FireEye Reports Financial Results for First Quarter 2018
-
Q1 Revenue of
$199 million , an increase of 8 percent from the first quarter of 2017 -
Q1 Billings of
$175.1 million , an increase of 21 percent from the first quarter of 2017 -
Q1 Cash flow generated by operations of
$9 million , an increase of$26 million from the first quarter of 2017 -
Annual recurring revenue of
$500 million , an increase of 14 percent compared to the end of the first quarter of 2017
"We continued to execute well in the first quarter and delivered revenue
above our guidance range and billings slightly above our guidance
range," said
"Our frontline knowledge of the threat landscape and how organizations are combating cyber attacks is at the heart of our unique innovation cycle," added Mandia. "FireEye network, email and endpoint security products continue to detect attacks that evade other security solutions. Our Helix platform operationalizes our intelligence and expertise to reduce the complexity of security operations and capture the untapped potential of prior security investments."
First Quarter 2018 Financial Results
-
Revenue of
$199 million , an increase of 8 percent from the first quarter of 2017, and above the guidance range of$192 million to$197 million . -
Billings of
$175.1 million , an increase of 21 percent from the first quarter of 2017, and slightly above our guidance range of$165 million to$175 million .1 - GAAP gross margin of 66 percent, compared to 64 percent in the first quarter of 2017.
- Non-GAAP gross margin of 74 percent, compared to 74 percent in the first quarter of 2017, and consistent with guidance of approximately 74 percent.1
- GAAP operating margin of negative 31 percent, compared to negative 36 percent in the first quarter of 2017.
- Non-GAAP operating margin of negative 3 percent, compared to negative 4 percent in the first quarter of 2017, and within the guidance range of negative 2 percent to negative 4 percent.1
-
GAAP net loss per share of
$0.39 , compared to a GAAP net loss per share of$0.45 in the first quarter of 2017. -
Non-GAAP net loss per share of
$0.04 , compared to a non-GAAP net loss per share of$0.05 in the first quarter of 2017, and within the guidance range of non-GAAP net loss per share of$0.03 to$0.06 .1 -
Cash flow generated by operations was
$9 million , compared to cash flow generated by operations of negative$17 million in the first quarter of 2017, and better than the guidance range of negative$10 million to break-even.
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."
Second Quarter and Updated 2018 Outlook
For the second quarter of 2018,
-
Total revenue in the range of
$199 million to$203 million . -
Billings in the range of
$180 million to$195 million . - Non-GAAP gross margin of approximately 74 percent.
- Non-GAAP operating margin in the range of negative 2 percent to positive 1 percent.
-
Non-GAAP net income (loss) per share of
$(0.03) to$0.00 . -
Cash flow generated by operations between zero dollars and negative
$15 million .
Non-GAAP net income (loss) per share for the second quarter assumes cash
interest expense of approximately
For 2018,
-
Revenue in the range of
$820 million to$830 million . -
Billings in the range of
$815 million to$835 million . - Non-GAAP operating margin between 1 percent and 2 percent.
-
Non-GAAP net income per share between
$0.00 and$0.04 . -
Positive cash flow generated by operations of
$50 million to$60 million . -
Capital expenditures between
$35 million and$40 million .
Non-GAAP net income per share for 2018 assumes cash interest expense of
approximately
Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, and non-cash interest expense related to the company's convertible senior notes. 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 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 second quarter of 2018 and full year 2018 will have a significant impact on the company's GAAP operating margin and net loss per share. Further, amortization of intangible assets, as well as other non-recurring expenses, if any, will also impact results. 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 second quarter and full year 2018, including revenue, billings, non-GAAP gross margin, non-GAAP operating margin, cash flows generated by operations, interest expense, provision for income taxes, non-GAAP net income (loss) per share, basic and diluted weighted average shares outstanding, and capital expenditures in the section entitled "Second Quarter and Updated 2018 Outlook" above, as well as statements related to future growth, profitability, innovation, competitive advantages, and adapting as the threat landscape evolves.
