FireEye Reports Record Q2 Billings and Revenue and Raises 2015 Outlook
"Our business continued to gain momentum in the second quarter as the power of our platform resulted in expansion of our customer base, new strategic partnerships, and additional cross-selling opportunities," said
Second Quarter 2015 Revenue and Billings
- Revenue: Second quarter revenue was
$147.2 million , an increase of 56 percent from the second quarter of 2014 and above the previously issued guidance range of$140 to$144 million . Total revenue included product revenue of$49.7 million , product subscription revenue of$48.5 million , support and maintenance revenue of$21.4 million and professional services revenue of$27.6 million .
- Billings1: Second quarter billings were
$178.3 million , an increase of 57 percent from the second quarter of 2014 and above the previously issued guidance range of$165 to$170 million . Total billings included product billings of$48.8 million , product subscription billings of$72.5 million , support and maintenance billings of$31.1 million , and professional services billings of$25.9 million . The average contract length for new subscription and support billings was approximately 31 months, compared to approximately 29 months in the second quarter of 2014.
- Deferred revenue: Deferred revenue totaled
$409.9 million at the end of the second quarter, an increase of$177.9 million , or 77 percent, from the end of the second quarter of 2014. Current deferred revenue was$232.5 million , an increase of$95.7 million from the end of the second quarter of 2014, and included$9.2 million in deferred product revenue and$223.3 million in deferred subscription, support and services revenue. Non-current deferred revenue was$177.4 million , an increase of$82.2 million from the end of the second quarter of 2014. Non-current deferred revenue included$3.6 million of deferred product revenue and$173.8 million of deferred subscription, support and services revenue.
"Demand was strong across product families, vertical markets and geographies in the second quarter, strengthening our belief that we have 'crossed the chasm' in advanced security," said DeWalt. "The opportunity continues to expand, and we believe the breadth and depth of our platform positions us to extend our leadership as the market develops."
Second Quarter 2015 Operating Performance
"Our continued focus on driving efficiency along with growth resulted in improved operating leverage and the best operating cash flow in our history," said
- Cash flow from operations: Second quarter cash flow from operations increased more than
$100 million year-over-year to$39.1 million , compared to negative$61.9 million in the second quarter of 2014. Purchases of property and equipment decreased to$11.9 million in the second quarter of 2015, compared to$17.3 million in the second quarter of 2014.
- GAAP net loss: Second quarter GAAP net loss was
$133.6 million , or$0.87 per share, based on approximately 154 million weighted average shares outstanding. This compares to a GAAP net loss of$116.8 million , or$0.82 per share, based on approximately 142 million weighted average shares outstanding, in the second quarter of 2014.
- Non-GAAP net loss1: Second quarter non-GAAP net loss was
$62.6 million , or 43 percent of revenue, compared to a non-GAAP net loss of$78.5 million , or 83 percent of revenue in the second quarter of 2014. Non-GAAP net loss per share was$0.41 , based on approximately 154 million weighted average shares outstanding, compared to second quarter 2014 non-GAAP net loss per share of$0.55 , based on approximately 142 million weighted average shares. Non-GAAP net loss and net loss per share in the second quarter 2015 excluded stock-based compensation expense, amortization of intangible assets, and$2.8 million of non-cash interest expense related to our outstanding convertible senior notes. Non-GAAP net loss for the second quarter of 2014 excluded stock-based compensation expense, amortization of intangible assets,$11.6 million in discrete tax benefits related to acquisition ofMandiant and$0.5 million in acquisition-related expenses related to the acquisition of nPulse Technologies.
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."
Third Quarter and Updated 2015 Outlook
For the third quarter of 2015,
- Total billings in the range of
$225 to$230 million . - Gross margin in the range of 70 to 73 percent of total revenue.
- Research and development expenses in the range of 33 to 36 percent of total revenue.
- Sales and marketing expenses in the range of 61 to 65 percent of total revenue.
- General and administrative expenses in the range of 13 to 17 percent of total revenue.
