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Proofpoint Inc (NASDAQ:PFPT)
Q1 2020 Earnings Call
May 9, 2020, 8:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Proofpoint First Quarter 2020 Earnings Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Jason Starr, Vice President, Investor Relations. You may begin.

Jason Starr -- Vice President of Investor Relations

Thanks, Shelley. Good afternoon, and welcome to Proofpoint's First Quarter 2020 Earnings Call. Joining me on the call are Gary Steele, Proofpoint's Chief Executive Officer and Chairman of the Board; and Paul Auvil, Proofpoint's Chief Financial Officer. Today, we'll be discussing the results announced in our press release that was issued after the market closed this afternoon, a copy of which is available on the Investor Relations section of our website.

Through the course of this call, we will make forward-looking statements regarding future events and future financial performance of the company, which are subject to material risks and uncertainties that could cause actual results to differ materially. We caution you to consider the important risk factors contained in the press release and on this conference call. These risk factors are more fully detailed under the caption Risk Factors in Proofpoint's filings with the SEC, including our most recent Form 10-K.

We believe that the COVID-19 crisis creates particular complexity when it comes to providing a forward-looking view of the business, and we are providing our guidance on a good faith basis per recent SEC recommendations. More specifically, note that on April 8, the SEC Chairman, Jay Clayton; and the Director, Division of Corporate Corporation Finance, Bill Hinman, issued a joint statement extolling the importance of companies to provide as much guidance as possible during the current earnings season. And in that context, we are choosing to follow this directive as issued.

Note that we would like to specifically caution investors that our future performance will be harder to predict for the foreseeable future as compared to our performance over the past eight years as a public company given the crisis and the many degrees of complexity that it brings to understanding the impact to the various markets and customers that we serve. These forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, May 7, 2020. We undertake no obligation to update these statements as a result of new information or future events.

Of note, it is Proofpoint's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is also done through a public disclosure such as a press release or through the filing of a Form 8-K. Additionally, we will present both GAAP and non-GAAP financial measures on today's call. These non-GAAP measures exclude a number of items as set forth in our release and are not intended to be considered in isolation from, a substitute for or superior to our GAAP results, and we encourage you to consider all measures when analyzing Proofpoint's performance.

A reconciliation of GAAP to non-GAAP measures and a list of the reasons why the company uses these non-GAAP measures are included in today's press release and Form 8-K. You will also note that we have changed the format of today's prepared remarks to focus on our views regarding the impact of COVID-19 to our business, and hence, we have curtailed the amount of detail that we will typically that we typically provide regarding the performance of the quarter just ended, in this case, Q1 2020. Like all of our prior quarters, there was a long list of compelling highlights from our sales activity during the quarter, but in the interest of time, they will not be included in this call.

Also note that given our current scale of the business, we are now rounding all figures to the nearest million for our commentary on this call, and we plan to continue this practice on all future calls. Finally, in addition to reading our press releases and SEC filings, we encourage investors to also monitor the Investors section of our website at investors.proofpoint.com as we routinely post investor-oriented information such as news and events, financial filings, webcasts, presentations and other relevant materials to it.

So with all that said, I'll turn the call over to Gary.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Thanks, Jason. I'd like to thank everyone for joining us on the call today. Let me start by saying that we would like to extend our best wishes to everyone listening to today's call and that our thoughts are with everyone impacted by the current pandemic. Our top priority is the health and safety of our employees while maintaining our world-class operational readiness to continue to support and protect our customers despite this unique crisis. Our company, our operating infrastructure and our product lines were all specifically designed from the ground up to be able to handle disasters and emergencies of any kind, and I'm pleased to report that we have proven ourselves to be equal to the task in all respects.

Proofpoint implemented a work-from-home policy across our global locations in March, and I'm happy to say that we prepared well and that our overall team productivity remains quite strong. I'd like to thank our teams around the world for doing such a fine job of quickly adapting to our work-from-home operating model as well as all of their outstanding efforts in support of our continued commitment to our mission of defending our customers from advanced threats and compliance risks in this unprecedented situation.

In the first quarter, our results exceeded our guidance on all metrics, driven by good linearity, strong cash collections and solid demand across our broad product lines. As the crisis deepened in the final weeks of March, our sales team did an excellent job in closing out the quarter, particularly as many shelter in place orders were implemented around the globe with little notice, resulting in overall disruption in sales cycles, in general, as well as fairly widespread reprioritization by procurement teams to urgently source unplanned products and solutions that were directly responsive to the COVID-19 crisis over their over other purchasing initiatives.

During this time, we also saw modest contraction in pipeline due to certain projects being deferred by enterprises, particularly those in hard hit industries such as energy, travel, hospitality, retail and certain segments of healthcare. We also saw both existing and new customers pivot toward shorter duration contracts as companies sought to conserve cash to weather the unknown economic challenges in the year ahead, similar to the actions we saw during the 2019 financial crisis.

As a result, we saw 11% sequential decline in billed contract duration from Q4 2019 to Q1 2020, though this was partially offset by pricing gains through the elimination of the customary 10% discount for three year prepaid transactions. As we look ahead to the remainder of the year, I would state that our business overall remains healthy and the powerful secular drivers that fuel our business remain firmly in place with continuing demand for our next-generation cloud security and compliance platform, the ongoing migration to the cloud continuing to pace and our unique visibility into the rapidly evolving threat landscape, proving to be more important and valuable than ever.

With that as a backdrop, I'd like to share the following observations in terms of how I expect our business to be impacted by the crisis as compared to our historical norms until the pandemic subsides. First, I expect that customers will continually continue to generally focus on conserving cash. And as such, I would expect that our billed contract durations would trend to the very low end of our targeted range of 14 to 20 months in the quarters ahead. While this trend toward shorter contracts impacts billings and cash flow in 2020, it also improves overall pricing and, of course, would contribute additional cash flow in 2021 as these contracts renew in the following year.

Second, I believe that layoffs and furloughs will persist for at least the next several quarters, with particular concentration in the highly impacted industries. Given our per se pricing model and a reduction in customer head count, will, by definition, impact our ARR retention rates when these customers renew. Third, I believe that we will continue to experience some project deferrals in our existing pipeline, first and foremost, in the highly impacted industries, but also on our larger scale archiving projects that involve significant third-party resources to execute the exporting of large data sets from the incumbent platform.

