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Proofpoint Inc (NASDAQ:PFPT)
Q2 2020 Earnings Call
Jul 30, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Proofpoint Second Quarter 2020 Earnings Results Conference Call. This call is being recorded.

At this time, I would like to hand the conference over to Mr. Jason Starr, Vice President, Investor Relations. Please go ahead.

Jason Starr -- Vice President, Investor Relations

Thanks Lisa. Good afternoon, and welcome to Proofpoint's second quarter 2020 earnings call. Today we'll be discussing our results for the second quarter as detailed in the press release that we issued after the market close this afternoon, a copy of which is available on the Investor Relations section of our website.

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.

During 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. Of note, we believe that the COVID-19 crisis creates additional complexity when it comes to providing a forward-looking view of the business, and we are providing our guidance on a good faith basis for recent SEC recommendations. We caution you to consider the important risk factors contained in the press release and on this conference call. These risk factors are also more fully detailed under the caption Risk Factors in Proofpoint's filings with the SEC, including our most recent Form 10-Q. These forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, July 30, 2020. We undertake no obligation to update these statements as a result of new information or future events. Also it is Proofpoint's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is done through a public disclosure such as a press release or through the filing of a Form 8-K.

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. These non-GAAP measures 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.

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 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. We are very pleased with our second quarter results, which came in above our expectations on all metrics, and we are excited to raise guidance for the year, as Paul will detail shortly.

The current work-from-home environment mandates and our unique visibility into an increasingly active threat landscape continue to highlight the importance of Proofpoint's people-centric security and compliance services. Overall demand for our services was quite strong in the quarter with continued momentum in our email security offerings, as well as strong performance from emerging services like our Email Fraud Defense or EFD, Cloud App Security Broker or CASB, Security Awareness Training or PSAT, and Insider Threat Management or ITM solutions. We were also pleased to maintain our ARR renewal rate at over 90%.

The competitive environment remains favorable, and our people-centric approach to cybersecurity and compliance is resonating with our customers and prospects alike, as evidenced by our continued high win rates, robust demand for our emerging products and the ongoing traction with our product bundles.

During the COVID-19 crisis, our top priority remains the health and safety of our employees, while maintaining our world-class operational readiness to continue to support and protect our customers. I'm pleased to report that our overall productivity levels remain high and our overall engagement with our customer base has never been better. I'd like to thank our teams around the world for their continued dedication and hard work throughout this challenging time.

As enterprises around the world remain in a work-from-home environment and employees often beyond the reach of traditional on-premise security controls, many security teams are increasingly realizing that the traditional enterprise perimeter has effectively shifted from the network to their individual employees. In other words, people not infrastructure are the new perimeter, making Proofpoint's unique people-centric approach to cybersecurity and compliance even more relevant for security teams' efforts to protect their end users and safeguard the sensitive data they interact with.

While email remains the primary method of attack in the last 12 months, we've seen them more aggressively -- we've seen them move more aggressively toward account takeovers, including email account compromise and also spook email impersonation, also known as business email compromise, as the basis for launching and hosting sophisticated attacks. According to the FBI, these specific forms of attack have resulted in over $26 billion in losses worldwide since June of 2016. A primary reason for these staggering numbers is that these malicious messages are extremely difficult to detect as they often carry no malicious payloads at all but are an effective method for threat actors to trick unwitting users into changing the instructions for a wire payment or payroll information, moving the shipping location for a delivery of capital equipment or sending malware through legitimate corporate email accounts to other employees or supply chain partners. Our competitors often fail to detect these new methods of attack, particularly since many of them have not made adequate investments in advancing their capabilities over the years, and often struggle to keep up with the rapidly changing threatscape, as a result.

By comparison, the many investments Proofpoint has made in email security, web isolation, CASB and Email Fraud Defense provides us with, unique threat intelligence and a set of comprehensive controls to better protect our customers and also further reinforces our own world-class visibility. For example, threat intelligence from CASB on compromised accounts and post-login [Phonetic] malicious behavior feeds into our machine-learning models and detection for inbound email security threats, while our phish detection from email enables us to map attacker infrastructure and improve our CASB compromised account detection. Additionally, our combination of Proofpoint isolation with our Email Protection suite provides yet another line of defense.

Beyond world-class threat protection, security leaders also increasingly need the visibility to understand not only who in their organization is being targeted, but also the sensitivity of the information and the resources that those individuals can access and whether that information is being handled appropriately, as enterprises also face the risk of data loss from employees that may be unknowingly compromised by threat actors or ones that are indeed malicious, disgruntled or simply negligent in their daily activities. With the complementary technology gained through our acquisition of ObserveIT last year, Proofpoint is now able to provide our customers this additional visibility through our Insider Threat Management offering. This service is delivered through a lightweight sensor that runs on the endpoint and communicates back to a central on-premise server, which empowers security teams to detect, investigate and prevent potential insider threat incidents by delivering real-time alerts and actionable insights into user activity.

As we discussed on last quarter's call, the work-from-home mandates have generated solid customer interest in our ITM capabilities, as companies search for added visibility into their remote employees, resulting in a handful of additional wins in Q2. As we recently announced, we released the cloud-based version of this solution in June, which enables customers to seamlessly redirect the endpoint sensors to communicate and store the data collection and analytics directly in our highly scalable cloud infrastructure instead of a centralized on-premise server. This new option leads to accelerated incident response and broader unified visibility across user activity, data interaction and threat information. This cloud-based ITM capability is also the foundational element of our forthcoming enterprise data loss protection or DLP offering, which integrates DLP across email, cloud and the endpoint, and fundamentally reimagines how organizations should protect their most critical information. We expect to launch enterprise DLP by the end of the third quarter.

The DLP industry has historically taken a data-centric view of the problem, trying to classify and protect information at rest and in motion across the places it should be and where it shouldn't be. The cloud has revealed the shortcomings of that approach, but it also creates an opportunity to solve the problem much more effectively. Data doesn't just get up and walk away. It moves because of a negligent, compromised or malicious user. With a cloud-native people-centric solution, enterprises will finally be able to use not only -- not just content classification, but also user behavior and threat context to figure out rapidly what users are doing with their critical data and whether it's appropriate. We believe this could be a potential game changer when compared to other legacy on-premise DLP solutions that are currently deployed in the market and represents an opportunity in excess of $3 billion, when including our CASB and Insider Threat Management functionality.

