Proofpoint

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the section entitled "Risk Factors" and our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment in our common stock.

Company Overview

Proofpoint is a pioneering security-as-a-service vendor that enables large and mid-sized organizations worldwide to defend, protect, archive and govern their most sensitive data. Our security-as-a-service platform is comprised of an integrated suite of on-demand data protection solutions, including threat protection, regulatory compliance, archiving and governance, and secure communication. Our solutions are built on a flexible, cloud-based platform and leverage a number of proprietary technologies, including big data analytics, machine learning, deep content inspection, secure storage and advanced encryption, to address today's rapidly changing threat landscape.

A fundamental shift in the sources of cyber crime, from hackers to organized crime and governments, combined with the emergence of international data trafficking, are driving an unprecedented wave of targeted, malicious attacks designed to steal valuable information. At the same time, the growth of business-to-business collaboration, as well as the consumerization of IT and the associated adoption of mobile devices and unmanaged Internet-based applications, have proliferated sensitive data and reduced the effectiveness of many existing security products. These factors have contributed to an increasing number of severe data breaches and expanding regulatory mandates, all of which have accelerated demand for effective data protection and governance solutions.

Our platform addresses this growing challenge by not only protecting data as it flows into and out of the enterprise via on-premise and cloud-based email, instant messaging, social media and other web-based applications, but also securely archiving these communications for compliance and discovery. We address four important problems for the enterprise:

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Keeping malicious content out;


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Preventing the theft or inadvertent loss of sensitive information and, in turn, ensuring compliance with regulatory data protection mandates;


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Collecting, retaining, governing and discovering sensitive data for compliance and litigation support; and


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Securely sharing sensitive data with customers, partners and suppliers.

Our platform and its associated solutions are sold to customers on a subscription basis and can be deployed through our unique cloud-based architecture that leverages both our global data centers as well as optional points-of-presence behind our customers' firewalls. Our flexible deployment model enables us to deliver superior security and compliance while maintaining the favorable economics afforded by cloud computing, creating a competitive advantage for us over legacy on-premise and cloud-only offerings.

Our solutions are used by approximately 2,400 customers worldwide, including 24 of the Fortune 100, protecting tens of millions of end-users. We market and sell our solutions worldwide both directly through our sales teams and indirectly through a hybrid model where our sales organization actively assists our network of distributors and resellers. We also distribute our solutions through strategic partners including International Business Machines Corp. (IBM), Microsoft Corporation and VMware, Inc.

Industry Background

A number of trends are leading to a significant shift in the nature and severity of data security threats and the measures required to address them:

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Data security attacks are becoming more sophisticated and targeted. Professional criminals, governments and "hacktivists" are increasingly pursuing sensitive information, causing threats to shift from generic malware and high-volume spam to more targeted attacks, including "spear phishing" attacks, focused on high-value financial data.


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Consumerization of IT and growth of business-to-business collaboration increases risk of data loss. The widespread adoption of consumer technologies in the enterprise and the increasing need for business partners to exchange sensitive data make it more challenging for enterprises to control and govern their data.


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Consequences of data breaches have become more severe. The monetary and reputational cost of data breaches, whether malicious or inadvertent, is increasing rapidly. An ongoing wave of high profile breaches in multiple industries has exposed a broad range of data, including personal information, diplomatic communications, online banking credentials, financial accounts and health care records.


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Regulatory mandates create additional data protection and governance requirements. Governments around the world and at all levels of jurisdiction are continuing to enact new laws regarding data protection and privacy as well as new regulations to mandate closer oversight over all aspects of regulatory compliance.

To protect their data assets, organizations have typically employed a number of disparate on-premise security products. However, these solutions are not well suited to addressing today's challenges and many organizations are still unable to adequately protect their data assets for a variety of reasons, including:

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Legacy threat protection products are increasingly vulnerable to modern targeted attacks. Widely deployed threat protection products are often ineffective against today's more advanced, targeted attacks.


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Siloed, reactive security and compliance offerings provide inadequate data protection. Legacy security architectures lack the integration and common policy framework to effectively protect and govern data across the enterprise.


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Traditional security architectures assume data is behind corporate firewalls. With the consumerization of IT and the associated adoption of mobile devices and cloud-based applications, valuable corporate data is now widely distributed. Legacy systems are unable to provide adequate data protection in this new environment because they are not designed to apply data loss prevention technologies to webmail, Internet-based collaboration applications or social networking sites.


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Inflexible, cumbersome security and compliance systems are often bypassed by end-users. Most existing solutions are inflexible, cumbersome to use, and hinder end-users' day-to-day business activities, all of which lead end-users to bypass them.