Fourth, while Europe was the first of our regions to be impacted by the crisis, and hence, one might assume that it would be first to recover, our sense is that demand in this region could be impacted for the full year as the key economies in that region rustle with restarting. Fifth, we do expect slower engagement with procurement teams in some companies as they continue to prioritize certain projects needed to properly enable working from home across the enterprises ahead of other projects. Overall, we remain confident in our ability to deliver top line growth and attractive free cash flow margins as we weather this unprecedented global crisis, underscoring the power of our business model built on 98% recurring revenue, high renewal rates and solid free cash flow.

Given the rapidly shifting operating environment as a result of COVID-19, we have already taken quick actions to aggressively manage our spending, including moderating the pace of our hiring activity, rationalizing our marketing spend, reducing travel and entertainment expense and executing a shift to virtual events across the board, including our customer user conference in September. We will continue to take a close look at other areas to reduce costs where feasible. Importantly, I'd like to highlight that we have no plans or expectations in terms of reducing headcount through layoffs or furloughs in our business and we plan to continue to pay our entire workforce without any reduction in their typical hours worked or any adverse adjustments to their salaries.

These commitments to our workforce and our customers are a testament to the quality caliber of the business that Proofpoint has built over the past 18 years, and we believe that these actions will further our ability to deliver our world-class security and compliance capabilities no matter how challenging the situation may be. Overall, the threat landscape remains quite active with threat actors exploiting the fear and uncertainty in the current environment by targeting unwitting users through the use of COVID-19 lures and other similar tactics to steal logging credentials, compromise users and gain access to other sensitive corporate data in these uncertain times.

In fact, current work-from-home requirements, in many cases, serve to further amplify the need for Proofpoint's people-centric security and compliance solutions as employees are accessing and interacting with sensitive corporate data in cloud venues from home networks, and hence, by definition, are not operating on corporate networks where they have the traditional protections. Add to this is the fact that many employees may be stressed in the new work environment, often distracted by their family members or uncertain of new telecommuting procedures, which only further serves to magnify these risks.

Threat actors are keenly aware of this new reality, too, and are actively trying to capitalize on these factors to try to increase the chances of a successful attack. Our threat researchers have tracked a significant rise in attacks and campaigns over the past few months with hundreds of thousands of COVID-19 associated lurers attempting to deliver BEC emails, malicious attachments and URLs and other dangerous payloads. In fact, Proofpoint is currently tracking nearly 300 different campaigns. And last week, we saw over 75 million malicious messages leveraging COVID-19 themes.

Our competitors struggle with detecting and preventing these new forms of attacks further adding to the risk employees face when working from home. In some recent cases, this efficacy gap has resulted in accelerated implementations of Proofpoint services. While it remains early, we believe that these new work-from-home mandates could further accelerate the embrace of the cloud by enterprises and hence serve as yet another catalyst in the shift away from legacy on-premise applications in support of more flexible work-from-home capabilities. This new reality also reinforces the need for people-centric cybersecurity and compliance given the inherent challenges of applying infrastructure-based security offerings in these new settings.

Unsurprisingly, email remains the most critical factor to secure given that over 90% of all breaches begin with malicious email. However, there are many other layers of capabilities and adaptive controls that are required to help protect users from the advanced threats they face in other venues beyond email, such as cloud and social media properties. Our Cloud Application Security Broker, or CASB, can programmatically detect advanced threats and data loss prevention or DLP violations in cloud venues. And our browser isolation capability can provide similar protection for unsanctioned cloud applications or other web properties.

Our recently acquired Insider Threat Management solution provides security and compliance teams with important visibility into risks on the endpoint from employees who are either acting with malicious intent, behaving carelessly or unknowingly compromised by a threat actor. This capability is particularly important when employees are operating beyond the reach of the corporate network. In fact, during the first quarter, we saw several wins driven by this specific concern. And finally, security awareness training and phishing simulations are a critical last line of defense to ensure employees remain vigilant on the threats they face outside of corporate offices.

Proofpoint is uniquely positioned to solve all of these challenges by combining our excellence in email security and threat intelligence with our growing portfolio of people-centric security and compliance solutions, which broaden our reach across these new threat vectors. We see compelling opportunity to continue to invest in expanding our product offerings while scaling our organization and infrastructure around the globe with an eye toward emerging even better positioned to capture the significant growth opportunity that lies ahead as this crisis subsides.

Our platform of services is also enabling Proofpoint to emerge as a strategic and trusted partner for our customers, particularly as they look to consolidate spending around best-in-class solutions in support of today's threat environment, while also reducing the number of point solutions from smaller, often privately held vendors in order to streamline their security and compliance infrastructure and simplify vendor management.

We also continued to make progress toward further expansion abroad, and our international business grew 29% year-over-year and represented 20% of total revenue. While we're pleased with these results, we did see a pronounced downturn in Europe in the final two weeks of the quarter as countries such as Italy and Spain implemented shelter in place policies in advance of the U.S. and other markets. While we remain optimistic on longer-term ability to gain share internationally, we recognize that there could be further deferrals on purchases over the arc of 2020 in these markets, depending on the timing and slope of their economic recovery.

As a final update, earlier this week, we closed a small but exciting acquisition of a company called Defence Works, a security awareness start-up based in Manchester, U.K. The purchase price is less than $5 million. And while the financial impact for 2020 is minimal, the acquisition brings a library of interactive content to our high-growth security awareness training business. It provides our customers innovative content that we think will support our continued success in this market, and the acquired team will be another interactive content engine to enable us to drive further differentiation and deliver highly engaging training aimed at helping customers improve their employee security behavior.

Before turning it over to Paul, while we are clearly operating in uncertain times, I'd like to remind investors the six important characteristics of our business model that we believe bolster our ability to weather the current crisis and help to enable us to emerge even stronger when things normalize. First, we protect the most important threat vector in the enterprise. And as such, we provide a service that cannot be allowed to lapse despite the challenging economic conditions that surround us.

Cybersecurity and compliance requirements are nondiscretionary. And if anything, the need for these solutions has become even more apparent as threat actors escalate their attacks to exploit the crisis. The record number of people working from home also significantly expands the threat surface and our people-centric set of solutions fit nicely to address this challenge. Second, our overall efficacy of advanced threat services is measurably superior to our competitors and easily demonstrated through a remote proof of concepts. Our cloud-based delivery model requires no complex on-site implementations to activate service.

Third, our business model is built on a recurring subscription revenue model that drives 98% annual recurring revenue, which when paired with our strong renewal rates, result in a business with a remarkable degree of stability in turbulent times. Fourth, we have a blue-chip customer base, which is diversified across verticals and predominantly enterprise focused, though we estimate that approximately 20% of our revenue comes from sectors more impacted by the current crisis, such as retail, travel, energy and parts of the healthcare industry. As we shared last quarter, at the end of 2019, our enterprise customer count increased 16% to 7,100 as compared to 2018. These customers collectively generate over 90% of our revenue and hence, only a small fraction of our overall revenues are exposed to the SMB segment.

