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•	Keeping malicious content out;

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

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

•	Securely sharing sensitive data with customers, partners and suppliers.

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Superior protection against advanced, targeted threats.  We use a combination of proprietary technologies for big data analytics, machine learning and deep content inspection to detect and stop targeted "spear phishing" and other sophisticated attacks. By processing and modeling billions of requests per day, we can recognize anomalies in traffic flow to detect targeted attacks. Our deep content inspection technology enables us to identify malicious message attachments and distinguish between valid messages and "phishing" messages designed to look authentic and trick the end-user into divulging sensitive data or clicking on a malicious web link. Our machine learning technology enables us to detect targeted "zero-hour" attacks in real time, even if they have not been seen previously at other locations, and quarantine them appropriately.

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Comprehensive, integrated data protection suite.  We offer a comprehensive solution for data protection and governance through an integrated, security-as-a-service platform that is comprised of four main suites: Proofpoint Enterprise Protection, Proofpoint Enterprise Privacy, Proofpoint Enterprise Archive and Proofpoint Enterprise Governance. Together, these solutions can improve an organization's ability to detect and mitigate inbound and outbound threats and securely archive and discover communication across all major communication channels including on-premise and cloud-based email, instant messaging, social media and other web-based applications. In addition, our common policy framework and reporting systems enable organizations to comply with complex regulatory mandates, implement consistent data governance policies and ensure end-to-end incident response across the enterprise.

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Designed to empower end-users.  Unlike legacy offerings that simply block communication or report audit violations, our solutions actively enable secure business-to-business and business-to-consumer communications. Our easy-to-use policy-based email encryption service automatically encrypts sensitive emails and delivers them to any PC or mobile device. In addition, our secure file-transfer solution makes it easy for end-users to securely share various forms of documents and other content that are typically too large to send through traditional e-mail systems. All of our solutions provide mobile-optimized capabilities to empower the growing number of people who use mobile devices as their primary computing platform.

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Security optimized cloud architecture.  Our multi-tenant security-as-a-service solution leverages a distributed, scalable architecture deployed in our global data centers for deep content inspection, global threat correlation and analytics, high-speed search, secure storage, encryption key management, software updates and other core functions. Customers can choose to deploy optional physical or virtual points-of-presence behind their firewalls for those who prefer to deploy certain functionality inside their security perimeter. This architecture enables us to leverage the benefits of the cloud to cost-effectively deliver superior security and compliance, while optimizing each deployment for the customer's unique threat environment.

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Extensible security-as-a-service platform.  The key components of our security-as-a-service platform, including services for secure storage, content inspection, reputation, big data analytics, encryption, key management, and identity and policy, can be exposed through application programming interfaces, or APIs, to integrate with internally developed applications as well as with those developed by third-parties. In addition, these APIs provide a means to integrate with the other security and compliance components deployed in our customers' infrastructures.

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Threat detection.  Uses our Proofpoint MLX machine learning technology and reputation data to examine millions of possible attributes in every message, including envelope headers and structure, embedded web links, images, attachments and sender reputation, as well as unstructured content in the message body, to block phishing and spear phishing attacks, spam and other forms of malicious or objectionable content. This solution also includes sophisticated policy and routing controls designed to ensure security and the effective handling of all classifications of content.

•	Virus protection.  Combats email-borne viruses, worms and trojans with a solution that combines efficient message handling, comprehensive reporting, and robust policy management with leading third-party anti-virus scanning engines.

•	Zero-hour threat detection.  Protects enterprises against new phishing attacks, viruses and other forms of malicious code during the critical period after new attacks are released and before full information is available to characterize the threat.

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•	Smart search.  Offers an easy-to-use interface that provides real-time visibility into message flows across an organization's messaging infrastructure, using built-in logging and reporting capabilities with advanced message tracing, forensics and log analysis capabilities.

•	Targeted Attack Protection. Protects enterprises against advanced persistent threats such as phishing and other targeted email attacks using big data analysis techniques to identify and apply additional security controls against suspicious messages and any associated links to the web.

•	Superior protection from advanced threats, spam and viruses.  Protects against advanced threats, spam and other malicious code such as viruses, worms and spyware.

•	Comprehensive outbound threat protection.  Analyzes all outbound email traffic to block spam, viruses and other malicious content from leaving the corporate network, and pinpoint the responsible compromised systems.

•	Effective, flexible policy management and administration.  Provides a user-friendly, web-based administration interface and robust reporting capabilities that make it easy to define, enforce and manage an enterprise's messaging policies.

•	Easy-to-use end-user controls.  Gives email users easy, self-service control over their individual email preferences within the parameters of corporate-defined messaging policies.

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Advanced data loss prevention.  Our advanced data loss prevention solution identifies regulated private content, valuable corporate assets and confidential information before it leaves the organization via email, web-based applications, or our Secure Share solution. Pre-packaged smart identifiers and dictionaries automatically and accurately detect a wide range of regulated content such as social security numbers, health records, credit card numbers, and driver's license numbers. In addition to regulated content, our machine learning technology can identify confidential, organization-specific content and assets. Once identified and classified, sensitive data can be blocked, encrypted and transmitted or re-routed internally based on content and identity-aware policies.

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Flexible remediation and supervision.  Content, identity and destination-aware policies enable effective remediation of potential data breaches or regulatory violations. Remediation options include stopping the transfer completely, automatically forcing data-encryption, or routing to a compliance supervisor or the end-user for disposition. Proofpoint Enterprise Privacy provides comprehensive reporting on potential violations and remediation using our analytics capabilities.

•	Policy-based encryption.  Automatically encrypts regulated and other sensitive data before it leaves an organization's security perimeter without requiring cumbersome end-user key management. This enables authorized users, whether or not they are our customers, to quickly and easily decrypt and view content from most devices.

•	Secure file transfer.  Provides secure, large file transfer capabilities that allow end-users to send large files quickly, easily, and securely while eliminating the impact of large attachments on an email infrastructure.

•	Secure share. Cloud-based security-focused solution designed to enable enterprise users to securely exchange large files with ease while staying compliant with enterprise data policies.

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•	Regulatory compliance.  Allows outbound messages to comply with national and state government and industry-specific privacy regulations.

•	Superior malicious and accidental data loss protection.  Protects against the loss of sensitive data, whether from a cybercriminal attempting to exfiltrate valuable data from a compromised system, or from an employee accidently distributing a file to the wrong party through email, webmail, social media, file sharing, or other Internet-based mechanisms for publishing content.

•	Easy-to-use secure communication.  Allows corporate end-users to easily share sensitive data without compromising security and privacy, and enables authorized external recipients to transparently decrypt and read the communications from any device. Our mobile-optimized interfaces provide an easy experience for the rapidly growing number of recipients on smartphones and tablets.

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Secure cloud storage.  With our proprietary double blind encryption technology and the associated data storage architecture, all email messages, files and other content are encrypted with keys controlled by the customer before the data enters the Proofpoint Enterprise Archive. This ensures that even our employees and law-enforcement agencies cannot access a readable form of the customer data without authorized access by the customer to the encryption keys stored behind the customer's firewall.

•	Search performance.  By employing parallel, big data search techniques, we are able to deliver search performance measured in seconds, even when searching hundreds of terabytes of archived data. Traditional on-premise solutions can take hours or even days to return search results to a complex query.

•	Flexible policy enforcement.  Enables organizations to easily define and automatically enforce data retention and destruction policies necessary to comply with regulatory mandates or internal policies that can vary by user, group, geography or domain.

•	Active legal-hold management.  Enables administrators or legal professionals to easily designate specific individuals or content as subject to legal hold. Proofpoint Enterprise Archive then provides active management of these holds by suspending normal deletion policies and automatically archiving subsequent messages and files related to the designated matter.

•	End-user supervision.  Leveraging our flexible workflow capabilities, Proofpoint Enterprise Archive analyzes all electronic communications, including email and communications from leading instant messaging and social networking sites, for potential violations of regulations, such as those imposed by Financial Industry Regulatory Authority (FINRA) and the SEC in the financial services industry.

•	Regulatory compliance.  Helps organizations meet regulatory requirements by archiving all messages and content according to compliance retention policies and enabling staff to systematically review messages for compliance supervision.

•	Proactive data governance.  Allows organizations to create, maintain and consistently enforce a clear corporate data retention policy, reducing the risk of data loss and the cost of eDiscovery.

•	Efficient litigation support.  Provides advanced search features that reduce the cost of eDiscovery and allow organizations to more effectively manage the litigation hold process.

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•	Reduced storage and management costs.  Helps to simplify mailbox and file system management by automatically moving storage-intensive attachments and files into cost-effective cloud storage.

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Document Tracking—Digital Thread.  Proofpoint Enterprise Governance creates a unique "digital fingerprint" for every document and version. Our solution can monitor most major document stores including share-drives, Microsoft Sharepoint, Microsoft Exchange, Lotus Domino, EMC Documentum and desktops, and track every document, version and location. This enables organizations to track and govern their sensitive documents wherever they travel inside or outside the enterprise.

•	Cloud-based Search and Analytics.  By employing advanced search techniques, we are able to deliver detailed reporting on all monitored documents and locations. Administrators can quickly locate all copies and versions of a given document or run summary reports detailing types and locations of stored documents throughout the enterprise.

•	Flexible policy enforcement.  Enables organizations to easily define and automatically enforce data retention and destruction policies necessary to comply with regulatory mandates or internal policies that can vary by user, group, project or geography.

•	Regulatory compliance.  Helps organizations meet regulatory requirements by systematically retaining required documents and unstructured content according to compliance retention policies and enabling staff to efficiently review and enforce these policies.

•	Proactive data governance.  Allows organizations to create, maintain and consistently enforce a clearcorporate data retention and destruction policy around documents and other unstructured content, reducing the risk of data loss and the cost of eDiscovery.

•	Efficient litigation support.  Provides advanced search features that locate all copies of documents wherever they live reducing the cost of eDiscovery and allowing organizations to effectively manage the litigation process.

•	Reduced storage and management costs.  Reduces document management and storage costs by automating the reporting and clean-up of unnecessary documents including duplicates, intermediate versions and non-business records.

•	Content inspection.  Applies our Proofpoint MLX machine learning techniques to understand the meaning of email, documents and social networking communications and to identify and classify content as malicious, sensitive or relevant to a litigation matter for threat protection, data loss prevention and discovery.

•	Reputation.  Leverages machine learning and big data analytics to analyze and correlate billions of requests per day to create a dynamic reputation profile of hundreds of millions of IP addresses, domains, web links and other Internet content. This database of reputation profiles is used to help identify and block malicious attacks.

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•	Encryption and key management.  Securely encrypts data and stores and indexes hundreds of thousands of individual encryption keys without requiring cumbersome key-exchange or other end-user set-up. Enables authorized users to quickly and easily decrypt and view content from a wide variety of devices.

•	Notification and workflow.  Creates notifications and an enabling workflow to alert administrators and compliance officers of an incident and enable subsequent review, commentary, tracking, escalation and remediation of each event.

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Analytics and search.  Provides an easy-to-use, web-based interface for searching and analyzing information to enable enterprises to rapidly trace inbound and outbound messages, analyze how messages were processed by a Proofpoint Enterprise deployment, report on the disposition and status of any email message, and retrieve in real time archived communications for litigation support and eDiscovery.

•	Big data analytics.  Indexes and analyzes petabytes of information in real time to discover threats, detect data leaks and enable end-users to quickly and efficiently access information distributed across their organizations.

•	Machine learning.  Builds predictive data models using our proprietary Proofpoint MLX machine learning techniques to rapidly identify and classify threats and sensitive content in real time.

•	Identity and policy.  Enables the definition and enforcement of sophisticated data protection policies based on a wide set of variables, including type of content, sender, recipient, pending legal matters, time and date, regulatory status and more.

•	Secure storage.  Stores petabytes of data in the cloud cost-effectively using proprietary encryption methods, keeping sensitive data tamper-proof and private, yet fully searchable in real time.

•	Flexibility.  Our cloud architecture enables individual customers to deploy entirely in Proofpoint's global data centers or in hybrid configurations with optional points of presence located behind the customer's firewall. This deployment flexibility enables us to deliver security, compliance and performance tailored to the unique threat profile and operating environment of each customer.

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•	High availability.  Our services employ a wide range of technologies including redundancy, geographic distribution, real-time data replication and end-to-end service monitoring to provide 24x7 system availability.

•	Network operations control.  We employ a team of skilled professionals who monitor, manage and maintain our global data center infrastructure and its interoperability with the distributed points of presence located behind our customers' firewalls to ensure 24x7 operations.

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Low cost.  We deploy our services on shared, low-cost, commodity computing and storage infrastructure. In addition, we utilize multi-tenancy and hardware virtualization to further reduce hardware and management costs. Because we primarily rely on internally developed and open source technology instead of commercially licensed technology, we are able to offer a cost-effective solution to our customers.

•	4 of the 5 largest U.S. retailers

•	4 of the 5 largest U.S. aerospace and defense contractors

•	3 of the 5 largest U.S. banks

•	3 of the 5 largest global pharmaceutical companies

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Direct sales and reseller channel.  We market and sell our solutions to large and mid-sized customers directly through our field and inside sales teams as well as indirectly through a hybrid model, where our sales organization actively assists our network of distributors and resellers. Our sales personnel are primarily located in North America, with additional personnel located in Asia-Pacific, EMEA, Japan and South America. Our reseller partners maintain relationships with their customers throughout the territories in which they operate, providing them with services and third party solutions to help meet their evolving security requirements. As such, these partners act as a direct conduit through which we can connect with these prospective customers to offer our solutions. Our reseller channel includes top security organizations including Accuvant, Adaptive Solutions, Inc., CGI Information Systems and Management Consultants Inc., Computer Sciences Corporation, FishNet Security, Integralis, NEC Corporation, Nissho Electronics Corporation, and Verizon Business Services.

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Strategic relationships.  We also sell our solutions indirectly through key technology companies such as IBM, Microsoft and VMware that offer our solutions in conjunction with one or more of their own products or services. These companies each have a large, established customer base built around a broad platform of products and solutions sold under their own brand, and they promote our products to augment their own branded solutions.

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•	Data Protection and Privacy:  Cisco (through its acquisition of IronPort), Google (through its acquisition of Postini), McAfee, an Intel subsidiary (through its acquisitions of Secure Computing and MX Logic), Microsoft (through its acquisition of Frontbridge), and Symantec (through its acquisitions of Brightmail and MessageLabs)

•	Archiving and Governance:  EMC (through its acquisitions of Legato and Kazeon), Hewlett-Packard (through its acquisition of Autonomy) and Symantec (through its acquisitions of KVS and LiveOffice)

•	level of protection against advanced threats;

•	comprehensiveness and integration of the solution;

•	flexibility of delivery models;

•	total cost of ownership;

•	scalability and performance;

•	customer support; and

•	extensibility of platform.

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•	the level of demand for our solutions and the level of perceived urgency regarding security threats and compliance requirements;

•	the timing of new subscriptions and renewals of existing subscriptions;

•	the mix of solutions sold;

•	the extent to which customers subscribe for additional solutions or increase the number of users;

•	customer budgeting cycles and seasonal buying patterns;

•	the extent to which we bring on new distributors;

•	any changes in the competitive landscape of our industry, including consolidation among our competitors, customers, partners or resellers;

•	deferral of orders in anticipation of new solutions or enhancements announced by us;

•	price competition;

•	changes in renewal rates and terms in any quarter;

•	any disruption in our sales channels or termination of our relationship with important channel partners;

•	general economic conditions, both domestically and in our foreign markets;

•	insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions; or

•	future accounting pronouncements or changes in our accounting policies.

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•	expenditure of significant financial and development resources in efforts to analyze, correct, eliminate or work around errors or defects or to address and eliminate vulnerabilities;

•	loss of existing or potential partners or customers;

•	loss or disclosure of our customers' confidential information, or the inability to access such information;

•	loss of our proprietary technology;

•	our solutions being susceptible to hacking or electronic break-ins or otherwise failing to secure data;

•	delayed or lost revenue;

•	delay or failure to attain market acceptance;

•	lost market share;

•	negative publicity, which could harm our reputation; or

•	litigation, regulatory inquiries or investigations that would be costly and harm our reputation.