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 income
(loss), net income (loss) per share, and free cash flow.
Non-GAAP net loss and net loss per share in the first quarter of 2018
excluded stock-based compensation expense, amortization of intangible
assets, acquisition-related expenses, non-cash interest expense related
to the convertible senior notes issued in
Non-GAAP net loss and net loss per share for the first quarter of 2017
excluded stock-based compensation expense, amortization of intangible
assets, change in fair value of contingent earn-out liability, 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
© 2018
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) |
||||||||
2018 |
2017* |
|||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 167,850 | $ | 180,891 | ||||
Short-term investments | 718,536 | 715,911 | ||||||
Accounts receivable, net | 103,056 | 146,317 | ||||||
Inventories | 6,806 | 5,746 | ||||||
Prepaid expenses and other current assets | 102,851 | 93,799 | ||||||
Total current assets | 1,099,099 | 1,142,664 | ||||||
Property and equipment, net | 76,579 | 71,357 | ||||||
|
999,920 | 984,661 | ||||||
Intangible assets, net | 180,875 | 187,388 | ||||||
Deposits and other long-term assets | 69,912 | 72,767 | ||||||
Total assets | $ | 2,426,385 | $ | 2,458,837 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 30,749 | $ | 35,684 | ||||
Accrued and other current liabilities | 23,817 | 19,569 | ||||||
Accrued compensation | 54,020 | 59,588 | ||||||
Deferred revenue, current portion | 533,540 | 546,615 | ||||||
Total current liabilities | 642,126 | 661,456 | ||||||
Convertible senior notes, net | 789,272 | 779,578 | ||||||
Deferred revenue, non-current portion | 352,596 | 363,485 | ||||||
Other long-term liabilities | 22,957 | 22,102 | ||||||
Total liabilities | 1,806,951 | 1,826,621 | ||||||
Stockholders' equity: | ||||||||
Common stock | 19 | 19 | ||||||
Additional paid-in capital | 2,952,085 | 2,891,441 | ||||||
|
(150,000 | ) | (150,000 | ) | ||||
Accumulated other comprehensive loss | (4,476 | ) | (2,881 | ) | ||||
Accumulated deficit | (2,178,194 | ) | (2,106,363 | ) | ||||
Total stockholders' equity | 619,434 | 632,216 | ||||||
Total liabilities and stockholders' equity | $ | 2,426,385 | $ | 2,458,837 |
* | Certain prior period amounts have been adjusted as a result of adoption of the new revenue recognition standard. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) |
||||||||
Three Months Ended
|
||||||||
2018 | 2017* | |||||||
Revenue: | ||||||||
Product, subscription and support | $ | 165,473 | $ | 153,729 | ||||
Professional services | 33,597 | 31,030 | ||||||
Total revenue | 199,070 | 184,759 | ||||||
Cost of revenue: (1)(2) | ||||||||
Product, subscription and support | 47,429 | 46,423 | ||||||
Professional services | 20,500 | 19,324 | ||||||
Total cost of revenue | 67,929 | 65,747 | ||||||
Total gross profit | 131,141 | 119,012 | ||||||
Operating expenses: (1)(2) | ||||||||
Research and development | 66,196 | 58,352 | ||||||
Sales and marketing | 97,251 | 98,988 | ||||||
General and administrative (3)(4) | 28,418 | 27,615 | ||||||
Total operating expenses | 191,865 | 184,955 | ||||||
Operating loss | (60,724 | ) | (65,943 | ) | ||||
Other expense, net (5) | (10,053 | ) | (9,981 | ) | ||||
Loss before income taxes | (70,777 | ) | (75,924 | ) | ||||
Provision for income taxes (6) | 1,053 | 1,293 | ||||||
Net loss attributable to common stockholders | $ | (71,830 | ) | $ | (77,217 | ) | ||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.39 | ) | $ | (0.45 | ) | ||
Weighted average shares used in per share calculations, basic and diluted | 186,456 | 172,236 |
* | Certain prior period amounts have been adjusted as a result of adoption of the new revenue recognition standard. |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, in thousands) |
||||||||
Three Months Ended
|
||||||||
2018 | 2017* | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (71,830 | ) | $ | (77,217 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 22,389 | 26,365 | ||||||
Stock-based compensation | 42,148 | 43,889 | ||||||
Non-cash interest expense related to convertible senior notes | 9,694 | 9,226 | ||||||
Change in fair value of contingent earn-out liability | — | 13 | ||||||
Deferred income taxes | (60 | ) | 251 | |||||
Other | 1,342 | 2,120 | ||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | ||||||||
Accounts receivable | 42,986 | 22,021 | ||||||
Inventories | (1,373 | ) | (1,090 | ) | ||||
Prepaid expenses and other assets | (6,330 | ) | 630 | |||||
Accounts payable | (5,354 | ) | 3,331 | |||||
Accrued liabilities | 4,254 | (930 | ) | |||||
Accrued compensation | (5,568 | ) | (7,006 | ) | ||||
Deferred revenue | (23,965 | ) | (39,789 | ) | ||||
Other long-term liabilities | 854 | 1,234 | ||||||
Net cash provided by (used in) operating activities | 9,187 | (16,952 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment and demonstration units | (14,487 | ) | (8,483 | ) | ||||
Purchases of short-term investments | (109,469 | ) | (98,480 | ) | ||||
Proceeds from maturities of short-term investments | 104,711 | 94,689 | ||||||
Proceeds from sales of short-term investments | — | 3,620 | ||||||
Business acquisitions, net of cash acquired | (5,977 | ) | — | |||||
Lease deposits | (116 | ) | (70 | ) | ||||
Net cash used in investing activities | (25,338 | ) | (8,724 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments for contingent earn-outs | — | (38,928 | ) | |||||
Proceeds from exercise of equity awards | 3,110 | 4,311 | ||||||
Net cash provided by (used in) financing activities | 3,110 | (34,617 | ) | |||||
Net change in cash and cash equivalents | (13,041 | ) | (60,293 | ) | ||||
Cash and cash equivalents, beginning of period | 180,891 | 223,667 | ||||||
Cash and cash equivalents, end of period | $ | 167,850 | $ | 163,374 |
* | Certain prior period amounts have been adjusted as a result of adoption of the new revenue recognition standard. |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited, in thousands, except per share amounts) |
|||||||||
Three Months Ended
|
|||||||||
2018 | 2017* | ||||||||
GAAP operating loss | $ | (60,724 | ) | $ | (65,943 | ) | |||
Stock-based compensation expense (1) | 42,148 | 43,889 | |||||||
Amortization of intangible assets (2) | 12,614 | 14,787 | |||||||
Acquisition related expenses (3) | 264 | — | |||||||
Change in fair value of contingent earn-out liability (4) | — | 13 | |||||||
Non-GAAP operating loss | $ | (5,698 | ) | $ | (7,254 | ) | |||
GAAP gross margin | 66 | % | 64 | % | |||||
Stock-based compensation expense (1) | 4 | % | 4 | % | |||||
Amortization of intangible assets (2) | 4 | % | 6 | % | |||||
Non-GAAP gross margin | 74 | % | 74 | % | |||||
GAAP operating margin | (31 | )% | (36 | )% | |||||
Stock-based compensation expense (1) | 21 | % | 24 | % | |||||
Amortization of intangible assets (2) | 7 | % | 8 | % | |||||
Non-GAAP operating margin | (3 | )% | (4 | )% | |||||
GAAP net loss | $ | (71,830 | ) | $ | (77,217 | ) | |||
Stock-based compensation expense (1) | 42,148 | 43,889 | |||||||
Amortization of intangible assets (2) | 12,614 | 14,787 | |||||||
Acquisition related expenses (3) | 264 | — | |||||||