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Discrete, hardware-based offerings have high total cost of ownership. Traditional on-premise security and archiving products are time consuming to deploy and manage, require redundancy and excess capacity to handle peak-level workloads, and are difficult and expensive to upgrade.

Market Opportunity

In an attempt to defend against the constantly evolving threat landscape and to comply with government mandates, enterprises are beginning to implement new, more robust corporate policies for data protection, archiving and governance. To enforce these new policies, secure communication technologies and policy-based encryption are being used to limit the leakage of sensitive data and intellectual property, and archiving and eDiscovery solutions are being used to reduce legal compliance risks. According to International Data Corporation (IDC), a third-party market research company, the total worldwide market for data protection solutions is estimated to grow from $5.2 billion in 2011 to $8.0 billion by 2015, a compound annual growth rate (CAGR) of 11%.*

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*

See "Industry and Market Data."

The Proofpoint Solution

Our integrated suite of on-demand security-as-a-service solutions enables large and mid-sized organizations to defend, protect, archive and govern their sensitive data. Our comprehensive platform provides threat protection, regulatory compliance, archiving and governance, and secure communication. These solutions are built on a cloud-based architecture, protecting data not only as it flows into and out of the enterprise via on-premise and cloud-based email, instant messaging, social media and other web-based applications, but also securely archiving these communications for compliance and discovery. We have pioneered the use of innovative technologies to deliver better ease-of-use, greater protection against the latest advanced threats, and lower total cost of ownership than traditional alternatives. The key elements of our solution include:

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Superior protection against advanced, targeted threats. We use a combination of proprietary technologies for big data analytics, machine learning and deep content inspection to detect and stop targeted "spear phishing" and other sophisticated attacks. By processing and modeling billions of requests per day, our technology can recognize anomalies in traffic flow to detect targeted attacks, distinguish between valid messages and "phishing" messages, and detect targeted "zero-hour" attacks in realtime and quarantine them appropriately.


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Comprehensive, integrated data protection suite. We offer a comprehensive solution for data protection and governance through an integrated, security-as-a-service platform that improves an organization's ability to detect and mitigate inbound and outbound threats and securely archive and discover communication across all major communication channels including email, instant messaging, social media and other web-based applications.


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Designed to empower end-users. Our solutions actively enable secure, business-to-business and business-to-consumer communications and make it easy for end-users to share information.


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Security optimized cloud architecture. Our multi-tenant security-as-a-service solution enables us to leverage the benefits of the cloud to cost-effectively deliver superior security and compliance while optimizing each deployment for the customer's unique threat environment.


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Extensible security-as-a-service platform. Our security-as-a-service platform integrates with internally developed applications as well as with those developed by third parties while also providing a means to integrate with the other security and compliance components deployed in our customers' infrastructures.

Our Business Strategy

Our objective is to be the leading security-as-a-service provider of next-generation data protection and governance solutions. The key elements of our strategy include:

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Grow our customer base;


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Broaden the adoption of our platform with existing customers;


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Grow and further expand our international presence;


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Extend our channel partner network;


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Leverage and extend the capabilities of our security-as-a-service platform; and


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Protect against threats from established and emerging communication and collaboration platforms.

Risks Affecting Us

Our business is subject to numerous risks, as highlighted in the section entitled "Risk Factors" immediately following this prospectus summary. Some of these risks include:

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We have a history of losses, and we may not achieve profitability in the future;


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We operate in a highly competitive environment with large established competitors;


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If we are unable to maintain high subscription renewal rates or sell additional solutions to current subscribers, our future revenue and operating results will be harmed;


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If our solutions fail to protect our customers from security breaches, our brand and reputation could be harmed;


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If our customers experience data losses, our brand, reputation and business could be harmed; and


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If enterprises continue to migrate to cloud-based email systems, and we fail to develop, market, or enhance our solutions so that they are valued by either our existing customers currently using these cloud-based systems or by new prospects, our ability to grow or maintain our revenues could be harmed.

Corporate Information

We were incorporated in Delaware in 2002. Our principal executive offices are located at 892 Ross Drive, Sunnyvale, California 94089, and our telephone number is (408) 517-4710. Our website address is www.proofpoint.com. The information on, or that can be accessed through, our website is not incorporated by reference into this prospectus and should not be considered to be a part of this prospectus.

Unless otherwise indicated, the terms "Proofpoint," "we," "us" and "our" refer to Proofpoint, Inc., a Delaware corporation, together with its consolidated subsidiaries.

