FireEye Reports Record Billings and Revenue for Third Quarter 2014
"Our third quarter billings reflected strong demand for
"In this past quarter, we took a major step forward in our mission to reimagine security with the announcement of our Adaptive Defense™ security model and
Third Quarter 2014 Financial Results
- Billings1: Third quarter billings were
$165.1 million , up 45 percent from the second quarter of 2014 and exceeding the previously issued guidance range of$150 to$155 million . Total billings included$44.1 million in product billings,$71.9 million in product subscription billings,$30.7 million in support and maintenance billings, and$18.3 million in professional services billings. - Revenue: Third quarter revenue was
$114.2 million , an increase of 168 percent from the third quarter of 2013 and within the previously issued guidance range of$114 to$117 million . Total revenue included$48.4 million of product revenue,$32.8 million of product subscription revenue,$14.2 million of support and maintenance revenue, and$18.9 million of professional services revenue. - Deferred revenue: Deferred revenue totaled
$282.9 million at the end of the third quarter, an increase of$152.2 million from the end of the third quarter of 2013. Current deferred revenue was$160.8 million , an increase of$89.3 million from the end of the third quarter of 2013. Non-current deferred revenue was$122.2 million , an increase of$62.9 million from the end of the third quarter of 2013. - GAAP net loss: Third quarter GAAP net loss was
$120.0 million , or$0.83 per share, based on 144.9 million weighted average shares outstanding. This compares with a GAAP net loss of$50.9 million , or$1.61 per basic and diluted share, based on 31.6 million weighted average shares outstanding, in the third quarter of 2013. - Non-GAAP net loss1: Third quarter non-GAAP net loss was
$73.9 million , or$0.51 per basic and diluted share, compared with the previously issued guidance range of$0.52 to$0.56 loss per share. Non-GAAP net loss in the third quarters of 2013 and 2014 excluded stock-based compensation expenses, amortization of intangible assets, acquisition related costs and discrete tax benefits. Additionally, non-GAAP net loss for the third quarter of 2013 excluded changes in the fair value of preferred stock warrant liabilities and non-GAAP net loss for the third quarter of 2014 excluded a charge of$2.8 million related to workforce reductions and consolidation of facilities.
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."
Recent Business Highlights
Since its initial public offering in the third quarter of 2013,
- Released more than 20 new and enhanced products and services, including new appliances, support for Apple operating environments, a mobile threat prevention solution, a data center threat prevention solution, cloud-based email threat protection, the Threat Analytics Platform™ (TAP™), an Intrusion Prevention System (IPS), and the
FireEye -as-a-Service offering. - More than doubled its customer base, from 1,349 customers at the end of the third quarter of 2013 to 2,761 customers at the end of the third quarter of 2014.
- Expanded its presence to more than 65 countries.
- Expanded its channel partner programs to more than 900 distributors and resellers worldwide.
- Built 24/7, round-the-clock, round-the-world customer support and security operations centers.
- Increased the number of employees from 1,164 at the end of the third quarter of 2013 to 2,402 at the end of the third quarter of 2014.
Business highlights announced since the release of second quarter 2014 financial results on
- An agreement between Verizon and
FireEye to join forces to secure organizations from advanced attacks and emerging mobile threats. As part of the agreement, Verizon clients will have access to the FireEye® Mobile Threat Prevention™ (MTP™) offering to protect against mobile threats and correlate attack data from the mobile vector. - A strategic partnership with
SingTel to launch the first managed defense solution powered byFireEye in theAsia-Pacific region (APAC). The partnership includes significant investments related to new Advanced Security Operation Centres (ASOCs) inSingapore andAustralia ; training up to 150 professionals to operate the ASOCs; and bi-annual APAC-focused threat advisory reports bySingTel andFireEye . - Introduction of new and enhanced products and services, including:
FireEye -as-a-Service, the industry's first global security-as-a-service solution, an on-demand security management offering that allows organizations to applyFireEye's technology, intelligence and expertise to find and stop cyber attacks.- FireEye Advanced Threat Intelligence™ (ATI), providing access to advanced threat intelligence and analytical tools to identify attacks and provide context about the tactics and motives of specific threat actors.