Fifth, in both the first quarter of 2020 as well as throughout 2019, over 60% of our new and add-on revenue came from existing customers, underscoring the demonstrable trust and value that Proofpoint has created with our customers and hence, our ability to consolidate spending within our customer base across point solutions, which is increasingly important in a world where enterprises have fewer IT staff available to manage vendors. And the sixth and final point, Proofpoint has always had a strong culture around maintaining discipline with our discretionary spending.

The resulting strong free cash flow, paired with our strong balance sheet enables us to continue to invest in the business while maintaining financial stability without any change to our employee morale or expectations as a result of the current economic environment. So in summary, we are very pleased with our Q1 operating results, though we also recognize the additional complexity of our operating environment and the challenges that many of our customers face.

Our unique people-centric approach to cybersecurity and compliance is clearly resonating with customers and prospects alike, and we believe that we are well positioned to further execute on our plan to continue to gain share and drive attractive top and bottom line growth. In the current environment, we will remain keenly focused on our health and well-being of our employees and the needs of our customers while delivering on our operational objectives with discipline. We believe this rigor will enable Proofpoint to emerge from this unprecedented situation even stronger and better positioned in the years ahead.

With that, let me turn it over to Paul.

Paul Auvil -- Chief Financial Officer

Thanks, Gary. We were pleased with our operating results this quarter, particularly given the rapidly changing environment in the final few weeks of the quarter. Revenue totaled $250 million, up 23% year-over-year and above our guidance range of $246 million to $248 million. As Gary noted, we recorded an 11% sequential decline in billed contract duration this quarter across our new add-on and renewal bookings activity. And we also saw a number of project deferrals, particularly in impacted industries, which resulted in a dip in new and add-on business closed during the final two weeks of March.

So all things considered, we were pleased to deliver $238 million in billings here in the first quarter. As noted on prior calls, under ASC 606, the derivation of our billings metric now requires adjustments to reflect unbilled accounts receivable activity during the quarter as well as any right of refund liability. And for Q1, the adjustment related to these two items had a negative impact of $1 million. Turning to expenses and profitability for the first quarter. On a non-GAAP basis, our total gross margin was 79%, in line with our expectations.

During the first quarter, total non-GAAP operating expenses increased 26% over the prior year period to $172 million, representing 69% of total revenue. As expected, this was primarily driven by the additional operating costs that we absorbed from our acquisition of ObserveIT and also broad-based hiring in all key functions of the business. In terms of profitability for the quarter, we reported non-GAAP net income of $24 million, well above our guidance range of $16 million to $18 million.

Note that this result benefited by approximately $2 million due to a stronger U.S. dollar at the end of the quarter, which reduced our international lease liabilities carried on the balance sheet when reported in U.S. dollars since these leases are denominated in local currencies. Even without this benefit, we still beat the high end of the range by $4 million. As a brief reminder, under the new leasing standard, ASC 842, that we adopted in 2019, the future payments of all leases are now carried in our balance sheet and denominated in local currencies. And as we saw this quarter, this can induce some movement to our reported net income during periods of foreign exchange rate volatility.

Moving to earnings per share. Non-GAAP earnings per share for the quarter was $0.38 per fully diluted share, above our guidance range of $0.25 to $0.29 based on 65 million shares. The EPS calculation applies the "If-Converted" method to our newly issued convertible notes and as such, assumes conversion of approximately six million shares associated with our 2024 convertible notes and adds back just under $0.5 million of cash interest associated with the convertible debt. As an important point, when including these additional shares to calculate the enterprise value of Proofpoint, keep in mind that when using the fully diluted share count associated with the If-Converted method, you must also eliminate the $920 million in debt associated with these notes since the higher share count is based on the premise that the 2024 convertible notes have been fully converted from debt to equity.

On a GAAP basis, we recorded a net loss for the first quarter totaling $74 million or $1.30 per share based on 57 million shares outstanding. In terms of cash flow, we generated $92 million in operating cash flow and invested $12 million in capital expenditures, resulting in free cash flow for the quarter of $80 million. We had very good bookings linearity in the quarter, which helped to accelerate some cash flow into the first quarter. As well, expected cash disbursement of $20 million for the repatriation of ObserveIT's intellectual property was delayed, which contributed $20 million to the quarter as compared to our guidance in January. Absent that delay, our free cash flow for the quarter would have been otherwise, $60 million, still nicely above our guidance range of $52 million to $54 million.

Moving to the balance sheet. We ended the quarter in a very strong position with approximately $946 million in cash and cash equivalents. As I just noted, while we do carry outstanding convertible notes of $920 million, this debt is not due until August of 2024, and hence, we have over four years to either exceed the conversion price of $153.99 per share or retire the debt through our strong cash flow generated from operations. This debt also has no financial or restricted payment covenants of any kind in terms of how we operate the business or how we put the cash balances to work thus giving us plenty of operating flexibility in the years ahead.

So now turning to guidance for 2020. As Jason highlighted in the opening section, we are choosing to follow the guidance of the SEC Chairman from his comments on April 8, and as such, under the protections afforded under safe harbor, we are engaging in a good faith effort to provide a forward-looking view of our business for the remainder of the year. Given that it is unclear how long the current pandemic may impact the global economy, and based on our results here in the first quarter, we have made some adjustments to our operating plans and financial assumptions for the remainder of 2020. It is based on what we know as of today, and this could, of course, change depending on how the COVID-19 pandemic plays out in the months ahead.

The Chairman's statement on April eight specifically requested that companies use upcoming earnings calls not as forum to showcase historical results that may be relatively less significant, but instead, it's an opportunity to address, one, where the company stands today operationally and financially; two, how the company's COVID-19 response, including its efforts to protect the health and well-being of its workforce and its customers, is progressing; and three, how its operations and financial condition may change as a result of all of our efforts to fight COVID-19.

So let me address each of these in turn. In his first question, in terms of where the company stands today operationally and financially, we believe that we are well positioned in all respects. Our transition to work from home has been relatively smooth. Above and beyond this, with almost $1 billion of cash on hand and a business model with 98% recurring subscription revenue that has historically generated cash flow margins of 20% or better, we believe that the financial model that powers our business, backed by a strong balance sheet, gives us a solid foundation to weather the economic challenges that may lie ahead.

