Proofpoint (PFPT) Beats Q3 Earnings & Revenue Estimates

Zacks Equity Research
·4-min read

Proofpoint Inc. PFPT reported third-quarter 2020 non-GAAP earnings of 59 cents per share, outpacing the Zacks Consensus Estimate by 35.9%. Moreover, the figure increased 20.4% year over year.

Revenues came in at $266.7 million in the third quarter, which beat the consensus mark of $261.8 and increased 17% year over year as well.

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.

Top Line Details

Total billings during the reported quarter grew 6% year over year to $294.4 million.

Proofpoint, Inc. Price, Consensus and EPS Surprise

Proofpoint, Inc. Price, Consensus and EPS Surprise
Proofpoint, Inc. Price, Consensus and EPS Surprise

Proofpoint, Inc. price-consensus-eps-surprise-chart | Proofpoint, Inc. Quote

Subscription revenues came in at $260.7 million, up 16.2% from the year-ago quarter. In addition, hardware and service revenues surged 92.8% year over year to $6 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 23% year over year, accounting for 21% of total revenues during the September-end quarter.

Operating Details

Non-GAAP gross profit climbed 18.8% from the year-ago quarter to $215 million. Non-GAAP gross margin expanded 100 basis points (bps) to 81% on impressive revenue performance.

Proofpoint’s non-GAAP operating income jumped 38.3% to $46.9 million.

Balance Sheet & Cash Flow

As of Sep 30, 2020, the company’s cash, cash equivalents and short-term investments were $1.02 billion compared with $973.3 million as of Jun 30, 2020.

The company generated operating cash flow of $86 million compared with the $30.6 million reported in the previous quarter. Free cash flow was $64.6 million compared with the prior quarter’s $18.8 million.

Guidance

Proofpoint updated its 2020 revenue guidance. The company now expects revenues of $1.043-$1.045 billion, up from the previous projection of $1.035-$1.037 billion.

Non-GAAP gross margin is still expected to be 80%.

Non-GAAP earnings per share are anticipated in the band of $1.88-$1.91, higher than its previous guidance of $1.64-$1.70.

Free cash flow is estimated in the range of $166.2-$168.2 million, up from the prior forecast of $130-$140 million.

Capital expenditures are now expected to be $72.6 million, down from the $75 million projected earlier.

For the December-end quarter, Proofpoint anticipates revenues of $268-$270 million.

Non-GAAP gross margin is estimated to be 80%. Non-GAAP earnings per share are  predicted in the band of 41-44 cents.

Free cash flow is estimated in the range of $3 million to $5 million.

Capital expenditures are expected to be approximately $27 million for the ongoing quarter, including $19.4 million for building Proofpoint’s new headquarters.

Zacks Rank and Stocks to Consider

Proofpoint currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Zoom Video Communications ZM, Viasat VSAT and CDW Corporation CDW, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Viasat and CDW is currently pegged at 25%, 19%, and 13.1%, respectively.

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