- Support for Apple OS X and iOS operating environments in the FireEye Network Security Threat Prevention Platform (NX series), FireEye Forensic Analytics (AX series), FireEye Mobile Threat Prevention (MTP) and the FireEye Investigation Analysis System (IAS) platforms.
- FireEye Investigation Analysis System (IA Series), a forensics analytics platform that enhances and expedites incident investigation by pairing in-depth analytics and visualization capabilities with the industry's fastest lossless, intelligent packet capture and retrieval.
- FireEye App for Splunk Enterprise, which allows organizations to visualize internal and external threats and unearth threat patterns in
FireEye data by leveraging Splunk Enterprise's ability to correlate multiple data sources from across their IT infrastructure. - FireEye Threat Analytics Platform (TAP) for Amazon Web Services (AWS) customers. A cloud-based security analytics solution, TAP applies FireEye Dynamic Threat Intelligence™ (DTI™) to event data produced by security devices, networks, systems, and applications for attack detection, security monitoring, and incident investigation support.
- A free service to help victims recover files encrypted by CryptoLocker ransomware, offered with Fox-IT and resulting in close to three thousand successful recoveries of ransomed data.
Leadership in Advanced Threat Intelligence
Threat intelligence is at the heart of the
In addition to regular blog posts on new attack campaigns and trends in cybersecurity, recent threat discoveries and analyses by the
- Discovery of two new zero-days exploiting the Windows Kernel. Security researchers in
FireEye Labs have identified 16 total zero-day attacks in the last two years uncovering 11 in 2013 and five in 2014. - A report exposing long-standing operations by cyber espionage group APT28 targeting government, military, and security groups of interest to
Russia . - A technical report, "A Daily Grind: Filtering Java Vulnerabilities," outlining the three most commonly exploited Java vulnerabilities used in targeted attacks and mapping out the step-by-step infection flow of exploit kits that leverage them.
- A warning regarding a new strategic web compromise campaign targeting non-profit organizations and non-governmental organizations (NGOs) with links to the Sunshop Digital Quartermaster, a collective of malware authors that supports multiple
China -based advanced persistent threat (APT) groups. - A report, "Operation Quantum Entanglement," detailing two attack campaigns by different groups in separate regions of
China , apparently operating in parallel. - A joint study with
KPMG of the Swedish threat landscape showing 93 percent of the organizations were infected with malware and 79 percent experiencing attempts to exfiltrate data from the organizations.
Forward Outlook
For the fourth quarter of 2014,
- Total billings in the range of
$195 to$210 million . - Gross margin in the range of 70 to 73 percent of total revenue.
- Research and development expenses in the range of 34 to 37 percent of total revenue.
- Sales and marketing expenses in the range of 70 to 73 percent of total revenue.
- General and administrative expenses in the range of 16 to 19 percent of total revenue.
- Loss per share of
$0.46 to$0.50 , based on estimated weighted average shares outstanding of approximately 144 million.
For 2014, the company currently expects total revenue in the range of
- Total billings in the range of
$573 to$588 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.
- Loss per share of
$2.05 to$2.15 , based on estimated weighted average shares outstanding of approximately 142 million.
Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, acquisition expenses, restructuring charges, 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
Analyst Update Scheduled for
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 the features, benefits and availability of
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
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© 2014
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(Unaudited, in thousands) | ||||||||||
2014 | 2013 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 98,843 | $ | 173,918 | ||||||
Short-term investments | 299,022 | - | ||||||||
Accounts receivable, net | 155,798 | 95,772 | ||||||||
Inventories | 5,765 | 5,663 | ||||||||
Deferred tax assets, current portion | 26,775 | 14,584 | ||||||||
Prepaid expenses and other current assets | 31,508 | 25,230 | ||||||||
Total current assets | 617,711 | 315,167 | ||||||||
Property and equipment, net | 84,095 | 64,765 | ||||||||
Goodwill | 750,275 | 706,327 | ||||||||
Intangible assets | 273,314 | 281,377 | ||||||||
Deposits and other long-term assets | 10,366 | 8,677 | ||||||||
Total assets | $ | 1,735,761 | $ | 1,376,313 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 30,198 | $ | 34,128 | ||||||
Accrued and other current liabilities | 20,574 | 17,677 | ||||||||
Accrued compensation | 66,308 | 41,625 | ||||||||
Deferred revenue, current portion | 160,768 | 110,535 | ||||||||
Total current liabilities | 277,848 | 203,965 | ||||||||
Deferred revenue, non-current portion | 122,153 | 76,979 | ||||||||
Deferred tax liabilities, non-current portion | 36,068 | 45,147 | ||||||||
Other long-term liabilities | 6,553 | 2,120 | ||||||||
Total liabilities | 442,622 | 328,211 | ||||||||
Stockholders' equity: | ||||||||||
Common stock | 15 | 14 | ||||||||
Additional paid-in capital | 1,855,016 | 1,271,590 | ||||||||
Accumulated other comprehensive loss | (326 | ) | - | |||||||
Accumulated deficit | (561,566 | ) | (223,502 | ) | ||||||
Total stockholders' equity | 1,293,139 | 1,048,102 | ||||||||
Total liabilities and stockholders' equity | $ | 1,735,761 | $ | 1,376,313 | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Revenue: | ||||||||||||||||||
Product | $ | 48,375 | $ | 23,729 | $ | 110,310 | $ | 55,957 | ||||||||||
Subscription and services | 65,836 | 18,923 | 172,370 | 48,333 | ||||||||||||||
Total revenue | 114,211 | 42,652 | 282,680 | 104,290 | ||||||||||||||
Cost of revenue: (1)(2)(3) | ||||||||||||||||||
Product | 15,440 | 7,358 | 39,515 | 18,124 | ||||||||||||||
Subscription and services | 29,488 | 6,079 | 82,286 | 12,481 | ||||||||||||||
Total cost of revenue | 44,928 | 13,437 | 121,801 | 30,605 | ||||||||||||||
Total gross profit | 69,283 | 29,215 | 160,879 | 73,685 | ||||||||||||||
Operating expenses:(1)(2) | ||||||||||||||||||
Research and development | 54,707 | 20,492 | 150,085 | 44,570 | ||||||||||||||
Sales and marketing | 111,625 | 44,414 | 283,070 | 110,577 | ||||||||||||||
General and administrative (3) | 30,119 | 11,704 | 89,150 | 29,385 | ||||||||||||||
Restructuring charges (4) | 2,769 | - | 2,769 | - | ||||||||||||||
Total operating expenses | 199,220 | 76,610 | 525,074 | 184,532 | ||||||||||||||
Operating loss | (129,937 | ) | (47,395 | ) | (364,195 | ) | (110,847 | ) | ||||||||||
Other expense, net (5) | (414 | ) | (4,448 | ) | (579 | ) | (7,595 | ) | ||||||||||
Loss before income taxes | (130,351 | ) | (51,843 | ) | (364,774 | ) | (118,442 | ) | ||||||||||
Provision for (benefit from) income taxes (6) | (10,320 | ) | (917 | ) | (26,710 | ) | (320 | ) | ||||||||||
Net loss attributable to common stockholders | $ | (120,031 | ) | $ | (50,926 | ) | $ | (338,064 | ) | $ | (118,122 | ) | ||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.83 | ) | $ | (1.61 | ) | $ | (2.41 | ) | $ | (5.41 | ) | ||||||
Weighted average shares used in per share calculations, basic and diluted | 144,923 | 31,590 | 140,285 | 21,838 | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||
(Unaudited, in thousands) | ||||||||||||
Nine Months Ended | ||||||||||||
2014 | 2013 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (338,064 | ) | $ | (118,122 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 67,631 | 12,344 | ||||||||||
Stock-based compensation expense | 106,607 | 16,344 | ||||||||||
Deferred income taxes | (30,142 | ) | - | |||||||||
Other | 1,702 | 5,363 | ||||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | ||||||||||||
Accounts receivable, net | (60,041 | ) | (20,727 | ) | ||||||||
Inventories | 162 | (5,174 | ) | |||||||||
Prepaid expenses and other assets | (2,138 | ) | (5,676 | ) | ||||||||
Accounts payable | (8,359 | ) | 6,115 | |||||||||
Accrued liabilities | 6,684 | 3,711 | ||||||||||
Accrued compensation | 25,415 | 6,481 | ||||||||||
Deferred revenue | 95,107 | 54,370 | ||||||||||
Other long-term liabilities | 4,434 | 547 | ||||||||||
Net cash used in operating activities | (131,003 | ) | (44,424 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Acquisition of business, net of cash acquired | (55,058 | ) | (3,872 | ) | ||||||||
Purchase of property and equipment and demonstration units | (55,466 | ) | (35,956 | ) | ||||||||
Purchase of short-term investments | (352,401 | ) | - | |||||||||
Maturities of short-term investments | 50,780 | - | ||||||||||
Lease deposits | (565 | ) | (1,636 | ) | ||||||||
Net cash used in investing activities | (412,710 | ) | (41,464 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net proceeds from follow-on public offering | - | 322,863 | ||||||||||
Net proceeds from follow-on public offering | 444,338 | - | ||||||||||
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 | 24,299 | 5,400 | ||||||||||
Repayment of notes receivable from stockholders | - | 7,294 | ||||||||||
Net cash provided by financing activities | 468,637 | 353,398 | ||||||||||
Net change in cash and cash equivalents | (75,075 | ) | 267,510 | |||||||||
Cash and cash equivalents, beginning of year | 173,918 | 60,200 | ||||||||||
Cash and cash equivalents, end of year | $ | 98,843 | $ | 327,710 | ||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(Unaudited, in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
GAAP operating loss | $ | (129,937 | ) | $ | (47,395 | ) | $ | (364,195 | ) | $ | (110,847 | ) | |||||
Stock-based compensation expense (1) | 43,160 | 8,814 | 106,607 | 16,344 | |||||||||||||
Amortization of intangible assets (2) | 11,478 | 359 | 33,463 | 883 | |||||||||||||
Acquisition related expenses (3) | - | - | 1,559 | - | |||||||||||||
Restructuring Charges (4) | 2,769 | - | 2,769 | - | |||||||||||||
Non-GAAP operating loss | $ | (72,530 | ) | $ | (38,222 | ) | $ | (219,797 | ) | $ | (93,620 | ) | |||||
GAAP net loss | $ | (120,031 | ) | $ | (50,926 | ) | $ | (338,064 | ) | $ | (118,122 | ) | |||||
Stock-based compensation expense (1) | 43,160 | 8,814 | 106,607 | 16,344 | |||||||||||||
Amortization of intangible assets (2) | 11,478 | 359 | 33,463 | 883 | |||||||||||||
Acquisition related expenses (3) | - | - | 1,559 | - | |||||||||||||
Restructuring Charges (4) | 2,769 | - | 2,769 | - | |||||||||||||
Change in fair value of preferred stock warrant liability (5) | - | 3,560 | - | 6,538 | |||||||||||||
Non-recurring benefit from income taxes (6) | (11,247 | ) | - | (30,099 | ) | - | |||||||||||
Non-GAAP net loss | $ | (73,871 | ) | $ | (38,193 | ) | $ | (223,765 | ) | $ | (94,357 | ) | |||||
GAAP net loss per common share, basic and diluted | $ | (0.83 | ) | $ | (1.61 | ) | $ | (2.41 | ) | $ | (5.41 | ) | |||||
Stock-based compensation expense (1) | 0.30 | 0.28 | 0.76 | 0.75 | |||||||||||||