To the second question, in terms of how the company's COVID-19 response is progressing, including its efforts to protect the wealth and well-being of its workforce and its customers, note that Gary has already covered this topic quite thoroughly during his prepared remarks, and so in the interest of time, I won't reiterate those comments here. On the third question, in terms of how our operations and financial condition may change as a result of all of our efforts to fight COVID-19, I think the simplest way to address this question is with our updated guidance for the year. We have run a number of potential financial models to examine the impact to our future financial condition, depending on the depth and severity that the current pandemic has on the global economy.

And we continue to believe that the outlook for our business is solid across the spectrum of these modeling outcomes. Unlike our traditional guidance, where we can typically rely on a reasonably stable set of economic conditions to persist throughout the annual period, in this case, we are taking a different approach and broadening our guidance to reflect two very different economic outcomes over the course of the remainder of the year, and hence, providing investors with a broader view in terms of how we believe that the business will operate under these two disparate sets of assumptions, taking into account the key impacts from the crisis that Gary covered earlier.

With that in mind, it is again important to understand that these figures are not meant to reflect a traditional guidance range but rather are meant to serve as two anchor points for investors to consider as we evaluate our potential performance across a wide range of possible economic conditions that may play out as this unprecedented operating environment unfolds over the remainder of the year. At the high end of the range, which is consistent with the path that we believe our business is currently tracking today, we are assuming that the COVID-19 crisis peaks during the second quarter of 2020 with a gradual return to normalcy over the second half of the year.

In this context, the total new and add-on business that we would expect to close across the arc of the entire year would decline roughly by 5% as compared to 2019. Our ARR retention rates would decline modestly compared to historical norms due to workers that have been laid off or furloughed by our customers. And as companies focus on preserving cash, our billed contract duration for the remainder of the year would be consistent with Q1 2020, below our historical norms. At the low end of the range, we are assuming that COVID-19 and the crisis associated with it continues to meaningfully impact the global economy across the arc of the entire year.

In this context, the total new and add-on business that we would expect to close could decline by as much as 40% as compared to 2019, and our ARR retention rates could decrease to the mid- to high 80s due to widespread reduction in the workforce as a result of layoffs or furloughs in impacted industries. And our billed contract duration for the remainder of the year could fall to approximately 14 months as a wider range of companies seek to move to shorter contracts in the interest of preserving cash throughout the year. It is important to note that as the economy recovers, we would expect billings duration and ARR retention to normalize and that many of those who lost their jobs will rejoin the workforce, creating a nice uplift to our business when the time comes just as we saw during recovery from the 2009 financial crisis.

So with those assumptions as a backdrop, our guidance for 2020 is as follows: revenue should be in the range of $1.005 billion to $1.03 billion as compared to our prior expectations of $1.06 billion to $1.067 billion. Gross margin should be approximately 79%. Net income should be in the range of $91 million to $101 million compared to our prior range of $91 million to $95 million, reflecting the beneficial impact of our efforts to readjust our spending plans for the year in response to our lower revenue outlook. This translates to $1.41 to $1.46 $1.41 to $1.56 per share using 66 million fully diluted shares outstanding.

This guidance also assumes depreciation of roughly $36 million to $38 million, $5 million in net cash interest income, an assumed tax rate of 17% under C&DI. Free cash flow should be in the range of $85 million to $135 million as compared to our prior guidance of $178 million to $182 million. This updated range contemplates the two operating scenarios I just described and reflects the direct input of the updated assumptions around billings duration declining and the updated expectations in terms of lower new and add-on business that would close this year under the two scenarios as we work through the current crisis.

Note that this guidance includes $20 million of payment to the repatriation of ObserveIT's intellectual property, which we now expect to be paid in the second half of the year. As a reminder, the guidance also reflects the $35 million in net cash operating costs that we're absorbing in 2020 from the acquisition of ObserveIT, as we outlined last quarter. And finally, note that as we explained last quarter, this guidance assumes capital expenditures of $94 million, including approximately $43 million in capex associated with the build-out of our new headquarters in Sunnyvale.

As a reminder, we have negotiated an $18 million tenant allowance with the landlord, which will partially offset some of the capex associated with this project, though it will run through the operating cash line of the cash flow statement as opposed to netting against capital expense. If we adjust for these onetime effects, it suggests a range for our adjusted free cash flow of $165 million to $215 million from our ongoing operations, which we believe is a very solid result when considered in the context of this crisis. So again, I would reiterate that this guidance is for the full year is meant to provide two anchor points that are grounded in two very different sets of economic assumptions. And at this time, we believe that we are tracking to the more favorable set of outcomes.

Now let's discuss our financial outlook for the second quarter, which reflects the tracking consistent with the high end of the range for the full year that I just outlined. We expect revenue to range between $251 million to $255 million, reflecting 18% growth at the midpoint. We expect second quarter non-GAAP gross margin to be roughly 79%, consistent with Q1. We expect second quarter non-GAAP net income to be $24 million to $26 million or $0.38 to $0.41 per share, using 65 million fully diluted shares outstanding, and this assumes depreciation of approximately $9 million, net cash interest income of less than $1 million and an assumed tax rate of 17% under C&DI.

Given the duration trends that we saw in Q1, coupled with the potential for orders to slip as the economy absorbs the full impact from recent shocks in the second quarter, we now expect Q2 cash flow, free cash flow specifically, to be breakeven to $10 million. Q2 capex is expected to be $12 million, including $5 million of capex associated with our new corporate headquarters, which will largely be offset by the tenant allowance just described. As a final point of reference, while we typically don't comment on early results during the current quarter, I thought it would be appropriate to highlight that for the month of April, our linearity on billings, new and add on business, customer rules and collections all tracked at or above our historical norms for the first month of the quarter when considered in the context of the guidance just provided for the second quarter.

And so while we still have the lion's share of the business left to close here in May and June for the quarter, a period which will likely continue to be turbulent and unpredictable, we are nevertheless pleased with our start to the quarter and remain hopeful that the path of our business remains to be on target to achieve the high end of our updated outlook for the year. In conclusion, despite a very challenging economic environment as a result of the coronavirus pandemic and the resulting economic downturn, we believe that we remain well positioned. Our world-class security and compliance capabilities are even more relevant now for customers and prospects around the world with many adjusting to the new work-from-home paradigm.

Our team continues to execute well, delivering strong top and bottom line operating results, and we remain well positioned competitively. Note that while we remain focused on driving the business through this crisis with an expectation of delivering over $1 billion of revenue this year on our path to $2 billion over the next several years, clearly, as we work our way through this crisis, the date of achieving this $2 billion milestone could very well be impacted by at least a few quarters.