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•	our lack of familiarity with commercial and social norms and customs in other countries which may adversely affect our ability to recruit, retain and manage employees in these countries;

•	difficulties and costs associated with staffing and managing foreign operations;

•	the potential diversion of management's attention to oversee and direct operations that are geographically distant from our U.S. headquarters;

•	compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;

•	legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States, including more limited protection for intellectual property rights in some countries;

•	immaturity of compliance regulations in other jurisdictions, which may lower demand for our solutions;

•	greater difficulty with payment collections and longer payment cycles;

•	higher employee costs and difficulty terminating non-performing employees;

•	differences in work place cultures;

•	the need to adapt our solutions for specific countries;

•	our ability to comply with differing technical and certification requirements outside the United States;

•	tariffs, export controls and other non-tariff barriers such as quotas and local content rules;

•	adverse tax consequences;

•	fluctuations in currency exchange rates;

•	restrictions on the transfer of funds;

•	anti-bribery compliance by us or our partners; and

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•	new and different sources of competition.

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•	variations in our revenue, billings, gross margin, operating results, free cash flow, loss per share and how these results compare to analyst expectations;

•	forward looking guidance that we may provide regarding financial metrics such as billings, revenue, gross margin, operating results, free cash flow, and loss per share;

•	announcements of technological innovations, new products or services, strategic alliances, acquisitions or significant agreements by us or by our competitors;

•	disruptions in our cloud-based operations or services or disruptions of other prominent cloud-based operations or services;

•	the economy as a whole, market conditions in our industry, and the industries of our customers; and

•	any other factors discussed herein.

•	creating a classified board of directors whose members serve staggered three-year terms;

•	authorizing “blank check” preferred stock, which could be issued by our board without stockholder approval which may contain voting, liquidation, dividend and other rights which are superior to our common stock;

•	limiting the liability of, and providing indemnification to, our directors and officers;

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limiting the ability of our stockholders to call and bring business before special meetings by providing that any stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and providing that only our board of directors, the chairman of our board of directors, our Chief Executive Officer or President may call a special meeting of the stockholders; and

•	requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors.

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•	develop or enhance our application and services;

•	continue to expand our product development, sales and marketing organizations;

•	acquire complementary technologies, products or businesses;

•	expand operations, in the United States or internationally;

•	hire, train and retain employees; or

•	respond to competitive pressures or unanticipated working capital requirements.

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

(2)	Please see notes 12 of our notes to consolidated financial statements included elsewhere in this report for an explanation of the calculations of basic and diluted net loss per share of common stock.

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•	In 2004, we launched our Regulatory Compliance and Digital Asset Security solutions, designed to prevent the loss of critical data. These Data Loss Prevention, or DLP, solutions apply our proprietary machine learning and deep content inspection technologies to screen outbound email to prevent the theft or inadvertent loss of sensitive or confidential information.

•	In 2005, we launched Proofpoint Secure Messaging, our first email encryption solution.

•	In 2006, we combined our email encryption and DLP technologies to develop a new solution for policy-based encryption, enabling each outgoing message to be inspected for confidential content and automatically encrypted accordingly.

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In 2007, we began selling our software-based virtual appliance, enabling our customers to deploy our solutions in a private cloud configuration. We also invested in international expansion by establishing a team in the United Kingdom as a precursor to the build out of our data center infrastructure, and launching operations in Germany and the Netherlands to support our customers outside of the United States.

•	In 2008, we introduced Proofpoint Enterprise Archive, a cloud-based email archiving solution that enables businesses to securely archive both their email and instant message conversations while enabling real-time access to the entire repository for quick and easy electronic discovery, or eDiscovery.

•	In 2009, we launched Proofpoint Encryption, a proprietary email encryption solution that improved the level of integration across our data protection suite and allowed us to phase out technology licensed from a third party. We also introduced a cloud-based email messaging service.

•	In 2010, we evolved our solutions to address new forms of messaging and information sharing in the enterprise such as social media and Internet-based collaboration and file sharing applications.

•	In 2011, we achieved FISMA certification for our cloud-based archiving and governance solution, enabling us to serve the rigorous security requirements of U.S. Federal agencies. We also introduced an integrated security offering in conjunction with VMware for its Zimbra Collaboration Server.

