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Proofpoint Announces First Quarter 2020 Financial Results

May 7, 2020

 First Quarter Highlights

  • Total revenue of $249.8 million, up 23% year-over-year
  • Billings of $238.0 million, up 11% year-over-year
  • GAAP EPS of $(1.30) per share, Non-GAAP EPS of $0.38 per share
  • Operating cash flow of $92.2 million and free cash flow of $79.8 million

SUNNYVALE, Calif., May 07, 2020 (GLOBE NEWSWIRE) -- Proofpoint, Inc. (NASDAQ: PFPT), a leading next-generation security and compliance company, today announced financial results for the first quarter ended March 31, 2020.

“We were pleased that our first quarter results were above guidance, particularly given the challenges we faced as a result of the COVID-19 pandemic,” stated Gary Steele, chief executive officer of Proofpoint. “Our top priorities continue to be maintaining the health and safety of our employees and protecting our customers from the advanced threats and compliance risks they face in these unique and uncertain times. We believe that Proofpoint and our people-centric approach to cybersecurity are even more relevant for enterprise customers given work-from-home mandates around the world, and we believe that we will emerge from this uncertain period even better positioned and stronger than ever.” 

First Quarter 2020 Financial Highlights

  • Revenue: Total revenue for the first quarter of 2020 was $249.8 million, an increase of 23%, compared to $202.9 million for the first quarter of 2019.

  • Billings: Total billings for the first quarter of 2020 were $238.0 million, an increase of 11%, compared to $215.0 million for the first quarter of 2019. This result also included an 11% sequential decline in billings duration.

  • Gross Profit: GAAP gross profit for the first quarter of 2020 was $180.8 million, compared to $147.7 million for the first quarter of 2019. Non-GAAP gross profit for the first quarter of 2020 was $197.7 million, compared to $159.2 million for the first quarter of 2019. GAAP gross margin for the first quarter of 2020 was 72%, compared to 73% for the first quarter of 2019. Non-GAAP gross margin for the first quarter of 2020 was 79%, compared to 78% for the first quarter of 2019.

  • Operating Income (Loss): GAAP operating loss for the first quarter of 2020 was $(41.8) million, compared to a loss of $(28.4) million for the first quarter of 2019. Non-GAAP operating income for the first quarter of 2020 was $25.4 million, compared to $22.9 million for the first quarter of 2019.

  • Net Income (Loss): GAAP net loss for the first quarter of 2020 was $(74.2) million, or $(1.30) per share, based on 57.0 million weighted average shares outstanding. This result also included a current and deferred GAAP tax expense of $27.0 million for the transfer of certain intellectual property from Israel to the United States in the first quarter of 2020 associated with the acquisition of ObserveIT. This compares to a GAAP net loss of $(28.3) million, or $(0.51) per share, based on 55.3 million weighted average shares outstanding for the first quarter of 2019. Non-GAAP net income for the first quarter of 2020 was $24.4 million, or $0.38 per share, based on 65.0 million weighted average diluted shares outstanding. This result included a $5.0 million income tax expense, calculated using an effective rate of 17%, by applying the SEC’s Non-GAAP Financial Measures Compliance and Disclosure Interpretations (C&DI 102.11). Non-GAAP earnings per share for the first quarter of 2020 included the 6.0 million shares associated with the company’s convertible notes, and cash interest expense (net of tax) of $0.5 million was added back to net income as the “If-Converted” threshold during this period was achieved.

  • Cash and Cash Flow: As of March 31, 2020, Proofpoint had cash, cash equivalents, and short-term investments of $945.7 million. The company generated $92.2 million in net cash from operations for the first quarter of 2020, compared to $54.1 million during the first quarter of 2019. The company’s free cash flow for the first quarter of 2020 was $79.8 million, compared to $48.6 million for the first quarter of 2019.  Note that the $20.0 million cash tax payment for the transfer of certain intellectual property from Israel to the United States associated with the acquisition of ObserveIT did not occur in the first quarter and is expected to be paid in the second half of 2020. 

“The company entered this crisis from a position of strength, with nearly one billion in cash and cash equivalents, strong free cash flow, and a business model built on 98% recurring subscription revenue,” stated Paul Auvil, chief financial officer of Proofpoint. “Given the rapidly changing operating environment and the economic headwinds that we expected to face as a result of the current crisis, in late March and early April we took a number of proactive steps in order to pare down our cost structure as we weather the pandemic, with an eye on maintaining our original investment plans for technical hiring and technology in order to ensure that we continue to deliver world-class solutions in support of our customers while also maintaining our trajectory to deliver on the long-term growth opportunity that lies ahead.”

