Proofpoint, Inc. reports 38.0% revenue growth in 2018 and 1.5 pp EBITDA Margin decline from -2.5% to -3.9%
01/31/2019 • About Proofpoint, Inc. (
$PFPT) • By InTwits
Proofpoint, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Proofpoint, Inc. is a fast growth stock: 2018 revenue growth was 38.0%, 5 year revenue CAGR was 39.0% at 2018 ROIC -20.1%
- The company operates at negative EBITDA Margin: -3.9%
- Proofpoint, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 19.8%. Average EBITDA Margin for the same period was -8.8%. In 2018 SBC/Revenue was even higher: 19.9%
- Proofpoint, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.9%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $30m in 2018, $47m in 2017, $34m in 2016, $26m in 2015, $15m in 2014
- In the last 5 years the company invested considerably less than D&A: $152m vs. $190m. In 2018 this situation was still the same: CAPEX was 30 while D&A was 74
- The company has unprofitable business model: ROIC is -20.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.2x while industry average is -1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 38.0%. Revenue growth showed small slowdown in 18Q4 - it was 35.1% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.7 pp from 29.6% to 27.9% in 2018. EBITDA Margin stuck to a growing trend at 4.4 pp per annum in 2014-2018.
Gross Margin decreased slightly on 0.55 pp from 72.4% to 71.9% in 2018. Gross Margin stuck to a growing trend at 1.5 pp per annum in the last 5 years. SG&A as a % of Revenue increased on 2.2 pp from 58.0% to 60.2% in 2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.1 pp from 18.8% to 19.9% in 2018.
Net Income margin decreased slightly on 1.0 pp from -13.4% to -14.5% in 2018. Net Income margin stuck to a growing trend at 6.1 pp per annum in 2014-2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 4.1%. The company's CAPEX/Revenue decreased on 5.6 pp from 9.7% in 2015 to 4.1% in 2018. It's average CAPEX/Revenue for the last three years was 7.4%. During 2014-2018 CAPEX as a % of Revenue topped in 2015 at 9.7% and was declining since that time.
Accounts receivable as a % of Revenue increased on 7.1 pp from 20.7% to 27.8% in 2018. Inventories as a % of Revenue showed almost no change at 0.067% in 2018. Accounts payable as a % of Revenue increased slightly on 1.5 pp from 8.6% to 10.0% in 2018.
Proofpoint, Inc. has spent
$224m on M&A in 2018 which accounts for 31.2% of revenue.
Return on investment
The company operates at negative ROIC (-20.1%) and ROE (-25.6%). ROIC decreased on 8.1 pp from -12.1% to -20.1% in 2018. ROE surged on 15.0 pp from -40.6% to -25.6% in 2018. During 2014-2018 ROE bottomed in 2016 at -174% and was growing since that time.
Leverage (Debt)
The company paid down all the debt in 2018. Cash dropped on 35.2%.
Management team
Proofpoint, Inc.'s CEO Gary Steele is a founder and has spent 17 years with the company. CEO total compensation was
$64,730,296 in 2018 which included
$496,875 salary. The company's CFO is Paul R Auvil III. Paul R Auvil III has 12 years tenure at the company.
At the end of financial year the company had 2.1% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 2,613 employees. The number of employees surged on 27.7%. Average revenue per employee in 2018 was
$274,395 and it increased on 8.1%.
