FireEye Reports Above-Guidance Revenue and Improved Operating Margins for Third Quarter 2017
- Revenue of
$189.6 million grew 2 percent from third quarter 2016 - Operating margins improved 27 percentage points from third quarter 2016
- Product subscription billings increased 28 percent sequentially from second quarter of 2017
- Cash flow from operations of
$12.5 million exceeded prior guidance range
“We executed against our financial commitments in the third quarter,
delivering billings, revenue, earnings per share and operating cash flow
above expectations,” said
“Our mission is to relentlessly protect our customers with innovative technology and expertise learned on the front lines,” added Mandia. “FireEye Helix is our technology platform that makes it simple to deliver advanced security to any organization. It enhances the visibility into unseen threats provided by our individual security products and empowers organizations to make expert decisions based on our frontline threat intelligence and expertise. I believe Helix, coupled with innovations in our key product families, has the potential to expand our customer base, accelerate multi-product adoption, and increase our subscription billings over the long term."
Third Quarter 2017 Financial Results
-
Revenue of
$189.6 million , an increase of 2 percent from the third quarter of 2016 and above the guidance range of$183 million to $189 million . -
Billings of
$201.7 million , a decrease of 6 percent from the third quarter of 2016 and above the mid-point of the guidance range of$190 million to $205 million .1 - GAAP gross margin of 64 percent, compared to 63 percent in the third quarter of 2016.
- Non-GAAP gross margin of 74 percent, compared to 74 percent in the third quarter of 2016 and above the guidance of approximately 73 percent.1
- GAAP operating margin of negative 33 percent, compared to negative 60 percent in the third quarter of 2016.
- Non-GAAP operating margin of negative 2 percent, compared to negative 14 percent in the third quarter of 2016 and better than the guidance range of approximately negative 4 percent to negative 6 percent.1
-
GAAP net loss per share of
$0.41 , compared to a GAAP net loss per share of$0.75 in the third quarter of 2016. -
Non-GAAP net loss per share of
$0.04 , compared to a non-GAAP net loss per share of$0.18 in the third quarter of 2016 and better than the guidance range of$0.06 to $0.09 .1 -
Cash flow from operations of
$12.5 million , compared to cash flow from operations of$14.1 million in the third quarter of 2016 and better than the guidance range of$1 million to $10 million .
“We continued to improve our operating efficiency on a
quarter-over-quarter and year-over-year basis,” said
1 A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”
Fourth Quarter and Updated 2017 Outlook
For the fourth quarter of 2017,
-
Total revenue in the range of
$190 million to $196 million . -
Billings in the range of
$210 million to $230 million . - Non-GAAP gross margin of approximately 75 percent.
- Non-GAAP operating margin of approximately negative 1 percent to positive 1 percent.
-
Non-GAAP net loss per share of
$0.00 to $0.03 . -
Positive cash flow from operations of
$16 million to $25 million .
Non-GAAP net loss per share for the fourth quarter assumes cash interest
expense of approximately
For 2017,
-
Revenue in the range of
$739 million to $745 million . -
Billings in the range of
$736 million to $756 million . -
Non-GAAP net loss per share of
$0.16 to $0.19 . -
Positive cash flow from operations of
$1 million to $10 million . -
Capital expenditures between
$40 million and $45 million . Capital expenditures expectations for 2017 include an estimated$20 million in capital expenditures associated with the build-out and relocation of the company’s headquarters from five separate buildings to a single building inMilpitas inJanuary 2018 .
Non-GAAP net loss per share for 2017 assumes cash interest expense of
approximately
Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, non-cash interest expense related to the company’s convertible senior notes, and other non-recurring expenses. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability of, the amounts of stock-based compensation expense, amortization of intangible assets, and other non-recurring expenses that may be incurred in the future. Stock-based compensation expense is impacted by the company’s future hiring and retention needs, as well as the future fair market value of the company’s common stock, all of which is difficult to predict and subject to constant change. The actual amount of stock-based compensation in the fourth quarter of 2017 and full year 2017 will have a significant impact on the company’s GAAP operating margin and net loss per share. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.
