FireEye Inc (NASDAQ:FEYE) announced financial results for the third quarter ended September 30, 2016.
“Our performance in the third quarter — with billings, revenue, operating margin, earnings per share and cash flow above guidance — reflected customer confidence in FireEye intelligence-led products and services,” said Kevin Mandia, FireEye chief executive officer. “We experienced strong demand for our cloud-based email security and threat intelligence solutions, as well as continued growth in renewal subscriptions. Of the 47 customers who spent more than one million dollars on FireEye solutions in the third quarter, 41 invested in multiple products.”
“Perhaps most importantly, we achieved these results in spite of the distractions of our restructuring and changes to sales leadership,” added Mandia. “The FireEye team pulled together to support our customers, improve efficiency and achieve our goals.”
“Thousands of the world’s most security-conscious customers rely on FireEye technology, expertise and military-grade threat intelligence to protect their organizations from cyber attacks. We are leveraging the combined DNA of FireEye and Mandiant to evolve our platform as new threats emerge and IT infrastructures migrate to the cloud,” said Mandia. “Today we announced the introduction of Cloud MVX and MVX Smart Grid, expanding the form factors and deployment architectures of our security platform to deliver security from the cloud. I believe we are in the early phases of the richest new innovation cycle in our history, and these are the first of many planned releases that will help customers elevate their security profile at a lower total cost of ownership. The investments we’ve made in intelligence, orchestration, and integration are redefining the FireEye security platform and creating new engines for growth.”
Third Quarter 2016 Financial Results
- Revenue of $186.4 million, an increase of 13 percent from the third quarter of 2015.
- Billings of $215.4 million, an increase of two percent from the third quarter of 2015.1
- GAAP gross margin of 63 percent, consistent with 63 percent in the third quarter of 2015.
- Non-GAAP gross margin of 74 percent, compared to 73 percent in the third quarter of 2015.1
- GAAP operating margin of negative 60 percent, compared to negative 74 percent in the third quarter of 2015.
- Non-GAAP operating margin of negative 14 percent, compared to negative 32 percent in the third quarter of 2015.1
- GAAP net loss per share of $0.75, compared to GAAP net loss per share of $0.88 in the third quarter of 2015.
- Non-GAAP net loss per share of $0.18, compared to a non-GAAP net loss per share of $0.37 in the third quarter of 2015.1
- Cash flow from operations of $14.1 million, compared to cash flow from operations of negative $8.3 million in the third quarter of 2015.
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.”
“We made significant progress strengthening FireEye financially and operationally in the third quarter,” said Mike Berry, FireEye chief financial officer and chief operating officer. “Through a combination of improved efficiency, restructuring and headcount reductions, we reduced our total expense base by more than $10 million compared to the second quarter and posted the best operating margin in our history.”
“Reflecting our improved operating leverage and performance, we are raising our guidance range for non-GAAP operating margin by four percentage points and our full year guidance range for non-GAAP earnings per share by 15 cents,” added Berry. “Additionally, strong collections against above-guidance billings resulted in positive cash flow from operations of $14.1 million. Our continued progress on these operating metrics underscores my confidence in our ability to achieve non-GAAP profitability in the fourth quarter of 2017 and generate positive free cash flow for the full year of 2017.”
Fourth Quarter and Updated 2016 Outlook
FireEye provides guidance based on current market conditions and expectations. For the fourth quarter of 2016, FireEye expects:
- Total revenue in the range of $187 to $193 million.
- Billings in the range of $230 to $250 million.
- Non-GAAP gross margin of approximately 74 percent.
- Non-GAAP operating margin of approximately negative 11 to negative 13 percent of revenue.
- Non-GAAP net loss per share of $0.16 to $0.18.
- Cash flow from operations of negative $19 to negative $29 million, which includes $10 million of cash restructuring payments.
Non-GAAP net loss per share for the fourth quarter assumes interest expense of approximately $3.0 million associated with the company’s convertible senior notes, provision for income taxes of between $1.0 and $2.0 million, and weighted average shares outstanding of approximately 167 million.
For 2016, FireEye now expects:
- Total revenue in the range of $716 to $722 million.
- Billings in the range of $828 to $848 million.
- Non-GAAP gross margin of approximately 73 percent.
- Non-GAAP operating margin in the range of negative 22 to negative 23 percent of revenue.
- Non-GAAP net loss per share of $1.14 to $1.16.
- Cash flow from operations of negative $41 to negative $51 million, which includes approximately $22 million of cash restructuring payments.
Non-GAAP net loss per share for 2016 assumes interest expense of $12.1 million associated with the company’s convertible senior notes, provision for income taxes of between $5.0 and $6.0 million and weighted average shares outstanding of approximately 163 million. (Original Source)
Shares of FireEye are rising 13% to $12.49 in after-hours trading Thursday. FEYE has a 1-year high of $24.16 and a 1-year low of $10.87. The stock’s 50-day moving average is $13.84 and its 200-day moving average is $15.35.
On the ratings front, FireEye has been the subject of a number of recent research reports. In a report issued on October 24, First Analysis analyst Howard Smith downgraded FEYE to Sell, with a price target of $11, which represents a slight downside potential from current levels. Separately, on October 20, Wedbush’s Steven Koenig reiterated a Hold rating on the stock and has a price target of $13.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Howard Smith and Steven Koenig have a yearly average return of 24.6% and 3.1% respectively. Smith has a success rate of 75% and is ranked #615 out of 4165 analysts, while Koenig has a success rate of 46% and is ranked #1002.
The street is mostly Neutral on FEYE stock. Out of 16 analysts who cover the stock, 12 suggest a Hold rating, 3 suggest a Buy and one recommends to Sell the stock. The 12-month average price target assigned to the stock is $17.50, which represents a potential upside of 54% from where the stock is currently trading.
FireEye, Inc. develops virtual machine-based security platform that provides real-time protection to enterprises and governments worldwide against the next generation of cyber attacks. The FireEye Threat Prevention Platform provides real-time, dynamic threat protection without the use of signatures to protect an organization across the primary threat vectors, including Web, email, and files and across the different stages of an attack life cycle. Its virtual machine-based security platform is a virtual execution engine, complemented by dynamic threat intelligence, to identify and block cyber attacks in real time.