FireEye Reports Financial Results for Fourth Quarter and Full Year 2018

  • Record revenue and billings for fourth quarter and full year 2018
  • Q4 revenue of $218 million increased 6 percent from the fourth quarter of 2017
  • Q4 billings of $265 million increased 10 percent from the fourth quarter of 20171
  • Q4 ending annual recurring revenue of $553 million increased 9 percent compared to the end of the fourth quarter of 2017

MILPITAS, Calif. – February 6, 2019 – FireEye, Inc. (NASDAQ: FEYE), the intelligence-led security company, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“The fourth quarter was a strong finish to a record year for FireEye,” said Kevin Mandia, FireEye chief executive officer.  “We posted double-digit billings growth for the quarter and the year, and achieved full-year non-GAAP profitability for the first time in our history.”

Fourth Quarter 2018 Financial Results
  • Revenue of $218 million increased 6 percent from the fourth quarter of 2017 and was at the high end of the guidance range of $214 million to $218 million.Billings of $265 million increased 10 percent from the fourth quarter of 2017 and were above the guidance range of $245 million to $255 million.1
  • GAAP gross margin was 68 percent of revenue, compared to 66 percent of revenue in the fourth quarter of 2017.
  • Non-GAAP gross margin was 75 percent of revenue, compared to 76 percent of revenue in the fourth quarter of 2017, and was within the guidance range of 75 percent to 76 percent of revenue.1
  • GAAP operating margin was negative 17 percent of revenue, compared to negative 29 percent of revenue in the fourth quarter of 2017.
  • Non-GAAP operating margin was 5 percent of revenue, compared to 5 percent of revenue in the fourth quarter of 2017, and was within the guidance range of 5 percent to 7 percent of revenue.1
  • GAAP net loss per share was $0.25, compared to GAAP net loss per share of $0.39 in the fourth quarter of 2017.
  • Non-GAAP diluted net income per share was $0.06, compared to non-GAAP diluted net income per share of $0.04 in the fourth quarter of 2017, and was at the high end of the guidance range of $0.04 to $0.06.1
  • Cash flow generated by operations was $31 million, compared to cash flow generated by operations of $34 million in the fourth quarter of 2017, and was within the guidance range of $30 million to $35 million.
2018 Financial Results
  • Revenue of $831 million increased 7 percent from 2017 and was at the high end of the guidance range of $827 million to $831 million.
  • Billings of $856 million increased 12 percent from 2017 and were above the guidance range of $835 million to $845 million.1
  • GAAP gross margin was 67 percent of revenue, compared to 65 percent of revenue in 2017.
  • Non-GAAP gross margin was 75 percent of revenue, compared to 75 percent of revenue in 2017.1
  • GAAP operating margin was negative 22 percent of revenue, compared to negative 31 percent of revenue in 2017.
  • Non-GAAP operating margin was 3 percent of revenue, compared to breakeven in 2017, and was within the guidance range of 2 percent to 4 percent of revenue.1
  • GAAP net loss per share was $1.27, compared to GAAP net loss per share of $1.60 in 2017.
  • Non-GAAP diluted net income per share was $0.08, compared to non-GAAP net loss per share of $0.05 in 2017, and was at the high end of the guidance range of $0.06 to $0.08.1
  • Cash flow generated by operations was $18 million, compared to cash flow generated by operations of $18 million in 2017.
  • Non-GAAP cash flow generated by operations was $62 million, compared to cash flow generated by operations of $18 million in 2017.  Non-GAAP cash flow generated by operations in 2018 excludes approximately $44 million that was deemed to be repayment of accreted debt discount on $340 million principal amount of the 1.000% Convertible Senior Notes due 2035 ("Series A Notes"), which were repurchased and retired on May 24, 2018.1

“Our business continued to evolve toward a recurring subscription model,” said Frank Verdecanna, FireEye chief financial officer and chief accounting officer.  "Recurring subscriptions and support billings increased more than 20 percent year over year and accounted for 82 percent of non-services billings in 2018.”