Enterprise DLP represents another great example of our ongoing innovation and mission to provide our customers with an integrated, comprehensive people-centric security and compliance platform to protect their users and sensitive data from people-based attacks.

Now, turning to some of our key operating results during the second quarter. The rapidly changing threat landscape and the accelerating transition to the cloud and the migration to Microsoft Office 365 in particular continue to be the key secular trends that are helping to drive demand for Proofpoint's full suite of security and compliance solutions, as existing on-premise infrastructure by definition cannot meet the challenges of this new generation of cloud systems and infrastructure. The work-from-home environment continues to reinforce email security as one of the most important vectors for security teams to protect, and we had a solid quarter of new protection and TAP wins, including our largest transaction in the quarter, a large financial firm with nearly 300,000 users, and another Fortune 100 consumer goods company with 130,000 users.

We continue to effectively demonstrate the strength of Proofpoint's products when compared to the baseline security solutions provided by Microsoft as part of their Office 365 bundles. Examples of customers who had moved to Office 365 and subsequently decided to upgrade their security capabilities with Proofpoint during the second quarter included a Fortune 100 health insurer that added protection and TAP for 65,000 users, a Global 2000 manufacturing company that purchased protection and TAP for 45,000 users, a Fortune 500 consumer goods company that purchased a P0 bundle and added Email Fraud Defense for 25,000 users, and a Fortune 1000 financial services firm that purchased a P1 bundle for 10,000 users and expanded their Insider Threat Management deployment.

We are also pleased with the success of our add-on sales into our customer base, which contributed approximately 60% of our new annual recurring revenue growth this quarter. In particular, we are very encouraged by the ongoing strength in demand for our emerging products, which yet again represented over one-third of the total new and add-on business closed during the quarter, led by strong demand for Proofpoint Security Awareness Training, Email Fraud Defense, Cloud App Security Broker, Threat Response and Insider Threat Management. We also continue to make progress in our bundling initiative in support of these emerging products through the launch of our P0 through P3 offerings. We believe that these bundles make it easier for customers to consume our broad set of capabilities, eliminating the need for multiple sales cycles and greatly simplifying the selling process for our sales team and importantly, for the channel.

In fact, during the current pandemic, many customers have expressed their desire to consolidate spend around strategic vendors to simplify their security purchasing and operations and have cited our bundles' ability to help accomplish this. While this effort is still early, bundled products again contributed nicely to our Q2 results, reflecting solid customer interest in this approach. In fact, we closed over 300 bundle deals and are making further progress with our higher-end P2 and P3 bundles. Examples of customers that purchased bundles during the second quarter included a Fortune 100 healthcare company that upgraded to the P3 bundle for 30,000 users, a university medical center that upgraded to the P3 bundle for 20,000 users, a Fortune 500 food and beverages company that upgraded to the P2 bundle for 15,000 users, and a Fortune 500 healthcare company that purchased the P2 bundle for 12,000 users.

In our archiving business, we're seeing good demand from midsize companies and we won several new financial and healthcare customers in the second quarter. We also continue to make progress with several large deals that are maturing in our pipeline, but these are still expected to likely push into 2021 due to the COVID-19 related headwinds that we discussed last quarter.

Our technology ecosystem partnerships continue to drive our pipeline, expand our market reach and increase our overall value to customers by delivering an integrated framework across a family of best-in-class security solutions, including CrowdStrike, CyberArk, Okta, Palo Alto Networks and Splunk. We had several wins this quarter that were influenced by these integrations, including a Fortune 500 insurance company that purchased protection, TAP, EFD, Threat Response, CASB, Internal Mail Defense, isolation and PSAT for 30,000 users, and a university medical center that purchased protection and TAP for 100,000 users.

Turning to our international operations, we are encouraged at the progress being made against COVID-19 in Europe, and the recovery appears better than our assumptions back in May. Overall, international revenue increased to 21% of total revenue and grew 28% year-over-year. We closed several notable international deals during the quarter such as a global communications equipment manufacturer that added protection for 250,000 users, a Global 2000 IT services company that added protection and TAP and PSAT for 40,000 users, and a Global 2000 retail and financial services company that purchased protection and TAP for 15,000 [Phonetic] users.

As we look to the rest of 2020, we expect our international demand to moderate somewhat in Q3, as is typical for that region in the technology industry, but we are also optimistic to see this increase over the fourth quarter as the recovery in Europe takes hold.

So, in summary, we are very pleased with our strong Q2 results and our market momentum as we enter the second half 2020. Our operating strategy is progressing very well, even in the face of COVID-19 headwind, and our product roadmap is exceptional. And we believe the investments we're making today, coupled with the strong secular trends driving our market opportunity, have [Phonetic] us well positioned to gain share, reinforce our competitive position, and build the leading people-centric cybersecurity and compliance franchise in the years ahead.

With that, let me turn it over to Paul.

Paul Auvil -- Chief Financial Officer

Thanks Gary. We are quite pleased with our operating results this quarter, which beat our updated guidance on all metrics. Revenue totaled $258 million, up 21% year-over-year and above our guidance range of $251 million to $255 million. Note that our revenue for the quarter benefited from approximately $3 million of accelerated revenue under ASC 606, that was not expected at the time that we provided guidance in May, driven by the sale of solutions that were deployed on-premises by our customers and hence triggering the requirement to recognize the majority of the subscription revenue at the time of sale. That said, all of this business was based on our standard subscription contract structure, and as such, will renew in future periods, similar to our other recurring revenue business. We believe that these results are particularly compelling when considering that approximately 98% of this revenue is recurring, which sets us apart as a leader on this metric across all publicly traded SaaS companies.

While we no longer provide guidance on billings, our Q2 result of $250 million was solid, particularly given the headwinds we continue to face from sectors more significantly impacted by the current crisis such as retail, travel, energy and parts of the healthcare industry, which collectively represent just over 20% of our billings. In particular, I would like to highlight that we were pleased that our ARR renewal rate remained above 90% during the quarter, a very good result given that a number of our renewals were impacted by layoffs and furloughs across our customer base, which ultimately served to lower the ARR value of those particular renewals.

As we look to the second half of 2020, as discussed during our call in May, we continue to see the potential for this metric to dip modestly below 90% in future quarters due to impacts related to COVID. As we stated last quarter, we expect that the overall employment rates of these impacted customers will improve over time, similar to the recovery from the Great Recession back in 2009, enabling an eventual return to growth for these customers as the crisis eventually abates.