Conference Call Information
Forward-Looking Statements
This press release contains forward-looking statements, including
statements related to future financial results for the fourth quarter
and full year 2017, including revenue, billings, non-GAAP gross margin,
non-GAAP operating margin, operating cash flows, interest expense,
provision for income taxes, non-GAAP net loss per share, weighted
average shares outstanding and capital expenditures in the section
entitled “Fourth Quarter and Updated 2017 Outlook” above, as well as
statements related to
These forward-looking statements involve risks and uncertainties, as
well as assumptions which, if they do not fully materialize or prove
incorrect, could cause FireEye’s results to differ materially from those
expressed or implied by such forward-looking statements. The risks and
uncertainties that could cause FireEye’s results to differ materially
from those expressed or implied by such forward-looking statements
include customer demand and adoption of FireEye’s products and services;
real or perceived defects, errors or vulnerabilities in
All forward-looking statements in this press release are based on
information available to the company as of the date hereof, and
Non-GAAP Financial Measures
In this release
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable financial information prepared in accordance with GAAP, and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.
Billings.
Non-GAAP gross margin, operating income, operating margin, net loss,
net loss per share, and free cash flow.
Non-GAAP net loss and net loss per share in the third quarter of 2017
excluded stock-based compensation expense, amortization of intangible
assets, and non-cash interest expense related to the convertible senior
notes issued in
There are a number of limitations related to the use of these non-GAAP
financial measures versus their nearest GAAP equivalents. First, these
non-GAAP financial measures exclude stock-based compensation expense.
Stock-based compensation expense has been and will continue to be for
the foreseeable future a significant recurring expense in the company's
business. Stock-based compensation is an important part of
About
© 2017
FireEye, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) |
||||||||
September 30, 2017 |
December 31, 2016 |
|||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 160,807 | $ | 223,667 | ||||
Short-term investments | 717,960 | 712,058 | ||||||
Accounts receivable, net | 120,170 | 121,150 | ||||||
Inventories | 5,368 | 5,955 | ||||||
Prepaid expenses and other current assets | 36,826 | 25,081 | ||||||
Total current assets | 1,041,131 | 1,087,911 | ||||||
Property and equipment, net | 67,147 | 61,852 | ||||||
Goodwill | 978,260 | 978,260 | ||||||
Intangible assets, net | 199,671 | 244,032 | ||||||
Deposits and other long-term assets | 10,140 | 10,910 | ||||||
Total assets | $ | 2,296,349 | $ | 2,382,965 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 32,487 | $ | 20,269 | ||||
Accrued and other current liabilities | 21,918 | 22,997 | ||||||
Accrued compensation | 59,117 | 96,004 | ||||||
Deferred revenue, current portion | 409,442 | 397,118 | ||||||
Total current liabilities |
522,964 | 536,388 | ||||||
Convertible senior notes, net | 770,003 | 741,980 | ||||||
Deferred revenue, non-current portion | 221,371 | 256,398 | ||||||
Other long-term liabilities | 15,200 | 7,087 | ||||||
Total liabilities | 1,529,538 | 1,541,853 | ||||||
Stockholders' equity: | ||||||||
Common stock | 18 | 17 | ||||||
Additional paid-in capital | 2,834,744 | 2,682,909 | ||||||
Treasury stock | (150,000 | ) | (150,000 | ) | ||||
Accumulated other comprehensive loss | (1,214 | ) | (1,742 | ) | ||||
Accumulated deficit | (1,916,737 | ) | (1,690,072 | ) | ||||
Total stockholders’ equity | 766,811 | 841,112 | ||||||