As the economy rebounds down the road, we will provide an update on this time frame, but nevertheless, we continue to see a significant opportunity and are driving aggressively toward that target. We will continue our targeted investments with discipline, and we expect these to help us to emerge from this uncertain period stronger than ever and further our opportunity to protect our customers and drive strong returns for our shareholders in the years ahead.

[Operator Instructions] Thank you very much for taking the time to join us on the call today. And with that, we would be happy to take your questions. Operator?

Jason Starr -- Vice President of Investor Relations

No, this is Jason. I'm just going to clarify a quick thing that Paul said. I thought I heard him say $1.46 per share on the net income guide for the year. So I wanted to be clear that it's $1.41 to $1.56, just in case that doesn't come through on the transcript.

So with that said, I'll turn it back to Shelley for Q&A. Thanks.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Gur Talpaz from Stifel. Please go ahead.

Chris Speros -- Stifel -- Analyst

Hi, This is actually Chris Speros on for Gur. One for Gary. Can you talk about the demand for DLP that you saw within this environment? Also, can you speak to where we are in the ObserveIT integration process and if that has been impacted by COVID in any way at all?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Great questions. Real quickly. So demand for DLP, we see a significant amount of interest in looking at a next-generation of DLP, and we feel like the capabilities that we've been driving through the ObserveIT acquisition and further integration have been on mark in terms of meeting those demands. Those are bigger projects, and we see those coming to life really in the second half of the year. We're very pleased with the ObserveIT integration. We saw no slowdown through the work-from-home transition. And honestly, I think our productivity is probably on the development side has been higher. And so we feel very good about the work that's been done there and the early feedback that we're getting from customers.

Chris Speros -- Stifel -- Analyst

Great, thanks.

Operator

Our next question comes from Phil Winslow from Wells Fargo. Please go ahead.

Phil Winslow -- Wells Fargo -- Analyst

Yeah, I'm glad to hear that you're all well and hope the same is true for your families. Paul, thanks for the color you gave on sort of potential renewal implications just due to higher unemployment. But Gary, I wonder if you could focus in on some of the newer solutions because that's one of the things that we've picked up in our checks, that there is with work from home a lot of growing interest in some of those newer products, your Meta, CASB and browser isolation. How do you think about sort of what your what are your customers telling you in terms of just the number of attaches of products, as they think about Proofpoint as with the change in work? And then how are you thinking about that, I guess, Paul, relative to the churn commentary that you gave?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. So great question, Phil. So as we transition to work from home, we did see very positive demand and pipeline build as it relates to our CASB solution, our browser isolation solution, our ITM solution. And in the second half of March, as people got reoriented and then working into April, we've just seen broadly a lot of engagement from our sales team around these capabilities and products as customers rethink their overall security infrastructure to support a work-from-home environment.

We did see and it was mentioned briefly in the prepared remarks, things like our Insider Threat Management being purchased and deployed in really short periods of time because you had employees who had never worked from home before. They never had laptops before. And so to enable and fully secure these people, they needed some form of ITM solution. So there were some very specific examples where we saw accelerated sales cycles. We'll have to see how that plays out through Q2 and the remainder of the year. But we feel good about the demand profile across these capabilities that enable a very different security architecture supporting people working from home.

Paul Auvil -- Chief Financial Officer

Yes. And I think to your point on just churn and furloughs, the one thing that we are definitely seeing and it's very consistent with the financial crisis back in 2009, is that you have companies that are unaffected, and they just continue the normal renewal, and of course, buying new things from Proofpoint. We did a lot of add-on business in the quarter, over 60% of the total new and add-on came from add-on business in the quarter. That said, we do have companies that are affected that either have had layoffs or furloughs, in some case, a very large percentage of the overall workforce, that then in the near term, affects the renewal value because we, in most cases, adjust the renewal value to reflect the folks that are actually working and using email systems day in, day out.

But it is interesting that if you think of the intersection of that Venn diagram, we do have customers who have had furloughs or layoffs that nevertheless also have a workforce that needs to work remotely that have come in and executed add on purchases for things like Meta, CASB and other things to help enable work from home while at the same time seeing a compression in the value of the existing business. And that's OK. We're fine with that. For us, we're a strategic supplier to these folks. And we're quite confident, just like we saw in the recovery from 2009 that as their businesses get back online, they'll hire folks back. And ultimately, that increases the value of our original subscriptions back to where they started. And again, as the economy kicks in, ultimately grow from there over time.

Phil Winslow -- Wells Fargo -- Analyst

Right, thanks guys.

Operator

Thank you. Our next question comes from Walter Pritchard from Citi. Please go ahead.

Walter Pritchard -- Citi -- Analyst

Hi, thanks, Gary, wondering how helpful commentary there on new and add on business. As it relates to just sort of core email technology displacement and winning business from a market share perspective, what did you see in terms of that as the COVID impact started to take hold in the quarter? And what are you assuming as it relates to your guidance through the rest of the year around core share gains in the email market?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. So what drove the Q1 wins in core was really what was happening in the threat environment. So we saw at the beginning of the quarter, and it was exacerbated as we got to the end, where as threat actors moved to COVID lures, we saw many of the incumbent solutions not responding adequately to that. And we saw then these aggressive moves and purchases, like we had we literally had a Fortune 100 company demand that we moved them over a weekend because they were, I would call it, getting smoked.

And so we see this opportunity through the remainder of the year to continue to take share because of our overall efficacy. And as we noted in our prepared remarks, we can do all this remotely. We don't have to see people. We don't have to physically touch anything. And so we feel good about how that fits into the broader demand opportunity. And Paul can comment on how we factored that into guidance.

Paul Auvil -- Chief Financial Officer

Yes. I mean, overall, I think that we don't expect the threat environment to change. In fact, I think these new lurers and the like seem to be persisting and so that will continue to drive this catalyst that Gary just described. And of course, there continues to be an opportunity to go into the Symantec installed base and drive change, particularly where they've essentially on record said that smaller customers are no longer considered to be part of their core framework as they drive their business going forward.

And so while many of those customers were on two, three, four, five year prepaid contracts, we do see a litany of them coming along over the course of, not only here in the second quarter, but over the course of the remainder of the year that we think will help fuel core share shift gain in our favor. And of course, we I think as we've shared in past calls, often when we bring someone over and sell them core email security to replace an existing vendor, we often have the opportunity to sell other capabilities along with it. And so what might have been $100 to one vendor can easily be $200 or $300 to us, just using that as sort of a relative factor. So we can get two to three times the value selling a broader product set as we also convert over that core email market share from whoever the incumbent vendor is over to Proofpoint.