- Interest expense of
$3.0 million related to the company's convertible senior notes. - Loss per share of
$0.44 to$0.48 , based on estimated weighted average shares outstanding of approximately 154 million.
For 2015, the company currently expects total revenue in the range of
- Total billings in the range of
$840 to$850 million . - Gross margin in the range of 71 to 74 percent of total revenue.
- Research and development expenses in the range of 33 to 36 percent of total revenue.
- Sales and marketing expenses in the range of 61 to 65 percent of total revenue.
- General and administrative expenses in the range of 13 to 17 percent of total revenue.
- Interest expense of
$7.0 million related to the company's convertible senior notes. - Loss per share of
$1.70 to$1.80 , based on estimated weighted average shares outstanding of approximately 152 million. - Cash flow from operations in the range of negative
$10 million to positive$10 million .
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.
CFO Transition Announced
Verdecanna joined
"Mike helped build
"
Additional Business Highlights
Business highlights since the release of first quarter 2015 financial results on
Enhancements to solutions in
- New features and functionality for the FireEye Email Threat Prevention Platform ™ (EX™), including the availability of FireEye Advanced Threat Intelligence™ (ATI™) subscription on the EX Series of appliances.
- A new release of FireEye Endpoint Security™ (HX™ Series) with security content support, enhanced compliance logging, and a redesigned reporting dashboard.
- Internationalization of the
FireEye security platform with the release of FireEye Endpoint Security in multiple languages, including Japanese and German.
- A new release of the PX™ Series and IA™ Series of packet capture and analysis appliances for enterprise forensics.
- Regular threat intelligence updates based on the discovery of new zero day attacks exploiting vulnerabilities in Adobe Flash software, identification of new variants of malware targeting Apple iOS, point-of-sale terminals, and banking systems, and exposure of a Chinese APT team's obfuscation tactic on Microsoft's TechNet web portal.
Also during this period,
- An announcement with Visa to co-develop tools and services to help merchants and issuers protect against advanced cyber attacks targeting their IT and payment infrastructure.
- A technology integration with
PFU Systems , a Fujitsu company, to integrate PFU's iNetSec Smart Finder and the FireEye NX Series security platform.
- A strategic alliance with the
ACE Group , one of the world's largest multiline property and casualty insurers to allow cyber insurance to be tailored specifically for an organization's risk profile. - A collaboration with Marsh, a global leader in insurance broking and risk management, to offer clients a new service designed to provide an objective evaluation of an organization's ability to detect and respond to cyber attacks.
- An initiative with the
National Fusion Center Association (NFCA) focused on intelligence sharing and cyber training for state and local governments. The initiative includes the joint development of the Automated Threat Intelligence Exchange network (ATIX) for the California State Threat Assessment System (STAS).
Conference Call Information
Forward-Looking Statements
This press release contains forward-looking statements, including statements related to future total revenue, billings, 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, non-GAAP interest expense, non-GAAP loss per share, weighted average shares outstanding, and cash flow from operations in the section entitled "Third Quarter and Updated 2015 Outlook" above, as well as statements related to the continued momentum in
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
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 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. Stock-based compensation is an important part of
About
© 2015
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(Unaudited, in thousands) | |||||||||||
2015 | 2014 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 726,480 | $ | 146,363 | |||||||
Short-term investments | 463,137 | 255,845 | |||||||||
Accounts receivable, net | 105,183 | 193,182 | |||||||||
Inventories | 10,485 | 7,952 | |||||||||
Deferred tax assets, current portion | 25,081 | 25,126 | |||||||||
Prepaid expenses and other current assets | 32,706 | 28,669 | |||||||||
Total current assets | 1,363,072 | 657,137 | |||||||||
Property and equipment, net | 74,438 | 82,298 | |||||||||
Goodwill | 750,288 | 750,288 | |||||||||
Intangible assets, net | 238,092 | 261,625 | |||||||||
Deposits and other long-term assets | 6,824 | 7,533 | |||||||||
Total assets | $ | 2,432,714 | $ | 1,758,881 | |||||||
Liabilities and Stockholders' Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 25,344 | $ | 34,057 | |||||||
Accrued and other current liabilities | 27,286 | 24,596 | |||||||||
Accrued compensation | 63,693 | 64,551 | |||||||||
Deferred revenue, current portion | 232,522 | 203,877 | |||||||||
Total current liabilities | 348,845 | 327,081 | |||||||||
Convertible senior notes, net | 688,961 | - | |||||||||
Deferred revenue, non-current portion | 177,369 | 148,666 | |||||||||
Deferred tax liabilities, non-current portion | 24,893 | 24,903 | |||||||||
Other long-term liabilities | 9,959 | 7,403 | |||||||||
Total liabilities | 1,250,027 | 508,053 | |||||||||
Stockholders' equity: | |||||||||||
Common stock | 16 | 15 | |||||||||
Additional paid-in capital | 2,267,972 | 1,918,546 | |||||||||
Treasury stock | (150,000 | ) | - | ||||||||
Accumulated other comprehensive loss | (472 | ) | (441 | ) | |||||||
Accumulated deficit | (934,829 | ) | (667,292 | ) | |||||||
Total stockholders' equity | 1,182,687 | 1,250,828 | |||||||||
Total liabilities and stockholders' equity | $ | 2,432,714 | $ | 1,758,881 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
Revenue: | ||||||||||||||||||
Product | $ | 49,696 | $ | 37,683 | $ | 89,933 | $ | 61,935 | ||||||||||
Subscription and services | 97,511 | 56,806 | 182,644 | 106,534 | ||||||||||||||
Total revenue | 147,207 | 94,489 | 272,577 | 168,469 | ||||||||||||||
Cost of revenue: (1)(2) | ||||||||||||||||||
Product | 17,101 | 13,749 | 32,301 | 24,075 | ||||||||||||||
Subscription and services | 39,006 | 27,831 | 75,857 | 52,798 | ||||||||||||||
Total cost of revenue | 56,107 | 41,580 | 108,158 | 76,873 | ||||||||||||||
Total gross profit | 91,100 | 52,909 | 164,419 | 91,596 | ||||||||||||||
Operating expenses:(1)(2) | ||||||||||||||||||
Research and development | 68,798 | 53,408 | 134,403 | 95,378 | ||||||||||||||
Sales and marketing | 116,008 | 94,591 | 223,603 | 171,445 | ||||||||||||||
General and administrative (3) | 34,687 | 31,931 | 67,294 | 59,031 | ||||||||||||||
Total operating expenses | 219,493 | 179,930 | 425,300 | 325,854 | ||||||||||||||
Operating loss | (128,393 | ) | (127,021 | ) | (260,881 | ) | (234,258 | ) | ||||||||||
Other expense, net (4) | (4,253 | ) | (150 | ) | (4,752 | ) | (166 | ) | ||||||||||
Loss before income taxes | (132,646 | ) | (127,171 | ) | (265,633 | ) | (234,424 | ) | ||||||||||
Provision for (benefit from) income taxes (5) | 927 | (10,348 | ) | 1,904 | (16,390 | ) | ||||||||||||
Net loss attributable to common stockholders | $ | (133,573 | ) | $ | (116,823 | ) | $ | (267,537 | ) | $ | (218,034 | ) | ||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.87 | ) | $ | (0.82 | ) | $ | (1.75 | ) | $ | (1.58 | ) | ||||||