FireEye adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2018, using the full retrospective method. Certain prior period information has been adjusted to reflect the adoption of the new standard.

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.”

First Quarter and 2019 Outlook

FireEye provides guidance based on current market conditions and expectations.

For the first quarter of 2019, FireEye currently expects:

  • Revenue in the range of $208 million to $212 million.
  • Billings in the range of $170 million to $180 million.
  • Non-GAAP gross margin as a percent of revenue of approximately 74 percent.
  • Non-GAAP operating margin as a percent of revenue in the range of negative 3 percent to negative 1 percent.
  • Non-GAAP net loss per share between $0.02 and $0.04.
  • Cash flow generated by operations between $10 million and $15 million.
  • Capital expenditures of approximately $10 million.

Non-GAAP net loss per share for the first quarter assumes interest income on cash and cash equivalents and short-term investments will offset cash interest expense associated with the company’s convertible senior notes, provision for income taxes of between $1.5 million and $2.0 million, and weighted average shares outstanding of approximately 198 million.

For 2019, FireEye currently expects:

  • Revenue in the range of $880 million to $890 million.
  • Billings in the range of $910 million to $930 million.
  • Non-GAAP gross margin as a percent of revenue of approximately 75 percent.
  • Non-GAAP operating margin as a percent of revenue between 5 percent and 6 percent.
  • Non-GAAP diluted net income per share between $0.17 and $0.21.
  • Cash flow generated by operations between $90 million and $110 million.
  • Capital expenditures between $40 million and $50 million.

Non-GAAP diluted net income per share for 2019 assumes interest income on cash and cash equivalents and short-term investments will offset cash interest expense associated with the company's convertible senior notes, provision for income taxes of between $6 million and $8 million, and diluted weighted average shares outstanding of approximately 210 million.

Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, non-cash interest expense related to the company’s convertible senior notes, and other non-recurring items. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability of, the amounts of stock-based compensation expense, amortization of intangible assets, and non-recurring expenses that may be incurred in the future. Stock-based compensation expense is impacted by the company’s future hiring and retention needs, as well as the future fair market value of the company’s common stock, all of which are difficult to predict and subject to constant change. The actual amount of stock-based compensation in the first quarter of 2019 and full year 2019 will have a significant impact on the company’s GAAP operating margin and net loss per share.  Further, amortization of intangible assets, as well as other non-recurring expenses, if any, will also impact results. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures for future periods is not available without unreasonable effort.

Conference Call Information

FireEye will host a conference call today, February 6, 2019, at 5 p.m. Eastern time (2 p.m. Pacific time) to discuss its fourth quarter and full year 2018 financial results and the company’s outlook for the first quarter and full year 2019. Interested parties may access the conference call by dialing 877-312-5521 (domestic) or 678-894-3048 (international). A live audio webcast of the call can be accessed from the Investor Relations section of the company's website at https://investors.fireeye.com. An archived version of the webcast will be available at the same website shortly after the conclusion of the live event.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to future financial results for the first quarter and full year 2019, including revenue, billings, non-GAAP gross margin, non-GAAP operating margin, interest income and expense, provision for income taxes, non-GAAP net income (loss) per share, basic and diluted weighted average shares outstanding, cash flows generated by operations, and capital expenditures in the section entitled “First Quarter and 2019 Outlook” above, as well as statements related to future growth, profitability, innovation, and competitive advantages.

