FireEye Reports Record Revenue for Third Quarter 2015
"We delivered a solid quarter of overall growth, with revenue up 45 percent and non-GAAP operating margins and earnings per share well ahead of our outlook," said
"Our role as first responder to today's most significant breaches, combined with our threat research labs and global
Third Quarter Financial Highlights
- Revenue of
$165.6 million , an increase of 45 percent from the third quarter of 2014. - Billings of
$210.6 million , an increase of 28 percent from the third quarter of 2014.1 - Current deferred revenue of
$265.9 million , up a record$105.1 million , or 65 percent, from the end of the third quarter of 2014. - Total deferred revenue of
$454.9 million , an increase of$171.9 million , or 61 percent, from the end of the third quarter of 2014. - GAAP operating margin of negative 74 percent, compared to negative 114 percent in the third quarter of 2014.
- Non-GAAP operating margin of negative 32 percent, compared to negative 64 percent in the third quarter of 2014.1
- GAAP net loss per share of
$0.88 , compared to a GAAP net loss per share of$0.83 in the third quarter of 2014. - Non-GAAP net loss per share of
$0.37 , compared to a non-GAAP net loss per share of$0.51 in the third quarter of 2014.1 - Cash flow used in operations of
$8.3 million , an improvement of$38.2 million compared to the third quarter of 2014.
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 is also included under the heading "Non-GAAP Financial Measures."
"The leverage inherent in our business model was evident in the 32 percentage point improvement in our non-GAAP operating margin and our operating cash flow performance. Our operating margin has improved year-over-year in every quarter since the second quarter of 2014, as we continue to balance growth with progress on our path to profitability," said
"While we outperformed on many financial metrics, our billings performance did not meet the expectations we set in late July. The strength evident in our sales to new logo customers, our North American enterprise business and the
Fourth Quarter and Updated 2015 Outlook
For the fourth quarter of 2015,
- Total billings in the range of
$240 to$260 million . - Gross margin in the range of 72 to 74 percent of revenue.
- Operating margin in the range of negative 28 to negative 31 percent of revenue.
- Interest expense of
$3.0 million related to the company's convertible senior notes. - Net loss per share of
$0.36 to$0.38 , based on estimated weighted average shares outstanding of approximately 156 million.
For 2015, the company currently expects total revenue in the range of
- Total billings in the range of
$780 to$800 million . - Gross margin in the range of 72 to 73 percent of revenue.
- Operating margin in the range of negative 38 to negative 39 percent of revenue.
- Interest expense of
$7.0 million related to the company's convertible senior notes. - Net loss per share of
$1.61 to$1.63 , based on estimated weighted average shares outstanding of approximately 154 million. - Positive cash flow from operations.
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.
Business Highlights
Business highlights since the release of second quarter 2015 financial results on
The company announced that software industry veteran
Recent accolades and awards for
- Recognition of
FireEye as the leading provider of "must have" network security technology for advanced attacks in a report by industry research firmFrost and Sullivan . The report found that the combination of features and 62 percent market share establishedFireEye as the clear leader of the network security sandbox segment. - Confirmation of
FireEye's continued market share leadership by IDC in its report Worldwide Specialized Threat Analysis and Protection Market Shares, 2014: Rapidly Evolving Security Defenses (October 2015 , document #259667).
Significant enhancements to the FireEye Threat Prevention Platform included:
- The next generation of the company's core MVX™ architecture, which tripled analysis speed to improve time to protection and added visibility into SSL encrypted traffic.
- The FireEye HX™ Endpoint 3.0 product, which extends FireEye Threat Intelligence to the endpoint and adds enterprise search capabilities that enable quick and precise security searches across endpoints to help organizations rapidly find and mitigate threats.
- The FireEye Threat Intelligence Engine™, the threat intelligence capability that both powers and leverages the company's threat prevention products and service offerings. The FireEye Threat Intelligence Engine optimizes the intelligence production cycle, capturing, processing, analyzing intelligence and delivering these insights to
FireEye customers and analysts.
- The availability of Visa Threat Intelligence, Powered by
FireEye , a jointly-developed solution tailored to the needs of the payments industry that will deliver real-time threat information toVisa merchants and issuers so they can quickly assess and act on cyber attacks that could breach their payment systems. - A global partnership with F5 Networks to defend against the evolving security threats to the enterprise with comprehensive security solutions that integrate application delivery infrastructure from F5 and advanced threat protection from FireEye Network Security. The agreement also includes a unified approach to worldwide sales, deployment and support, to help ensure the best possible end-to-end experience for customers.
