Cybersecurity Top Performers — Q4 Earnings Notes
RPD, FSCT, PFPT, MIME, CYBR have average YTD return of 43.2%
YTD Top Security Performers (among 21 cybersecurity names we cover):
1-Rapid7 ((RPD, $45.94) +47%
2-ForeScout (FSCT, $38.05) +46%
3-Proofpoint (PFPT, $121.15) +44%
4-Mimecast (MIME, $47.64) +42%
5-CyberArk (CYBR, $101.05) +36%
Q4 Earnings Notes
Rapid7 (RPD)
Market cap: $2.17 billion
Q4 revenue growth: 22%
Latest 2019 revenue guidance: $304 million to $312 million
2019 estimated revenue growth: 25% to 28%
2019 consensus revenue estimate going into Q4 report: $291.4 million
*Q4 revenue $68.8 million beat consensus of $66.6 million
*Annualized recurring revenue of $251.8 million rose 53%; showed accelerated growth for the sixth quarter in a row.
*Q4 gross margin 74%
*Total customers: 7,800+, +11% y/y (includes ~40% of Fortune 100)
*More than 50% of customers are on Insight platform, vs. 37% year ago
*Renewal rate of 120% held steady sequentially
*ARR per customer: >$32,000, up 38% y/y (Was >$29K in Q3)
*Guides 2019 ARR growth > 30%
*Guides 2019 EPS to 5 cents, above consensus of -$0.02
*Nearly 40% of Q4 new ARR came from non-vulnerability management products
*Insight IDR (SIEM offering) remains fastest-growing product. Saw triple-digit ARR growth in 2018. Seeing solid demand in midsize enterprise & large enterprise
*Insight Connect product (launched October 2018) showing good pipeline growth and healthy ASPs. SOAR market is still in early stages.
ForeScout (FSCT)
Market cap: $1.63 billion
Q4 revenue growth: 35%
Latest 2019 revenue guidance: $363.1 million to $373.1 million
2019 estimated revenue growth: 22% to 25%
2019 consensus revenue estimate going into Q4 report: $347.8 million
*Q4 revenue rose 35% to $84.7 million, above the consensus of $77.8 million
*Product revenue rose 36%
*Gross margin 81% +400 bp y/y
*Product gross margin 86% +600 bp y/y
*CFFO +$6.1 mil = 7% of revenue
*Dfd revenue $172 million, +$9 million sequentially
*Added a record 200 new customer logos; Total customer count = nearly 3,300
*In 2018, added 500+ new logos, including 60+ new Global 2K customers
*Top 2 verticals — gov’t & financial services — accounted for 61% of total 2018 revenue. Gaining traction in these other verticals: healthcare, retail, tech, manufacturing & energy
*In 2018, # of devices under management rose more than 13 million
*Total # of device licenses sold = 65 million (including 5 million added in Q4)
*Largest individual deployment is nearly 3 million devices
*In Q4, largest deal was with federal civilian agency that expanded its FSCT deployment by roughly 700,000 new devices, bringing total # under management to 1.5 million. Management said integration and orchestration with Splunk was important part of this win.
*Landed top 10 U.S. bank for 250k devices and a U.S. Fortune 10 healthcare company for nearly 250k devices.
*Extended Modules (orchestration) represented 24% of total product revenue, up from 9% in 2017. 27% of the customer base has bought at least 1 Extended Module.
*Sales rep maturity: roughly 50% of reps have been with FSCT for more than 2 years, up from roughly 35% at the end of 2017
*In Q4, closed $113-mil Security Matters acquisition. Goal is to see deeper into the OT stack (controllers/sensors). Seeing accelerated pipeline of OT-related business. Will soon introduce new IT/OT solution based on this deal
*2019 revenue guidance: $363.1 million to $373.1.1 million (growth of 24% at midpoint), vs. consensus $348.6 million
*Analyst Day is March 4. Will discuss bringing more SaaS-delivered products to market
Proofpoint (PFPT)
Market cap: $6.68 billion
Q4 revenue growth: 35%
Latest 2019 revenue guidance: $870 million to $874 million
2019 estimated revenue growth: 21% to 22%
2019 consensus revenue estimate going into Q4 report: $875.3 million
*Q4 revenue of $198.5 million (including $3 million pulled in from Q1) beat the consensus of $192.4 million
*Q1 revenue guide of $198 mil-$200 mil, vs. $198.1 mil consensus
*2019 revenue guide: Reaffirms $870 mil-$874 mil
*Q4 gross margin 79%, +100 bp y/y
*Billings of $269.9 million rose 43%, acceleration from +33% in Q3
*Deferred revenue $598 million, +$73 mil sequentially
*Emerging products accounted for >30% of new & add-on business
*Int’l rev rose 45% and accounted for 19% of total revenue
*Ended 2018 with nearly 6,100 enterprise accounts (including 550 added via Wombat acquisition in March). 2018 enterprise customer count +25% organic growth y/y
*TAP has 3,900 enterprise customers, up 900 in 2018 (64% penetration into enterprise accounts)
*Multi-product metric: 2,900 customers have 3 or more products, +45% y/y
*Management commentary on MSFT competition: PFPT winning on efficacy in live production. Plus, PFPT has broader security product set demanded by enterprise market.
