Keeping its positive surprise history alive, Proofpoint Inc. PFPT reported solid results for fourth-quarter 2017, marking the eighth consecutive quarter of better-than-expected performance for both the top as well as the bottom line. Also, revenues and earnings came in ahead of the company's guidance ranges. Apart from this, Proofpoint witnessed significant year-over-year improvement on both the counts.
The company reported non-GAAP earnings of 29 cents, marking an impressive year-over-year jump of 61%. Earnings also came in ahead of the Zacks Consensus Estimate of 21 cents as well as the company's guidance of 19-21 cents per share. Quarter in Detail
Proofpoint reported total revenues of $145.4 million, up 36.1% year over year, mainly driven by customer additions, improved add-on-sales and strong renewal rate. The company's revenues also surpassed the Zacks Consensus Estimate of $140 million as well as came in ahead of the guidance range of $138-$140 million.
Total billings during the quarter also jumped 36% year over year to $188.6 million. Also, renewal rates remained well more than 90% during the reported quarter.
Non-GAAP gross profit advanced 37.1% from the year-ago quarter to $112.9 million. Moreover, non-GAAP gross margin expanded 50 basis points (bps) to 77.6%, primarily driven by higher sales and efficiency improvements across the company's cloud operations.
Total non-GAAP operating expenses flared up 32.9% year over year to $96.2 million mainly due to increased spending on hiring sales personnel. However, as a percentage of revenues, it decreased to 66.2% from 67.8% in the year-ago quarter.
Proofpoint's non-GAAP operating income for the quarter increased to $16.6 million from $9.9 million reported in the year-ago quarter. In addition, non-GAAP operating margin expanded 210 basis points to 11.4%, mainly benefiting from higher revenues, improved gross margin and decreased operating expenses as a percentage of sales.
Non-GAAP net income increased to $16.4 million from $9.6 million reported in the prior-year quarter. It also came in ahead of the company's guidance of $9.5-$10.5 million.
Proofpoint, Inc. Price, Consensus and EPS Surprise
Proofpoint, Inc. Price, Consensus and EPS Surprise | Proofpoint, Inc. Quote
Balance Sheet & Cash Flow
Proofpoint exited the quarter with cash and cash equivalents, and short-term investments of approximately $331.6 million, up from the previous-quarter balance of $459.6 million. Accounts receivable were $109.3 million compared with $91.5 million reported at the end of third-quarter 2017.
During 2017, the company generated operating cash flow of $153.7 million. Free cash flow for the year came in at $106.7 million.
The company revised its full-year 2018 projections wherein it raised the revenue expectation but lowered the earnings forecast. Proofpoint now expects revenues in the range of $660-$665 million (mid-point $662.5 million), up from $644-$648 million (mid-point $646 million) predicted earlier. The Zacks Consensus Estimate is currently pegged $665.5 million. Billings expectations have also been raised to $828-$833 million from $798-$802 million projected earlier.
Non-GAAP earnings per share are now anticipated in the band of 95 cents to $1.02 (mid-point 98.5 cents), down from the previous guidance of 96 cents to $1.03 (mid-point 99.5 cents). Analysts polled by Zacks anticipate earnings of $1.02.
GAAP and non-GAAP gross margins are estimated to be 71% and 77%, respectively. Non-GAAP net income is projected in the range of $52-$56 million.
Free cash flow for the year is expected in the range of $138-$140 million, while capital expenditure will likely be approximately $45 million.
The company also initiated outlook for the first quarter. Proofpoint anticipates revenues in the range of $149-151 million, and billings between $180 million and $182 million. Currently, the Zacks Consensus Estimate for revenues is pegged at approximately $149.5 million.
GAAP and non-GAAP gross margins are estimated to be 70% and 76%, respectively. Non-GAAP net income is projected in the range of $8-$9 million, or 15-17 cents per share. Currently, the Zacks Consensus Estimate stands at 18 cents.
Free cash flow is projected in the range of $22-$24 million, while capital expenditure will likely be approximately $10 million during the first quarter.
Proofpoint has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader technology sector are NVIDIA NVDA , Intel INTC and Texas Instruments TXN , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Long-term expected EPS growth rates for NVIDIA, Intel and Texas Instruments are 10.3%, 8.4% and 9.6%, respectively.
(We are reissuing this article to correct a mistake. The original article, issued on Feb 7, should no longer be relied upon.)
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