Proofpoint Inc. PFPT reported second-quarter 2020 non-GAAP earnings of 51 cents per share, which beat the Zacks Consensus Estimate by 30.8%. Moreover, the figure increased 24.4% year over year.
Revenues came in at $258.4 million in the second quarter, which beat the consensus mark of $253 and increased 20.5% year over year.
This upside can be attributed to strong demand for its next-generation cloud security and compliance platform, ongoing migration to the cloud, solid international growth, and high renewal rates.
Proofpoint, Inc. Price, Consensus and EPS Surprise
Proofpoint, Inc. price-consensus-eps-surprise-chart | Proofpoint, Inc. Quote
Top Line Details
Total billings during the quarter grew 8% year over year to $250 million.
Subscription revenues came in at $254.9 million, up 20.9% from the year-ago quarter. However, hardware and service revenues decreased 3% year over year to $3.5 million.
The company has stopped reporting results for its advanced threat and compliance-oriented products as it believes the data is not informative in terms of measuring business performance.
Proofpoint continues to expand globally. Its international business grew 28% year over year, accounting for 21% of total revenues in the June-end quarter.
Non-GAAP gross profit climbed 22.5% from the year-ago quarter to $207.5 million. Non-GAAP gross margin expanded 100 basis points (bps) to 74% on impressive revenue performance.
Proofpoint’s non-GAAP operating income rose 45.1% to $41.2 million.
Balance Sheet & Cash Flow
As of Jun 30, 2020, the company’s cash, cash equivalents and short-term investments were $973.3 million compared with $946 million as of Mar 31, 2020.
The company generated operating cash flow of $30.6 million compared with the $92.2 million reported in the previous quarter. Free cash flow was $18.8 million compared with the prior quarter’s $79.8 million.
Proofpoint updated its 2020 revenue guidance. The company now expects revenues of $1.035-$1.037 billion, up from the previous projection of $1.005-$1.030 billion.
Non-GAAP gross margin projection increased to 80% from 79%.
Non-GAAP earnings per share are anticipated in the band of $1.64-$1.70, higher than its previous guidance of $1.41-$1.46.
Free cash flow is estimated in the range of $130-$140 million, up from the prior forecast of $85-$135 million.
Capital expenditures are now expected to be approximately $75 million, down from the $94 million projected earlier.
For the third quarter, Proofpoint anticipates revenues of $260-$262 million.
Non-GAAP gross margin is estimated to be 80%. Non-GAAP earnings per share are anticipated in the band of 37-40 cents.
Free cash flow is estimated in the range of $16 million to $21 million.
Capital expenditures are expected to be approximately $25 million for the ongoing quarter, including $16 million for building Proofpoint’s new headquarters.
Zacks Rank and Key Picks
Currently, Proofpoint carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Dropbox DBX, Zoom Video Communications ZM and Analog Devices ADI. While both Dropbox and Zoom sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Dropbox, Zoom and Analog Devices is currently pegged at 32.5%, 25%, and 13.3%, respectively.
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