Financial Outlook

While we believe we are in a strong financial position to weather impacts caused to our business by the COVID-19 pandemic, many of our customers are now operating under very challenging circumstances, especially those in industries highly affected by COVID-19, and may re-evaluate their spend. As such, the guidance we are providing today factors in expected impacts of COVID-19. These new assumptions reflect increased uncertainty around new business, contract renewal timing, contraction in billings duration, and reductions in employee count, particularly from customers in these highly affected industries. This outlook is being provided under the protections of safe harbor, and in light of the U.S. Securities and Exchange Commission’s request on April 8, 2020, that companies provide a good-faith effort to provide investors and other market participants with forward-looking information.

Proofpoint will provide its forward-looking guidance for full year 2020 and additional important commentary and assumptions around Proofpoint’s second quarter 2020 and full year 2020 financial outlook on today’s conference call and webcast at 1:30 PM (PDT).

This financial outlook is based on information known as of May 7, 2020, and on assumptions that we believe to be reasonable as of today. We undertake no obligation to update these forward-looking statements as a result of new information or future events. It is Proofpoint’s policy neither to reiterate nor adjust the financial guidance provided in this release unless it is also done through another public disclosure, such as a subsequent press release or filing on Form 8-K. 

Proofpoint is providing its second quarter 2020 guidance as follows:

  • Total revenue is expected to be in the range of $251.0 million to $255.0 million.

  • GAAP gross margin is expected to be approximately 73%. Non-GAAP gross margin is expected to be approximately 79%.

  • GAAP net loss is expected to be in the range of $(47.2) million to $(48.8) million, or $(0.82) to $(0.85) per share, based on approximately 57.4 million weighted average shares outstanding. Non-GAAP net income is expected to be in the range of $24.0 million to $26.0 million, or $0.38 to $0.41 per share, using 65.2 million weighted average diluted shares outstanding, and based on our reporting under C&DI 102.11.

  • Free cash flow during the quarter is expected to be in the range of breakeven to $10.0 million. Capital expenditures are expected to be approximately $12.0 million, including $5.0 million associated with the Company’s new headquarters build-out.

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, 2020. To access this call, dial (888) 254-3590 for the U.S. or Canada, or (929) 477-0402 for international callers, with conference ID #7728518. 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 May 21, 2020, by dialing (844) 512-2921 for the U.S. or Canada or (412) 317-6671 for international callers, and entering passcode #7728518.

About Proofpoint, Inc.

Proofpoint, Inc. (NASDAQ: PFPT) is a leading cybersecurity company that protects organizations’ greatest assets and biggest risks: their people. With an integrated suite of cloud-based solutions, Proofpoint helps companies around the world stop targeted threats, safeguard their data, and make their users more resilient against cyber attacks. Leading organizations of all sizes, including more than half of the Fortune 1000, rely on Proofpoint for people-centric security and compliance solutions that mitigate their most critical risks across email, the cloud, social media, and the web. 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; the potential effects on our business of events beyond our control such as the current coronavirus (COVID-19) pandemic; 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, 2019, 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.

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 income. We define non-GAAP operating income 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 it excludes 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 income versus operating loss calculated in accordance with GAAP. For example, as noted above, non-GAAP operating income excludes stock-based compensation expense. In addition, the components of the costs that we exclude in our calculation of non-GAAP operating income 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 income and evaluating non-GAAP operating income together with operating loss calculated in accordance with GAAP.

Non-GAAP net income. We define non-GAAP net income 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. 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 income.

Our current and deferred income tax expense is commensurate with the non-GAAP measure of profitability using a non-GAAP tax rate of 17% for the three months ended March 31, 2020 and 2019. We use an annual projected tax rate in a computation of the non-GAAP income tax provision, and exclude the impact of stock-based compensation, intangible amortization expenses, costs associated with acquisitions and litigations, and non-cash interest expense related to the debt discount and issuance costs for the convertible notes. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate.

Billings. We define billings as revenue recognized plus the change in deferred revenue and customer prepayments less change in unbilled accounts receivable from the beginning to the end of the period, but excluding additions to deferred revenue and customer prepayments from acquisitions. Customer prepayments represent billed amounts for which the contract can be terminated and the customer has a right of refund. Unbilled accounts receivable represent amounts for which the company has recognized revenue, pursuant to its revenue recognition policy, for subscription software already delivered and professional services already performed, but billed in arrears and for which the company believes it has an unconditional right to payment. 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,
 
