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Proofpoint, Inc. (NASDAQ:PFPT)
Q1 2014 Results Earnings Conference Call
April 30, 2014, 05:00 p.m. ET
Paul Auvil – Chief Financial Officer
Gary Steele – Chief Executive Officer
Rob Owens – Pacific Crest Securities
Phil Winslow – Credit Suisse
Matthew Hedberg – RBC Capital Markets
Craig Nankervis – First Analysis
Jonathan Ruykhaver – Stephens
Tim Klasell – Northland Securities
Sanjit Singh – Wedbush
Michael Kim – Imperial Capital
Eric Suppiger – JMP Securities
Jonathan Ho – William Blair & Company
Walter Prichard – Citigroup
Good day and welcome to the Proof Point First Quarter 2014 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to hand things over to Mr. Paul Auvil, Chief Financial Officer. You may begin.
Paul Auvil
Thank you. Good afternoon and welcome to Proofpoint's first quarter 2014 earnings call. Today, we will be discussing the results announced in our press release that was issued after the market closed today. I am Paul Auvil; Chief Financial Officer of Proofpoint and with me on the call is Gary Steele, Proofpoint's Chief Executive Officer.
During the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements, contained in the press release and this conference call. These risk factors are described in our press release and more fully detailed under the caption Risk Factors in Proofpoint's most recent Form 10-K and Form 10-Q filed with the SEC and the company's other filings with the SEC.
During this call, we will present both GAAP and non-GAAP financial measures. These non-GAAP measures may exclude stock-based compensation expenses, acquisition related costs, accretion of the debt discounts and amortization of the debt issuance costs associated with our convertible debt, additions to deferred revenue from acquisitions, costs associated before litigation as well as the amortization of intangibles related to acquisitions or other components of GAAP metrics.
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 is included in today's press release regarding our first quarter 2014 results, which can be found in the Investors Relations section of our website.
In addition, please note that the date of this conference call is April 30, 2014 and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.
So with that said, I will turn the call over to Gary.
Gary Steele
Thanks Paul. I'd like to thank everyone for joining us on the call today. We are once again very pleased with a strong execution during the first quarter which resulted in our ability to exceed the high end of expectations across all of our key operating metrics, particulary our billings and $1.8 million in free cash flow generation.
During the quarter we saw a strength across our entire product line highlighting the high demand for our world class set of security, achieving and governance solutions. In addition, Proofpoint continues to witness a decline in terms of the quality and capability of many of our competitor's solutions. Consequently we believe the company is well positioned to maintain a momentum and gain market share in the longer term.
Taking a quick look at our financial results for the first quarter. Total revenue increased 39% year-over-year to $42.7 million and was driven by a 45% increase in subscription revenue and this represented our 43rd consecutive quarter of sequential revenue growth. We also recorded billings of $46.6 million up 33% on a year-over-year basis. Both revenue and billings were above the first quarter guidance ranges
Now turning to some of our key accomplishments during the first quarter. Our high win rates versus our competition continued to drive momentum in winning new customers. Larger and mid type organizations that have been relying on outdated legacy detection and prevention technology which often left them unprepared to have upstage advanced security attacks are switching to Proofpoint's cloud based solution. A few of these competitive wins include a Fortune 500 financial services company with 80,000 users which purchase our protection and privacy solutions.
A global provider of medical technology with 25,000 users which purchase our protection and path solutions. One of the worlds most renowned universities with over 25,000 users which also purchase our protection and TAP solutions. A leading regional consumer goods retailer with 30,000 users which purchase our protection solution and a large US based industrial company with over 13,000 users in addition to a large North American energy provider with 10,000 users both of which also purchase our protection solution.
We are also excited to report that we had another very strong quarter with Proofpoint Targeted Attack Protection as we once again grew the TAP business by over 100% year-over-year in Q1. We are particularly pleased to announce a key deal with a large global enterprise that deploy TAP for over 300,000 users. Due to a corporate mandate that requires the solution to be deployed globally on a very short notice, we successfully deployed TAP across the entire enterprise in less than 48 hours, which we believe demonstrates the power of the cloud as well as the strong execution of our major accounts team.
Some of the noteworthy TAP winds during the quarter included a leading global agricultural cultural supplier which added TAP for 16,000 users. A premiere regional health care provider in North America, which deployed TAP for 13,000 users, a leading global provider of employment services which procured staff for 4000 users and a global medical technology company along with one of the worlds most renowned university each with 25,000 users which deployed both TAP and protection as I mentioned earlier.
We are also excited about the recent addition of our next generation predicted defense for TAP which we launched at the RSA Conference in February. Our ability to effectively identify a block and TAPs before uses are compromised has resulted in good early interest in its enhanced solution and it also creates an additional revenue opportunity for the TAP business.
Furthermore, the momentum of our privacy solution has been 10 years; appear to keep privacy wins included, a large financial services company which brought our privacy solution for 13,000 users. A leading consumer products company which brought our privacy solution for over 10,000 users and a Fortune 500 retailer which brought our privacy solution for 5500 users which also purchased our protection and TAP solutions.
We also had another strong quarter in our cloud based archiving business as evidenced by deals one where a leading urban public school system in the US that purchased our archiving solution for 25,000 users and one of the worlds largest consumer services company which purchased our archiving solutions for 7000 users.
A new important driver in our archiving business is our social media capability where we continue to see traction. During the quarter we had wins with a number of financial services companies, including a large regional bank with approximately 1,400 branches throughout 12 states. We believe that our social media compliance capability for archiving continues to strengthen our competitive advantage and provide net cap feature for regulated organizations that embrace social media and their business practices.
During the quarter we were also pleased with the performance of both our new and add-on business with new bookings roughly square between the two. As a reminder, the number of customers using two or more of our solutions increased to 33% at the end of 2013, up from 30% in 2012 and 26% in 2011, resulted in a substantial opportunity for us to drive revenue growth to continue it out on sales.
Finally, we continue to make progress towards further expansion of broad as we build the foundation to drive our efforts in Europe and Asian Pacific, as evidenced by deals won where one of the worlds largest semi conductor providers which purchased our solution for 30,000 users, a global financial services provider which purchased our protection solution for 7,500 users, a large transportation and logistics company which purchased our protection solution for 8000 users and a leading provider of information technology and communication services which purchased protection for over 20,000 users.
While we are pleased with the solid momentum, we continue to refine our organization strategy and as a result Tracey Newell, our EVP of worldwide sales has made a number of – changes enabling her to take a more hands on approach towards managing our operations in Europe. As a reminder, the addressable market outside the United States in both EMEA and Asia Pacific continues to represent a growth opportunity for Proopoint. And we finally continue to expand our sales and marketing teams in those locations as well as our new channel partners to further grow market share in these regions.
So in summary, I am very pleased with our strong start to the year and the momentum we have seen across Proofpoints entire product line. Enterprises continue to select Proofpoint cloud based data protection solution over legacy solutions given our proven capability in handling today's advance security for us. As a result, I believe we are well positioned to continue to drive momentum and grow market share.
With that, let me turn it back over to Paul.
Paul Auvil
Thanks Gary. We were very pleased with our ability to exceed expectations for revenue, billings, adjusted EBITDA, EPS and free cash flow during the first quarter. Proofpoint continued to benefit from the combination of a very healthy growth rate of new customers, a strong cycle of demand from existing customers buying additional solutions and wall --- rate that continues to exceed 90%. Please note that I will be discussing both GAAP and non-GAAP measures and unless stated otherwise, all non-GAAP measures excludes stock-based compensation, acquisition related costs, accretion of the debt discounts and amortization of the debt issuance costs associated with our convertible debt, additions to deferred revenue from acquisitions, cost associated with litigation and the amortization of intangibles associated with acquisitions. I will first provide additional details on our performance during the first quarter of 2014 and then conclude with our outlook for the second quarter and full year 2014.
During the first quarter, total revenue was $42.7 million, up 39% year-over-year and above our previously announced guidance range of $40 million to $41 million. These strong results were driven by a 45% year-over-year growth in our subscription revenue which included $2.4 million related to Sendmail as I mentioned on the fourth quarter call.
From a geographic perspective our growth continues to be largely driven by our strength in the US market, where revenue grew by 38% year-over-year and accounted for 82% of total revenue as compared to 83% last year. Billings for the first quarter totaled $46.6 million, reflecting growth of 33% on a year-over-year basis and exceeding the high-end of our previously announced guidance range of $43 million to $45 million.
Consistent with the past several quarters, approximately one half of the net new subscription business that we closed during the first quarter was driven by sales of new solutions to our existing customers. We remain very pleased with the statistics as it demonstrates our ability to leverage our extensive and growing customer base by selling them additional solutions and expanding their number of users, hence providing a meaningful important contribution to our long-term revenue growth.