"Proofpoint" is our registered trademark in the United States, and the Proofpoint logo and all of our product names are our trademarks. This prospectus contains additional trade names, trademarks, and service marks of ours and of other companies. We do not intend our use or display of other companies' trade names, trademarks, or service marks to imply a relationship with these other companies, or endorsement or sponsorship of us by these other companies. Other trademarks appearing in this prospectus are the property of their respective holders.

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The Offering

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The number of shares of our common stock to be outstanding after this offering is based upon the 47,402,137 shares of our common stock outstanding as of September 30, 2011, and does not include:

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20,227,426 shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2011, with a weighted-average exercise price of $1.73 per share;


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711,800 shares of our common stock issuable upon the exercise of stock options granted after September 30, 2011 through November 30, 2011, with a weighted-average exercise price of $3.29 per share;


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4,375 shares of our common stock issuable upon the exercise of a warrant outstanding as of September 30, 2011, with an exercise price of $0.15 per share; and


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shares of our common stock reserved for future issuance under our 2012 Equity Incentive Plan and our 2012 Employee Stock Purchase Plan, each of which will become effective on the first day that our common stock is publicly traded and each of which contains provisions that automatically increase the number of shares reserved for issuance each year, as more fully described in "Executive Compensation—Employee Benefit Plans."

Except as otherwise indicated, all information in this prospectus assumes:

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a -for- split of our common stock, to be effected in 2012;


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the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 39,134,535 shares of our common stock effective immediately upon the completion of this offering;


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the filing of our restated certificate of incorporation and the effectiveness of our restated bylaws, which will occur upon the completion of this offering; and


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no exercise by the underwriters of their option to purchase up to an additional shares of our common stock from us in this offering.

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Summary Consolidated Financial Information

The following tables present summary historical financial data for our business. You should read this information in conjunction with "Selected Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements, related notes and other financial information included elsewhere in this prospectus.

We derived the summary consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the unaudited consolidated statements of operations data for the nine months ended September 30, 2010 and 2011, and the unaudited consolidated balance sheet data as of September 30, 2011 from our unaudited consolidated financial statements included elsewhere in this prospectus. Our unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which consist only of normal recurring adjustments, necessary for the fair statement of those unaudited consolidated financial statements. Our historical results are not necessarily indicative of the results to be expected in the future, and the results for the nine months ended September 30, 2011 are not necessarily indicative of operating results to be expected for the full year ending December 31, 2011 or any other period.

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(1)

Includes stock-based compensation and amortization of intangible assets as follows:

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(2)

Please see notes 12 and 13 of our notes to consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of basic and diluted net loss per share and pro forma net loss per share.

(3)

Adjusted subscription gross profit is a non-GAAP measure. Please see "—Reconciliation of Non-GAAP Financial Measures" below for more information and the reconciliation of subscription gross profit to adjusted subscription gross profit.

(4)

The billings metric is a non-GAAP measure. Please see "—Reconciliation of Non-GAAP Financial Measures" below for more information and the reconciliation of total revenue to billings.

(5)

Adjusted EBITDA is a non-GAAP measure. Please see "—Reconciliation of Non-GAAP Financial Measures" below for more information and the reconciliation of net loss to adjusted EBIDTA.

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(1)

The pro forma consolidated balance sheet data as of September 30, 2011 reflects the automatic conversion of all our outstanding convertible preferred stock into common stock upon the completion of this offering.

(2)

The pro forma as adjusted consolidated balance sheet data as of September 30, 2011 also gives effect to our receipt of the net proceeds from the sale of the shares of common stock that we are offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) each of cash, cash equivalents and short-term investments, total assets and total stockholders' equity by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Reconciliation of Non-GAAP Financial Measures

Adjusted subscription gross profit We have included adjusted subscription gross profit, a non-GAAP financial measure, in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our operating results, core operating performance, and trends to prepare and approve our annual budget and to develop short- and long-term operational plans. We have provided a reconciliation between subscription gross profit, the most directly comparable GAAP financial measure, and adjusted subscription gross profit. We believe that adjusted subscription gross profit provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of adjusted subscription gross profit has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider adjusted subscription gross profit alongside other financial performance measures, including subscription gross profit and our other GAAP results.

The following unaudited table presents the reconciliation of subscription gross profit to adjusted subscription gross profit for the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011:

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Billings

We have included billings, a non-GAAP financial measure, in this prospectus because it is a key measure used by our management and board of directors to manage our business and monitor our near term cash flows. We have provided a reconciliation between total revenue, the most directly comparable GAAP financial measure, and billings. Accordingly, we believe that billings provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of billings as a non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for revenue or an analysis of our results as reported under GAAP. Some of these limitations are: