FireEye Reports Financial Results for Second Quarter 2014
"I am pleased to report strong growth in billings and revenue in the second quarter, which is reflected in our fourth increase to 2014 billings and revenue guidance ranges since our initial public offering in
"We believe our second quarter results demonstrate the market's endorsement of our virtual machine-based security platform and mark the beginning of the next phase in our evolution from advanced security pioneer to industry leader. This new phase, which follows our startup and hyper-growth phases, is characterized by continued high revenue growth, accompanied by continued progress toward our target long-term financial model," added DeWalt.
Second Quarter 2014 Financial Results
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Billings1: Second quarter billings were
$113.8 million , compared to the previously issued guidance range of$108 to$112 million . Total billings included$35.6 million in product billings,$42.1 million in product subscription billings,$18.6 million in support and maintenance billings, and$17.5 million in professional services billings.
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Revenue: Second quarter revenue was
$94.5 million , compared to the previously issued guidance range of$89 to$91 million . Total revenue included$37.7 million of product revenue,$28.0 million of product subscription revenue,$11.9 million of support and maintenance revenue, and$16.9 million of professional services revenue.
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Deferred revenue: Deferred revenue totaled
$232.0 million at the end of the second quarter, an increase of$129.4 million from the end of the second quarter of 2013. Current deferred revenue was$136.8 million , an increase of$81.1 million from the end of the second quarter of 2013. Non-current deferred revenue was$95.2 million , an increase of$48.3 million from the end of the second quarter of 2013.
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GAAP net loss: Second quarter GAAP net loss was
$116.8 million , or$0.82 per share, based on 141.9 million weighted average shares outstanding. This compares to a GAAP net loss of$40.2 million , or$2.15 per basic and diluted share, based on 18.7 million weighted average shares outstanding, in the second quarter of 2013.
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Non-GAAP net loss1: Second quarter non-GAAP net loss was
$78.5 million , or$0.55 per basic and diluted share, compared to the previously issued guidance range of$0.58 to$0.63 loss per share. Non-GAAP net loss in the second quarters of 2013 and 2014 excluded stock-based compensation expenses, amortization of intangible assets, acquisition related costs and discrete tax benefits. Non-GAAP net loss for the second quarter of 2013 also excluded changes in the fair value of preferred stock warrant liabilities.
1A 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 also is included under the heading "Non-GAAP Financial Measures."
Recent Business Highlights
Since the second quarter of 2013,
Business highlights since the release of first quarter 2014 financial results on
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General availability of the FireEye Network Threat Prevention Platform with IPS to customers worldwide as an add-on license to the FireEye Network Threat Prevention Platform (NX Series).
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A new release of the company's email solutions, including FireEye Email Security (EX Series) and Email Threat Prevention Cloud, which added the traditional email security features of anti-spam and anti-virus protection to the advanced threat detection capabilities.
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Certification of the FireEye Forensic Analysis (AX Series) Threat Prevention Platform by
NATO for inclusion in the Information Assurance Product Catalogue (NIAPC).
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Appointment of a chief privacy officer to create a new global privacy program to establish data protection standards and lead the industry in data protection initiatives.
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Recognition of
FireEye's Threat Analytics Platform (TAP) as Best of Show for the Cloud Services category at InterOp Japan.
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A Net Promoter Score of 54, compared to an average score of 35 for the software industry.
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Integration of Rapid7 UserInsight into the FireEye Threat Analytics Platform (TAP), adding user and account analysis to TAP's hosted incident response platform to augment the detection of advanced attacks and insider threats.
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Appointment of
John McGee as Senior Vice President, Worldwide Sales, and the expansion of sales leadership inEurope and the East and West regions of the U.S.
Leadership in Advanced Threat Intelligence
Threat intelligence is at the heart of the
Recent threat discoveries and analyses by the
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Release of the report "Cybersecurity's Maginot Line: A Real-world Assessment of the Defense-in-Depth Model" examining attack data captured by
FireEye security appliances in trials from 1,217 organizations around the world. The study revealed that today's top-selling non-FireEye security tools failed to protect 97 percent of organizations in which they were installed.
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Discovery and analysis of a zero-day exploit targeting users of Internet Explorer versions 8 through 11 and Windows XP, 7 and 8 in a multi-vector attack campaign called "Operation Clandestine Fox."
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Publication of "Operation Saffron Rose," a research report detailing the activities of a cyber-espionage group, dubbed by
FireEye as the Ajax Security Team, likely based inIran targeting Iranian dissidents and U.S. defense firms.
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Discovery and analysis of the first "in-the-wild" malware reported to actively scan OPC servers, the specialized servers that control devices in critical infrastructure (e.g., water and electric utilities), energy and manufacturing sectors.
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Discovery and analysis of multiple malicious mobile app families, including an Android app that pretends to be a "Google Service Framework" but actually executes privacy leakage, banking credential theft, and remote access commands.
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Discovery and analysis of a new kind of mobile malware that encrypts an embedded Android application with an attachment to conceal malicious activities within a seemingly benign application.
Forward Outlook
For the third quarter of 2014,
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Total billings in the range of
$150 to$155 million . - Gross margin in the range of 68 to 71 percent of total revenue.
- Research and development expenses in the range of 41 to 44 percent of total revenue.
- Sales and marketing expenses in the range of 77 to 80 percent of total revenue.
- General and administrative expenses in the range of 18 to 21 percent of total revenue.
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Loss per share of
$0.52 to$0.56 , based on estimated weighted average shares outstanding of approximately 144 million.
For 2014, the company currently expects total revenue in the range of
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Total billings in the range of
$560 to$580 million . - Gross margin in the range of 69 to 72 percent of total revenue.
- Research and development expenses in the range of 41 to 44 percent of total revenue.
- Sales and marketing expenses in the range of 76 to 79 percent of total revenue.
- General and administrative expenses in the range of 18 to 21 percent of total revenue.
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Loss per share of
$2.05 to$2.15 , based on estimated weighted average shares outstanding of approximately 142 million.
For the fourth quarter of 2014, the company currently expects non-GAAP loss per share in the range of
Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, acquisition expenses, discrete tax benefits, and other non-recurring expenses. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.
Conference Call Information
Forward-Looking Statements
This press release contains forward-looking statements, including statements related to future billings, revenue, non-GAAP gross margins, non-GAAP research and development expenses as a percent of total revenue, non-GAAP sales and marketing expenses as a percent of total revenue, non-GAAP general and administrative expenses as a percent of total revenue, weighted average shares outstanding, and non-GAAP loss per share in the section entitled "Forward Outlook" above, as well as statements related to continued high revenue growth and progress toward
These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause
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
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 margin, net loss and net loss per share.
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. Second, stock-based compensation is an important part of