Walter Pritchard -- Citi -- Analyst

Thank you.

Paul Auvil -- Chief Financial Officer

Thanks.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Thanks.

Operator

Thank you. [Operator Instructions] We'll now take the next question from Sarah Hindlian-Bowler from Macquarie. Please go ahead.

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Thank you so much. Maybe this is a question for Paul actually. It seems like with duration coming down, you are certainly being flexible with your customers in distress, which we're definitely expecting from all of our companies. But Paul, it will be really helpful to me if you could walk me through how your renewals team is just generally approaching the renewals process with distressed industries. And maybe a little bit of what you saw in terms of trends month-over-month between March and April and then heading into May on that side.

Paul Auvil -- Chief Financial Officer

Yes. No, that's a great question. So as you know, well, Sarah, but just for the benefit of the broader interface of investors that may be listening, we have a separate dedicated team that does nothing but handle renewals for the company. And so we don't have our sales team that would go out and either drive new or add-on business involved at all, except where they may need to assist here and there. And so our engagement is to look after all these customers, whether we're having a pandemic or whether it's just a normal natural course of business. And it helps drive and foster really positive relationships with all these folks.

So naturally, first and foremost, we are seeing customers that may have historically done a three year deal or a two year deal, prepay, where they get a bit of a discount for that. Almost all of them seem to now be saying, "Hey, you know what I want to do? A 1-year deal." Now that, of course, means your price per user is going to go up a little bit because that discount associated with the prepayment goes away. But it enables them to conserve cash because obviously they're saving a fair amount of dollars that they can then use for an emergency fund of one sort or another.

For us, we're OK with that because what that means is that if we were to do a three year prepay this year, that means we wouldn't have another opportunity to renew and have another billings event for three years. If they just do a one year deal, not only I'm getting a little bit more in terms of price per user, but they're going to renew again next year. So it helps bolster billings in the subsequent year 2021. So there's that. I think the other thing that is kind of first is a standout is that when we are interacting with these customers, not only for those that are looking to move to shorter duration, the other thing that we run into is folks that have had furloughs or layoffs and so naturally, we'll make adjustments to reflect that lower user count.

So that's a fair and equitable way of handling, if you will, a downsizing the value of the contract. But I will tell you, and it's hard to predict what will happen here, but in the 2009 financial crisis, we have customers that would downsize their contracts and literally, within six months, have hired back some meaningful number of those workers. And so then we get an add-on to resize back upward that value of the renewal accordingly. And so it will be interesting to see how it plays out this time around.

But again, shortening duration in terms of going from a multiyear to a single year, and then adjusting to lower user counts are kind of classic examples. We do occasionally have requests for special payment terms and the like. But quite frankly, we're not in the business of financing our customers, quite frankly. And so our view is that, look, if you want to go get a loan, go to the bank and get a loan. I'm happy to do what I can to help you financially in terms of how you structure the business, but we're not going to give you 180-day payment terms to help finance your business. That's not what we do.

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Thank you so much. I appreciate that.

Operator

Thank you.Our next question comes from Rob Owens from Piper Sandler. Please go ahead.

Justin -- Piper Sandler -- Analyst

Hey guys. This is Justin [Phonetic] on for Rob. Gary, you mentioned about the international revenue being pretty strong in the quarter, consistent with some of the past quarters. Now I was just wondering if you could maybe give a little more color going into April how this is trending and then how you guys are thinking of this in terms of the guidance moving forward.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. As we indicated, while growth in the quarter was good at 29%, representing 20% of overall revenue, we did see a more significant impact as we got to the middle part of March. And we've seen less bounce back in Europe in April. So and we and Paul can discuss how we've thought about that more broadly in our guidance, but we're being relatively cautious. And if you go back to our prepared remarks, we noted that in our prepared remarks that we're being more cautious about Europe given what we've seen thus far. Paul, would you add anything to that?

Paul Auvil -- Chief Financial Officer

No. Okay. No, that's good.

Operator

Thank you. Our next question comes from Steve Koenig from Wedbush Securities. Please go ahead.

Steve Koenig -- Wedbush Securities -- Analyst

Great, thanks. Yeah thanks to having my question So most of my questions have been asked. Maybe, maybe a little bit more color would be interesting, though. When you think about what the work-from-home situation, could do for you guys. And let's fast forward maybe 12 months, 18 months, whatever we can to get whatever we need to do to get to a better business environment, if you think about you've got a bunch of irons in the fire in terms of emerging products that could play into this and already piece out, seeing some sales. And Gary, you called out ITM, personal email protect, I imagine, would be helpful here.

You're coming out with a unified DLP offering later this year. I presume that's multi vector. I'm wondering how that is going to be differentiated from the bigger DLP players out there. But as you fast forward down the road 12, 18 months, and you kind of maybe rank order these opportunities to think about what's going to be most interesting for driving growth, what pops up for you? What do you see as you look out?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. I think the thing that we're excited about, and I do believe this paradigm of working from home actually accelerates demand in this area, is I believe that customers will accelerate their move to the cloud. So as a result of that, we will see benefits in our core. So that's a positive. So we'll see continue to see those benefits over the course of the next three to five years. Second is how customers ultimately protect the cloud as they get there more fully from an IT strategy point of view, and we believe that drives demand for our CASB solution.

And then finally, I would say the investments that we're making through the integration of insider threat into an overall unified DLP set of capabilities that roll out later this year, we feel like we're really well positioned there to take advantage of a very large, very significant market. And I think it plays a much bigger role in a work from home world where DLP across CASB is a primary and key use case, having visibility all the way down to the endpoint, given that you're not on the corporate network anymore. You bring that together as well with our zero trust capabilities with the Meta Networks acquisition that we did, I think all of these capabilities really set us up for long-term really interesting growth.

And I do believe that while the pandemic is painful for many organizations around the world, I think this force to work from home will accelerate the adoption of a lot of these capabilities. So while COVID-19 is extremely painful for many organizations around the world, I do believe we're very well positioned to come out of this in a very strong position.

Steve Koenig -- Wedbush Securities -- Analyst

Thanks, Gary.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Thanks, Steve.

Operator

Thank you. Our next question comes from Melissa Franchi from Morgan Stanley. Please go ahead.

Melissa Franchi -- Morgan Stanley -- Analyst

Great. Right. Thank you for taking my question. I guess this question is for Paul. And I'd like to just dig into your guidance for net income for the full year. So you mentioned that you're reevaluating your spending plans, just given the macro environment, but your commentary suggests that you're going to continue to invest in product development. So I'm wondering what that means for your spending intentions in sales and marketing and particularly related to sales capacity for the full year?