As a final point regarding billings, I would like to note that while we saw a modest increase in duration during the quarter when compared to Q1, we expect this will likely remain under pressure for the remainder of the year as companies try to preserve cash, given the current economic environment around the world.

Turning to expenses and profitability for the second quarter, on a non-GAAP basis, our total gross margin was 80%, above our expectations, driven primarily by our strong revenue performance. This gross margin performance puts us in the top quartile of all publicly traded SaaS companies and stands as a testament to the efficiency with which we operate our global cloud operations. During the second quarter, total non-GAAP operating expenses increased 18% over the prior year period to $167 million, representing 64% of total revenue.

Moving down the income statement, on a GAAP basis, we recorded a net loss for the second quarter totaling $23 million or $0.39 per share, based on 57 million outstanding shares. This result included a noncash gain of $14 million resulting from the reversal of stock compensation expense related to performance-based stock awards. These amounts have been accrued in prior periods based on progress toward the target metrics associated with these performance grants. But based on the impact of the crisis, as reflected in our updated guidance, we no longer believe it's likely that these targets will be achieved, and hence, these accruals have been reversed accordingly. We reported non-GAAP net income of $33 million, well above our guidance range of $24 million to $26 million.

Moving on to EPS, non-GAAP earnings per share for the quarter was $0.51 per fully diluted share, above our guidance range of $0.38 to $0.41, based on 65 million shares. The EPS calculation applies the if-converted method to our convertible notes due in 2024, and as such, assumes the conversion of approximately 6 million shares and adds back just under $0.5 million in cash interest associated with this debt instrument.

In terms of cash flow, we generated $31 million in operating cash flow, which included a $4 million reimbursement for tenant improvements [Phonetic] associated with our corporate headquarters project. We invested $12 million in capital expenditures, of which $7 million was associated with our new headquarters, resulting in free cash flow for the quarter of $19 million, well above the high end of our guidance range of breakeven to $10 million. This upside was principally driven by the strong billings linearity during the second quarter, which helped to accelerate some cash collections into Q2 that otherwise would have been collected in Q3.

So with that, let's move on to guidance for 2020. Recall that back in May of this year, as a result of the COVID-19 pandemic, we opted to take a very different approach to our guidance. As such, instead of providing our traditional guidance range for the year, we chose to outline two very different scenarios based on potential directions the pandemic could take and how that might impact our business. In the first scenario, where the COVID-19 crisis peaked during the second quarter with a gradual return to normalcy over the rest of the year, we modeled revenues of $1.03 billion, absorbing the impact of a 5% reduction in our new and add-on business as compared to 2019. In the second scenario, where the pandemic continued to meaningfully impact the global economy over the entire year, we modeled revenues of $1.005 billion, absorbing the impact of a 40% reduction potentially in our new and add-on business as compared to the prior year.

As Gary already noted, our business remains well positioned despite the continued uncertainty regarding the recovery from the COVID-19 pandemic and the resulting impact to the global economy. While the overall operating environment remains challenging compared to normative standards and the current crisis is yet to stabilize in many of our markets around the world, given our stronger-than-expected Q2 operating results, our solid pipeline and our good linearity here in July, we no longer view the second more dire scenario is likely. And as such, we are suspending that aspect of our outlook for the year. We are also pleased to be able to raise the top end of our guidance range on all metrics with a return to a more traditional approach to guidance for the year, though we are being particularly thoughtful given the current environment in how we provide this guidance.

In terms of revenue guidance for 2020, we are increasing our range to $1.035 billion to $1.037 billion, with a midpoint that implies an annual growth rate of approximately 17% for the year. We expect full year 2020 non-GAAP gross margins to be approximately 80%, modestly improve when compared to our prior guidance of 79%. In terms of non-GAAP net income, we are raising our guidance to a range of $106 million to $110 million from our prior range of $91 million to $101 million. This new range translates to approximately $1.64 to $1.70 per share, using 66 million shares outstanding. In terms of tax rate under C&DI, for 2020, we expect a rate of approximately 17%. This guidance also assumes depreciation for the year of roughly $37 million to $39 million and $4 million in net cash interest income.

In terms of cash flow for the year, we are raising our free cash flow estimate to an updated range of $130 million to $140 million. This guidance assumes capital spending of approximately $75 million, down from our prior expectations of $95 million. This is comprised of approximately $40 million in capital spending associated with the build-out of our new headquarters, and partially offset by approximately $16 million in the form of tenant allowance reimbursements that we have negotiated with the landlord. And as a reminder, this reimbursement runs through the operating cash line of the cash flow statement as opposed to netting against capital expense. This cash flow guidance for the year also includes the tax payment for the transfer of intellectual property associated with our acquisition of ObserveIT, which we now estimate to be no more than $15 million, down from our prior estimate of $20 million.

Now, let's discuss our financial outlook specifically for the third quarter. We expect revenue to range between $260 million and $260 [Phonetic] million, reflecting 15% growth at the midpoint. I would like to note that this outlook, when viewed in conjunction with our guidance for the full year, implies Q4 revenue of approximately $267 million for the fourth quarter, and hence, a year-over-year growth rate of 10% for the final quarter of the year.

As I noted earlier, for 2020, we are currently modeling an actual decline in new and add-on business of roughly 5% as compared to the prior year as precipitated by the COVID-19 crisis and its general impact on the global economy, and more specifically, the relatively stifling effect it has had on the roughly 20% of our customers operating in the highly impacted industries, in particular. This decline in new and add-on business, by definition, creates some pressure on relative revenue growth for the year. Assuming an improved operating environment in 2021, where our new and add-on business returns to growth year-over-year, we would expect that the fourth quarter of 2020 will mark a low point for our revenue growth with a reacceleration playing out across the arc of 2021.

For third quarter, we expect non-GAAP gross margin to be roughly 80%. We expect non-GAAP net income to be $24 million to $26 million or $0.37 to $0.40 per share. This assumes depreciation of approximately $10 million and less than $1 million in net cash interest income and a share count of 66 million fully diluted shares outstanding. We expect free cash flow to be $16 million to $21 million for the third quarter, which includes capital expenditures of roughly $25 million, of which $16 million is associated with spending on the new headquarters, this being partially offset by $10 million in expected leasehold improvement reimbursement that will flow through the operating cash flow line.

Note that given some of the construction delays associated with the shelter-in-place orders here in California that occurred earlier in the year, a larger percentage of capex for this project, approximately $16 million in total, will fall into the fourth quarter. Though note that our reimbursement allowance is expected to be fully used during the third quarter. And as a result, the final phase of spending on the new headquarters will impact Q4 free cash flow by a full $16 million, which is a significant step-up as compared to the $6 million of net impact during Q3. Our Q3 free cash flow guidance also includes the aforementioned cash payment associated with the ObserveIT intellectual property transfer.

As a final note on guidance, while we have been pleased to be able to continue to provide our quarterly and full year guidance despite the crisis, I would like to note that we do not expect to provide an initial outlook for the fiscal year 2021 on our third quarter earnings call later this year, given the pandemic and its impact on our ability, measured over the somewhat longer time horizons, to have visibility into the business.

In conclusion, despite a challenging operating environment, we continued to execute well, delivering strong top and bottom line results in the second quarter, and we believe that we remain well positioned to drive disciplined growth with increasing free cash flow margins in the years ahead, built on our proven ability to defend enterprises against today's advanced security and compliance threats. We are well positioned to weather the COVID-19 crisis over the coming quarters with a 98% or better portion of our revenues coming from recurring business, a cash balance of nearly $1 billion, healthy free cash flow generation, strong secular drivers, a favorable competitive environment and our broad people-centric product set.

We continue our targeted investments with discipline, and we expect these to help us emerge from this uncertain period stronger than ever, with the goal of returning to our Rule of 40 operating paradigm, targeting a score of 40 or better, as the crisis eventually resolves and we return to a more normal operating environment at some point in the future.

I will now turn it over to Jason to review our upcoming Investor Relations schedule for the quarter before taking questions from the sell side.

Jason Starr -- Vice President, Investor Relations

Thanks you, Paul. Before I get into that, just wanted to mention I've heard that the webcast service provider for today's call had an issue with multiple companies' calls today. So, from a transparency standpoint, we're going to try to post the transcript or the language from the script to the investor website as soon as we can, just as a quick heads up for everybody.

From a marketing standpoint, in the third quarter, Proofpoint's management team will be presenting at D.A. Davidson's Software and Internet Virtual Conference on September 9 and Citi's Global Technology Conference on September 10. A webcast of these presentations will be made available on the Investor Relations page at investors.proofpoint.com and hopefully today's call will be too.

We will now take questions from our sell-side analysts. In the interest of maximizing the number of analysts that are included in the portion of --- this portion of the call, I would like to request participants to please limit themselves to just one question. Thank you for taking the time to join us on our call today. And with that, we'll be happy to take your questions now. Lisa?

Questions and Answers:

Operator

[Operator Instructions] We'll go first to Rob Owens, Piper Sandler.

Rob Owens -- Piper Sandler -- Analyst

Good afternoon guys. It's a good thing I can ask multipart question. So Gary, I wanted to touch a little bit on the enterprise DLP products and effectively what that brings. I know that, that's been kind of a legacy market where some historical vendors of Symantec has -- have dominated there. And does that go hand in glove with email security? Or is it honestly [Phonetic] viewed separately? And as you're engaging with some of those Symantec customers, is this a type of solution that can potentially shake more of them through? Thanks.

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

Yeah. We're very excited about the opportunity around enterprise DLP and helping customers think about this differently, taking a people-centric approach, where we believe we can fundamentally deliver a whole different category of time to value in terms of implementation, and that's been one of the historical issues. Where we find that there's incredible leverage is, many customers already use us for single vector DLP. So email DLP is something that we've always had very good success on. But we're seeing -- with the momentum broadly in our CASB solution and the early indications that are super positive on ObserveIT, we believe that bringing all this together into a complete enterprise solution really positions us uniquely in the market. It's big, and I think that market is being underserved, and I think it creates a tremendous opportunity for us.

Rob Owens -- Piper Sandler -- Analyst

Great. Thank you.

Operator

Next up is Jonathan Ruykhaver, Baird.

Jonathan Ruykhaver -- Baird -- Analyst

Yeah. Good afternoon guys. Regarding the solution bundles, can you just talk about your expectations? You mentioned potentially larger enterprise adoption around P2 and P3 as we move into the second half. So I'm just wondering, in particular, what you are expecting? And any color on what's driving that expected adoption from a modular use case perspective would be helpful.

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

Yeah. I would say -- hey, Jonathan, good to hear you. I would say, first and foremost, there's a definite focus on vendor consolidation. So, people looking for a way to operate with fewer vendors, see if they can get some savings, particularly from internal efficiencies associated with operating with fewer vendors, fewer people having to manage different solutions. But the other side of this, of course, is that when you look at Proofpoint's broader people-centric security and compliance framework, there are incredible benefits from having all these capabilities delivered by a single vendor, in this case, Proofpoint, and having a single pane of glass to manage and essentially remediate compliance issues, but also see the threat landscape broadly beyond just the aperture of email, but looking broadly across all of these different cloud properties where you're being attacked and understand who your VIPs and your Very Attacked People are, being able to manage and be responsive to that and understand who the threat actors are and what they're after. So it's a combination of all these things that are very much playing in a favorable way toward our opportunities to sell these larger P2 and P3 bundles.

Paul Auvil -- Chief Financial Officer

And I think it became much more pronounced in the COVID where CSOs are really thinking about who their strategic partners are, how many vendors they really want to deal with, and that's been a key catalyst for us to help drive bundle sales.

Jonathan Ruykhaver -- Baird -- Analyst

Okay. Helpful. Thanks guys.

Operator

We'll take the next question today from Andrew Nowinski D.A. Davidson.

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

Great. Thank you and congrats on a great quarter. So I just wanted to ask on our email tracker that we published, we picked up on more wins for Proofpoint this quarter than maybe we've seen in the past. So I'm wondering if you could provide any color on the rate of new local acquisition this quarter relative to last quarter and perhaps how it compared to your internal expectation? Thanks.

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

I'll start and Paul maybe has a comment. One of the things that we saw was -- and we mentioned this in the prepared remarks, that our core protection and TAP business had a really good quarter. And we've referenced some very large deals, the large financial services firm. That was a customer actually coming off of Symantec. And so, I think broadly speaking, we see tailwind from -- in our core simply because we're seeing -- this email being such a high priority and people are rethinking what they've traditionally done. So I think we've been well positioned, and that's why -- I think that's why it's showing up the way it is in your tracker.

Paul Auvil -- Chief Financial Officer

Yeah. I don't have anything to add. I'd agree with that.

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

Thank you very much, guys. Keep up the good work.

Operator

Walter Pritchard of Citi has the next question.

Walter Pritchard -- Citi -- Analyst

Hi. Wondering if you could give us a little bit more color around -- you're seeing some consolidation into bundles, which makes sense given the environment. What areas are you seeing the most benefit there, especially as you talk -- P2 and P3? And what areas are -- other areas of the market that are kind of stand-alone that are seeing consolidation into that? Thanks.

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

Yeah, Walter, I would say one of the primary areas would be CASB. That market is very fluid. Requirements have moved around. And we've made significant investments. And so, it just is a natural part to think about -- it's a natural component to include in that broader bundle.

Walter Pritchard -- Citi -- Analyst

Got it. Any others?

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

I would highlight that as the primary one. And then obviously, in the lower bundles, you have our Security Awareness Training. That has been a natural adder. And all the integration work that we've done there make it very compelling to buy it with the rest of the solution.

Walter Pritchard -- Citi -- Analyst

Thank you.

Operator

Next up is Jonathan Ho, William Blair.

Jonathan Ho -- William Blair -- Analyst

Hi, good after noon. I guess, one thing I wanted to understand a little bit better was sort of the dynamic that you're seeing around some of the net expansion and some of the headwinds there, particularly given headcounts. And do you see that potentially bouncing back if we see a recovery? Just helping us understand maybe the pace of that and what those headwinds look like in the back half of the year might be helpful. Thanks.

Paul Auvil -- Chief Financial Officer

Yeah. I think, Jonathan, I'll start, and then Gary probably has a few things to add. I would say that within our installed base, the highly impacted industries, definitely, you've got the furloughs and the layoffs that are then impacting our renewals accordingly. Gary and I were both here leading the company back during the Great Recession, so we know what this pattern looks like. Most of these businesses will eventually recover their former level of output and success. It just takes some time. And as they do, they'll hire folks back, and then we'll move our subscription levels back up to those original levels of employment and the subscription values accordingly.

So, with all that said, with regards to specifically the second half of the year, it's a little hard to tell, but I would say we all have sort of our own anecdotal experience here. But as I look at travel-related services, for example, it doesn't feel like there's going to be much of a recovery for those industries in the second half of the year. But let's all hope that sometime as we work our way through '21, there'll be a better recovery. Some parts of retail may be a little more successful here in the second half of the year, depending on how things come together. Healthcare was already starting to see a bit of a rebound, but now with kind of resumed lockdown, a lot of elective surgeries have been put on hold. But let's hope, with the new lockdowns that you've seen in different states, they seem to be getting the better of case count increases, maybe we get back to an increase in elective activity again maybe mid to late Q3, which then brings headcount back into those healthcare providers. So, I think it's going to depend industry by industry. But the good news is it then kind of bakes in some uplift in terms of new and add-on recurring, if you will, that will pick up over the next, I would guess, probably 12 to 18 months as those companies all come back online to their former levels of employment.

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

Yeah. And the only thing I'd add to that is, what I feel really good about is, these companies that had maybe done temporary reductions in headcount, we do believe they come back because these are large enterprise companies that have long-term sustainability. These are not companies in the SMB world that may not ever come back. So, we feel very good, given the segments that we serve, that we will see a rebound. And as Paul said, it will be naturally sort of basically be built into ARR uplift over time versus companies that just fundamentally are going away, which I think people will see in the SMB world.

Jonathan Ho -- William Blair -- Analyst

Thank you.

Operator

Next up from Wells Fargo is Phil Winslow.

Richard Hilliker -- Wells Fargo -- Analyst

Hey, team. This is Rich Hilliker on for Phil. Thanks for taking my question here. We talked a little bit earlier in your prepared remarks and in the Q&A about vendor consolidation and some new logo acquisition. I was wondering if we can double-click there a little bit on your competitive win rates, specifically, if you can, against some recently acquired vendors. Thanks.

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

When you say recently acquired vendors, can you elaborate a little bit more? I want to make sure we're answering your question.

Paul Auvil -- Chief Financial Officer

You're referring to Symantec?

Richard Hilliker -- Wells Fargo -- Analyst

Oh, yeah, exactly. Yeah.

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

Okay. All right. Yeah. No, our win rates have been extremely high. We've referenced that in our in our prepared remarks. And our win rates, I would say, were steady to increasing, frankly, over the course of Q2, and so we feel very good about our positioning, our market momentum. And I think, frankly, one of the things that we saw, we referenced a little bit of this in the prepared remarks as well, in the COVID world, we've seen the threat landscape move. And if you didn't demonstrate agility, you have a hard time keeping up with the threat environment. And I think our technical team did a really good job of ensuring that our customers were well protected. And I can't say that necessarily across the other -- the competitors that we saw in the market.

Richard Hilliker -- Wells Fargo -- Analyst

Great. Thanks guys, and congrats.

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

Thanks.

Operator

Brian Essex of Goldman Sachs is next.

Brian Essex -- Goldman Sachs -- Analyst

Hi, good afternoon. Thank you very much for taking question. I was wondering if maybe you could comment a little bit on contract duration. Is there any way to quantify the impact of that in the quarter? And then, with regard to contracts that come up for renewal on a more frequent basis, have you been able to quantify any potential lift in attach rates as that's an opportunity, obviously, for upsell when they come for renewal on a more frequent basis?

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

Yeah. It's hard to quantify. We haven't put specific numbers out there. But obviously, contraction in duration does put a little bit of a headwind into the billings number. And hence, we were pleased with the $250 million we recorded as a result of that. Clearly, with a somewhat longer duration, you would have seen a higher billings number, by definition. But it's hard to put an exact number on what that otherwise might have looked like.

But to your point, we've always been advocates for shorter duration. Go back and look at any of our transcripts for the last eight years. Our compensation plan is actually focus on the sales team doing shorter, not longer duration contracts. And the reason for that is twofold. First, on a shorter duration contract, you get less of a discount. Or said differently, if you do a three-year prepaid contract, we do give you typically a 10% discount, which is kind of the industry standard. I'd rather not give you that 10% discount. I'd rather have it be a one-year deal because we generate more revenue profitability, net income and ultimately cash flow by renewing the same customer year after year on those single-year terms.