Weighted average shares used in per share calculations, basic and diluted | 154,121 | 141,895 | 152,890 | 137,939 | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||
(Unaudited, in thousands) | |||||||||||
Six Months Ended | |||||||||||
2015 | 2014 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net loss | $ | (267,537 | ) | $ | (218,034 | ) | |||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 54,169 | 42,726 | |||||||||
Stock-based compensation expense | 106,286 | 63,447 | |||||||||
Non-cash interest expense related to convertible senior notes | 2,832 | - | |||||||||
Deferred income taxes | 81 | (18,960 | ) | ||||||||
Other | 2,085 | 183 | |||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | |||||||||||
Accounts receivable | 86,840 | (11,660 | ) | ||||||||
Inventories | (3,309 | ) | 729 | ||||||||
Prepaid expenses and other assets | (2,354 | ) | (3,084 | ) | |||||||
Accounts payable | (6,053 | ) | (7,103 | ) | |||||||
Accrued liabilities | 3,891 | 8,747 | |||||||||
Accrued compensation | (992 | ) | 10,834 | ||||||||
Deferred revenue | 57,348 | 44,193 | |||||||||
Other long-term liabilities | 2,557 | 3,460 | |||||||||
Net cash provided by (used in) operating activities | 35,844 | (84,522 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchase of property and equipment and demonstration units | (24,538 | ) | (31,469 | ) | |||||||
Purchase of short-term investments | (301,213 | ) | (302,531 | ) | |||||||
Maturities of short-term investments | 92,138 | 8,000 | |||||||||
Acquisition of business, net of cash acquired | - | (55,058 | ) | ||||||||
Lease deposits | (786 | ) | (403 | ) | |||||||
Net cash used in investing activities | (234,399 | ) | (381,461 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net proceeds from follow-on public offering | - | 445,280 | |||||||||
Net proceeds from convertible debt offering | 897,000 | - | |||||||||
Prepaid forward stock purchase | (150,000 | ) | - | ||||||||
Proceeds from exercise of equity awards | 31,672 | 18,405 | |||||||||
Net cash provided by financing activities | 778,672 | 463,685 | |||||||||
Net increase (decrease) in cash and cash equivalents | 580,117 | (2,298 | ) | ||||||||
Cash and cash equivalents, beginning of year | 146,363 | 173,918 | |||||||||
Cash and cash equivalents, end of year | $ | 726,480 | $ | 171,620 | |||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(Unaudited, in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
GAAP operating loss | $ | (128,393 | ) | $ | (127,021 | ) | $ | (260,881 | ) | $ | (234,258 | ) | |||||
Stock-based compensation expense (1) | 56,411 | 38,253 | 106,286 | 63,447 | |||||||||||||
Amortization of intangible assets (2) | 11,766 | 11,187 | 23,532 | 21,985 | |||||||||||||
Acquisition related expenses (3) | - | 512 | - | 1,559 | |||||||||||||
Non-GAAP operating loss | $ | (60,216 | ) | $ | (77,069 | ) | $ | (131,063 | ) | $ | (147,267 | ) | |||||
GAAP net loss | $ | (133,573 | ) | $ | (116,823 | ) | $ | (267,537 | ) | $ | (218,034 | ) | |||||
Stock-based compensation expense (1) | 56,411 | 38,253 | 106,286 | 63,447 | |||||||||||||
Amortization of intangible assets (2) | 11,766 | 11,187 | 23,532 | 21,985 | |||||||||||||
Acquisition related expenses (3) | - | 512 | - | 1,559 | |||||||||||||
Non-cash interest expense related to convertible senior notes (4) | 2,832 | - | 2,832 | - | |||||||||||||
Non-recurring benefit from income taxes (5) | - | (11,610 | ) | - | (18,852 | ) | |||||||||||
Non-GAAP net loss | $ | (62,564 | ) | $ | (78,481 | ) | $ | (134,887 | ) | $ | (149,895 | ) | |||||
GAAP net loss per common share, basic and diluted | $ | (0.87 | ) | $ | (0.82 | ) | $ | (1.75 | ) | $ | (1.58 | ) | |||||