Paul Auvil -- Chief Financial Officer

Sure. No, that's a great question. We are in a very fortunate position in that given the fact that we have 98% recurring revenue and a generally strong renewal rate that we think will persist, as I described, even in a very tough potential economic outcome if COVID-19 were to really persist problematically across the arc of the whole year. And so it gives us a strength in our business model that many people don't. And so while we have obviously moderated on the margin spending in a number of areas, including broadly just sales and marketing investments, it's only in a fairly small amount.

I would say the biggest sales and marketing investment that we've curtailed is our travel budgets as salespeople obviously are not naturally traveling here and there to see customers. And yet we have found that our virtual engagements with customers have been highly effective. And so as we think about kind of how we've resized the business and the spending on a go-forward basis, we're going to continue to make fairly meaningful investments in sales and marketing over the course of the year.

We have moved a lot of our marketing spend to the digital format. In fact, I think Gary mentioned that Proofpoint Protect, which is our annual user conference, will be done virtually as opposed to in person as we've done traditionally. But the net of it is we will continue to build the size and scale of the sales organization around the world, both in the U.S. and all of our international geographies, which I think will position us very well as the crisis ultimately eases, whether that's a bit later this year or whether it takes sometime in 2021. I think that will set us up quite well as the market comes back around.

Melissa Franchi -- Morgan Stanley -- Analyst

Very good. Thank you.

Operator

Thank you. Your next question comes from Erik Suppiger from JMP. Please go ahead.

Erik Suppiger -- JMP -- Analyst

Yeah, thanks for taking the question. I want to just get a little better understanding of how the dynamics with Office 365 has evolved with COVID-19. Have you seen a pickup in terms of customer adoption of Office 365? And you had talked last quarter about a record number of customers migrating over from Office 365, do you still feel like that trend is continuing?

Gary Steele -- Chief Executive Officer and Chairman of the Board

We do. We continue to see broad adoption of Office 365. And we've seen in the current environment, we've seen many customers that went to Office 365 and began utilizing the core capabilities of Office 365 for security, they moved to Proofpoint. And specifically, what happened is as the threat actors move, their trade crafts all around COVID and COVID lures, we saw many of the Microsoft accounts very much hurt by that. And we had I gave an example earlier on the call of a customer that moved quickly. We had another customer, same thing over a weekend. They were Microsoft account getting smoked, and they just felt like they had to do something quickly, and we moved them over a weekend. So we do continue to see movement to Office 365, and we find that as a very compelling way to go continue to take share.

Erik Suppiger -- JMP -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Daniel Bartus from Bank of America. Please go ahead.

Daniel Bartus -- Bank of America -- Analyst

Hey guys, thanks for taking the question.Just wondering if you can discuss the pipeline pressure a little bit from a product perspective. Would you characterize it as across the board? Or is it maybe pronounced for some of your more discretionary or complex products?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. No, great question. The one thing that we noted in the prepared remarks was what we're seeing on some of the larger archiving opportunities that have large data sets that require a pretty big engagement to move that data from the incumbent solution to Proofpoint. So while we feel very good about the long-term opportunity in that particular market, we think that those deals will likely progress more slowly. But as I indicated in an earlier question, we're seeing really nice pipeline build in some of these newer capabilities that are driven from the desire to rethink security architecture as it relates to work from home. So CASB, our ITM solution, those kinds of capabilities, we see nice pipeline build.

Paul Auvil -- Chief Financial Officer

Yes. And I think the other thing that I'd add is, obviously, in the impacted industries, which as Gary articulated earlier, reflects roughly 20% of our historical installed base, those folks look when you're doing very significant furloughs. As I mentioned earlier, we do have cases where people, because they have work from home, they might be buying something to help enable that. But most people in these impacted industries, they're hunkering down and just trying to figure out how to get through this period. And so pipeline that we had developed associated with those businesses, in particular, is deferred at this stage. So the good news is I don't view them as projects that are lost. And I'm quite certain, in most cases, will come back around. It's just a question of what that timing might be.

Daniel Bartus -- Bank of America -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Andrew Nowinski from D.A. Davidson. Please go ahead.

Andrew Nowinski -- D.A. Davidson -- Analyst

Great. And thanks for all the color on guidance in the COVID outlook. You touched on this on a prior question, but historically, it seemed like you preferred shorter-term durations since you have a best-in-class solution and you don't incentivize your sales force to land those longer-term contracts. So despite the shorter durations, are you seeing customers taking on more products on the initial deals than they were last year at this point via your bundles? And I know you added two more this quarter as well, which would presumably set you up for a stronger renewal period once we get through this.

Paul Auvil -- Chief Financial Officer

Yes. Let me start, and then I'm sure Gary has a few things to add. So just speaking to the durations in general, yes, as we shared eight years we've been public, we're always oddly happier with shorter duration contracts. It means the price per user on the products is higher. And it means we renew those customers every year, which is great in terms of how we drive our current cash flow. And it's also just one more natural point of engagement with the customer on an annual basis.

So as we look at things, we do originally model and build the business around an average duration given our history. And so the fact that the duration has suddenly changed and shortened changes then our outlook and hence, how that drives billings and cash flow as we size the business and hence, the need to take our cash flow ranges down for the full year. But that said, I think that as we think to 2021 and beyond, if this lower duration then were to persist for a longer period of time, I view that as only a positive for us in how we operate the business measure over the longer term.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. And the on the comment of multiple products, we did see good adoption of bundles in the P0, P1, and we had some nice P2s. And the one thing that we as I noted in the prepared remarks, we're starting to see as we move into this COVID world, we're starting to see a more a stronger demand around consolidating spend and the bundles help facilitate that. So we feel really good about where we are with respect to having those bundles, helping customers consolidate spend and driving broader adoption across our product line, given that bundled structure.

Andrew Nowinski -- D.A. Davidson -- Analyst

Great, thanks guys.

Operator

Thank you. Our next question comes from Gray Powell from BTIG. Please go ahead.

Gray Powell -- BTIG -- Analyst

All right. Thank you. Welcome. Yes, maybe can we talk about the opportunity for share gains? And specifically, how are you feeling about Symantec? And have you seen any change in the pace of those customer conversations there just given incremental attack volumes and uncertainty on their product set?

Gary Steele -- Chief Executive Officer and Chairman of the Board

Yes. We've seen there's been really good outreach from the Symantec base as they decide what they want to do. And as many of you are aware, Symantec did clarify or Broadcom did clarify that they now have decided an email is strategic, but we haven't seen that really change the behavior of the incumbent customers. And so there's been good dialogue both on the email side as well as on the DLP side, and we still see that as a pretty significant opportunity.