And as well, to your point, those shorter duration contracts just create one more touch point where you can go in and drive an add-on sale, whether it's upgrading the customer to one of our newer larger bundles or just simply selling a third or fourth or fifth product. And so, we like moving to shorter duration. There obviously is some near-term impact to billings, but in the long run, it actually creates a more significant cash flow stream for shareholders over time.

Brian Essex -- Goldman Sachs -- Analyst

That makes a lot of sense. Thank you very much.

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

Thanks.

Operator

The next question is Alex Henderson, Needham.

Alex Henderson -- Needham -- Analyst

Thank you very much. I was hoping you could give us a little bit of more granularity around the personnel training, security training side of the business. What kind of scale has it gotten up to? And what kind of growth rate are you seeing within that particular segment of your business? Thanks.

Paul Auvil -- Chief Financial Officer

Yeah. I'll start, and Gary may want to chime in. We've seen really good success with our Security Awareness Training product. As you probably are familiar, we picked it up through an acquisition back in 2018 of a company called Wombat. We've now rebranded it to Proofpoint Security Awareness Training, but it continues consistently each quarter to be one of the top contributors to new and add-on recurring revenue that we bring into the Company each quarter. We were really pleased last quarter. We closed a small acquisition in Europe called The Defence Works, which added some additional content and capability to the platform. So it's nearly where -- we continue to invest both organically with a large team of developers, primarily in the Pittsburgh area, as well as the most recent acquisition, and who knows, there may be another acquisition or two at some point down the road. We think it's a really important area. It's a critical part of how you build out your overall strategy for defending the enterprise. Educating your employees and making sure they understand what threats look like and know how to identify them is an important part of the overall defense paradigm that all companies need to adopt, large or small.

So, with all that said, I think we've been pleased with the performance. The business has grown to a reasonable scale. We don't break it out separately as a specific division with externally reported revenues, and part of which is, it's frequently sold as a bundle with other products, naturally, as you can imagine. If you're buying our protection and advanced threat capability, buying our Security Awareness Training is a natural third piece of that equation, if you will. But I would say that generally, we see that our customers are really pleased with the capability, and it fits very nicely together in our portfolio.

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

Yeah. I would just add that strategically, we feel like we're well differentiated from the independent companies in this sector, and our differentiation has come from the fact that we've done some very interesting integration, bringing together our core with the phishing simulation and Security Awareness Training. Then there's a lot of very demonstrable benefits of having these two products together. And so, we think we're really well positioned relative to independent players in this particular market.

Alex Henderson -- Needham -- Analyst

Thank you very much. That's very helpful.

Operator

Next, we'll go to Sarah Hindlian-Bowler, Macquarie.

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Great. Thank you so much Gary and Paul. I appreciate it. Paul, can you drill down a little bit more on the duration comments you were just going over? I know they were up this quarter, which is a bit of a surprise to me, but you're guiding for them to continue to come down. And then, Gary, just a follow-up for you on international. What is it that you guys think you need to do there to really move the needle?

Paul Auvil -- Chief Financial Officer

Yeah. So I'll start, Sarah. I would say that the fact that we had a modest uptick in duration this quarter was a surprise to me as well. But as I look at it in retrospect, the one thing that's clear is, it was primarily companies in the financial services space where we were seeing this. And I think as you can imagine, in the current interest rate environment and the degree to which the Fed is basically shoveling money into the vaults of the banks and daring them to do something useful with it, one of the useful things to do is to get your 10% discount and do a three-year prepay with Proofpoint. And so, as a result, financial services, in particular, which, as you know, is one of the important segments for Proofpoint, proved to have somewhat higher duration than I ever would have anticipated going into the quarter. With that said, it's hard to say exactly what behaviors will be week-to-week, month-to-month, quarter-to-quarter. And so, for modeling purposes, for now, we're assuming that the duration for the second half of the year is more consistent with what we saw in Q1. And then, we'll see -- maybe we'll be positively surprised and see an uptick in third and fourth quarter. But for now, I just want to set expectations at a lower level until we see how third quarter plays out.

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

And Sarah, with respect to international, we were very pleased with the results. So 28% growth in the quarter, we were very happy with, and we feel like that momentum carries through the second half. The one thing that was interesting in Q2, we're seeing broader participation out of our APAC team, which we think could be -- as that business begins to grow, we think that could be a catalyst over the next several years as well. So, we feel really good about international. We feel like we're on the right track.

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Awesome, guys. Thank you very much. Appreciate it.

Operator

Up next is Gray Powell, BTIG.

Gray Powell -- BTIG -- Analyst

Okay, great. Thanks for taking the question. Maybe just a follow-up on Symantec. So, it sounds like the pace of wins against Symantec is picking up. I just want to make absolutely certain that I'm hearing that correctly. And then, when a customer does switch over, what's sort of a typical [Phonetic] price uplift that you see? Like, if they're spending $100 per user -- or they're spending $100 with Symantec, how much do they end up spending with Proofpoint? Or what's sort of the product uplift?

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

Yeah. Great question. No, we've definitely seen an uptick in Symantec. We feel really good about the kinds of customers we're winning. We've referenced to Fortune 500 companies in the script. But obviously, we had very good momentum sort of across the broad customer base. When someone switches, it's very much like what happened in the McAfee transition, where we see the core email security dollars transferring sort of dollar for dollar. And then our sales team will work hard to put them into a bundle, which will ultimately get us 2 times or 3 times or 4 times what they had traditionally been paying. So, how do we do that? Well, we're trying to move them into a bundle, like a P1 bundle or even a P2 bundle. So we're including things like Security Awareness Training that bring the price up and adding other products.

Gray Powell -- BTIG -- Analyst

Got it. That's really helpful. Thank you very much.

Operator

Next up is Erik Suppiger, JMP Securities.

Erik Suppiger -- JMP Securities -- Analyst

Yeah. Thanks for taking my question. First off, I'm just curious, can you talk a little bit about whether you've seen any acceleration in business coming from Office 365? Do you think that just the pandemic has accelerated any business to them and therefore, creating additional opportunities for you? And then secondly, have you -- do you anticipate any efficiencies realized during the pandemic that you can continue once the pandemic passes, which might create upside to long-term margin targets?