    2020     2019  
Revenue:                
Subscription   $ 244,069     $ 199,584  
Hardware and services     5,705       3,353  
Total revenue     249,774       202,937  
Cost of revenue:(1)(2)                
Subscription     59,848       48,252  
Hardware and services     9,083       6,991  
Total cost of revenue     68,931       55,243  
Gross profit     180,843       147,694  
Operating expense:(1)(2)                
Research and development     69,895       53,249  
Sales and marketing     123,162       97,004  
General and administrative     29,555       25,825  
Total operating expense     222,612       176,078  
Operating loss     (41,769 )     (28,384 )
Interest expense     (8,920 )      
Other income, net     4,621       726  
Loss before income taxes     (46,068 )     (27,658 )
Provision for income taxes     (28,169 )     (620 )
Net loss   $ (74,237 )   $ (28,278 )
Net loss per share, basic and diluted   $ (1.30 )   $ (0.51 )
Weighted average shares outstanding, basic and diluted     56,974       55,335  
(1) Includes stock-based compensation expense as follows:                
Cost of subscription revenue   $ 5,542     $ 3,875  
Cost of hardware and services revenue     1,371       906  
Research and development     15,605       11,499  
Sales and marketing     18,519       13,754  
General and administrative     10,528       10,987  
  Total stock-based compensation expense   $ 51,565     $ 41,021  
(2) Includes intangible amortization expense as follows:                
Cost of subscription revenue   $ 9,938     $ 6,762  
Sales and marketing     4,513       3,537  
  Total intangible amortization expense   $ 14,451     $ 10,299  
                 

 


Proofpoint, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)

 
    March 31,     December 31,  
    2020     2019  
Assets                
Current assets:                
Cash and cash equivalents   $ 921,743     $ 847,555  
Short-term investments     23,927       43,385  
Accounts receivable, net     172,082       265,741  
Inventory     377       1,249  
Deferred product costs     2,946       2,723  
Deferred commissions     48,039       47,250  
Prepaid expenses and other current assets     27,873       22,081  
Total current assets     1,196,987       1,229,984  
Property and equipment, net     79,591       73,512  
Operating lease right-of-use assets     54,960       51,852  
Long-term deferred product costs     417       581  
Goodwill     687,517       687,517  
Intangible assets, net     171,046       186,023  
Long-term deferred commissions     90,053       90,305  
Other assets     17,690       17,737  
Total assets   $ 2,298,261     $ 2,337,511  
Liabilities and Stockholders Equity                
Current liabilities:                
Accounts payable   $ 9,242     $ 16,311  
Accrued liabilities     109,067       119,423  
Operating lease liabilities     18,166       20,202  
Deferred revenue     604,838       615,874  
Total current liabilities     741,313       771,810  
Convertible senior notes     757,965       749,620  
Long-term operating lease liabilities     38,917       36,223  
Other long-term liabilities     33,157       19,172  
Long-term deferred revenue     168,730       168,189  
Total liabilities     1,740,082       1,745,014  
Stockholders equity                
Common stock, $0.0001 par value; 200,000 shares authorized; 57,260 and 56,784
  shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
    6       6  
Additional paid-in capital     1,357,999       1,318,084  
Accumulated other comprehensive income     5       1  
Accumulated deficit     (799,831 )     (725,594 )
Total stockholders’ equity     558,179       592,497  
Total liabilities and stockholders’ equity   $ 2,298,261     $ 2,337,511  
                 

 


Proofpoint, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
    Three Months Ended
March 31,
 
    2020     2019  
Cash flows from operating activities                
Net loss   $ (74,237 )   $ (28,278 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     23,470       18,660  
Stock-based compensation     51,565       41,021  
Amortization of debt issuance costs and accretion of debt discount     8,345        
Amortization of deferred commissions     14,633       11,271  
Noncash lease costs     6,426       5,634  
Deferred income taxes     (325 )     (60 )
Other     (1,181 )     734  
Changes in assets and liabilities:                
Accounts receivable     93,453       35,616  
Inventory     872       (131 )
Deferred product costs     (58 )     100  
Deferred commissions     (15,170 )     (12,915 )
Prepaid expenses     (6,290 )     (6,369 )
Other current assets     (282 )     222  
Long-term assets     (96 )     (469 )
Accounts payable     (6,017 )     (4,305 )
Accrued liabilities     14,720       (12,547 )
Operating lease liabilities     (7,159 )     (6,188 )
Deferred revenue     (10,495 )     12,103  
Net cash provided by operating activities     92,174       54,099  
Cash flows from investing activities                
Proceeds from maturities of short-term investments     39,232       32,273  
Purchase of short-term investments     (19,876 )     (26,373 )
Purchase of property and equipment     (12,359 )     (5,477 )
Net cash provided by investing activities     6,997       423  
Cash flows from financing activities                
Proceeds from issuance of common stock     2,966       1,105  
Withholding taxes related to restricted stock net share settlement     (27,600 )     (24,623 )
Net cash used in financing activities     (24,634 )     (23,518 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (907 )     206  
Net increase in cash, cash equivalents and restricted cash     73,630       31,210  
Cash, cash equivalents and restricted cash                
Beginning of period     857,907       186,152  
End of period   $ 931,537     $ 217,362  
                 

 