About
© 2014
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CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(Unaudited, in thousands) | ||||||||||
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2014 | 2013 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 171,620 | $ | 173,918 | ||||||
Short-term investments | 292,874 | - | ||||||||
Accounts receivable, net | 108,039 | 95,772 | ||||||||
Inventories | 5,198 | 5,663 | ||||||||
Deferred tax assets, current portion | 21,712 | 14,584 | ||||||||
Prepaid expenses and other current assets | 31,879 | 25,230 | ||||||||
Total current assets | 631,322 | 315,167 | ||||||||
Property and equipment, net | 78,390 | 64,765 | ||||||||
Goodwill | 750,132 | 706,327 | ||||||||
Intangible assets | 284,793 | 281,377 | ||||||||
Deposits and other long-term assets | 10,035 | 8,677 | ||||||||
Total assets | $ | 1,754,672 | $ | 1,376,313 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 36,343 | $ | 34,128 | ||||||
Accrued and other current liabilities | 23,273 | 17,677 | ||||||||
Accrued compensation | 52,728 | 41,625 | ||||||||
Deferred revenue, current portion | 136,808 | 110,535 | ||||||||
Total current liabilities | 249,152 | 203,965 | ||||||||
Deferred revenue, non-current portion | 95,199 | 76,979 | ||||||||
Deferred tax liabilities, non-current portion | 41,044 | 45,147 | ||||||||
Other long-term liabilities | 5,580 | 2,120 | ||||||||
Total liabilities | 390,975 | 328,211 | ||||||||
Stockholders' equity: | ||||||||||
Common stock | 15 | 14 | ||||||||
Additional paid-in capital | 1,805,328 | 1,271,590 | ||||||||
Accumulated other comprehensive income (loss) | (110 | ) | - | |||||||
Accumulated deficit | (441,536 | ) | (223,502 | ) | ||||||
Total stockholders' equity | 1,363,697 | 1,048,102 | ||||||||
Total liabilities and stockholders' equity | $ | 1,754,672 | $ | 1,376,313 | ||||||
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
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2014 | 2013 | 2014 | 2013 | |||||||||||||||
Revenue: | ||||||||||||||||||
Product | $ | 37,683 | $ | 17,240 | $ | 61,935 | $ | 32,228 | ||||||||||
Subscription and services | 56,806 | 15,982 | 106,534 | 29,410 | ||||||||||||||
Total revenue | 94,489 | 33,222 | 168,469 | 61,638 | ||||||||||||||
Cost of revenue: (1)(2) | ||||||||||||||||||
Product | 13,749 | 5,804 | 24,075 | 10,766 | ||||||||||||||
Subscription and services | 27,831 | 4,482 | 52,798 | 6,402 | ||||||||||||||
Total cost of revenue | 41,580 | 10,286 | 76,873 | 17,168 | ||||||||||||||
Total gross profit | 52,909 | 22,936 | 91,596 | 44,470 | ||||||||||||||
Operating expenses:(1)(2) | ||||||||||||||||||
Research and development | 53,408 | 14,016 | 95,378 | 24,078 | ||||||||||||||
Sales and marketing | 94,591 | 37,594 | 171,445 | 66,163 | ||||||||||||||
General and administrative (3) | 31,931 | 10,370 | 59,031 | 17,681 | ||||||||||||||
Total operating expenses | 179,930 | 61,980 | 325,854 | 107,922 | ||||||||||||||
Operating loss | (127,021 | ) | (39,044 | ) | (234,258 | ) | (63,452 | ) | ||||||||||
Other expense, net (4) | (150 | ) | (807 | ) | (166 | ) | (3,147 | ) | ||||||||||
Loss before income taxes | (127,171 | ) | (39,851 | ) | (234,424 | ) | (66,599 | ) | ||||||||||
Provision for (benefit from) income taxes (5) | (10,348 | ) | 384 | (16,390 | ) | 597 | ||||||||||||
Net loss attributable to common stockholders | $ | (116,823 | ) | $ | (40,235 | ) | $ | (218,034 | ) | $ | (67,196 | ) | ||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.82 | ) | $ | (2.15 | ) | $ | (1.58 | ) | $ | (3.98 | ) | ||||||
Weighted average shares used in per share calculations, basic and diluted | 141,895 | 18,704 | 137,939 | 16,877 | ||||||||||||||
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||
(Unaudited, in thousands) | |||||||||||
Six Months Ended | |||||||||||