Total liabilities and stockholders' equity | $ | 2,296,349 | $ | 2,382,965 | ||||
FireEye, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue: | ||||||||||||||||
Product | $ | 30,472 | $ | 43,857 | $ | 85,418 | $ | 118,340 | ||||||||
Subscription and services | 159,131 | 142,554 | 463,395 | 411,078 | ||||||||||||
Total revenue | 189,603 | 186,411 | 548,813 | 529,418 | ||||||||||||
Cost of revenue: (1)(2) |
||||||||||||||||
Product | 13,815 | 16,675 | 41,342 | 49,767 | ||||||||||||
Subscription and services | 54,403 | 52,378 | 158,173 | 158,143 | ||||||||||||
Total cost of revenue | 68,218 | 69,053 | 199,515 | 207,910 | ||||||||||||
Total gross profit | 121,385 | 117,358 | 349,298 | 321,508 | ||||||||||||
Operating expenses: (1)(2) | ||||||||||||||||
Research and development | 64,316 | 62,665 | 183,415 | 225,020 | ||||||||||||
Sales and marketing | 88,901 | 110,756 | 273,411 | 355,189 | ||||||||||||
General and administrative (3)(4) | 29,843 | 32,860 | 85,291 | 108,925 | ||||||||||||
Restructuring charges (5) | — | 22,423 | — | 27,630 | ||||||||||||
Total operating expenses | 183,060 | 228,704 | 542,117 | 716,764 | ||||||||||||
Operating loss | (61,675 | ) | (111,346 | ) | (192,819 | ) | (395,256 | ) | ||||||||
Other expense, net (6) | (10,143 | ) | (10,799 | ) | (30,461 | ) | (31,801 | ) | ||||||||
Loss before income taxes | (71,818 | ) | (122,145 | ) | (223,280 | ) | (427,057 | ) | ||||||||
Provision for (benefit from) income taxes (7) | 1,127 | 1,228 | 3,385 | (8,464 | ) | |||||||||||
Net loss attributable to common stockholders | $ | (72,945 | ) | $ | (123,373 | ) | $ | (226,665 | ) | $ | (418,593 | ) | ||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.41 | ) | $ | (0.75 | ) | $ | (1.29 | ) | $ | (2.59 | ) | ||||
Weighted average shares used in per share calculations, basic and diluted | 179,732 | 164,728 | 176,232 | 161,862 | ||||||||||||
FireEye, Inc. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, in thousands) |
||||||||
Nine Months Ended |
||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (226,665 | ) | $ | (418,593 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 78,612 | 90,852 | ||||||
Stock-based compensation | 125,492 | 168,117 | ||||||
Non-cash interest expense related to convertible senior notes | 28,023 | 26,670 | ||||||
Change in fair value of contingent earn-out liability | (54 | ) | 1,756 | |||||
Deferred income taxes | (53 | ) | (11,836 | ) | ||||
Other | 5,142 | 6,984 | ||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | ||||||||
Accounts receivable | (354 | ) | 60,372 | |||||
Inventories | (1,890 | ) | 2,985 | |||||
Prepaid expenses and other assets | (9,657 | ) | 4,258 | |||||
Accounts payable | (960 | ) | (11,598 | ) | ||||
Accrued liabilities | (1,079 | ) | (5,059 | ) | ||||
Accrued transaction costs of acquiree | — | (7,727 | ) | |||||
Accrued compensation | 2,095 | 6,142 | ||||||
Deferred revenue | (22,703 | ) | 68,334 | |||||
Other long-term liabilities | 8,116 | (3,174 | ) | |||||
Net cash used in operating activities | (15,935 | ) | (21,517 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment and demonstration units | (25,924 | ) | (28,009 | ) | ||||
Purchases of short-term investments | (315,626 | ) | (379,695 | ) | ||||
Proceeds from maturities of short-term investments | 304,042 | 438,624 | ||||||
Proceeds from sales of short-term investments | 3,620 | 4,507 | ||||||
Business acquisitions, net of cash acquired | — | (204,926 | ) | |||||
Lease deposits | (451 | ) | (480 | ) | ||||
Net cash used in investing activities |
(34,339 | ) | (169,979 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayment of debt of acquired business | — | (8,842 | ) | |||||
Payments for contingent earn-outs | (38,928 | ) | (87 | ) | ||||
Payment related to shares withheld for taxes | (1,004 | ) | (1,124 | ) | ||||
Proceeds from employee stock purchase plan | 10,764 | 12,684 | ||||||