Reconciliation of Non-GAAP Measures
(In thousands, except per share amounts)
(Unaudited)

 
    Three Months Ended  
    March 31,  
    2020     2019  
                 
GAAP gross profit   $ 180,843     $ 147,694  
GAAP gross margin     72 %     73 %
Plus:                
Stock-based compensation expense     6,913       4,781  
Intangible amortization expense     9,938       6,762  
Non-GAAP gross profit     197,694       159,237  
Non-GAAP gross margin     79 %     78 %
                 
GAAP operating loss     (41,769 )     (28,384 )
Plus:                
Stock-based compensation expense     51,565       41,021  
Intangible amortization expense     14,451       10,299  
Acquisition-related expenses     307        
Litigation-related expenses     817        
Non-GAAP operating income     25,371       22,936  
                 
GAAP net loss     (74,237 )     (28,278 )
Plus:                
Stock-based compensation expense     51,565       41,021  
Intangible amortization expense     14,451       10,299  
Acquisition-related expenses     307        
Litigation-related expenses     817        
Interest expense - debt discount and issuance costs     8,345        
Income tax expense (1)     23,168       (3,403 )
Non-GAAP net income   $ 24,416     $ 19,639  
Add interest expense of convertible senior notes, net of tax (2)     477        
Numerator for non-GAAP EPS calculation   $ 24,893     $ 19,639  
Non-GAAP net income per share - diluted   $ 0.38     $ 0.34  
                 
GAAP weighted-average shares used to compute net loss per share, diluted     56,974       55,335  
Dilutive effect of convertible senior notes (2)     5,975        
Dilutive effect of employee equity incentive plan awards (3)     2,082       2,271  
Non-GAAP weighted-average shares used to compute net income per share, diluted     65,031       57,606  
                 

(1) The Company’s current and deferred income tax expense commensurate with the non-GAAP measure of profitability using non-GAAP tax rate of 17% for the three months ended March 31, 2020 and 2019. The Company uses annual projected tax rate in its computation of the non-GAAP income tax provision, and excludes the direct impact of stock-based compensation, intangible amortization expenses, costs associated with acquisitions and litigations, and non-cash interest expense related to the debt discount and issuance costs for the convertible notes.

(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  
    March 31,  
      2020       2019  
Total revenue   $ 249,774     $ 202,937  
Deferred revenue and customer prepayments                
Ending     787,098       617,170  
Beginning     797,173       605,073  
Net Change     (10,075 )     12,097  
Unbilled accounts receivable                
Ending     3,965       1,261  
Beginning     2,255       1,276  
Net Change     (1,710 )     15  
Less:                
Deferred revenue and customer prepayments contributed by acquisitions            
Billings   $ 237,989     $ 215,049  
                 

 


Reconciliation of GAAP Cash Flows from Operations to Free Cash Flows
(In thousands)
(Unaudited)

 
    Three Months Ended  
    March 31,  
    2020     2019  
GAAP cash flows provided by operating activities   $ 92,174     $ 54,099  
Less:                
Purchases of property and equipment     (12,359 )     (5,477 )
Non-GAAP free cash flows   $ 79,815     $ 48,622  
                 

 


Reconciliation of Non-GAAP Measures to Guidance
(In millions, except per share amount)
(Unaudited)

 
    Three Months Ending
    June 30,
    2020
     
Total revenue   $251.0 - $255.0
     
GAAP gross profit   182.4 - 185.2
GAAP gross margin   73%
Plus:    
Stock-based compensation expense   6.0 - 6.4
Intangible amortization expense   9.9
Non-GAAP gross profit   198.3 - 201.5
Non-GAAP gross margin   79%
     
GAAP net loss   (47.2) - (48.8)
Plus:    
Stock-based compensation expense   51.0 - 55.0
Intangible amortization expense   13.8
Acquisition-related expenses   -
Litigation-related expenses   1.4
Interest expense - debt discount and issuance costs   8.4
Income tax expense   (3.4) - (3.8)
Non-GAAP net income   24.0 - 26.0
Add interest expense of convertible senior notes, net of tax (if dilutive)   0.5
Numerator for non-GAAP EPS calculation   $24.5 - $26.5
Non-GAAP net income per share - diluted   $0.38 - $0.41
Non-GAAP weighted-average shares used to compute net income per share, diluted   65.2
     
     
    Three Months Ending
    June 30,
    2020
     
GAAP cash flows provided by operating activities   $12.0 - $22.0
Less:    
Purchases of property and equipment   (12.0)
Non-GAAP free cash flows   $0.0 - $10.0
     

Media Contact

Kristy Campbell
Proofpoint, Inc.
408-517-4710
kcampbell@proofpoint.com

Investor Contact

Jason Starr
Proofpoint, Inc.
408-585-4351
jstarr@proofpoint.com 

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Source: Proofpoint, Inc.

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