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2014 | 2013 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net loss | $ | (218,034 | ) | $ | (67,196 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | 42,726 | 7,095 | |||||||||
Stock-based compensation expense | 63,447 | 7,530 | |||||||||
Deferred income taxes | (18,960 | ) | - | ||||||||
Other | 183 | 3,017 | |||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | |||||||||||
Accounts receivable, net | (11,660 | ) | 2,052 | ||||||||
Inventories | 729 | (1,168 | ) | ||||||||
Prepaid expenses and other assets | (2,287 | ) | (4,569 | ) | |||||||
Deferred costs of revenue | (797 | ) | (444 | ) | |||||||
Accounts payable | (7,103 | ) | 8,207 | ||||||||
Accrued liabilities | 8,747 | 1,310 | |||||||||
Accrued compensation | 10,834 | 4,949 | |||||||||
Deferred revenue | 44,193 | 26,180 | |||||||||
Other long-term liabilities | 3,460 | 338 | |||||||||
Net cash used in operating activities | (84,522 | ) | (12,699 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Acquisition of business, net of cash acquired | (55,058 | ) | - | ||||||||
Purchase of property and equipment and demonstration units | (31,469 | ) | (22,055 | ) | |||||||
Purchase of short-term investments | (302,531 | ) | - | ||||||||
Maturities of short-term investments | 8,000 | - | |||||||||
Lease deposits | (403 | ) | (1,597 | ) | |||||||
Net cash used in investing activities | (381,461 | ) | (23,652 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net proceeds from follow-on public offering | 445,280 | 330 | |||||||||
Borrowing from line of credit | - | 10,000 | |||||||||
Repayment of term loan | - | (2,147 | ) | ||||||||
Net proceeds from issuance of convertible preferred stock | - | 9,988 | |||||||||
Proceeds from exercise of equity awards | 18,405 | 4,771 | |||||||||
Repayment of notes receivable from stockholders | - | 7,294 | |||||||||
Net cash provided by financing activities | 463,685 | 30,236 | |||||||||
Net change in cash and cash equivalents | (2,298 | ) | (6,115 | ) | |||||||
Cash and cash equivalents, beginning of year | 173,918 | 60,200 | |||||||||
Cash and cash equivalents, end of year | $ | 171,620 | $ | 54,085 | |||||||
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(Unaudited, in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
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2014 | 2013 | 2014 | 2013 | ||||||||||||||
GAAP operating loss | $ | (127,021 | ) | $ | (39,044 | ) | $ | (234,258 | ) | $ | (63,452 | ) | |||||
Stock-based compensation expense (1) | 38,253 | 4,278 | 63,447 | 7,530 | |||||||||||||
Amortization of intangible assets (2) | 11,187 | 262 | 21,985 | 524 | |||||||||||||
Acquisition related expenses (3) | 512 | - | 1,559 | - | |||||||||||||
Non-GAAP operating loss | $ | (77,069 | ) | $ | (34,504 | ) | $ | (147,267 | ) | $ | (55,398 | ) | |||||
GAAP net loss | $ | (116,823 | ) | $ | (40,235 | ) | $ | (218,034 | ) | $ | (67,196 | ) | |||||
Stock-based compensation expense (1) | 38,253 | 4,278 | 63,447 | 7,530 | |||||||||||||
Amortization of intangible assets (2) | 11,187 | 262 | 21,985 | 524 | |||||||||||||
Acquisition related expenses (3) | 512 | - | 1,559 | - | |||||||||||||
Change in fair value of preferred stock warrant liability (4) | - | 811 | - | 2,978 | |||||||||||||
Non-recurring benefit from income taxes (5) | (11,610 | ) | - | (18,852 | ) | - | |||||||||||
Non-GAAP net loss | $ | (78,481 | ) | $ | (34,884 | ) | $ | (149,895 | ) | $ | (56,164 | ) | |||||
GAAP net loss per common share, basic and diluted | $ | (0.82 | ) | $ | (2.15 | ) | $ | (1.58 | ) | $ | (3.98 | ) | |||||
Stock-based compensation expense (1) | 0.27 | 0.23 | 0.46 | 0.45 | |||||||||||||
Amortization of intangible assets (2) | 0.08 | 0.01 | 0.16 | 0.03 | |||||||||||||
Acquisition related expenses (3) | 0.00 | - | 0.01 | - | |||||||||||||