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 operating margin, non-GAAP interest expense, non-GAAP loss per share, weighted average shares outstanding, and cash flow from operations in the section entitled "Fourth 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.
Non-GAAP net loss and net loss per share in the third quarter 2015 excluded stock-based compensation expense, amortization of intangible assets, and
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 | $ | 436,901 | $ | 146,363 | |||||||
Short-term investments | 733,026 | 255,845 | |||||||||
Accounts receivable, net | 140,940 | 193,182 | |||||||||
Inventories | 11,628 | 7,952 | |||||||||
Deferred tax assets, current portion | 26,391 | 25,126 | |||||||||
Prepaid expenses and other current assets | 30,595 | 28,669 | |||||||||
Total current assets | 1,379,481 | 657,137 | |||||||||
Property and equipment, net | 73,129 | 82,298 | |||||||||
750,288 | 750,288 | ||||||||||
Intangible assets, net | 226,326 | 261,625 | |||||||||
Deposits and other long-term assets | 6,228 | 7,533 | |||||||||
Total assets | $ | 2,435,452 | $ | 1,758,881 | |||||||
Liabilities and Stockholders' Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 33,611 | $ | 34,057 | |||||||
Accrued and other current liabilities | 30,407 | 24,596 | |||||||||
Accrued compensation | 73,030 | 64,551 | |||||||||
Deferred revenue, current portion | 265,906 | 203,877 | |||||||||
Total current liabilities | 402,954 | 327,081 | |||||||||
Convertible senior notes, net | 697,526 | - | |||||||||
Deferred revenue, non-current portion | 188,961 | 148,666 | |||||||||
Deferred tax liabilities, non-current portion | 26,198 | 24,903 | |||||||||
Other long-term liabilities | 10,144 | 7,403 | |||||||||
Total liabilities | 1,325,783 | 508,053 | |||||||||
Stockholders' equity: | |||||||||||
Common stock | 16 | 15 | |||||||||
Additional paid-in capital | 2,330,436 | 1,918,546 | |||||||||
(150,000 | ) | - | |||||||||
Accumulated other comprehensive loss | (424 | ) | (441 | ) | |||||||
Accumulated deficit | (1,070,359 | ) | (667,292 | ) | |||||||
Total stockholders' equity | 1,109,669 | 1,250,828 | |||||||||
Total liabilities and stockholders' equity | $ | 2,435,452 | $ | 1,758,881 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited, in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
Revenue: | ||||||||||||||||||
Product | $ | 60,101 | $ | 48,375 | $ | 150,034 | $ | 110,310 | ||||||||||
Subscription and services | 105,515 | 65,836 | 288,159 | 172,370 | ||||||||||||||
Total revenue | 165,616 | 114,211 | 438,193 | 282,680 | ||||||||||||||
Cost of revenue: (1)(2) | ||||||||||||||||||
Product | 21,265 | 15,440 | 53,566 | 39,515 | ||||||||||||||
Subscription and services | 40,606 | 29,488 | 116,463 | 82,286 | ||||||||||||||
Total cost of revenue | 61,871 | 44,928 | 170,029 | 121,801 | ||||||||||||||
Total gross profit | 103,745 | 69,283 | 268,164 | 160,879 | ||||||||||||||
Operating expenses:(1)(2) | ||||||||||||||||||
Research and development | 73,374 | 54,707 | 207,777 | 150,085 | ||||||||||||||
Sales and marketing | 117,131 | 111,625 | 340,734 | 283,070 | ||||||||||||||
General and administrative (3) | 36,518 | 30,119 | 103,812 | 89,150 | ||||||||||||||
Restructuring Charges (4) | - | 2,769 | - | 2,769 | ||||||||||||||
Total operating expenses | 227,023 | 199,220 | 652,323 | 525,074 | ||||||||||||||
Operating loss | (123,278 | ) | (129,937 | ) | (384,159 | ) | (364,195 | ) | ||||||||||
Other expense, net (5) | (11,616 | ) | (414 | ) | (16,368 | ) | (579 | ) | ||||||||||
Loss before income taxes | (134,894 | ) | (130,351 | ) | (400,527 | ) | (364,774 | ) | ||||||||||
Provision for (benefit from) income taxes (6) | 636 | (10,320 | ) | 2,540 | (26,710 | ) | ||||||||||||
Net loss attributable to common stockholders | $ | (135,530 | ) | $ | (120,031 | ) | $ | (403,067 | ) | $ | (338,064 | ) | ||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.88 | ) | $ | (0.83 | ) | $ | (2.63 | ) | $ | (2.41 | ) | ||||||
Weighted average shares used in per share calculations, basic and diluted | 154,523 | 144,923 | 153,440 | 140,285 | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||
(Unaudited, in thousands) | ||||||||||||
Nine Months Ended | ||||||||||||
2015 | 2014 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (403,067 | ) | $ | (338,064 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 82,154 | 67,631 | ||||||||||
Stock-based compensation expense | 164,652 | 106,607 | ||||||||||
Non-cash interest expense related to convertible senior notes | 11,397 | - | ||||||||||
Deferred income taxes | 120 | (30,142 | ) | |||||||||
Other | 3,144 | 1,702 | ||||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | ||||||||||||
Accounts receivable | 50,885 | (60,041 | ) | |||||||||
Inventories | (4,986 | ) | 162 | |||||||||
Prepaid expenses and other assets | 1,059 | (2,138 | ) | |||||||||
Accounts payable | 1,289 | (8,359 | ) | |||||||||
Accrued liabilities | 7,554 | 6,684 | ||||||||||
Accrued compensation | 8,305 | 25,415 | ||||||||||
Deferred revenue | 102,324 | 95,107 | ||||||||||
Other long-term liabilities | 2,741 | 4,434 | ||||||||||
Net cash provided by (used in) operating activities | 27,571 | (131,002 | ) | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchase of property and equipment and demonstration units | (37,193 | ) | (55,466 | ) | ||||||||
Purchase of short-term investments | (640,162 | ) | (352,401 | ) | ||||||||
Maturities of short-term investments | 159,149 | 50,780 | ||||||||||
Acquisition of business, net of cash acquired | - | (55,058 | ) | |||||||||
Lease deposits | (627 | ) | (565 | ) | ||||||||
Net cash used in investing activities | (518,833 | ) | (412,710 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net proceeds from follow-on public offering | - | 444,338 | ||||||||||
Net proceeds from convertible debt offering | 896,530 | - | ||||||||||
Prepaid forward stock purchase | (150,000 | ) | - | |||||||||
Proceeds from exercise of equity awards | 35,270 | 24,299 | ||||||||||
Net cash provided by financing activities | 781,800 | 468,637 | ||||||||||
Net change in cash and cash equivalents | 290,538 | (75,075 | ) | |||||||||
Cash and cash equivalents, beginning of year | 146,363 | 173,918 | ||||||||||
Cash and cash equivalents, end of year | $ | 436,901 | $ | 98,843 | ||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(Unaudited, in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
GAAP operating loss | $ | (123,278 | ) | $ | (129,937 | ) | $ | (384,159 | ) | $ | (364,195 | ) | |||||
Stock-based compensation expense (1) | 58,365 | 43,160 | 164,651 | 106,607 | |||||||||||||
Amortization of intangible assets (2) | 11,766 | 11,478 | 35,298 | 33,463 | |||||||||||||
Acquisition related expenses (3) | - | - | - | 1,559 | |||||||||||||
Restructuring charges (4) | - | 2,769 | - | 2,769 | |||||||||||||
Non-GAAP operating loss | $ | (53,147 | ) | $ | (72,530 | ) | $ | (184,210 | ) | $ | (219,797 | ) | |||||
GAAP operating margin | -74 | % | -114 | % | -88 | % | -129 | % | |||||||||
Stock-based compensation expense (1) | 35 | % | 38 | % | 38 | % | 38 | % | |||||||||
Amortization of intangible assets (2) | 7 | % | 10 | % | 8 | % | 12 | % | |||||||||
Acquisition related expenses (3) | 0 | % | 0 | % | 0 | % | 1 | % | |||||||||
Restructuring charges (4) | 0 | % | 2 | % | 0 | % | 1 | % | |||||||||
Non-GAAP operating margin | -32 | % | -64 | % | -42 | % | -78 | % | |||||||||
GAAP net loss | $ | (135,530 | ) | $ | (120,031 | ) | $ | (403,067 | ) | $ | (338,064 | ) | |||||
Stock-based compensation expense (1) | 58,365 | 43,160 | 164,651 | 106,607 | |||||||||||||
Amortization of intangible assets (2) | 11,766 | 11,478 | 35,298 | 33,463 | |||||||||||||
Acquisition related expenses (3) | - | - | - | 1,559 | |||||||||||||
Restructuring charges (4) | - | 2,769 | - | 2,769 | |||||||||||||
Non-cash interest expense related to convertible senior notes (5) | 8,565 | - | 11,397 | - | |||||||||||||