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

I'll start, and then Paul probably has a couple of comments. So with respect to Office 365, we've just seen continued momentum of movement to Office 365, and that's been a contributor of growth for us, pre-pandemic, during pandemic, and I think it will be with us for a long time as more and more customers finally get to the cloud. I do believe that COVID has put more pressure on people to rethink what their cloud strategy is, and I think there will be continued momentum in that direction. We've also seen, as we noted this in the script, there are a number of things that I think are -- raise the visibility and the importance of our capabilities in a work-from-home environment. I think with users sitting at home, it's everything you -- the customers know that they need to protect their employees with respect to a good email solution. So I think that's been a positive. We've also seen, as we noted, more interest in our Insider Threat Management solution because, again, you have a whole set of users at home, off the corporate network. Companies want to understand what those users are doing, how they're managing data. And so, we've seen uptick in interest. And frankly, I think even as COVID subsides, I think we continue to see this momentum because people are seeing the value of what we can deliver and the importance it is in the overall security posture. So, I don't anticipate a slowdown in demand. I think we're just raising the visibility of the kind of work that we do for customers during this period.

Would you add anything to that Paul?

Paul Auvil -- Chief Financial Officer

No. I think just to the other part of the question, which is related to other things that we are doing in terms of how we're operating the business today in the middle of the pandemic that, as we emerge from the pandemic, will it change the operating profile of how we run as a business? I would say that in our case, I don't believe so. Obviously, pretty much everyone is working from home at this stage. I expect that to continue for the foreseeable future. But with that said, we very much believe in the power of having people working together in offices. And so, while the productivity of the teams has remained remarkably high over this stretch where people have been working from home. We very much look forward to bringing everyone back into the office when it's safe and get the power of having teams working together and just the benefits of the camaraderie of people working under the same roof. As well, while travel budgets obviously are roughly running at zero right now. Unless we see a behavior change in our customers themselves, where for whatever reason, they decide that they no longer want to meet with our executives or salespeople and we'll continue to just make decisions via Zoom and virtual meetings, unless that were to happen, I think we'll be back to our normal travel activities when we come back around. Again, I suspect that's still the ways out. But that's what I see. So again, I don't see any changes to our business model in the long term as a result of this. But obviously, there have been some short-term impacts to our spending profile.

Erik Suppiger -- JMP Securities -- Analyst

Got it. Thank you.

Operator

We'll now go to Matt Hedberg, RBC Capital Markets.

Matt Hedberg -- RBC Capital Markets -- Analyst

Hey, guys. Thanks for taking my questions. Paul, you noted good linearity, which was really good to hear. I'm wondering if you can expand on that a bit in terms of the pace of business. And also, comment on the pipeline build through this uncertainty, and I assume it's probably the pipeline is strong, but maybe the close rate assumptions are sort of what we're all watching.

Paul Auvil -- Chief Financial Officer

Yeah. I think linearity was very, very good in the second quarter and linearity so far here in Q3 has been good as well. It's hard for me to attribute, specifically, what that might be related to. I do think there is a heightened understanding and concern on the part of both customers and prospects about the threat environment with people working from home. They need to make sure that they are properly protected. So, that obviously tips things on the margin in our favor. But I wouldn't call it a sea change in buying behavior, but it probably maybe creates a little more vigilance and a little more urgency on the part of our customers on average.

So with all that said, I think that the pipeline entering the quarter, I think we felt good about, obviously, in the context of the guidance that we provided. We haven't changed any assumptions around close rates, though. I think our close rates are kind of following our traditional pattern, or at least that's what we've seen thus far in the second quarter and what we would expect to see in Q3. So, it's a little bit business as usual other than, of course, the sales team doesn't get to go out and actually see the customers in person. So, almost all of our interactions are virtual at this stage. But our solid paradigm seems to have transitioned fairly effectively to that. And again, we were really pleased with how Q2 came together and hopeful for some good results here in the second half.

Matt Hedberg -- RBC Capital Markets -- Analyst

Excellent. Thanks.

Operator

Next up is Hamza Fodderwala, Morgan Stanley.

Hamza Fodderwala -- Morgan Stanley -- Analyst

Hi, guys. Thanks for taking my question. I just had a quick one on the recent partnership that you guys made with Okta, CrowdStrike and Netskope to secure remote work. Can you give a little bit more color as to what that involves from an additional integration standpoint, as well as a go-to-market standpoint with some of the benefits that you foresee there?

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

Yeah. We've been we've been on this mission to do technical integrations with critical partners, and we've had very good success most recently with CrowdStrike and with Okta. And so, when the opportunity came along to bring together all of this in a zero trust framework, it just made a ton of sense. And so again, we're leveraging the technical work that we've been doing with these vendors and bringing then -- bringing it out to the market with channel partners as well as joint marketing activities with each of these organizations. Then we think just that broad power across these vendors gives us some lift in the market.

Hamza Fodderwala -- Morgan Stanley -- Analyst

Thank you.

Operator

Nehal Chokshi of Northland Capital Markets is next.

Nehal Chokshi -- Northland Capital Markets -- Analyst

Yeah. Thank you. Paul, at the beginning of your script, you talked about an ASC 606 acceleration. Can you just double-click on what happened there? And then, just clarify that the forward guidance, does that include a benefit from the ASC 606 acceleration?

Paul Auvil -- Chief Financial Officer

Yeah. I'm sure you're familiar for -- under the new accounting standard -- it's not actually new at this stage, but relatively new over the last couple of years -- even if you have a recurring subscription business, if the product can be deployed on-premise and is, in fact, deployed on-premise by the customer, and it doesn't require regular updates and upgrades from the vendor in order to enable that capability, then you end up accelerating roughly 80% of the value of that subscription into the period of time when that deal actually closes. And of course, when it renews a year later, you'll see that same effect again. And so, because we did have some customers who chose to deploy some of the TAC on-premise unexpectedly, which is fine, we don't mind what -- if you want to build your own little private cloud and run it in your data center, we're perfectly happy to do that. It ended up creating some more accelerated revenue in period. So, while we were really pleased with the overall subscription business we closed, a larger amount of it got recognized in period than we would normally expect because as you can imagine, if I close a 12-month contract near the end of the month of June and it's a subscription business, very little of that revenue gets taken in June and ultimately then in the second quarter. But under ASC 606, even if that deal closes on the last day of June, I'll end up with 80% of it being recognized in the month of June and ultimately in the second quarter. So the result of that, of course, is that we had that $3 million unexpected step-up in revenues for the second quarter. And that then pulls revenue out of future period. So again, if you think of $3 million and divide it by 4, it's a negative impact actually of about $750,000 a quarter to our revenues for the subsequent periods, which would be Q3 and Q4 of this year and Q1 and Q2 next year, and again, our guidance reflects all of that. So 606 created a nominal benefit here in Q2, and it actually is a bit of a nominal takeaway then in the next four quarters as a result.