Paul Auvil -- Chief Financial Officer

Yes. And I would say that just generally, if I reflect on we have weekly calls with the sales organization, where we go through a litany of larger, more important deals that they're working on. If I reflect on the deals that they're working on in and around, Symantec as just one example, the degree to which those products had fallen behind what anyone would consider to be reasonable market standards prior to the acquisition was quite significant. And at least for now, it's not clear that despite the change in statement by Broadcom, that there's been any change in either the vector of the investment or maybe if there's a change in the investment.

There certainly hasn't been a change in the outcome in terms of the quality, caliber efficacy of the products as experienced by the customer, which in our business is the only thing that matters. And so I as I mentioned earlier, I do think that we'll have some interesting opportunities to drive Symantec displacements this year and look forward to having that being one part of what helps drive the new add-on business over the course of second, third and fourth quarter of the year.

Gray Powell -- BTIG -- Analyst

Got it. Okay, thank you very much.

Operator

Thank you. Our next question comes from Taz Koujalgi from Guggenheim. Please go ahead.

Taz Koujalgi -- Guggenheim -- Analyst

Hey guys, thanks. Taking my question. And Paul, thanks for all the color on the growth drivers of the guidance. I had a question on the Q2 guide. How being in part of the Q2 in terms of renewal rate, duration and your business growth for Q2?

Paul Auvil -- Chief Financial Officer

Yes. So for the second quarter guide, it's consistent with how I characterize the higher outcomes of the two anchors for our execution for the year. So it assumes a duration that's consistent with what we saw in Q1 in terms of build contracts. And it assumes that our overall ARR retention rate continues to be over 90%, although a little bit below our historical norms.

Taz Koujalgi -- Guggenheim -- Analyst

And what about the growth in your add-on business in Q2 2020 over Q2 2019?

Paul Auvil -- Chief Financial Officer

Yes. So as we talked about also, the in this baseline outlook that we built, that higher end range, we're assuming that the overall new and add-on business is actually down slightly from what we closed in 2019, given the fact that the affected industries are off-line and not buying new stuff for the most part; given the fact that larger, more complex deals in archiving are likely deferred for now. And so I'm pleased that we're able to put up these sort of results in a world where our overall new and add-on recurring revenue year-over-year actually isn't growing. Now it does drive growth, obviously, but to continue to drive the long-term growth flywheel for the company as we add more salespeople in quota capacity, we would expect that number to go up. But again, in the current environment, we're looking in the baseline assumption for it to be slightly down year-over-year.

Operator

Thank you. Our final question comes from Gregg Moskowitz from Mizuho. Please go ahead.

Gregg Moskowitz -- Mizuho -- Analyst

Good afternoon, guys and thank you very much for taking the question. Paul, I guess I had a question on billings, and I know you don't guide to billings anymore. But Q1 did come in a bit lower than where consensus was. And I was curious just from what you're able to discern after looking at the changes in duration as well as kind of what you saw in the last couple of weeks of March, if you were able perhaps to estimate the net impact of COVID-19 on billings in this quarter.

Paul Auvil -- Chief Financial Officer

In this quarter meaning in Q1?

Gregg Moskowitz -- Mizuho -- Analyst

Meaning in Q1, exactly.

Paul Auvil -- Chief Financial Officer

Yes. I mean, it's hard to specifically attribute the impact. And so if you're trying to say, Hey, what would have billings been had we not had a COVID-19 crisis? Obviously, they would have been higher, probably measurably higher because the duration would have been 10% higher on both new add-on and renewal. So that's a pretty big factor itself. And I would have expected, as I looked at how our sales team performed all the way up to the middle of March, that we would have seen a better close rate and little or no project deferral in the last couple of weeks of March. So in that alternate universe where COVID-19 didn't end up happening, we would have delivered a measurably higher billings number in the first quarter.

But I think what's always important to keep in mind is, as you look at the new assumptions that we have for the year, both the higher end assumption with the $1.03 billion of revenue and then the lower much more conservative assumption based on a more challenged economy for the year at $1.005 billion, what I'm pleased with is given the dynamics of the business model that we built over the last 10 years, the company will deliver what I think are actually pretty remarkable results under either of those scenarios, which then gives us a great foundation to the question earlier about investments in sales and marketing.

We can continue to not only retain all the great employees that we already have, but we'll continue to hire in what is obviously a great setup for us in terms of hiring because a lot of people either aren't hiring or laying people off even here in Silicon Valley. And so it gives us a chance to really build out and continue to grow our world-class teams that sets us up for a tremendous next step forward as we think about where we take the business when the pandemic finally comes to a close.

Jason Starr -- Vice President of Investor Relations

Great. This is Jason. I just wanted to make just a quick announcement that we just filed an additional 8-K, Form 8-K just hit a couple of minutes ago. That provides the 2020 guidance as well as a reconciliation of the non-GAAP measures. So I just wanted to point that out to everybody on the call and the webcast today. With that, I'll turn the call over to Gary for closing remarks.

Gary Steele -- Chief Executive Officer and Chairman of the Board

Great. I want to take a moment to thank everyone for joining us on the call today. We're very pleased with our Q1 results. And as we look ahead to a rapidly changing environment, we plan to continue to further our progress with our people-centric approach to cybersecurity and compliance while continuing to support the health and safety of our employees and customers. We also believe we remain well positioned to drive attractive returns for our shareholders, and we look forward to talking to you on our next call and to see many of you virtually on the conference circuit this quarter. We wish you all well in the weeks and months ahead as we press forward through this crisis with an eye toward better times that inevitably lay ahead. Thanks so much for joining us on the call today. Please stay safe.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Jason Starr -- Vice President of Investor Relations

Gary Steele -- Chief Executive Officer and Chairman of the Board

Paul Auvil -- Chief Financial Officer

Chris Speros -- Stifel -- Analyst

Phil Winslow -- Wells Fargo -- Analyst

Walter Pritchard -- Citi -- Analyst

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Justin -- Piper Sandler -- Analyst

Steve Koenig -- Wedbush Securities -- Analyst

Melissa Franchi -- Morgan Stanley -- Analyst

Erik Suppiger -- JMP -- Analyst

Daniel Bartus -- Bank of America -- Analyst

Andrew Nowinski -- D.A. Davidson -- Analyst

Gray Powell -- BTIG -- Analyst

Taz Koujalgi -- Guggenheim -- Analyst

Gregg Moskowitz -- Mizuho -- Analyst

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