Non-recurring benefit from income taxes (6) | - | (11,247 | ) | - | (30,099 | ) | |||||||||||
Non-GAAP net loss | $ | (56,834 | ) | $ | (73,871 | ) | $ | (191,721 | ) | $ | (223,765 | ) | |||||
GAAP net loss per common share, basic and diluted | $ | (0.88 | ) | $ | (0.83 | ) | $ | (2.63 | ) | $ | (2.41 | ) | |||||
Stock-based compensation expense (1) | 0.38 | 0.30 | 1.07 | 0.76 | |||||||||||||
Amortization of intangible assets (2) | 0.08 | 0.08 | 0.23 | 0.24 | |||||||||||||
Acquisition related expenses (3) | - | - | - | 0.01 | |||||||||||||
Restructuring charges (4) | - | 0.02 | - | 0.02 | |||||||||||||
Non-cash interest expense related to convertible senior notes (5) | 0.06 | - | 0.07 | - | |||||||||||||
Non-recurring benefit from income taxes (6) | - | (0.08 | ) | - | (0.21 | ) | |||||||||||
Non-GAAP net loss per common share, basic and diluted | $ | (0.37 | ) | $ | (0.51 | ) | $ | (1.25 | ) | $ | (1.60 | ) | |||||
Weighted average shares used in per share calculations for GAAP and Non-GAAP, basic and diluted | 154,523 | 144,923 | 153,440 | 140,285 | |||||||||||||
(1) includes stock-based compensation expense as follows: | |||||||||||||||||
Cost of product revenue | $ | 560 | $ | 243 | $ | 1,214 | $ | 624 | |||||||||
Cost of subscription and services revenue | 8,221 | 3,430 | 21,762 | 10,455 | |||||||||||||
Research and development | 18,852 | 7,648 | 51,412 | 20,054 | |||||||||||||
Sales and marketing | 18,612 | 22,543 | 54,424 | 47,154 | |||||||||||||
General and administrative | 12,120 | 9,296 | 35,839 | 28,320 | |||||||||||||
Total stock-based compensation expense | $ | 58,365 | $ | 43,160 | $ | 164,651 | $ | 106,607 | |||||||||
(2) includes amortization of intangible assets as follows: | |||||||||||||||||
Cost of product revenue | $ | 3,064 | $ | 2,852 | $ | 9,192 | $ | 7,955 | |||||||||
Cost of subscription and services revenue | 5,475 | 5,400 | 16,425 | 16,184 | |||||||||||||
Sales and marketing | 3,227 | 3,226 | 9,681 | 9,324 | |||||||||||||
Total amortization of intangible assets | $ | 11,766 | $ | 11,478 | $ | 35,298 | $ | 33,463 | |||||||||
(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 non-cash interest expense related to convertible senior notes as follows: | |||||||||||||||||
Other expense, net | $ | 8,565 | $ | - | $ | 11,397 | $ | - | |||||||||
(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 | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
GAAP revenue | $ | 165,616 | $ | 114,211 | $ | 438,193 | $ | 282,680 | |||||
Add change in deferred revenue | 44,976 | 50,914 | 102,324 | 95,407 | |||||||||
Non-GAAP billings | $ | 210,592 | $ | 165,125 | $ | 540,517 | $ | 378,087 | |||||
BILLINGS BREAKOUT | |||||||||||||||
(Unaudited, in thousands) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Product billings | $ | 58,796 | $ | 44,135 | $ | 145,854 | $ | 105,769 | |||||||
Product subscription billings | 82,481 | 71,925 | 218,671 | 153,446 | |||||||||||
Product billings and product subscription billings | 141,277 | 116,060 | 364,525 | 259,215 | |||||||||||
Support and maintenance billings | 35,708 | 30,717 | 89,657 | 64,994 | |||||||||||
Professional services billings | 33,607 | 18,348 | 86,335 | 53,878 | |||||||||||
Non-GAAP billings | $ | 210,592 | $ | 165,125 | $ | 540,517 | $ | 378,087 | |||||||
REVENUE BREAKOUT | ||||||||||||
(Unaudited, in thousands) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Product revenue | $ | 60,101 | $ | 48,375 | $ | 150,034 | $ | 110,310 | ||||
Product subscription revenue | 53,592 | 32,759 | 145,478 | 83,587 | ||||||||
Product revenue and product subscription revenue | 113,693 | 81,134 | 295,512 | 193,897 | ||||||||
Support and maintenance revenue | 23,245 | 14,198 | 63,758 | 36,823 | ||||||||
Professional services revenue | 28,678 | 18,879 | 78,923 | 51,960 | ||||||||
Total revenue | $ | 165,616 | $ | 114,211 | $ | 438,193 | $ | 282,680 | ||||
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