Financial and operational results
FY ended 12/31/2018
Proofpoint, Inc. ($PFPT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 195.6 | 265.4 | 375.5 | 519.7 | 717.0 | 38.0% |
| Gross Profit | 129.9 | 181.3 | 266.9 | 376.3 | 515.2 | 36.9% |
| SG&A | 129.1 | 185.0 | 254.0 | 301.4 | 431.6 | 43.2% |
| EBITDA | -33.3 | -53.3 | -54.0 | -12.8 | -28.2 | |
| EBIT | -51.1 | -78.2 | -85.6 | -54.9 | -101.7 | |
| Interest expence | | 18.0 | 23.5 | 25.6 | 14.2 | -44.6% |
| Tax | -0.3 | 0.6 | 1.0 | -10.0 | -13.2 | |
| Net Income | -64.2 | -98.7 | -111.2 | -69.8 | -103.7 | |
| Stock Based Compensation | 31.0 | 60.1 | 78.7 | 97.5 | 142.7 | 46.4% |
Balance Sheet
|
|---|
| Cash | 180.3 | 346.2 | 345.4 | 286.1 | 185.4 | -35.2% |
| Accounts Receivable | 40.9 | 54.5 | 73.0 | 107.7 | 199.2 | 85.0% |
| Inventory | 0.5 | 0.5 | 0.6 | 0.7 | 0.5 | -34.1% |
| Accounts Payable | 9.2 | 14.1 | 15.3 | 12.3 | 20.2 | 64.9% |
| Short Term Debt | 0.7 | 0.0 | 0.0 | 0.0 | 0.0 | -100.0% |
| Long Term Debt | 161.4 | 345.8 | 366.6 | 197.9 | 0.0 | -100.0% |
Cash flow
|
|---|
| Capex | 15.0 | 25.8 | 34.4 | 47.0 | 29.5 | -37.1% |
| Acquisitions | 53.7 | 51.6 | 54.1 | 155.4 | 223.8 | 44.1% |
Ratios
|
|---|
| Revenue growth | 41.8% | 35.7% | 41.5% | 38.4% | 38.0% | |
| EBITDA growth | 70.6% | 60.0% | 1.5% | -76.3% | 119.5% | |
|
|---|
| Gross Margin | 66.4% | 68.3% | 71.1% | 72.4% | 71.9% | -0.6% |
| EBITDA Margin | -17.0% | -20.1% | -14.4% | -2.5% | -3.9% | -1.5% |
| EBIT Margin | -26.1% | -29.4% | -22.8% | -10.6% | -14.2% | -3.6% |
| SG&A, % of revenue | 66.0% | 69.7% | 67.6% | 58.0% | 60.2% | 2.2% |
| SBC, % of revenue | 15.9% | 22.6% | 21.0% | 18.8% | 19.9% | 1.1% |
| Net Income Margin | -32.8% | -37.2% | -29.6% | -13.4% | -14.5% | -1.0% |
| CAPEX, % of revenue | 7.7% | 9.7% | 9.2% | 9.0% | 4.1% | -4.9% |
|
|---|
| ROIC | -22.6% | -24.1% | -20.4% | -12.1% | -20.1% | -8.1% |
| ROE | -96.1% | -141.4% | -173.6% | -40.6% | -25.6% | 15.0% |
| Interest expence / Average debt | | 7.1% | 6.6% | 12.9% | | |
People
|
|---|
| Insider ownership | 2.1% | 2.1% | 2.1% | 2.1% | 2.1% | 0.0% |
| Employees | 859 | 1,203 | 1,573 | 2,047 | 2,613 | 27.7% |
| Revenue/Employee, th. $ | 228 | 221 | 239 | 254 | 274 | 8.1% |
Proofpoint, Inc. ($PFPT) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 162 | 172 | 184 | 198 | | 40.5% | 40.4% | 37.1% | 35.1% |
| EBITDA | -8 | -11 | -7 | -2 | | | | | -269.1% |
| Net Income | -12 | -34 | -36 | -21 | | | | | |
Balance Sheet
|
|---|
| Cash | 101 | 114 | 161 | 185 | | -73.4% | -70.9% | -61.4% | -35.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -3.1% | 12.9% | -8.8% | -100.0% |
| Long Term Debt | 201 | 204 | 0 | 0 | | -46.0% | -45.9% | -100.0% | -100.0% |
Ratios
|
|---|
| Gross Margin | 71.0% | 70.5% | 72.3% | 73.3% | | -1.0% | -1.4% | -0.8% | 0.9% |
| EBITDA Margin | -5.1% | -6.4% | -3.9% | -0.9% | | -2.1% | -0.7% | 0.6% | -1.6% |
| Net Income Margin | -7.5% | -20.0% | -19.6% | -10.7% | | 10.1% | -0.8% | -3.2% | -6.2% |
Peers in Systems Software
Below we provide Proofpoint, Inc. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 18.2% | 14.6% | 14.0% | 19.0% |
|---|
| Proofpoint, Inc. ($PFPT) | | 35.7% | 41.5% | 38.4% | 38.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 77.0% | 75.4% | 73.6% | 74.1% | 75.0% |
|---|
| Proofpoint, Inc. ($PFPT) | 66.4% | 68.3% | 71.1% | 72.4% | 71.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -5.0% | -8.0% | -5.4% | -4.7% |
|---|
| Proofpoint, Inc. ($PFPT) | -17.0% | -20.1% | -14.4% | -2.5% | -3.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.7% | 2.1% | 2.0% | 2.2% | 2.5% |
|---|
| Proofpoint, Inc. ($PFPT) | 7.7% | 9.7% | 9.2% | 9.0% | 4.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -2.7% | -0.9% |
|---|
| Proofpoint, Inc. ($PFPT) | -22.6% | -24.1% | -20.4% | -12.1% | -20.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (23 companies) | -2.4x | -1.4x | -1.2x | -0.6x | -0.4x |
|---|