In addition, our strategic partners and resellers continue to account for approximately one half of our billings activity during the quarter, reflecting our ongoing ability to leverage external sales resources to further drive growth and market share gains in a cost effective manner and reflects our ongoing investment in EPT related infrastructure ahead of demand.
Turning to expenses and profitability for the first quarter, on a non-GAAP basis, our gross margins was 71% during the first quarter, which is in line with our prior guidance. In terms of our operating expenses, we continue our investment in sales and marketing as well as research and development to support future growth.
During the first quarter, non-GAAP sales and marketing expense increased 28% over the prior year period to $19.6 million, representing 46% of total revenue. This growth in expense was primarily driven by the addition of key sales personnel, as well as the investment in marketing and regeneration programs. Research and development expenses increased 40% year-over-year to $9.9 million accounting for 23% of total revenue reflecting our continued focus on enhancing and expanding our solutions and platform, and sharing the full impact of the R&D spending associated with acquisitions closed during the second half of 2013.
General and administrative expense was 4.1 million compared to 3.3 million last year, driven primarily by our larger scale as well as the resources needed to accommodate the integration of these recent acquisitions. Non-GAAP operating loss was 3.2 million for the quarter, compared to a non-GAAP operating loss of 3.4 million during the first quarter of 2012. Non-GAAP net loss was $4.2 million or $0.12 per share based on $36.6 million weighted average shares outstanding and was significantly better than our guidance range of a loss of $0.21 to a $0.18 per share. This compares to a non-GAAP net loss of $3.9 million or $0.12 per share based on $33.5 million weighted average shares outstanding in the year ago period.
First quarter 2014 adjusted EBITDA was negative 1.4 million, compared to negative 2.1 million during the same period last year and was also better than our original guidance range of negative 4.5 million to 3.5 million, driven by a combination of our upside to revenue during the quarter combined with lower than expected levels of growth in spending for sales and marketing as well as our day.
On a GAAP basis, GAAP net loss for the first quarter totaled $14.4 million or $0.39 per share, based on $36.6 million weighted average shares outstanding. And this compares to a GAAP net loss of $6.4 million or $0.19 per share based on $33.5 million weighted average shares outstanding in the prior year period. A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in our press release.
In terms of cash flow, I am pleased to report we just generated 4.1 million in operating cash flow for the quarter and invested 2.3 million in capital expenditures in support of our ongoing build-out infrastructure for our global SaaS platform. This resulted in positive free cash flow of 1.8 million for the quarter, which was above our guidance range of breakeven and represents a fine start for our overall goal of 10 million for the full year of 2014.
Turning to the balance sheet, we ended the first quarter with 257.2 million in cash and short-term investments and 157 million in debt, compared to 251.8 million in cash and short-term investments and 155.3 million in debt as of December 31, 2013. This sequential increase in cash during the quarter was driven by the combination of cash flow generated from operations, ongoing stock option exercises and the contributions to capital for our employee stock purchase plan.
We ended the first quarter with an accounts receivable balance of $22.3 million, resulting in DSOs of 44 days during the first quarter, lower than the fourth quarter as we continued to have strong collections during the first quarter. Total deferred revenue increased 36.7 million or 40% year-over-year to 127.9 million during the first quarter, up from 91.2 million in the year ago period. Compared to the fourth quarter of 2013, deferred revenues increased 3.9 million.
During the first quarter, the overall duration of our contract terms was down slightly from our fourth quarter results, and finished at the low end of our historical range of 17 to 22 25 months, highlighting our continued focus to shortened contract duration across our customer base. Now turning to our financial outlook starting with the second quarter. We currently expect billings to be $45.5 to $47.5 million resulting in year-over-year growth of approximately 32% at the midpoint of the range. Note that the midpoint of this guidance range is relatively flat sequentially as compared to the first quarter of this year due to the cyclicality of renewal activity over the course of the entire year 2014.
Regarding revenue for the second quarter, we are targeting total revenue of 43 million to 44 million or 37% growth year-over-year at the midpoint of the range. We expect second quarter non-GAAP gross margin to be approximately 71% consistent with the first quarter. And with regard to adjusted EBITDA we are currently targeting negative 1 to negative 2 million for the second quarter.
We expect second quarter non-GAAP net loss to be negative 5 million or a loss of $0.11 to $0.13 per share based on approximately $37.3 million weighted average shares outstanding. And this assumes an income tax provision exclusive of discrete items of approximately 0.2 million during the quarter. In addition, while we do not normally provide quarterly cash flow guidance, I wanted to highlight that we expect free cash flow during the second quarter to be roughly break even.
From a full year perspective, we are increasing our guidance above our over performance in Q1, driven by the expected ongoing strength of the business. Specifically, we now expect billings to be in the range of 207 million to 209 million for the year which represents an annual growth rate of 30% at the midpoint of the range. This compares to our previous guidance range for the year of 203 million to 205 million. With this billings performance, we are also increasing our total revenue guidance to a range of 178 million to 180 million, reflecting an annual growth rate of 30% at the midpoint range, this compared to our previous total revenue guidance of 174.5 million to 176.5 million.
Subscription revenues should continue to account for approximately 95% of our total revenue for the year. And as final point, note that that the Sendmail contribution to deferred revenue in the fourth quarter of 2013 was 2.8 million, whereas that contribution deferred revenue in the fourth quarter of 2014 is only 1.3 million creating a year-over-year headwind to revenue growth of 1.5 million or approximately 3.5% % for the Q4 '14 outlook.
We continue to expect full year 2014 non-GAAP gross margins to be approximately 71%, which includes the initial cost associated with the build out of infrastructure associated with our newest Targeted Attack and associated products.
Adjusted EBITDA for full year of 2014 is expected to be in the range of negative 3 million to negative 5 million, a few million dollar improvement over the guidance last quarter, driven by the upside to profitability delivered here during the first quarter of the year. As a reminder, this also includes our plan to plan to modestly accelerate investments in sales and marketing to capitalize on the weakening competitive environment and the rapidly expanding opportunity in the new landscape of advanced persistent threats. In addition, we will continue to expand our investment in research and development to support our ongoing slate of key product development initiatives.
As a result, we continue to expect our EBITDA loss to gradually improve over the course of the full year with breakeven results expected in the fourth quarter of 2014. We expect full year 2014 non-GAAP net loss to be up $15.3 million to $17.3 million or a loss of $0.41 to $0.46 per share based on approximately $37.7 million weighted average shares outstanding. This assumes depreciation of approximately 9 million, up 50% from 2013 and cash interest expense associated with convertible debt of roughly 2.5million, this is a new item for 2014.
As well the income tax provision, exclusive of potential discrete items is expected to be approximately 0.8 million for 2014. I would like to highlight again that we are currently generating a net loss and as such our weighted average share account of 36.6 million for Q1 did not include the impact of an exercised stock options. If we were profitable today, our fully diluted share count would have been approximately 40.7 million shares when applying the treasury stock method to outstanding options in restricted stock units. In addition, if our convertible note were in the money at the beginning of the quarter, it would add approximately 5.2 million shares.
Finally, we are reiterating our free cash flow of guidance of roughly $10 million for the full year 2014, which is an increase of almost 100% from 2013. This cash flow guidance assumes capital expenditures of 13 million to 15 million for the full year, as we continue to build out our cloud infrastructure to support the rapid scaling of our business and our latest product introductions.
As and additional point I would like to remind everyone that over 95% of our revenues come from the current subscription revenues each quarter. This business model when combined with our renewal rates that consistently exceed 90% enable us to enter each quarter with better than 90% visibility into our revenue for the coming quarter, which is uniquely a favorable aspect of our overall business model as compared to any of the other up the trade security companies.
So in summary, we had a very strong first quarter and believe that Proofpoint remains well positioned to maintain momentum throughout 2014 as the worldwide demand for integrated cloud based solutions remain strong. Before turning it over to the operator for questions, I wanted to mention again that we are hosting an Investor Day in New York on the afternoon of Tuesday May 20th.
With that, I wanted to thank everyone for taking the time for joining us on our call today and we'd be happy to take your questions now. Operator?
Question-and-Answer Session
Thank you. [Operator Instructions]. (Operator Instructions) And we'll take our first question from Rob Owens with Pacific Crest Securities.
Rob Owens - Pacific Crest Securities
Great, thank you very much. Want to focus on the organic, but I know you fully disclosed what Sendmail did but organic subscription was about 36% growth, is all that Sendmail in that subscription line and that accelerated versus the last quarter. And I know you said the second question you had strong renewal activity here in Q1 and some of the guidance for Q2. But if I look in year ago period for Q1, I think you had a $1 million data import which set up a tough comp, and so if I look at that subscription kind of guidance on an organic basis for Q2, looks to be accelerated to about 32%, so just kind of wondering if you could help me resolve that call? Thanks.
Paul Auvil
Yeah and so to your first question, yes on an organic basis subscription growth was roughly 35, 36% when you take into account the Sendmail deferred revenue contribution which was about $2.4 million in the quarter. So that's correct and that is an acceleration from what we've seen historically for organic growth rates. We were very pleased with that number.
In terms of the question on essentially the billings activity in Q1 of 2013 compared to Q1 of '14 and then what that means when we talk about Q2 of '14 in our current guide, you are absolutely right we did have that one time benefit in Q1 of '13 and so I will just remind everyone on the call that there's complexity in our model because in any given quarter we have a combination of one year deals that are up for renewals, two year deals that are up for renewals from two years prior and then three year deals that are up for renewals from three years prior.
And so as a result, it can be tricky just to do the year-over-year compares on our billings numbers from in this case, Q1'13 to Q1'14, Q2 '13 to Q2'14 I would say that overall when I look at the guidance we just provided for Q2'14 and considering the renewals that we do in that particular period, I think there is a healthy sequential improvement in the organic new and add on billings that are incumbent in that guide for Q2 '14. I know it is occasionally a matter of questioning regarding how much of that guide is new and at our versus renewals we don't historically provide that data, but I can tell you that when it all hangs together and you look at the guidance overall I think one, we had a very strong Q1 which you could see as – pointed out reflected in our strong organic subscription growth rate and we feel good about the guidance that we provided on the billings line for the second quarter and how that comports to the revenue guidance.
Rob Owens - Pacific Crest Securities
Great. Okay and then the second for Gary, you made the comment in the that first we saw the competitive landscape is shifting in your favor and you know looking at the acceleration here in subscription it appears that the velocity of the business is getting that much better given shrinking duration and billings and everything else that is going on. So maybe you talk about A, pricing and you are seeing a competitive response there and B, just what are you seeing kind of on the horizon in terms of potential competition.
Gary Steele
Yeah sure, so as we look at the competitive landscape as we included in this graph, we do see our larger competitors continuing to struggle. And that has created opportunity for us. In the quarter we saw strength across a variety of competitors in terms of our ability to take them out of existing customers. That was very strong and as we look at our you know as we think about our pipeline and the opportunity going forward, we don't see any short term changes to that competitive landscape. As we look more broadly at the horizon although in the events world where we play with path, there is a variety of companies participating there that's really more of our share of wallet competitive gain versus a head to head competitive gain. And we are fairing quite well in that getting larger organization to see the value of path and the dot path, while at the same time in the core protection area, our solutions were differentiated when customers cash that on a head to head basis. We can prove that we are that much more effective and that much more value for the dollar.
In terms of pricing and as we go to another part of your question, we do not see degradation in pricing in the quarter, we do see some reactive actions being taken by our competitors trying to save deals that when we get in, when we share the value we are commanding at market or higher prices than we've historically seen.
Rob Owens - Pacific Crest Securities
Great. Thank you guys.
Gary Steele
You bet. Thanks Rob.
And we'll go next to Phil Winslow with Credit Suisse.
Phil Winslow - Credit Suisse
Hi, thanks guys and congrats on a good quarter. Just wanted to focus in on expanding product portfolio, obviously add on sales were strong this quarter, but what if you can help us to sort of the balance just what you are seeing from this sort of call, you have net new customers, how much sort of not only is it sort of an upsell potential over you existing customer base but how this problem is -- is actually helping you with sort of the color being on just net new customer acquisition.
Paul Auvil
Yeah, great question Phil. So in Q1 similar to the last few quarters, we seen our passes of split basically 50-50 between new customers and add on. So we are using TAP as a key part of our message and story and penetrating new customers. As you heard in the script we also had a lot of solid attach between our customers our new customer who brought TAP he might have also brought protection. So the overall story is playing well together and we are successfully executing the strategy where we'll go sell TAP and sell protection at the same time to that new customer that's looking for an improved security solution. And I would just remind you again that half the business is going to new and half is going to existing customers.
Phil Winslow - Credit Suisse
Got it. And then also just what are you seeing as far as just you know pricing and it goes out there and the environment is sort of broadly speaking, when you think about you made the comment a moment ago that your pricing has actually been of – or there were some competitors are even winning on features, but maybe if you just kind of compare this with pricing environment that you are seeing now versus maybe a year or two years ago?
Paul Auvil
Yeah, Phil its Paul Auvil here. I'll tell you the one thing that we do pretty carefully is we measure pricing across all activity quarter. Just for new and adds on and seeing renewables are kind of a different realm. And we compare that with the prior quarter to five quarter trailing average and the 12 quarter trailing average and I could tell you that you know across those measures pricing continues to be consistently in the median or about median of the past couple of quarters across all customer size ranges, so we'll kind of break it down by size range to look at the small customers that are under a 1000 and then we'll look at ranges a 1000 to 5000 users etcetera.
And so, you again it's something that we give pretty careful attention to across all of our product launch, so we look at for the protection product for the privacy product or archiving and then obviously half as new book you look at it there as well.
So yes, I would say overall as we've looked at that data, not only this quarter but you know the past several quarters, we continue to be happy with the overall performance we see in the market in terms of the pricing although relatively steady. I wouldn't say there is a trend for pricing to move up, but there's definitely not a trend for pricing maybe down.
Phil Winslow - Credit Suisse
Got it. Thanks guys.
Paul Auvil
Thanks, Phil.
And we'll go next to Nandan Amladi with Deutsche Bank
Unidentified Analyst
Hi, it's actually [Ted] on behalf of Nandan. Two questions, one, you had good performance in this quarter. Were there any large deals that led to that performance?
Gary Steele
You know we didn't have any monster or whale deals, we again usually have a pretty good stratification of new and add on business. We still have a handful of deals that are high six or low seven figures and then we'll have a number of deals that are mid six figures and a number of deals that are you know in the 50 to 100,000 range. We don't disclose those statistics each quarter, but we saw the same kind of general broader granularity of opportunity across all of our sales organizations that we have seen in the past so there wasn't any specific concentration that helped drive their strength of this particular quarter.
Unidentified Analyst
Got it, thanks. And then you have seen a lot of royalty and see – run rates acquired in the end points base and they will be starting the golf synergies between the AP product and then end point products, what are your talks on that? I mean, do you guys see sort of going into an end point with a security product at some point to complement the TAP offering?
Gary Steele
Yeah, that is an interesting question. Today, where we have focused is we try to find synergy with all the capabilities that we are delivering and trying to find synergy with our specific buyer. I – we don't have any short term plan; based on that we don't have any short term plans to do anything at the end point area. I think it will be challenging for some of the companies that entered that area, if you get leverage from where they are selling and so we see lots of opportunities to continue to expand the broader faster print, deliver more value without heading into the endpoint phase.
Unidentified Analyst
Perfect. Thank you.
Gary Steele
Thanks, Ted.
We'll go next to Matt Hedberg with RBC Capital Markets.
Matthew Hedberg - RBC Capital Markets
Yeah thanks for taking my questions guys. In the prepared remarks you highlighted social media archiving solution had a lot of nice wins this quarter. Talked about a thing I must have a regulatory – I'm curious are those wins largely organic, are those into your installed base and do you see an opportunity even outside of you know more regulated industries?
Gary Steele
Yeah, great question. So those wins have been spread reasonably evenly between new net on. It is definitely attracting attention because as organizations think about how they are going to adopt social media and basically turn it on for their employees and many financial services companies for example don't allow access to those particular sites. At work and so as organizations want to figure out how to embrace that in the business practices they have got to buy something to meet their compliance requirements.
And so, it's opening door and – dialogue that we didn't have with new accounts and our existing customers are looking for that capability as well. In addition to that, it's not just financial services, we are seeing demand across other industries that are regulated in different ways, maybe not government regulated but have a much more stringent view of how the capabilities are being used so we have seen demand in healthcare, we have seen demand in energy and other industries.
Matthew Hedberg - RBC Capital Markets
That's great. And then, as a follow up, your cash balance here north of 250 million, I guess I call evaluations more real now on a security space or in the past few weeks you did, does that changes making on M&A or is it largely sort of more opportunistic as they come along?
Gary Steele
Yeah so a couple of things and Paul probably will have commented to our strategy with respect to M&A hasn't changed. We do believe that there is opportunity to acquire great technology from all companies, great teams of people with good proof in the market place. And if you look at the acquisitions that we did in 2013 that our strategy to continue to look for the kinds of opportunities in '14. And so I don't think you will see anything different from us, we were never in the business of trying to go by big companies or most of the revenue that has not been our point of view and nor will it be in 2014. Paul…
Paul Auvil
I would still say to your point Matt, we do have a strong cash balance and that gives us lot of flexibility but we are very thoughtful buyer. So, even when the product company evaluations got a little bit floppy over the prior four five months, our view is here we were not in a hurry, we are always looking for kind selected unique assets to fit it. And so, as we see instinct opportunities come along at prices that we think are reasonable in the context above our cash balance, our overall capital structure and the evaluation that we can deliver to our investors overtime by creating that business combination you know we'll execute accordingly, but we are not in any hurry but we do think there is some interesting things out there that could make sense to put together the through points at the right time, at the right price.
Matthew Hedberg - RBC Capital Markets
That's great guys. Thanks for the question and congrats on the quarter.
Paul Auvil
Thanks, Matt.
Gary Steele
Thanks, Matt.
We'll go next to Craig Nankervis with First Analysis
Craig Nankervis - First Analysis
Thanks, good afternoon and congrats on a nice quarter. I guess Gary, I'll start with – my sense that maybe the outbound privacy business has picked up more recently perhaps because of [NSA] stuff. I wondered it wasn't simple but I wonder if there is any commentary on what's happening there and whether it's a just new or existing customers that are – if there is a – with tackling any compression on that?
Gary Steele
Yeah, it's an interesting question, Craig. So as we exited 2013, we saw our pipeline build in terms of customers expressing interest in privacy. And so as we move through Q1 we did have a good number of really interesting wins. Our anecdotal view on why that is that given the high visibility breaches that happen, previously there's a hiding concern among organizations of how they are going to protect consumer data. And so I think people are saying, hey I've got to do everything I can within my power to make sure that I am doing what's required to protect the sensitive data to avoid the potential breach or breach disclosure.
So I think there is a view out in the market place that people want to take more aggressive action here. The deals that I referenced were a mix of both new customers that have not been Proofpoint customers before as well as Add on. We traditionally feel privacy more than add on solution frankly and we saw in the quarter more interest from new customers and we will have to see how that plays out through the end of May end of 2014.
Craig Nankervis - First Analysis
So your sense is what you are seeing is somewhat sustainable through the year?
Gary Steele
We felt good about the deals that we won in Q1 and we don't see anything changing in terms of pipeline. And maybe see it as very positive, very strong.
Craig Nankervis - First Analysis
I don't, I might have missed it, but I don't believe there was comment on you know fiscal and code activity that in sometimes here and I wonder is it sort of the same story you are continuing to make progress disclosing there is there any new color on what's happening?
Gary Steele
No we felt strange across the competitive landscape this quarter. We didn't call out in the script this particular quarter specific competitors that we displaced, but we didn't see any material change either. We felt strength across displacement of the traditional companies those including – Postini, Cisco IronPort, Symantec and others.
Craig Nankervis - First Analysis
In their being on the male to store side, I think basically on the Postini side that continues to work for you as well?
Gary Steele
It does. We continue to make very good progress there and we are in the phase of channel adoption. So we're getting the organization that had traditionally been distributors or resellers good for Postini to adopt the Proofpoint essential solution and we are starting to see some good traction, but its still very early and so look for more comments in coming quarters in terms of traction on that.
Craig Nankervis - First Analysis
That's it from me. Thanks a lot.
Gary Steele
Thank you, Craig.
We'll go next to Jonathan Ruykhaver with Stephens
Jonathan Ruykhaver - Stephens
Hey guys congrats on another strong quarter of execution. The first question I have is can you talk a little bit about the introduction of the predictive defense capabilities, specifically how does it add to TAPs value and proposition. And I know it's early but what kind of a tax rate do you anticipate and also maybe if you could put some color on pricing.
Gary Steele
Sure, I'll start and I'll let Paul talk a little bit about pricing. So we introduced new capabilities at the RSA Conference that are relatively new. We are seeing very strong interest in adoption. It really becomes a paid for core feature of TAP which we really like. So we expect most customers to want all the capabilities that we are delivering at part of TAP today. And we thing that that continues to give us pricing power and opportunity to continue to drive more value out of the deals that we do a TAP. And I'll let Paul comment on how to think about the pricing differential?
Paul Auvil
Yeah so when we take predicted defense and a cash for defense together, we see as those capabilities and in the addition to the URL defense capabilities that we had already been offering allows us to increase the overall value of the TAP opportunity by somewhere between 75 to 100% when sold as three elements as opposed to the single URL defense element. Now we do have people despite one capability or another, although so far we've had success in closing people on buying all most of the elements as we have introduced these new capabilities, meaning if you are going to buy cash with defense and – defense you also I you are also these things trend all go together. We do still have customers that only buy the URL defense solution and so it's early now and we're sort of sorting out what we think the most popular [actives] and bundles will be, but that's kind of a rough feeling for other pieces put together.
Jonathan Ruykhaver - Stephens
Okay, did you see any evidence to suggest that on the attach rates will be high enough to drive into that number you additionally eluded to before?
Gary Steele
When you say the number I initially wasn't (indiscernible)
Jonathan Ruykhaver - Stephens
But the demands of some opportunities 75 or 100%.
Gary Steele
You know it's a little too early right now. It's hard to tell exactly what the main stream adoption rates will look like since its early and we've only got a relatively small handful of deals that we've done as compared to the total deal flow of the company, so I'm not quite ready for making official or statement on that just yet.
Jonathan Ruykhaver - Stephens
Okay. And then the second question I had is if you could just provide a little bit more color on that 300,000 user dealer that you referenced with TAPS, specifically on the competitive dynamics for that end and also curious what the sales cycle was like, whether it was recognized in the March quarter?
Gary Steele
Sure. So the organization had been looking for advance [rate] capabilities. They had evaluated our technology for roughly a month and during that period of time we were able to show them the kind of nowhere we were able to uniquely detach. This is an organization with a very sophisticated security that have basically looked at many different capabilities are out there. And again I would characterize this as we were fighting for dollar against the other organizations. As we indicated in the script there is a corporate mandate to do something fast and frankly I think one of the key reasons we were able to get something done in the timeframe was that we were able to deploy with 48 hours. So we have the advantage because we are cloud based solution to be able to meet their very specific, very demanding time line. This was a deal that got booked in the quarter and then obviously revenue gets recognized over the period of that contract.
Paul Auvil
Right. So it's reflected in our billing number, gross value of the contract is that when a deferred and a small portion of that was recognized as revenue in the first quarter with the remainder to be recognized over the ensuing 11 months going forward.
Jonathan Ruykhaver - Stephens
Okay, perfect. Sounds like a great win. Thanks guys.
Gary Steele
Thanks, Jonathan.
We'll go next to Tim Klasell with Northland Securities
Tim Klasell - Northland Securities
Hey – my congrats as well. Quick question on the cross sell-ups. How A, the financial impact of Sendmail but how is that working out in the field as far being able to get into some of the larger customers. Has that been – or could you give any details of how successful has that been for you so far?
Gary Steele
Yeah I can talk to you – so we've been very excited about the results that we've seen been able to go into the Sendmail install base and sell those customers protection or some other capability. So we had a large technology company that had been a loyal Sendmail customers switch off their competitive solution that Sendmail had been selling to the TruPoint Solution. We had a large insurance company expand their deployment of Sendmail and purchase the Proofpoint protection solution and deploy for many users globally. Those are just a couple of examples where we've gotten this traction. We've been very very pleased with our ability to go drive additional business and pipeline within the Sendmail install base and we feel very good about that opportunity throughout as we look into the remainder of 2014.
Tim Klasell - Northland Securities
Great. And then just quick follow on, internationally you mentioned you are having, you guys doing some more focus there, how does that do, maybe I missed the numbers, but what percentage of your billing this quarter were international? How does that better [ground].
Gary Steele
We don't actually pass the (indiscernible) that way we talked about the fact that revenues from North America it was 83% in the quarter and as a result that need international that bulk of which is Europe. So Europe delivered a reasonable quarter, but it just – it needs to get a lot more traction in order to start taking in – representing a larger slice of the overall revenue pie. And I think you know Tracey has rolled up her sleeves and taken a few actions to continue to drive evolution of the organizational structure there to get much more hands on and detailed in how we are driving those actions. But I think we feel good about how pieces are coming together. But as we talked about over the last couple of calls, you know we think it will be probably late this year before we start to see interesting traction there to speak up. It's a long road of paving the way and driving some additional momentum and activity there.
Tim Klasell - Northland Securities
Okay. Great, thank you very much.
Gary Steele
Thanks, Klasell.
And we'll go next to Sanjit Singh with Wedbush
Sanjit Singh - Wedbush
Thank you for taking my questions and congrats guys on a great quarter. Very quick questions. On – what opportunities do you guys see to increase customer value on a per user basis. I think last quarter you guys talked about cancellation of TAPS because you are adding an incremental $3 per user per year. What opportunities do we see on gaining more customer value on a per user basis?
Gary Steele
So we talked about this in a couple of different forms overtime, but you know the most popular initial go to market motion with a new customer is to sell them protection. And so, a large part of our new business in any given quarter is protection although we also have customers who buy privacy is the first product or tab or archiving. So with that said, we then seek to drive out our business around those other products. Privacy historically has been our most popular add on which again if you think about a typical 5000 seat account they might pay you know on the order of $10 a user a year for protection and privacy would sell for an additional 10 to 15 so roughly double the size of the opportunity.
As we have TAP, TAP is now very natural add on to sell along with the protection solution and we're seeing good uptake there as well. You know it depends on the customer size, but TAP sold even as an add on where it sought of you know thing of it is getting doubled with whatever they are already buying. You know the price is consistently well over $3. Our very large accounts like pay $5 to $10 a user a year for that capability and the smaller accounts obviously pay quite a bit more than that.
And then archiving as we talked about before depending on your storage requirements the duration of retention etcetera their products starts in the – think of it in the 20 to $25 price range per user per year and it goes up from there. So as we drive to add on an archiving those sales cycles are a bit longer and pipeline takes longer to develop, but it creates a meaningful lever over what would have been initially much smaller protect ion sale.
Sanjit Singh - Wedbush
Great. And then just two quick follow ups, from an advertising solution that came up this quarter you know what's the initial feedback on that product. And I guess philosophically if you are thinking about free cash flow, you guys point to the double free cash flow from 2013, now think about longer term how do we think about free cash flow generation in the context of your growth strategy?
Gary Steele
Sure. We've had very good early feedback on that solution, but it's still very early and I think that as the remainder of Q2 plays out we will have more evidence there but we feel very good about that opportunity and we are doing some very unique things and that's the kind of feedback that we are getting. But again, very early and I'll let Paul comment on the free cash flow.
Paul Auvil
Yeah so free cash flow we talked about back at the time of the public offering a couple of years ago now and continue to talk about today in various forms and venues. You know we are looking to drive free cash flow as a percentage of revenue upto 20% or so in a five year timeframe measure the [historic] point being early 2012. So we feel like the 10 million that we are delivering this year which you know think of it in the order of 5% or so is nice staffing in that direction up from the 5 million a year prior. And so we felt like we are making good progress in demonstrating the ability to both grow the component club and generate free cash flow and growth in free cash flow as we do that.
So I would say all systems go I think we are on track to continue to drive towards that free cash flow target over the next couple of years in terms of getting to about 20% of revenues in the you think of it as 2017 timeframe or there.
Sanjit Singh - Wedbush
Thank you for the information. Congrats.
Gary Steele
And we'll go next to Michael Kim with Imperial Capital
Michael Kim - Imperial Capital
Hi good afternoon guys. Can you talk about the extension in major – and if you are seeing an acceleration of pipeline it sounds like a little stronger there, you know do you see larger accounts taking a bigger part of the mix and how much that affect the duration?
Paul Auvil
Yeah so let me start then Gary can add some color here. Yeah major accounts are a key part of our web market. And we have a product that works well across all customer sizes. F&B has been a market we largely haven't spend on, but that kind of midsize, large and then major accounts are all – if you go to market motions we are currently you know sitting at just shy of 20% of the thousands that are having one or more of our products and we have a major accounts team focused on that. You know we find that those customers are the ones that most highly value the unique and differentiated capabilities of our products and so it's a core area focus and we have a separate dedicated sales organization that goes out to major accounts as opposed to then just sort of large accounts and then what we call [major] enterprise, saw a good production from them here in the first quarter, obviously fourth quarter was a great outcome for them and they had some great numbers in that, typical of what you see in major accounts there is a stronger spending cycle in the fourth quarters compared to the rest of the year, but their pipeline looks good and we feel good about the progress we are making there.
Michael Kim - Imperial Capital
Okay, great. And then switching gears to international, is it your sense that a good portion of incremental spend and selling market maybe focused on building out the APAC and the partnership of the APAC region and how do you see that progressing through the balance of the year?
Gary Steele
Yeah given the fact that Europe is about 80% of the size of the US market most of our investment that is dedicated internationally would be focused on driving growth in the European market. We do our business in APAC, we are actually happy with how those things, that those businesses are coming along, but they are bit less focus for us as compared to Europe. And so, when we look at the sales and marketing dollar growth over the course of this year we are going to continue to put quite a bit fuel on fire in the US because that market is growing very well for us or differentiated products are well received and we have a tremendous opportunity yet on penetrated that again. We are in roughly 20% of the (indiscernible) big opportunity to grow just enough large market met alone for the rest of the North American opportunity.
But we will be putting a nice amount of resource to work in Europe. But Asia Pac we got a handful of additional resources there, but that's probably an area for strategic investment in a future year.
Michael Kim - Imperial Capital
Okay. Great. Thank you very much.
Gary Steele
And we'll go next to Daniel Ives with FBR Capital Markets.
Unidentified Analyst
Yeah thanks guys, this is (indiscernible). Just from a high level can you talk about they – how the security purchase divisions kind of changed over the last year and what you guys are seeing interms of or is it in terms of priorities and strategy at the enterprise?
Gary Steele
Yeah we are definitely seeing much more visibility for Chief Information Officers and how they are thinking about securing the enterprise. That visibility is developing at the board level today and most Fortune 500 boards are actively engaging with the Chief Information Security Officer to ensure that corporate assets are adequately protected to manage the enterprise risk. And all the things that I talked to you literally have to report at every board meeting either to the audit committee or to the general board.
Because of this broader exposure I think that the general penner within the steady community of people are aggressively working to ensure that they are taking all actions so as to protect the enterprise. I do believe that there is a shift in dollars from other IT budget in the security. It's really hard to characterize a caption that in terms of size, but we are definitely seeing more engagement, more concerned and more openness to have dialogue given the broad based breach exposures that have happened over the last six months.
Unidentified Analyst
Okay, great. Thanks for the color.
And we will go next to Eric Suppiger with JMP Securities.
Yes. Good afternoon. First off, any update on how the relationship with Office -- with Microsoft and Office 365 is progressing?
Gary Steele
No updates from what we have talked about in the last couple of calls in that as expected the Microsoft Business does continue to grow, but it grows at a slower rate than the rest of revenues. So, you know overtime the Microsoft direct relationship will drop below 10% revenues, but overall the archiving business for us, both through that relationship with those customers that continue to be very productive as well as the variety of other deals that we are doing in the archiving realm, both people who are on the Office 365 platform as well as people continue to running now on premise continues to grow nicely.
Eric Suppiger - JMP Securities
Okay. And then on the free cash flow, you maintain the $10 million outlook for the fiscal year, but you had some good upside in the quarter. Why are you maintaining it as opposed to taking it up, at least by the upside that you have in the March quarter?
Gary Steele
Yeah, part of the – I should have been a little more clear in the script. Part of the reason we have the upside in Q1 as we had a really strong collection cycle and we also spend a little less on CapEx than we had expected, so those two things together gave us a nice positive number, roughly $2 million in the Q1, but as you can see I guided to kind of roughly breakeven in Q2, so there's a sort of an offset there which is who knows how collections will play up, but my guess is we'll had more of a return to normalcy. That provided with some catch up by CapEx will get us to, they will call it $2 millionish for the first half and then we tend to generate a lot of our cash flow in the second half of the year, again, just based on the cyclical nature of the timing of some of our larger renewals that tend to be weighted into the second half of the year.
Eric Suppiger - JMP Securities
Okay. And then lastly, a few other security companies have noted challenges with closing large deals. It doesn't appeal that that was an issue for you at all. Did you have any guess as to what might be going on? Do you think that's an issue of budget allocation, or any guess what others might be seeing?
Gary Steele
It's hard to tell. They are in very different markets that we are. The one thing that we really benefit from that, I think is important for everyone to keep in mind is we're subscription business and we're – in the protection world, you're already spending money with somebody, so you may as well spend it with me. So there's no contention for budget. You are going to write that check to someone, whether it's Symantec or Intel Security or Cisco IronPort or Google Postini. So why don't you just give me the money and I'll do a much better job for you. So that dynamic really helps in that spending doesn't inherently stall. They got to write the check, so as long as we are lined up at the right time with the right opportunity those deals flow no matter what. So we have that benefit.
The other thing that's also true is, as we look at our other products again because we are subscription business that initial price of admission that people have to face up to in terms of that check that they write is relatively smaller as compared to making a decision on the perpetual infrastructure deal where, look, once I write this check I'd better be wedded to it for some number of years because I just put a lot of money behind this. In our case, people are free to buy it for year and you know what, if we didn't meet your expectations and do some great for you, you can move away and so you are not making quite as perilous or life committing a decision to buy ProofPoint when you are buying the one year subscription as you're if you're buying perpetual licenses or a large deployment of boxes. And so I think those things all work in our favor as compared to the other security companies out there.
Eric Suppiger - JMP Securities
Alright, good. Well, thank you very much.
Paul Auvil
Thank you.
(Operator Instructions) And we will go next to Jonathan Ho with William Blair.
Jonathan Ho - William Blair & Company
Hey, guys. Great quarter. Just wanted to start out with, is there any way that you can maybe quantify some of the improvements that you've seen in your win rates, and particularly, what segments of the market that you're seeing the most improvement in terms of those win rates?
Gary Steele
Yeah, this is Gary, Jonathan. I think that in terms of win rates I believe they're actually relatively consistent. The one benefit that we obviously are seeing is we're a broader sales footprint as we continue to hire. So I wouldn't say that I would characterize the out performance in the quarter by any change in run rate. I would characterize our success is just touching more customers and driving more business in the deals. Our run rate has always been quite high given the frankly the weakness with our competitors. We as we get more feet on the street and more sales preference will be on the touch more deals that continue to drive demand in that regard.
Jonathan Ho - William Blair & Company
Got it. And then can you talk a little bit about sort of the distribution channel leverage that you are looking for in terms of your partners. Are you seeing sort of a maturation at this point where they are carrying the deals a bit more or can you maybe describe where we are in that process?
Gary Steele
Yeah I would say the engagement model that we have today with our channel partners is essentially the same as it has been historically. I think what we are doing though is working hard to continue to align our selling efforts with those partners – within the security market today. And so, the – thing for us is to make sure that we are getting the profit share of mind with channel partners in that focus on tracing their team. But I don't think that has changed, going back to your exact question I don't think that our engagement model has changed but the channel is doing more for us today than they were historically. Our focus is how do we ensure that we are getting the appropriate mindshare and continue to ride business for that tax.
Jonathan Ho - William Blair & Company
Thanks gentlemen.
Gary Steele
Thank you.
And we'll take our final question from Walter Prichard with Citigroup.
Walter Prichard - Citigroup.
Hi, thanks. I wanted to talk a little bit about archiving specifically it was sort of the first one of the first add ons that you start selling. And I am wondering if you have seen any sort of (indiscernible).
Gary Steele
No actually we are not seeing any slowdown in terms of archiving the installed base. I think the interesting thing about archiving and we talked about this on previous calls is there is this greater and growing acceptance of archiving that reach to the cloud and we are benefiting from that broader market move. It's true with new customers, its true with our installed base. So we feel really good about that opportunity simply because we are not fighting the or we have got to convince you of that, if that is the right way to go. I think that that acceptance has really grown within the market place. And I do believe as a result of that we'll continue to see nice demand, both in the installed base as well as our new GAAP.
Walter Prichard - Citigroup.
And then how are you thinking about archiving I guess penetration of other adds on being quite – in privacy versus archiving. I mean, I guess someone (indiscernible) just trying to figure out as we sort of how we should think about it.
Gary Steele
Yeah a couple of things, one is, with the archiving business we have the special team that works with our general reps to ensure that archiving has paid a lot of attention. Archiving deals sometimes could be a little longer, a little more complicated in terms of the questions and types of engagement we need to do, so that specialist team plays that role. But one interesting convergence element that we are starting to see was that more and more [CSOS] today so it is not uncommon for us to see the individual considering and buying archiving to be the exact same person buying TAP.
Walter Prichard - Citigroup.
Got it. Thank you very much.
Gary Steele
Thanks Walter.
That concludes today's question and answer session. Mr. Steele, I would like to turn the call over back over to you for any additional or closing remarks.
Gary Steele
Great, thank you. I do appreciate everyone taking time out to discuss and to join us today. We are very excited about the results that we saw in Q1 and we look forward to talking to you again in Q2. Thanks so much.
That does conclude our conference. Thank you for your participation.
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text:
Little GoblinsbyGoldeniangel©
Carrie was asleep in her bed, alone at home because her parents were on a trip. A pretty girl who had only turned eighteen a week ago, she was content and dreaming in her bed. Always a believer in fantasy and fairy tales, she had no idea that her long-held beliefs had drawn some of the less savory creatures of this nature to her. Obviously, they were far easier to attract than any other; the trolls in particular were nasty. However, it wasn't a troll that was going to change Carrie's life forever, after all Trolls aren't seen much in populated areas - they're much too big to hide successfully.
In some ways it was almost fortunate that it was Goblins that Carrie attracted. After all, Goblins weren't nearly as vicious as Ogres, they didn't tear people apart like Trolls did, and there would be no blood sucking like a Vampire. No, Goblins just liked one thing and one thing only: Sex. Fortunately for Carrie, she had attracted miniature goblins, the big human size ones could be just as bad as Ogres when their lust was up. The miniature goblins were more of mischief makers, more in the way of imps than anything else.
Four of them crawled onto her bed as she slept. Barely a foot high, each of them had a dick that grew to be as big as they were - thick too. Despite their miniature size in everything else, they were equal to their larger brethren in that one area. Little and giggling, they looked at the sleeping girl, their strange greenish skin glowing slightly in the moonlight. With shrieking cries they attacked, one of them grabbing her wrists and holding them above her head, while two of them each grabbed an ankle and spread her legs wide apart.
The last jumped up on her stomach and started tearing off her clothes as she awoke with a scream, startled and frightened by their strange noises and finding herself pinned down. Finding a strange small creature with a dick that was growing steadily larger didn't help either, she screamed again as her clothes were ripped from her body and she lay naked before the four little creatures. They were incredibly strong, because they were so densely made. Theories in the Elven kingdom had been made that the miniature goblins were really just big goblins shrunken down. Weight, mass, all remained the same except the size - excepting of course those ridiculously protruding dicks.
However, those large spears didn't look so ridiculous to Carrie right now, especially as the first goblin began plumping up her breasts, playing with the soft mounds while his dick waved in her face. Tears began to trickle down her cheeks as she continued to cry for help, useless cries that the goblins ignored as the first gleefully pressed her breasts together with his dick in the middle; a large meat sandwich. Happily he tugged on her nipples, using them as leverage to push his dick back and forth; each nipple fit squarely in his hand, he was using them like pulleys to fuck her tits.
Carrie cried out as her poor nipples were gripped tightly, squeezed roughly, and the strange feeling of that dick sliding between her mounds of flesh. It was both humiliating and frightening, especially as the goblin leered at her, its tiny pointed teeth gleaming in the night. So silly to be so frightened of something that barely came up to her knee... and yet here she was. Held down by three of them while another raped her breasts.
The little goblin squealed happily as it came, spraying her face with greenish goo that made her cough at the strange smell. It continued pumping her breasts until all the goo was spread over her face and shoulders, not a pearl necklace, closer to jade.
Sobbing quietly, Carrie's breasts heaved as the goblin released them, her nipples looking almost purplish and bruised. She prayed that her ordeal was over as the goblin jumped off her. It ran to replace the one at her wrists, although she tried to pull her arms away they were much too quick for her. The one that had been at her wrists jumped up on top of her gooey chest, its large appendage making it wobbly oddly. Staring at it through tear filled eyes, she had no idea what it was doing until the tip of its dick pressed against her lips.
Firmly she kept them shut, absolutely refusing this indignity. The goblins all giggled at her defiance, causing her heart to quiver with fear, and then the one on top of her reached up and pinched her nose. Although she tried to hold her breath, of course the goblin won, and although she tried to keep her mouth closed as much as possible, the goblin's hard dick worked its way in. She tried to bite down, but the meaty dick was so hard that it actually hurt her teeth - and it didn't seem to affect the goblin at all, although they all squealed and made mocking noises at her after the attempt.
The mocking noises and laughter continued as the goblin on top of her started to shove its big dick down her throat, actually straddling her chin with its little legs as she gagged and choked. Holding itself up on all fours over her face, the little being started thrusting in and out of her mouth, barely giving her enough air to breath as it forced her to give it a blow job. This was so much worse than the first one, because she could taste its vile skin on her tongue, feel it inside her, its smell filled her nose.
She choked even more when it came, gallons of the gooey stuff going down her belly and filling her mouth. Although she tried to spit it out, the goblins large meat was still filling her mouth and she ended up swallowing quite a lot of it - much to her disgust. The little goblin was happy though, pulling out with a squeal of contentment. It squeezed her nipples on its way down to her right ankle, making her gasp.
The new goblin didn't jump up onto her, and she was filled with new dread as it positioned itself between her legs. Closing her eyes, she tried to ignore it as he began rubbing his large dick head up and down her pussy lips, coaxing wetness from them. She was a little wet, just from having her nipples played with so much even if it was roughly. Ashamed and embarrassed, she moaned with frustration at herself as the little goblin between her legs managed to stroke more moisture from her resisting pussy. It even rubbed her clit a little, making her gasp at the humiliation and the pleasure.
With her eyes closed, when the goblin began to push into her pussy, it felt almost like a man. A man with a very large dick... hot and hard inside her, stretching her open... Carrie's eyes popped open. How could she even THINK of enjoying this?! Looking down between her legs, it was most obvious that it wasn't a man down there, the goblin's strangely shaped head bobbed a little as it watched its thick green cock splitting open her pink pussy.
Carrie fought the growing pleasure... but it was so much easier to just close her eyes and pretend it was a man there. So much less humiliating, so much less disgusting... and it allowed her to actually take pleasure in the thick meat that was pumping in and out of her. Truthfully it did feel good, and a large part of her just wanted to enjoy it. The rest of her was ashamed of the part of her that could feel good, not only about being raped, but about being raped by a little goblin with a huge dick. It was just WRONG.
It was even more wrong when Carrie started to cum, moaning and unable to help herself as her insides burned with pleasure. The big dick just felt too good, especially with the way the little goblin's body rubbed up against her pussy and clit. Thrashing and moaning, she could hear the goblins squealing with glee as she came, the fact that she had in some way enjoyed this making them all the more excited. The dick inside her swelled, and she screamed her passion as it erupted inside her, pulsing and making the tightness of her pussy around it convulse. Shaking, she rode out the last throes of her orgasm as the creature finished pumping its green goo into her.
The goblin went and replaced the one at her left ankle. It took got between her legs, rubbing its dick up and down her now sloppy pussy. The touch felt good, she wondered if she was going to completely humiliate herself by having another orgasm while a second miniature goblin raped her. She was surprised when the little goblin said something in a chattering language, the other goblins giggled and squealed, and then began moving her ankles up towards her head.
Carrie groaned as her body was manipulated, turning her inside out. She wondered at the new position, but figured that this last goblin just wanted to be different. The last goblin did indeed want to be different, but not in the way Carrie thought he did... she found out though as the slimy tip of his cock began to press against her tight, crinkled asshole and she screamed. Struggling wildly was useless, but she kept doing it as the goblin pushed its painful way into her ass, she sobbed with embarrassment and pain as her tightest area was stretched open wide.
It hurt more than just physically, but no matter what she did the other three goblins just held on tight and the fourth kept pushing its awful way in. She groaned painfully as the goblin buried itself completely, her ass feeling swollen and overly full, almost as though she'd eaten too much. The humiliation of having this miniature creature stuff it's huge cock up her tight ass was almost as intense as the pain.
The goblin pushed in and out of her, all of the giggling as it made odd squelching sounds and she moaned in pain, writhing a little as she couldn't help but at least try to get away from the persistent ass-fucking. She moaned as the little goblin fucking her started playing with her pussy, the little fucker was actually making her feel good while her ass burned and cramped. It was a confusing mix of sensations that nonetheless was starting to turn her on.
She cried out with despair as the little goblin actually leaned down and began to suck on her clit, popping it in and out of its small mouth. Possibly the strangest sensation that she'd ever had, but also the most pleasurable... if that was what it felt like for a guy to get a blow job then she could understand the fascination. The goblin fucked her ass harder and harder as it sucked on her clit, nibbling it gently with its sharp little teeth.
Carrie couldn't help herself, her pussy betrayed her ravaged ass and she started cumming again, her ass clamping down painfully on the thrusting dick as her inner muscles rippled in ecstacy. Shockingly, even having a dick in her ass was feeling good as she came, the slick thrusting getting her off even more.
Having the goblin shooting off in her tight ass was one of the oddest feelings she'd ever had, the warm liquid spreading throughout her dark interior and leaking down the sides... it was the wrong way. She shuddered as he pulled his softening dick from her swollen asshole, crying out with relief as the goblins let her go.
The shower was the first place she went, scrubbing the green goo from her skin and pushing her fingers up into her pussy and sore ass to scoop out more of it. Grimacing, she cleaned herself thoroughly before returning to the bedroom and tossing the gooey sheets in the laundry.
But the next night as she went to sleep, she couldn't deny the hope that was burning in her chest... that maybe, just maybe, she would be woken up again.
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Is there any chance that we could ever get more of her and the fantasy creatures? I love how your mind works!!
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subset: commoncrawl


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As a scanner, multi-potentialite, renaissance woman, or whatever word you use, KC Peek has a gajillion interests. Travel (she wants to go to the Galapagos Islands so bad she can taste it), crafts, cooking, educating, arts, native and not so native flora and fauna (especially the flora), outdoor activities like hiking and camping, literature, she is fascinated with physics and by Leonardo da Vinci. 202 more words
Tags » Living The Life Of Your Dreams
Day 108 of 366Every Little Way
Being a Woman in the Corporate World
By Carol A. Salter
I haven't always been a woman in the corporate world. In fact, my beginnings as a wage earner actually began when I was about 12 years old when I was earning $.50 per hour as a babysitter. 542 more words
Personal Mission Statements by Chris Scott
Composing a personal mission statement has helped me to relax and direct my focus on searching for a better job that takes full advantage of my personal strengths, namely jobs involving coaching and training or supervising smaller teams with available one-on-one time. 432 more words
An Interview with Christine Lafinhan
Christine Lafinhan, mother of two grown daughters, is living the life of her dreams. She has been a nationally certified, freelance sign language interpreter for the past 30 years and she retired at only 58 years old this last year. 681 more words


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Southwest Costa Rica and w Panama.
- Clements, J. F., T. S. Schulenberg, M. J. Iliff, D. Roberson, T. A. Fredericks, B. L. Sullivan, and C. L. Wood. 2014. The eBird/Clements checklist of birds of the world: Version 6.9. Downloaded from http://www.birds.cornell.edu/clementschecklist/download/
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Located in the Amakhala Game Reserve, Leeuwenbosch offers luxurious country-style accommodation amidst extensive gardens with a chapel and outdoor pool. It offers games drives with the chance to see the Big Five.
The rooms are located in 2 converted farm buildings with high ceilings, verandas and original features such as a fireplace. Each room has a private bathroom stocked with free toiletries.
All meals are freshly prepared at the Leeuwenbosch Country House and served in the dining room with an exposed timber ceiling. Guests can relax after an active day on one of the wooden stools in the bar.
Leeuwenbosch Country House and Shearers Lodge are situated in the greater Addo and frontier country area and are 28 km from Addo Elephant Park. The Shamwari Game Reserve is 8 km away and free private parking is available.


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Past Event
Vanishing Point
World Premiere
Created by Vanishing Point
Conceived and directed by Matthew Lenton
Co-produced by Brighton Festival
' one of the most life-affirming, extraordinary pieces of theatre I've seen' The Independent on Interiors
This new work from Vanishing Point explores what it is to grow old and be cared for, in a world where myth and spirituality have been subsumed by what we all know to be true - that we are born, we live and we die.
Using its distinctive visual imagination, Vanishing Point explores this subject through the dreamlike scenario of a young man who suddenly finds himself in an alarmingly unfamiliar place. A place where everyone seems to know him and where strange rules apply. Where everyone seems to have his best interests at heart, but he is not at liberty to leave.
A major international co-production, Tomorrow is a striking meditation on growing old, dementia, needing care and needing to care.
As those who saw Interiors at Brighton Festival 2012 will know, Vanishing Point has a reputation for subverting reality and making the ordinary extraordinary. Its unflinching new production brings together an international, multi-age cast to ponder how we deal with old age now and in the future.
- Year
- 2014
- When
- Wed 21 May - Sat 24 May, 7.30pm
- Tickets
- £12.50 (Wed 21 May preview)
£15, £17.50
Festival Standby £10
- Other info
- Duration: 90 minutes approx
Age: 12+
Post show discussion on Fri 23 May
Sign Language interpreted Performance on Sat 24 May. Please email email@example.com to book reserved seats for service users
A co-production between Vanishing Point, Brighton Festival, Tramway (Glasgow) and Cena Contemporanea (Brasilia), in association with Platform (Easterhouse) and National Theatre Studio (London)
Image: INS
There is a £2 per order charge. Additional postage charges (50p or £1.50) apply


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European Gastronomy into the 21st Century
1st Edition
'European Gastronomy into the 21st Century' is a unique text examining the development and origins of European food traditions within social, economic and geographical contexts.