Change in fair value of contingent earn-out liability (4) | — | 13 | |||||||
Non-cash interest expense related to convertible senior notes (5) | 9,694 | 9,226 | |||||||
Adjustment to provision (benefit) from income taxes (6) | (382 | ) | — | ||||||
Non-GAAP net loss | $ | (7,492 | ) | $ | (9,302 | ) | |||
GAAP net loss per common share, basic and diluted | $ | (0.39 | ) | $ | (0.45 | ) | |||
Stock-based compensation expense (1) | 0.23 | 0.26 | |||||||
Amortization of intangible assets (2) | 0.07 | 0.09 | |||||||
Non-cash interest expense related to convertible senior notes (5) | 0.05 | 0.05 | |||||||
Non-GAAP net loss per common share, basic | $ | (0.04 | ) | $ | (0.05 | ) | |||
Non-GAAP net loss per common share, diluted | $ | (0.04 | ) | $ | (0.05 | ) | |||
Weighted average shares used in per share calculation for GAAP, basic and diluted | 186,456 | 172,236 | |||||||
(1) |
Includes stock-based compensation expense as follows: |
||||||||
Cost of product, subscription and support revenue | $ | 3,622 | $ | 4,360 | |||||
Cost of professional services revenue | 3,902 | 3,672 | |||||||
Research and development expense | 14,353 | 14,525 | |||||||
Sales and marketing expense | 12,977 | 14,015 | |||||||
General and administrative expense | 7,294 | 7,317 | |||||||
Total stock-based compensation expense | $ | 42,148 | $ | 43,889 | |||||
(2) |
Includes amortization of intangible assets as follows: |
||||||||
Cost of product, subscription and support revenue | $ | 8,662 | $ | 10,178 | |||||
Research and development expense | 157 | 162 | |||||||
Sales and marketing expense | 3,795 | 4,447 | |||||||
Total amortization of intangible assets | $ | 12,614 | $ | 14,787 | |||||
(3) |
Includes acquisition related expenses as follows: |
||||||||
General and administrative expense | $ | 264 | $ | — | |||||
(4) |
Includes change in fair value of contingent earn-out liability as follows: |
||||||||
General and administrative expense | $ | — | $ | 13 | |||||
(5) |
Includes non-cash interest expense related to convertible senior notes as follows: |
||||||||
Other expense, net | $ | 9,694 | $ | 9,226 | |||||
(6) |
Includes income tax effect of non-GAAP adjustments as follows: |
||||||||
Provision for (benefit from) income taxes | $ | (382 | ) | $ | — |
* | Certain prior period amounts have been adjusted as a result of adoption of the new revenue recognition standard. |
RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE (Unaudited, in thousands) |
||||||||
Three Months Ended
|
||||||||
2018 | 2017* | |||||||
GAAP revenue | $ | 199,070 | $ | 184,759 | ||||
Add change in deferred revenue | (23,964 | ) | (39,789 | ) | ||||
Non-GAAP billings | $ | 175,106 | $ | 144,970 |
BILLINGS BREAKOUT (Unaudited, in thousands) |
|||||||
Three Months Ended
|
|||||||
2018 | 2017* | ||||||
Product and related subscription and support billings | $ | 90,365 | $ | 76,930 | |||
Cloud subscription and managed services | 57,110 | 35,349 | |||||
Professional services billings | 27,631 | 32,691 | |||||
Non-GAAP billings | $ | 175,106 | $ | 144,970 |
REVENUE BREAKOUT (Unaudited, in thousands) |
|||||||
Three Months Ended
|
|||||||
2018 | 2017* | ||||||
Product and related subscription and support revenue | $ | 121,092 | $ | 112,184 | |||
Cloud subscription and managed services revenue | 44,381 | 41,545 | |||||
Professional services revenue | 33,597 | 31,030 | |||||
Total revenue | $ | 199,070 | $ | 184,759 |
* | Certain prior period amounts have been adjusted as a result of adoption of the new revenue recognition standard. |
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