Proceeds from exercise of equity awards | 16,582 | 10,460 | ||||||
Net cash used in financing activities | (12,586 | ) | 13,091 | |||||
Net change in cash and cash equivalents | (62,860 | ) | (178,405 | ) | ||||
Cash and cash equivalents, beginning of period | 223,667 | 402,102 | ||||||
Cash and cash equivalents, end of period | $ | 160,807 | $ | 223,697 | ||||
FireEye, Inc. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited, in thousands, except per share amounts) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
GAAP operating loss | $ | (61,675 | ) | $ | (111,346 | ) | $ | (192,819 | ) | $ | (395,256 | ) | ||||
Stock-based compensation expense (1) | 42,208 | 45,427 | 125,494 | 166,802 | ||||||||||||
Amortization of intangible assets (2) | 14,786 | 16,268 | 44,360 | 47,949 | ||||||||||||
Acquisition related expenses (3) | — | — | — | 2,413 | ||||||||||||
Change in fair value of contingent earn-out liability (4) | — | 600 | (54 | ) | 1,756 | |||||||||||
Restructuring charges (5) | — | 22,423 | — | 27,630 | ||||||||||||
Non-GAAP operating loss | $ | (4,681 | ) | $ | (26,628 | ) | $ | (23,019 | ) | $ | (148,706 | ) | ||||
GAAP gross margin | 64 | % | 63 | % | 64 | % | 61 | % | ||||||||
Stock-based compensation expense (1) | 4 | % | 5 | % | 4 | % | 5 | % | ||||||||
Amortization of intangible assets (2) | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||
Non-GAAP gross margin | 74 | % | 74 | % | 74 | % | 72 | % | ||||||||
GAAP operating margin |
(33 |
)% | (60 | )% | (35 | )% | (75 | )% | ||||||||
Stock-based compensation expense (1) | 22 | % | 25 | % | 23 | % | 32 | % | ||||||||
Amortization of intangible assets (2) | 9 |
% |
9 | % | 8 | % | 9 | % | ||||||||
Acquisition related expenses (3) | — | % | — | % | — | % | 1 | % | ||||||||
Change in fair value of contingent earn-out liability (4) | — | % | — | % | — | % | — | % | ||||||||
Restructuring charges (5) | — | % | 12 | % | — | % | 5 | % | ||||||||
Non-GAAP operating margin | (2 | )% | (14 | )% | (4 | )% | (28 | )% | ||||||||
GAAP net loss | $ | (72,945 | ) | $ | (123,373 | ) | $ | (226,665 | ) | $ | (418,593 | ) | ||||
Stock-based compensation expense (1) | 42,208 | 45,427 | 125,494 | 166,802 | ||||||||||||
Amortization of intangible assets (2) | 14,786 | 16,268 | 44,360 | 47,949 | ||||||||||||
Acquisition related expenses (3) | — | — | — | 2,413 | ||||||||||||
Change in fair value of contingent earn-out liability (4) | — | 600 | (54 | ) | 1,756 | |||||||||||
Restructuring charges (5) | — | 22,423 | — | 27,630 | ||||||||||||
Non-cash interest expense related to convertible senior notes (6) | 9,457 | 9,001 | 28,023 | 26,670 | ||||||||||||
Adjustment to provision (benefit) from income taxes (7) | — | 216 | — | (11,819 | ) | |||||||||||
Non-GAAP net loss | $ | (6,494 | ) | $ | (29,438 | ) | $ | (28,842 | ) | $ | (157,192 | ) | ||||
GAAP net loss per common share, basic and diluted | $ | (0.41 | ) | $ | (0.75 | ) | $ | (1.29 | ) | $ | (2.59 | ) | ||||
Stock-based compensation expense (1) | 0.23 | 0.28 | 0.72 | 1.03 | ||||||||||||
Amortization of intangible assets (2) | 0.09 | 0.10 | 0.25 | 0.30 | ||||||||||||
Acquisition related expenses (3) | — | — | — | 0.01 | ||||||||||||
Change in fair value of contingent earn-out liability (4) | — | — | — | 0.01 | ||||||||||||
Restructuring charges (5) | — | 0.14 | — | 0.17 | ||||||||||||
Non-cash interest expense related to convertible senior notes (6) | 0.05 | 0.05 | 0.16 | 0.17 | ||||||||||||
Adjustment to provision (benefit) from income taxes (7) | — | — | — | (0.07 | ) | |||||||||||
Non-GAAP net loss per common share, basic and diluted | $ | (0.04 | ) | $ | (0.18 | ) | $ | (0.16 | ) | $ | (0.97 | ) | ||||
Weighted average shares used in per share calculation for GAAP and Non-GAAP, basic and diluted | 179,732 | 164,728 | 176,232 | 161,862 | ||||||||||||
