Proofpoint, Inc. (PFPT)

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Proofpoint Inc (PFPT)

Q2 2013 Earnings Conference Call

July 25, 2013 04:30 p.m. ET


Paul Auvil – CFO

Gary Steele – CEO


Phil Winslow – Credit Suisse

Rob Owens – Pacific Crest Securities

Robert Breza – RBC Capital Markets

Jonathan Ruykhaver – Stephens, Inc.

Tim Klasell – Northland Securities

Craig Nankervis – First Analysis Securities Corp

Sanjit Singh – Wedbush Securities



Good day and welcome to the Proofpoint Second Quarter 2013 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Paul Auvil, Chief Financial Officer. Please go ahead, sir.

Paul Auvil

Thanks. Good afternoon and welcome to Proofpoint’s second quarter 2013 earnings call. Today, we will be discussing the results announced in our press release that was issued after the after close today. I’m Paul Auvil, Chief Financial Officer of Proofpoint, and with me on the call today is Gary Steele, Proofpoint’s Chief Executive Officer.

During the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements, contained in the press release and this conference call. These risk factors are described in our press release and more fully detailed under the caption Risk Factors in Proofpoint’s most recent Form 10-K filed with the SEC and the company’s other SEC filings.

During this call, we will present both GAAP and non-GAAP financial measures. These non-GAAP measures may exclude both stock-based compensation expenses as well as the amortization of intangibles related to acquisitions or other components of GAAP metrics. These non-GAAP measures are not intended to be considered in isolation form, a substitute for or superior to our GAAP results and we encourage you to consider all measures when analyzing Proofpoint’s performance.

A reconciliation of GAAP to non-GAAP measures is included in today’s press release regarding our second quarter 2013 results, which can be found in the Investors Relations section of our website. In addition, please note that the date of this conference call is July 25, 2013, and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

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

Gary Steele

Thanks, Paul. I’d like to thank everyone for joining us on the call today. We are very pleased with the company’s ongoing momentum and strong execution during the second quarter. Our ability to once again exceed the high end of our guidance across all key operating metrics was driven by the combination of strong competitive run rates, and new products along with robust add on and renewal activity during the quarter.

From a macro perspective we continue to benefit from the increase and types of security threats worldwide including advanced persistent threats. Enterprises are replacing their legacy security infrastructure with our integrated cloud based solution to more fully defend, protect, archive and govern them as sensitive data.

We’re very proud to again be positioned in the Leaders Quadrant in Gartner’s 2013 Magic Quadrant for Secure Email Gateways. And in particular, Proofpoint being positioned as having the most completeness of vision from among all the vendors included in the analysis. We do this as further confirmation of the company’s proven ability to execute in the email marketing and our ongoing innovation in using the cloud and big data technology to protect the enterprises from today’s most advanced targeted attacks.

Taking a look at our financial results for the second quarter, total revenue increased 23% year-over-year to $31.8 million and was driven by the 25% increase in subscription revenue. This represented our 40th consecutive quarter of sequential revenue growth. We also recorded billings of $35.1 million, up 33% on a year-over-year basis.

Both revenues and billings exceeded our second quarter guidance ranges. Our continued strong growth was driven by several key factors including renewal rates that once again exceeded 90%, sustained strong competitive run rates, new and add on business momentum and further traction with our strategic and channel partners.

Now, turning to some of our key accomplishments during the second quarter. Similar to the last few quarters, we benefited from Google’s end-of-life decision for their standalone Postini infrastructure and we expect to continue to drive replacements during the second half of 2013 and throughout 2014. In addition, we saw many of Postini’s largest distributors and resellers signed up for Proofpoint Essentials recently launched security and governance offering targeted at smaller enterprises worldwide.

Some examples of significant competitive wins during the second quarter were the Proofpoint enterprise protection and privacy solution replace Postini include a large global professional services company with more than a 160,000 users worldwide, one of the world’s largest federal research centers with 12,500 users and Fortune 500 industrial supply company with over 12,000 users.

In addition to Postini, we continued to see weakness with our other competitors which resulted in a number of new customer wins during the second quarter including one of the largest U.S. energy and utilities company with 25,000 users, a global provider of technology solutions with energy industry with over 18,000 users and notably the first Cisco IronPort customer to adopt their cloud solution and of the world’s leading automobile manufacturers.

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