Gastronomy is the art and science of good eating and drinking: a concept that extends outwards to embrace wider notions of tradition, culture, society and civilisation. This book provides a rigorous, well researched and much needed treatment of the subject, systematically outlining:
- the development of European gastronomic tradition, and the social, economic, philosophical and geographical contexts of change
- the experiences, philosophies and relative contributions of great gastronomes, past and present
- the interplay of traditional and contemporary influences on modern gastronomy
- the relationship between gastronomy and and travel and tourism
- salient issues of nutrition, food hygiene and health promotion
Taking an all-encompassing look at the subject of gastronomy past, present and future, 'European Gastronomy into the 21st Century' uses example menus and case studies to demonstrate the theory. It also provides an insight into the business arena, using key destination restaurants to illustrate management techniques and marketing issues. Accessible and highly structured, the book guides the reader through its wide-ranging and thought-provoking content.
Key Features
The only book of its kind in this subject area Completely up-to-date comprehensive guide Essential reading for industry practitioners and students of hospitality management and culinary arts courses
National Vocational Qualifications (and SVQs) up to level 4, the HCIMA Professional Diploma, the City and Guilds Higher Professional Diploma and undergraduate degrees. It also provides a valuable starting point for those identifying gastronomy as a legitimate focus for postgraduate studies.
Table of Contents
Introducing gastronomy - What is gastronomy?; The status of gastronomy in society; Major means by which gastronomic knowledge is disseminated; Determinants of European gastronomy; Approaches to the study of gastronomy; Developing the skills of gastronomic exploration; Summary; The development of gastronomy in Europe - A brief history of early European gastronomy; Medieval and renaissance cuisine and the rise of France; The fountain of gastronomy; The genesis of a grand cuisine: the 17th and 18th centuries; The enlightened 18th century; European gastronomy: the founding fathers; The genesis multiplication and acculturation of the restaurant; Demand to be self-consciously modern and avant guard; The 19th century: the golden age; The 20th century; Cuisines nouvelle; Summary; Modern European gastronomy - Diversity and development; The birth of a collection: paradigm of contemporary culinary refinement; Concept cuisines: impetus for market reinvigoration; The advance of fusion cuisine; A harmonious union: food and wine; The changing nature of dining; Gastronomic philosophy: meaning and symbolism in gastronomy; The apex of the hospitality industry; Summary; Contributors to the development of modern cuisine and gastronomy - Escoffier's legacy; Fernand point: father of modern gastronomy; Profiles of the key modern contributors; The distinguishing characteristics of the key contributors; Summary; Into the 21st century - Influences on cuisine; The status of the chef in society; Design, vision and leadership; Entreprenerialism; Gastrosophy: the new science?; Summary; Appendices - Bibliography; Glossary of terms; People named in the text; Trade, professional and gastronomic contacts.
- No. of pages:
- 224
- Language:
- English
- Copyright:
- © Butterworth-Heinemann 2001
- Published:
- 4th July 2001
- Imprint:
- Butterworth-Heinemann
- Paperback ISBN:
- 9780750652674
About the Author
Cailein Gillespie
He has over twenty five years' industry experience, which includes a variety of senior chef positions, and is currently responsible for the food and beverage curriculum and food and beverage training operations at the Hotel School. He is a member of various professional associations within the industry, and is former head of La Confrerie de la Chaine des Rotisseurs in Scotland.
Affiliations and Expertise
Consultant, author and lecturer in Hotel and Hospitality Management and Director of Industrial Liaison and Training at The Scottish Hotel School, University of Strathclyde.
"...provides underpinning knowledge of what is after all a complex and multifaceted subject...this book fills a niche that makes it essential reading for a range of students in further and higher education and it will certainly be a recommended text for my students." Hospitality Review "European gastronomy provides the underpinning knowledge and an excellent starting point for further study of a complex and multi-faceted subject...This book fills a niche that makes it essential reading for a range of students in further and higher education and it will certainly be a recommended text for my students." Joachim Schafheitle School of Service Industries, Bournemouth University "...a welcome addition to the many publications that have been written on the various contexts of the hospitality industry. The writing style is pitched to appeal to all levels of understanding and does not require prior expert knowledge of the subject area. "Gillespie's book is an important addition.... It provides a valuable insight into the modern gastronomes environment, it suggests some of the directions this 'ill defined' area may take. Most importantly it generates a plethora of areas of reflection for all and offers a multitude of dissertation ideas for the undergraduate and graduate communities." Peter Pelham, Program Leader, Thames Valley University, UK


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Extreme Weather Still Plaguing Parts of US
Extreme Weather Still Plaguing Parts of US
302 results for 'tornado'. Showing results 109 - 126
Extreme Weather Still Plaguing Parts of US
Memorial Day Weekend a Wild Weather Rollercoaster
As seen on "The 700 Club" May 27: Flooding, snow plague Midwest, Northeast states; Moore tornado victims recall storm,...
Obama: America Stands with Moore, Okla.
Tornado Victims Recall Storm, Find Hope
'Resilient' Oklahomans Picking Up the Pieces
As seen on "The 700 Club" May 23: London terrorists call soldier's murder 'eye for an eye,' 'Oklahoma spirit'...
Hard Road Ahead: Tornado Damage in the Billions
'Oklahoma Spirit' Keeps Tornado Survivors Strong
Operation Blessing is on the ground in Oklahoma to help residents begin the recovery from the devastating tornado that...
Gene and her little dog took cover in her small closet just moments before the F-4 tornado struck her...
Billy Graham Assoc. Assists Tornado Victims
'Least of These': Storm Aid Reaches Elderly, Disabled
Moore Resident: 'We Are Going to Survive This'
Forecasters Say 2013 Tornado Season Fairly Quiet
As seen on "The 700 Club" May 21: Oklahoma tornado death toll revised downward, Charity does 'heart' work in...
Okla. Families Share Stories of Survival amid Chaos
OK Tornado Home Video Before and After Footage


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The Sun reports that Giggs is to be offered a £200,000-a-week contract to finish his career in the Middle East.
A United insider told The Sun: "Ryan is a legend at United and still an important part of the team but like Scholesy and Gary Neville, he can't go on for ever.
"He has always rejected moves but this is a very attractive way for him to end his career, a last big pay day in the sun.
"The same goes for Scholesy and Nev."
Giggs, Scholes and Neville's contracts with United are set to expire at the end of the season.
More about...
What is your opinion? Feel free to discuss the article under. You have to comment by using your Facebook profile. Be fair and have respect for other people and opinions!
Summer 2016 is set to be a very exciting time for football fans, as this is when the long awaited Euro 2016 tournament kicks off.
Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.


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Sundance Coverage Superhero Movies Fantasy Movies Festival Features International Videos How ScreenAnarchy Works
Naomi Watts Smiles And Nods In First Teaser for DIANA
Directed by German filmmaker Oliver Hirschbiegel (Das Experiment, Downfall) Diana has been described as the "love story between a princess locked in a tower and an ordinary man," the man in this case being heart surgeon Dr. Hasnat Kahn, that lasted from 1995 until a few months before her death in 1997, with her divorce from Prince Charles coming in the middle. So more of an affair than a love story then.
Update: Here's the official synopsis:
Diana takes audiences into the private realm of one the world's most iconic and inescapably public women -- the Princess of Wales, Diana (two-time Oscar® nominee Naomi Watts) -- in the last two years of her meteoric life. On the occasion of the 16th anniversary of her sudden death, acclaimed director Oliver Hirschbiegel (the Oscar®-nominated Downfall) explores Diana's final rite of passage: a secret love affair with Pakistani heart surgeon Hasnat Khan (Naveen Andrews, Lost, The English Patient), the human complications of which reveal the Princess's climactic days in a compelling new light.Hirschbiegel directs from a screenplay by award-winning playwright Stephen Jeffreys, inspired by the book Diana: Her Last Love by Kate Snell, which was in turn drawn from extensive interviews with close friends and confidantes. The result is a window into the tumultuous, change-filled period from 1995-1997, in the wake of Diana's shattering divorce from Prince Charles, and at the moment when she stood on the cusp of adifferent life, evolving into a global humanitarian, a master of maneuvering fame and becoming her own woman.
Diana will be released in the UK in September.
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The 2015 winner of the Sweepstakes & Auction grand prize, Jean Tremblay, accepts his check from Community Events Manager Ryan Queenan for $10,000.
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