Nehal Chokshi -- Northland Capital Markets -- Analyst

Excellent. Thank you very much.

Operator

Next up from Stifel is Gur Talpaz.

Gur Talpaz -- Stifel -- Analyst

Okay, great. Thank you for taking my question. Gary, can you talk about the appetite for M&A in the current environment and ultimately where you might be looking?

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

Sure. We continue to explore the M&A market looking for interesting opportunities that extend the value that we currently have with customers where we can basically there find a -- finding a tight adjacency where we can create more value, drive more economic value for us with customers or something that extends this current solution. And our focus really is everything that fits in that people-centric view. And so, we look at all M&A opportunities through that lens. And while we had thought we would see a more significant decline in private company values, we haven't seen that. And so, we will continue to be super disciplined in how we look at opportunities and continue to explore it and see what we find. But we're going to be -- we're going to continue to be super disciplined.

Gur Talpaz -- Stifel -- Analyst

Great. Thank you.

Operator

Our next question is from Taz Koujalgi, Guggenheim Partners.

Imtiaz Koujalgi -- Guggenheim Partners -- Analyst

Hey, guys. Thanks for taking my question. Paul, I have a question about the new and add-on business. You said that it should be down 5% for the year, that's what you're expecting. Can you give some more color on what it was for Q2 and Q1? And is your full year guide implying that the momentum improves in the [Indecipherable]?

Paul Auvil -- Chief Financial Officer

Yeah. I didn't break that out. So it's just -- overall, for the year, it's down about 5%. The timing for the quarters obviously has a little bit of an impact on revenue, but you see that reflected in the guide. So obviously, we're hopeful that we not only deliver on that number, but with luck, maybe we get that NARR number back to even from the prior year. Yeah, we'll see how the second half of the year plays out. But I think with current pandemic and the fact that 20% of our installed base, a little bit more is in this highly impacted industry, where as you can imagine, we're getting the renewals, albeit often at somewhat lower value because of either furloughs or layoffs. Those customers have no dollars to spend for add-on product, almost uniformly. And as well, because we have sales teams that focus on those markets, there's not much in the way of new business that we're closing for new account acquisition in those impacted industries. So, I'm actually quite pleased that we're able to deliver a NARR number at this level, given the affected industries and the dynamics we see in those businesses right now.

Imtiaz Koujalgi -- Guggenheim Partners -- Analyst

Thanks.

Operator

We'll now go to Daniel Bartus, Bank of America.

Daniel Bartus -- Bank of America -- Analyst

Hey, guys. Thanks for squeezing me in here. I'm just curious how Meta Networks is doing. Gary, maybe you can discuss which of your products it might integrate well with and if they have indeed been replacing existing VPNs recently. And then, Paul, if there's any sense you can give us for the size or growth rate, that would be great, too. Thank you.

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

Yeah. No, great question. We've been focused Meta on integration with the CASB solution, providing interesting access capabilities. And this really fits within that broader SASE framework that Gartner talks about. There's a reasonable amount of development work to do there, but we're seeing some good early interest and early demand. And we feel good about how that really augments our overall CASB solution and overall competitive position.

Paul Auvil -- Chief Financial Officer

We haven't broken out any kind of stats explicitly on the revenues or things like that within the emerging cohort of products.

Daniel Bartus -- Bank of America -- Analyst

Got you. Thanks guys.

Operator

And our last question today comes from Yi Fu Lee, Oppenheimer.

Yi Fu Lee -- Oppenheimer -- Analyst

Thank you for taking my question, gents, and congrats on the solid execution in light of the pandemic. My one quick brief [Phonetic] question is about [Indecipherable] alliance. You've [Phonetic] seen some great wins because of these alliances. I was wondering, Gary or Paul, if you could explain how the economics split when you guys go to market together with other vendors? Thanks.

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

Yeah. So, in terms of the economics, we don't resell their products, they don't resell ours. It's very much -- the good news is, we share all the same channel partners. So, the channel partners will kit together the solutions and put together often a bundled quote that includes some combination of Proofpoint and the other solutions to the customer in question. And then, of course, we sell our piece to the reseller or the distributor accordingly. And so obviously, there's a lot of benefit for all of us cooperating. So if we find an opportunity where we think one or more of the other partners involved could benefit, we'll bring them in, and we'll encourage the channel partner to do that as well and vice versa. So, there's a lot of value in working and collaborating. And it's very similar to how the Palo Alto Networks relationship works, which is our first big foray in this area years ago. When you have a common enemy, there's a lot of power in working together, arm in arm to go win business jointly. And so, I think we're pleased with the early results we've seen from some of these newer partnerships. And I think that could potentially play a pretty meaningful role in helping to drive business for us down the road.

Yi Fu Lee -- Oppenheimer -- Analyst

Thank you for the color. And again, congrats on the strong execution.

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

Thanks.

Operator

And that does conclude the question-and-answer session today. I'll hand the conference back to Gary Steele for any additional or closing remarks.

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

Great. I want to take a moment and thank everyone for joining us on the call today. We're very pleased with our Q2 results and our continued progress with our people-centric approach to cybersecurity and compliance, while also supporting the health and safety of our employees and customers. We 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 seeing many of you virtually on the conference circuit this quarter. We wish you all good health as we press forward through this crisis. Thank you so much.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Jason Starr -- Vice President, Investor Relations

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

Paul Auvil -- Chief Financial Officer

Rob Owens -- Piper Sandler -- Analyst

Jonathan Ruykhaver -- Baird -- Analyst

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

Walter Pritchard -- Citi -- Analyst

Jonathan Ho -- William Blair -- Analyst

Richard Hilliker -- Wells Fargo -- Analyst

Brian Essex -- Goldman Sachs -- Analyst

Alex Henderson -- Needham -- Analyst

Sarah Hindlian-Bowler -- Macquarie -- Analyst

Gray Powell -- BTIG -- Analyst

Erik Suppiger -- JMP Securities -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Hamza Fodderwala -- Morgan Stanley -- Analyst

Nehal Chokshi -- Northland Capital Markets -- Analyst

Gur Talpaz -- Stifel -- Analyst

Imtiaz Koujalgi -- Guggenheim Partners -- Analyst

Daniel Bartus -- Bank of America -- Analyst

Yi Fu Lee -- Oppenheimer -- Analyst

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