Amortization of intangible assets (2) | 0.08 | 0.01 | 0.24 | 0.04 | |||||||||||||
Acquisition related expenses (3) | - | - | 0.01 | - | |||||||||||||
Restructuring Charges (4) | 0.02 | - | 0.02 | - | |||||||||||||
Change in fair value of preferred stock warrant liability (5) | - | 0.11 | - | 0.30 | |||||||||||||
Non-recurring benefit from income taxes (6) | (0.08 | ) | - | (0.21 | ) | - | |||||||||||
Non-GAAP net loss per common share, basic and diluted | $ | (0.51 | ) | $ | (1.21 | ) | $ | (1.60 | ) | $ | (4.32 | ) | |||||
Weighted average shares used in per share calculations for GAAP and Non-GAAP, basic and diluted | 144,923 | 31,590 | 140,285 | 21,838 | |||||||||||||
(1) includes stock-based compensation expense as follows: | |||||||||||||||||
Cost of product revenue | $ | 243 | $ | 143 | $ | 624 | $ | 279 | |||||||||
Cost of subscription and services revenue | 3,430 | 762 | 10,455 | 1,330 | |||||||||||||
Research and development | 7,647 | 2,350 | 20,053 | 4,425 | |||||||||||||
Sales and marketing | 22,543 | 3,784 | 47,154 | 5,878 | |||||||||||||
General and administrative | 9,297 | 1,775 | 28,321 | 4,432 | |||||||||||||
Total stock-based compensation expense | $ | 43,160 | $ | 8,814 | $ | 106,607 | $ | 16,344 | |||||||||
(2) includes amortization of intangible assets as follows: | |||||||||||||||||
Cost of product revenue | $ | 2,852 | $ | 262 | $ | 7,955 | $ | 786 | |||||||||
Cost of subscription and services revenue | 5,400 | 44 | 16,184 | 44 | |||||||||||||
Sales and marketing | 3,226 | 53 | 9,324 | 53 | |||||||||||||
Total amortization of intangible assets | $ | 11,478 | $ | 359 | $ | 33,463 | $ | 883 | |||||||||
(3) includes acquisition related expenses as follows: | |||||||||||||||||
General and administrative | $ | - | $ | - | $ | 1,559 | $ | - | |||||||||
(4) includes restructuring charges as follows: | |||||||||||||||||
Restructuring charges | $ | 2,769 | $ | - | $ | 2,769 | $ | - | |||||||||
(5) includes change in fair value of preferred stock warrant liability as follows: | |||||||||||||||||
Other expense, net | $ | - | $ | 3,560 | $ | - | $ | 6,538 | |||||||||
(6) includes discrete benefit from income taxes as follows: | |||||||||||||||||
Provision for (benefit from) income taxes | $ | (11,247 | ) | $ | - | $ | (30,099 | ) | $ | - | |||||||
RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
GAAP revenue | $ | 114,211 | $ | 42,652 | $ | 282,680 | $ | 104,290 | |||||
Add change in deferred revenue | 50,914 | 28,167 | 95,407 | 54,346 | |||||||||
Non-GAAP billings | $ | 165,125 | $ | 70,819 | $ | 378,087 | $ | 158,636 | |||||
BILLINGS BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Product billings | $ | 44,135 | $ | 27,077 | $ | 105,769 | $ | 62,241 | |||||
Product subscription billings | 71,925 | 25,415 | 153,446 | 57,563 | |||||||||
Product billings and product subscription billings | 116,060 | 52,492 | 259,215 | 119,804 | |||||||||
Support and maintenance billings | 30,717 | 16,124 | 64,994 | 35,498 | |||||||||
Professional services billings | 18,348 | 2,203 | 53,878 | 3,334 | |||||||||
Non-GAAP billings | $ | 165,125 | $ | 70,819 | $ | 378,087 | $ | 158,636 | |||||
REVENUE BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Product revenue | $ | 48,375 | $ | 23,729 | $ | 110,310 | $ | 55,957 | |||||
Product subscription revenue | 32,759 | 11,040 | 83,587 | 28,664 | |||||||||
Product revenue and product subscription revenue | 81,134 | 34,769 | 193,897 | 84,621 | |||||||||
Support and maintenance revenue | 14,198 | 6,928 | 36,823 | 18,097 | |||||||||
Professional services revenue | 18,879 | 955 | 51,960 | 1,572 | |||||||||
Total revenue | $ | 114,211 | $ | 42,652 | $ | 282,680 | $ | 104,290 |
Media contact:
415-699-9838
vitor.desouza@fireeye.com
Investor contact:
408-321-4957
kate.patterson@fireeye.com
Source:
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