*No competitive move into lower end of email security market (Mimecast)
*CFO called out these emerging products as having strong current momentum: CASB, Digital Risk & Browser Isolation. Wombat (acquired for $225 million in 2018) is the product CEO is most excited about for 2019.
*New Cloud Account Defense (CAD) product detects and responds to compromised Office 365 accounts. Includes CASB technology from FireLayers acquisition.
*Q4 saw improvement in new sales rep productivity
Mimecast (MIME)
Market cap: $2.87 billion
FQ3 (Dec.) revenue growth: 30%
Latest FY’2020 (March) revenue guidance: $413 million to $427 million
FY’20 estimated revenue growth: 21% to 26%
FY’20 consensus revenue estimate going into FQ3 report: $405.0 million
*FQ3 (Dec.) revenue +30% to $87.6 mil, above consensus of $84.7 mil
*Gross margin 75%, +100 bp y/y
*FQ3 geo rev mix: U.S. 50%; UK 30%; S Africa 13%; Other 6%
*FQ3 added 1,000 net new customers; total customers = 33,300
*Revenue retention: 110% vs. 111% yr ago
*Average customer uses 3.1 MIME services (out of 10 total)
*Avg order value $10,500, +10% y/y
*Core MIME market: organizations with 50 to 5,000 seats (this group accounts for vast majority of revenue); 17% of revenue from enterprise customers with >5k seats (avg. order value in enterprise segment +50% y/y)
*Targeted Threat Protection (TTP) in FQ3 added 1,600 new & existing customers. Total TTP customer count = 21,400 (64% penetration)
*Internal Email Protect (IEP) continues to gain traction, adding 500 customers in FQ3
*New Web Security product seeing good adoption among SMB customers as well as larger accounts with public WiFi networks (such as hospitals)
*13,700 MIME customers use with Office 365 = 41% penetration (vs. 29% yr ago)
*FQ3 closed record # of 6-figure deals; closed largest deal ever: a 7-fig transaction (a legacy replacement) with an int’l financial services company with 55k employees
*Initial FY’20 revenue guide: $413 mil to $427 mil (growth of 21% to 25% cc)
CyberArk (CYBR)
Market cap: $3.64 billion
Q4 revenue growth: 36%
Latest 2019 revenue guidance: $411 million to $415 million
2019 estimated revenue growth: 20% to 21%
2019 consensus revenue estimate going into Q4 report: $393.4 million
*Q4 revenue of $109.1 million beat the consensus by 14%
*Top-line growth accelerated to 36% from 31% in Q3
*License revenue growth accelerated to 38% from 29% in Q3
*Gross margin of 90% rose 200 bp y/y
*Q4 Operating margin 36%, vs. 24% year ago
*Q4 EPS of 89 cents beat by 30 cents
*Q4 added record 250+ new accounts; total customer base now 4,450+, +22% y/y
*Americas revenue rose 40%, acceleration from +23% in Q3
*Strongest Q4 verticals (showing >50% growth): manufacturing, telecom, IT services, software, retail and pharma
*Q1 revenue guide of $91 million to $93 million, above consensus of $86.5 million
*2019 revenue guide of $411 million to $415 million, vs. $393.4 million consensus
*2019 gross margin guide: 87% to 88% (was 88% in 2018)
*Application ID Manager (AIM) and Conjur (DevOps protection) together accounted for 10% of 2018 license revenue
*2019 goals include increasing enterprise customer penetration in new and add-on business. About 40% of 2018 license revenue was from new customers. In 2019, management said CYBR will focus more on mid-market opportunity.
Robert DeFrancesco is the Managing Editor of Tech-Stock Prospector. Download the latest monthly issue here from the Amazon Kindle Store.