(1) includes stock-based compensation expense as follows: | ||||||||||||||||
Cost of product revenue | $ | 546 | $ | 516 | $ | 1,600 | $ | 1,797 | ||||||||
Cost of subscription and services revenue | 7,767 | 7,759 | 22,137 | 25,013 | ||||||||||||
Research and development | 14,400 | 11,422 | 42,982 | 54,877 | ||||||||||||
Sales and marketing | 11,674 | 13,915 | 35,908 | 47,675 | ||||||||||||
General and administrative | 7,821 | 11,815 | 22,867 | 37,440 | ||||||||||||
Total stock-based compensation expense | $ | 42,208 | $ | 45,427 | $ | 125,494 | $ | 166,802 | ||||||||
(2) includes amortization of intangible assets as follows: | ||||||||||||||||
Cost of product revenue | $ | 2,802 | $ | 3,064 | $ | 8,406 | $ | 9,192 | ||||||||
Cost of subscription and services revenue | 7,375 | 8,489 | 22,125 | 24,770 | ||||||||||||
Research and development | 162 | 162 | 487 | 456 | ||||||||||||
Sales and marketing | 4,447 | 4,553 | 13,342 | 13,531 | ||||||||||||
Total amortization of intangible assets | $ | 14,786 | $ | 16,268 | $ | 44,360 | $ | 47,949 | ||||||||
(3) includes acquisition related expenses as follows: | ||||||||||||||||
General and administrative | $ | — | $ | — | $ | — | $ | 2,413 | ||||||||
(4) includes change in fair value of contingent earn-out liability as follows: | ||||||||||||||||
General and administrative | $ | — | $ | 600 | $ | (54 | ) | $ | 1,756 | |||||||
(5) includes restructuring charges as follows: | ||||||||||||||||
Restructuring charges | $ | — | $ | 22,423 | $ | — | $ | 27,630 | ||||||||
(6) includes non-cash interest expense related to convertible senior notes as follows: | ||||||||||||||||
Other expense, net | $ | 9,457 | $ | 9,001 | $ | 28,023 | $ | 26,670 | ||||||||
(7) includes adjustment to provision (benefit) from income taxes as follows: | ||||||||||||||||
Income tax effect of non-GAAP adjustment | $ | — | $ | 216 | $ | — | $ | (11,819 | ) | |||||||
FireEye, Inc. RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE (Unaudited, in thousands) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
GAAP revenue | $ | 189,603 | $ | 186,411 | $ | 548,813 | $ | 529,418 | ||||||||
Add change in deferred revenue | 12,077 | 28,967 | (22,703 | ) | 89,420 | |||||||||||
Subtotal | 201,680 | 215,378 | 526,110 | 618,838 | ||||||||||||
Less iSIGHT & Invotas deferred revenue assumed | — | — | — | (21,087 | ) | |||||||||||
Non-GAAP billings | $ | 201,680 | $ | 215,378 | $ | 526,110 | $ | 597,751 | ||||||||
FireEye, Inc. BILLINGS BREAKOUT (Unaudited, in thousands) |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Product billings | $ | 30,192 | $ | 47,014 | $ | 84,562 | $ | 120,457 | |||||||
Product subscription billings | 95,807 | 95,490 | 244,425 | 272,449 | |||||||||||
Platform billings | 125,999 | 142,504 | 328,987 | 392,906 | |||||||||||
Support and maintenance billings | 37,288 | 37,394 | 89,344 | 105,464 | |||||||||||
Professional services billings | 38,393 | 35,480 | 107,779 | 99,381 | |||||||||||
Non-GAAP billings | $ | 201,680 | $ | 215,378 | $ | 526,110 | $ | 597,751 | |||||||
FireEye, Inc. REVENUE BREAKOUT (Unaudited, in thousands) |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Product revenue | $ | 30,472 | $ | 43,857 | $ | 85,418 | $ | 118,340 | |||||||
Product subscription revenue | 89,908 | 80,899 | 263,303 | 231,410 | |||||||||||
Platform revenue | 120,380 | 124,756 | 348,721 | 349,750 | |||||||||||
Support and maintenance revenue | 35,701 | 32,091 | 103,098 | 90,171 | |||||||||||
Professional services revenue | 33,522 | 29,564 | 96,994 | 89,497 | |||||||||||
Total revenue | $ | 189,603 | $ | 186,411 | $ | 548,813 | $ | 529,418 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171101006784/en/
Source:
FireEye, Inc.
Media contact:
Dan
Wire, 415-895-2101
dan.wire@fireeye.com
or
Investor
contact:
Kate Patterson, 408-321-4957
kate.patterson@fireeye.com