Change in fair value of preferred stock warrant liability (4) | - | 0.04 | - | 0.18 | |||||||||||||
Non-recurring benefit from income taxes (5) | (0.08 | ) | - | (0.14 | ) | - | |||||||||||
Non-GAAP net loss per common share, basic and diluted | $ | (0.55 | ) | $ | (1.87 | ) | $ | (1.09 | ) | $ | (3.33 | ) | |||||
Weighted average shares used in per share calculations for GAAP and Non-GAAP, basic and diluted | 141,895 | 18,704 | 137,939 | 16,877 | |||||||||||||
(1) includes stock-based compensation expense as follows: | |||||||||||||||||
Cost of product revenue | $ | 236 | $ | 73 | $ | 381 | $ | 136 | |||||||||
Cost of subscription and services revenue | 3,605 | 401 | 7,025 | 568 | |||||||||||||
Research and development | 7,803 | 1,118 | 12,406 | 2,075 | |||||||||||||
Sales and marketing | 15,923 | 1,254 | 24,611 | 2,094 | |||||||||||||
General and administrative | 10,686 | 1,432 | 19,024 | 2,657 | |||||||||||||
Total stock-based compensation expense | $ | 38,253 | $ | 4,278 | $ | 63,447 | $ | 7,530 | |||||||||
(2) includes amortization of intangible assets as follows: | |||||||||||||||||
Cost of product revenue | $ | 2,672 | $ | 262 | $ | 5,103 | $ | 524 | |||||||||
Cost of subscription and services revenue | 5,394 | - | 10,784 | - | |||||||||||||
Sales and marketing | 3,121 | - | 6,098 | - | |||||||||||||
Total amortization of intangible assets | $ | 11,187 | $ | 262 | $ | 21,985 | $ | 524 | |||||||||
(3) includes acquisition related expenses as follows: | |||||||||||||||||
General and administrative | $ | 512 | $ | - | $ | 1,559 | $ | - | |||||||||
(4) includes change in fair value of preferred stock warrant liability as follows: | |||||||||||||||||
Other expense, net | $ | - | $ | 811 | $ | - | $ | 2,978 | |||||||||
(5) includes discrete benefit from income taxes as follows: | |||||||||||||||||
Provision for (benefit from) income taxes | $ | (11,610 | ) | $ | - | $ | (18,852 | ) | $ | - | |||||||
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RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
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2014 | 2013 | 2014 | 2013 | ||||||||||
GAAP revenue | $ | 94,489 | $ | 33,222 | $ | 168,469 | $ | 61,638 | |||||
Add change in deferred revenue | 19,286 | 11,791 | 44,494 | 26,179 | |||||||||
Non-GAAP billings | $ | 113,775 | $ | 45,013 | $ | 212,963 | $ | 87,817 | |||||
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BILLINGS BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
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2014 | 2013 | 2014 | 2013 | ||||||||||
Product billings | $ | 35,573 | $ | 18,883 | $ | 61,649 | $ | 35,164 | |||||
Product subscription billings | 42,086 | 15,541 | 81,521 | 32,239 | |||||||||
Product billings and product subscription billings | 77,659 | 34,424 | 143,170 | 67,403 | |||||||||
Support and maintenance billings | 18,582 | 9,702 | 34,277 | 19,283 | |||||||||
Professional services billings | 17,534 | 887 | 35,516 | 1,131 | |||||||||
Non-GAAP billings | $ | 113,775 | $ | 45,013 | $ | 212,963 | $ | 87,817 | |||||
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REVENUE BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
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2014 | 2013 | 2014 | 2013 | ||||||||||
Product revenue | $ | 37,683 | $ | 17,240 | $ | 61,935 | $ | 32,228 | |||||
Product subscription revenue | 28,025 | 9,608 | 50,844 | 17,625 | |||||||||
Product revenue and product subscription revenue | 65,708 | 26,848 | 112,779 | 49,853 | |||||||||
Support and maintenance revenue | 11,874 | 6,031 | 22,625 | 11,168 | |||||||||
Professional services revenue | 16,907 | 343 | 33,065 | 617 | |||||||||
Total revenue | $ | 94,489 | $ | 33,222 | $ | 168,469 | $ | 61,638 | |||||
Media contact:
415-699-9838
vitor.desouza@fireeye.com
Investor contact:
408-321-4957
kate.patterson@fireeye.com
Source:
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