According to a recent Research Report World report, the global enterprise cyber security market is expected to grow at 18% CAGR through 2025. The cloud-based enterprise email security, e-discovery, and compliance service provider Proofpoint (Nasdaq: PFPT) recently announced its first quarter results that surpassed market expectations. This was the fourth consecutive quarter that Proofpoint beat market expectations.
Q1 revenues grew 25% over the year to $202.9 million, ahead of the market’s forecast of $199.6 million. It ended the quarter with total billings growing 15% to $215 million. Net loss was $28.3 million or $0.51 per share. During the quarter, it reported $41 million in stock-based compensation and $10.3 million in amortization of intangibles. Excluding these adjustments, EPS was $0.40, compared with the market’s forecast of $0.34 for the quarter.
By segment, subscription revenues grew 26% over the year to $199.6 million. Hardware and services revenues declined 10% to $3.4 million.
On the basis of solutions, revenues from Advanced Threat, which includes Targeted Attack Protection offering, grew 22% to $151.3 million, and Compliance revenues grew 33% to $51.6 million.
For the current quarter, Proofpoint forecast revenues of $210-$212 million with billings of $228-$230 million and an EPS of $0.34-$0.37. The market was looking for revenues of $209.7 million, billings of $232.1 million and an EPS of $0.36 for the quarter. For fiscal 2019, Proofpoint expects revenues of $874-$878 million, and an EPS of $1.43-$1.49.
Earlier this week, Proofpoint announced the acquisition of cybersecurity startup Meta Networks for an estimated $120 million. Tel Aviv, Israel-based Meta Networks was founded in 2016 to cater to the growing demands of security services for the cloud-based workplace. Its products leverage the cloud and the internet to build a global, zero-trust private network that is both agile and scalable. Known as Meta Network-as-a-Service (NaaS), its solution allows users to rapidly connect devices to applications in the data center and the cloud and secure them with a software-defined perimeter.
Proofpoint plans to leverage Meta Networks’ zero trust network access technology to offer a simpler tool for organizations to control employee and contractor access to on-premises, cloud, and consumer applications. It will integrate Meta Networks’ ZTNA technology with its cloud access security broker (CASB) and web isolation product lines in the coming months. Prior to the acquisition, Meta Networks had raised $10 million in funding from a seed round held in 2018. Its investors include Vertex Ventures and BRM Capital. Owler estimates its revenues at a very modest $1.2 million.
Proofpoint has been growing through acquisitions of comparatively smaller players to expand market reach. Since being founded in 2002, Proofpoint has acquired 16 companies so far. Meta Networks is its second largest acquisition so far after last year’s $225 million acquisition of Wombat Security. It has been picking its targets from a pool of privately held, comparatively smaller, technology players. It has added carrier-grade messaging security and infrastructure solutions provider Cloudmark;
a policy-based platform for controlling, protecting, and analyzing cloud applications and data called FireLayers; social media compliance software service provider Socialware; and advanced threat intelligence service provider Emerging Threats in the past few years.
Its stock is trading at $118.85 with a market capitalization of $6.6 billion. It had touched a 52-week high of $131.43 in July last year. Like other tech stocks, Proofpoint too had fallen to a 52-week low of $75.92 in December last year. I think this is an under-valued stock.