Stock-based compensation expense (1) | 0.37 | 0.27 | 0.70 | 0.46 | |||||||||||||
Amortization of intangible assets (2) | 0.08 | 0.08 | 0.15 | 0.16 | |||||||||||||
Acquisition related expenses (3) | - | 0.00 | - | 0.01 | |||||||||||||
Non-cash interest expense related to convertible senior notes (4) | 0.02 | - | 0.02 | - | |||||||||||||
Non-recurring benefit from income taxes (5) | - | (0.08 | ) | - | (0.14 | ) | |||||||||||
Non-GAAP net loss per common share, basic and diluted | $ | (0.41 | ) | $ | (0.55 | ) | $ | (0.88 | ) | $ | (1.09 | ) | |||||
Weighted average shares used in per share calculations for GAAP and Non-GAAP, basic and diluted | 154,121 | 141,895 | 152,890 | 137,939 | |||||||||||||
(1) includes stock-based compensation expense as follows: | |||||||||||||||||
Cost of product revenue | $ | 386 | $ | 236 | $ | 654 | $ | 381 | |||||||||
Cost of subscription and services revenue | 7,163 | 3,605 | 13,541 | 7,025 | |||||||||||||
Research and development | 16,525 | 7,803 | 32,560 | 12,406 | |||||||||||||
Sales and marketing | 19,358 | 15,923 | 35,812 | 24,611 | |||||||||||||
General and administrative | 12,979 | 10,686 | 23,719 | 19,024 | |||||||||||||
Total stock-based compensation expense | $ | 56,411 | $ | 38,253 | $ | 106,286 | $ | 63,447 | |||||||||
(2) includes amortization of intangible assets as follows: | |||||||||||||||||
Cost of product revenue | $ | 3,064 | $ | 2,672 | $ | 6,128 | $ | 5,103 | |||||||||
Cost of subscription and services revenue | 5,475 | 5,394 | 10,950 | 10,784 | |||||||||||||
Sales and marketing | 3,227 | 3,121 | 6,454 | 6,098 | |||||||||||||
Total amortization of intangible assets | $ | 11,766 | $ | 11,187 | $ | 23,532 | $ | 21,985 | |||||||||
(3) includes acquisition related expenses as follows: | |||||||||||||||||
General and administrative | $ | - | $ | 512 | $ | - | $ | 1,559 | |||||||||
(4) Includes non-cash interest expense related to convertible senior notes as follows: | |||||||||||||||||
Other expense, net | $ | 2,832 | $ | - | $ | 2,832 | $ | - | |||||||||
(5) includes discrete benefit from income taxes as follows: | |||||||||||||||||
Provision for (benefit from) income taxes | $ | - | $ | (11,610 | ) | $ | - | $ | (18,852 | ) | |||||||
RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
GAAP revenue | $ | 147,207 | $ | 94,489 | $ | 272,577 | $ | 168,469 | |||||
Add change in deferred revenue | 31,127 | 19,285 | 57,348 | 44,493 | |||||||||
Non-GAAP billings | $ | 178,334 | $ | 113,774 | $ | 329,925 | $ | 212,962 | |||||
BILLINGS BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
Product billings | $ | 48,824 | $ | 35,573 | $ | 87,058 | $ | 61,648 | |||||
Product subscription billings | 72,454 | 42,085 | 136,190 | 81,521 | |||||||||
Product billings and product subscription billings | 121,278 | 77,658 | 223,248 | 143,169 | |||||||||
Support and maintenance billings | 31,107 | 18,582 | 53,949 | 34,277 | |||||||||
Professional services billings | 25,949 | 17,534 | 52,728 | 35,516 | |||||||||
Non-GAAP billings | $ | 178,334 | $ | 113,774 | $ | 329,925 | $ | 212,962 | |||||
REVENUE BREAKOUT | |||||||||||||
(Unaudited, in thousands) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
Product revenue | $ | 49,696 | $ | 37,683 | $ | 89,933 | $ | 61,935 | |||||
Product subscription revenue | 48,510 | 28,025 | 91,886 | 50,844 | |||||||||
Product revenue and product subscription revenue | 98,206 | 65,708 | 181,819 | 112,779 | |||||||||
Support and maintenance revenue | 21,429 | 11,874 | 40,513 | 22,625 | |||||||||
Professional services revenue | 27,572 | 16,907 | 50,245 | 33,065 | |||||||||
Total revenue | $ | 147,207 | $ | 94,489 | $ | 272,577 | $ | 168,469 | |||||
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