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In 2012, we introduced Proofpoint Enterprise Governance, an information governance solution that provides organizations the ability to monitor and apply governance policies to unstructured information across the enterprise. We also introduced Proofpoint Targeted Attack Protection along with Proofpoint Secure Share. Proofpoint Target Attack Protection is a solution that uses big data analysis techniques to identify and apply additional security controls to suspicious messages. Proofpoint Secure Share allows enterprises to securely exchange large files with ease in a cloud-based environment.

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•	Billings is not a substitute for revenue, as trends in billings are not directly correlated to trends in revenue except when measured over longer periods of time;

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Billings is affected by a combination of factors including the timing of renewals, the sales of our solutions to both new and existing customers, the relative duration of contracts sold, and the relative amount of business derived from strategic partners. As each of these elements has unique characteristics in the relationship between billings and revenue, our billings activity is not closely correlated to revenue except over longer periods of time; and

•	Other companies, including companies in our industry, may not use billings, may calculate billings differently, or may use other financial measures to evaluate their performance ‑ all of which reduce the usefulness of billings as a comparative measure.

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•	Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with our peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and

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It is useful to exclude certain non-cash charges, such as depreciation, amortization of intangible assets and stock‑based compensation and non-core operational charges, such as acquisition‑related expenses, from adjusted EBITDA because the amount of such expenses in any specific period may not be directly correlated to the underlying performance of our business operations and these expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets or the timing of new stock‑based awards, as the case may be.

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

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(1)	Includes stock-based compensation expense and amortization of intangible assets as follows:

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(1)	Represents our outstanding debt under our equipment loan, including the loan and equipment agreement commencing April 2011.

(2)	Represents interest payments on our outstanding debt under our equipment loan, including the loan and equipment agreement commencing April 2011.

(3)	Consists of capital leases and contractual obligations under operating leases for office space, including the new facility lease commencing December 2012 and June 2013.

(4)	Consists of purchase obligations for servers and similar equipment to support our third-party data centers.

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•	Revenue recognition and deferred revenue;

•	Stock-based compensation;

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•	Allowance for doubtful accounts;

•	Capitalized software costs;

•	Impairment of long lived assets; and

•	Income taxes.

•	Persuasive evidence of an arrangement exists;

•	Delivery has occurred;

•	The fee is fixed or determinable; and

•	Collectability is probable.

•	Persuasive evidence of an arrangement exists;

•	Delivery of our obligations to our customers has occurred;

•	Collection of the fees is probable; and

•	The amount of fees to be paid by the customer is fixed or determinable.

•	Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the arrangement consideration should be allocated among its elements;

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•	Require an entity to allocate revenue in an arrangement that has separate units of accounting using best estimated selling price (BESP) of deliverables if a vendor does not have VSOE of fair value or third-party evidence of selling price (TPE); and

•	Eliminate the use of the residual method and require an entity to allocate revenue using the relating selling price method to the separate unit of accounting.

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•	Our performance, growth rate and financial condition at the approximate time of the option grant;

•	The value of companies that we consider peers based on a number of factors including, but not limited to,

•	Changes in the company and our prospects since the last time the board approved option grants and made a determination of fair value;

•	Amounts recently paid by investors for our common stock and convertible preferred stock in arm's-length transactions with stockholders;

•	The rights, preferences and privileges of preferred stock relative to those of our common stock;

•	Future financial projections; and

•	Valuations completed in conjunction with, and at the time of, each option grant.

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(1)	The consolidated statement of cash flows for the year ended December 31, 2010 has been revised to reflect the correction of an immaterial error related to the classification of an earn-out payment in the consolidated statements of cash flows.

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•	Persuasive evidence of an arrangement exists,

•	Delivery has occurred,

•	The fee is fixed or determinable, and

•	Collectability is probable.

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•	Persuasive evidence of an arrangement exists,

•	Delivery of the Company’s obligations to its customers has occurred,

•	Collection of the fees is probable, and

•	The amount of fees to be paid by the customer is fixed or determinable.

•	Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the arrangement consideration should be allocated among its elements;

•	Require an entity to allocate revenue in an arrangement that has separate units of accounting using best estimated selling price (“BESP”) of deliverables if a vendor does not have VSOE of fair value or third-party evidence of selling price (“TPE”), and

•	Eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method to the separate unit of accounting.

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•	Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

•	Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

•

Level 3: Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

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