

 

 

 

 

 

GAAP net loss

 

$(30.1) - $(26.9)

 

$(117.6) - $(109.2)

 

Plus:

 

 

 

 

 

Stock-based compensation expense

 

25.5 - 23.5

 

106.0- 100.0

 

Intangible amortization expense

 

4.2 - 4.1

 

16.5 - 16.3

 

Acquisition-related expenses

 

 

 

Litigation-related expenses

 

 

 

Interest expense - debt discount and issuance costs

 

5.4

 

22.1

 

Income tax expense

 

(0.0) - (0.1)

 

(0.5) - (0.7)

 

Non-GAAP net income

 

$5.0 - $6.0

 

$26.5 - $28.5

 

Add interest expense of convertible senior notes, net of tax (if dilutive)

 

1.1

 

4.2

 

Numerator for non-GAAP EPS calculation

 

$6.1 - $7.1

 

$30.7 - $32.7

 

Non-GAAP net income per share - diluted

 

$0.11 - $0.13

 

$0.56 - $0.59

 

Non-GAAP weighted-average shares used to compute net income per share, diluted

 

54.8

 

55.3

 

 

 

 

Three Months Ending

 

Year Ending

 

 

 

June 30,

 

December 31,

 

 

 

2017

 

2017

 

 

 

 

 

 

 

GAAP cash flows provided by operating activities

 

$21.0 - $22.0

 

$138.0 - $148.0

 

Less:

 

 

 

 

 

Purchases of property and equipment

 

10.0

 

40.0 - 42.0

 

Non-GAAP free cash flows

 

$11.0 - $12.0

 

$98.0 - $106.0

 

 



 

Media Contact

 

Kristy Campbell

Proofpoint, Inc.

408-517-4710

kcampbell@proofpoint.com

 

Investor Contacts

 

 

 

Jason Starr

Seth Potter

Proofpoint, Inc.

ICR for Proofpoint, Inc.

408-585-4351

646-277-1230

jstarr@proofpoint.com

seth.potter@icrinc.com