These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause FireEye’s results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause FireEye’s results to differ materially from those expressed or implied by such forward-looking statements include customer demand and adoption of FireEye’s products and services; real or perceived defects, errors or vulnerabilities in FireEye's products or services; any delay in the release of FireEye's new products or services; FireEye's ability to react to trends and challenges in its business and the markets in which it operates; FireEye's ability to anticipate market needs or develop new or enhanced products and services to meet those needs; FireEye’s ability to hire and retain key executives and employees; FireEye’s ability to attract new and retain existing customers and train its sales force; the budgeting cycles, seasonal buying patterns and length of FireEye’s sales cycle; risks associated with new offerings; sales and marketing execution risks; the failure to achieve expected synergies and efficiencies of operations between FireEye and its acquired companies; the ability of FireEye and its acquired companies to successfully integrate their respective market opportunities, technologies, products, personnel and operations; the ability of FireEye and its partners to execute their strategies, plans, objectives and expected investments with respect to FireEye’s partnerships; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in FireEye’s Form 10-Q filed with the Securities and Exchange Commission on November 2, 2018, which should be read in conjunction with these financial results and is available on the Investor Relations section of FireEye’s website at investors.fireeye.com and on the SEC website at www.sec.gov.

All forward-looking statements in this press release are based on information available to the company as of the date hereof, and FireEye does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law. Any future product, service, feature, or related specification that may be referenced in this release is for informational purposes only and is not a commitment to deliver any offering, technology or enhancement. FireEye reserves the right to modify future product or service plans at any time.

Non-GAAP Financial Measures

In this release FireEye has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). These non-GAAP financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures used by other companies. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company's financial results with other companies in its industry, many of which present similar 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. FireEye defines billings as revenue recognized plus the change in deferred revenue from the beginning to the end of the period. FireEye excludes deferred revenue assumed in connection with acquisitions from the billings calculation. The company considers billings to be a useful metric for management and investors because billings drive deferred revenue balances, which are an important indicator of the company’s future revenues. Revenue recognized from deferred revenue represents a significant percentage of quarterly revenue. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. First, billings include amounts that have not yet been recognized as revenue. Second, FireEye’s calculation of billings may be different from other companies in its industry, some of which may not use billings, may calculate billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of billings as a comparative measure. FireEye compensates for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with revenue calculated in accordance with GAAP.

Non-GAAP gross margin, operating income, operating margin, net income (loss), net income (loss) per share, non-GAAP cash flow generated by (used in) operations, and free cash flow. FireEye defines non-GAAP gross margin as total gross profit excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, and, as applicable, other special or non-recurring items, divided by total revenue.

FireEye defines non-GAAP operating income (loss) as operating income (loss) excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, legal settlement costs, acquisition-related expenses, change in fair value of contingent earn-out liability, restructuring charges, and other special or non-recurring items. FireEye defines non-GAAP operating margin as non-GAAP operating income divided by total revenue.

FireEye defines non-GAAP net income (loss) as net income (loss) excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, legal settlement costs, acquisition-related expenses, change in fair value of contingent earn-out liability, restructuring charges, other special or non-recurring items, non-cash interest expense related to the company’s convertible senior notes, non-cash losses on Series A Notes retired prior to maturity, and discrete tax provision (benefits).  FireEye defines non-GAAP diluted net income per share as non-GAAP net income divided by diluted weighted average shares outstanding.  Diluted weighted average shares used to calculate non-GAAP diluted net income per share excludes shares issuable upon conversion of the company's convertible senior notes that are anti-dilutive.  FireEye defines non-GAAP net loss per share as non-GAAP net loss divided by basic weighted average shares outstanding, which excludes stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes that are anti-dilutive.

FireEye defines non-GAAP cash flow generated by (used in) operations as cash flow generated by (used in) operations excluding amounts deemed to be repayment of accreted debt discount on repurchased convertible senior notes. FireEye defines free cash flow as cash flow generated by (used in) operations plus amounts deemed to be repayment of accreted debt discount on repurchased convertible senior notes, less purchases of property and equipment and demonstration units.

Non-GAAP diluted net income and net income per share in the fourth quarter of 2018 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018, and discrete benefit from income taxes. Diluted weighted average shares outstanding used to calculate non-GAAP diluted net income per share excluded shares issuable upon conversion of convertible senior notes that are anti-dilutive.

Non-GAAP diluted net income and net income per share in the fourth quarter of 2017 excluded stock-based compensation expense, amortization of intangible assets, acquisition-related expenses, non-cash interest expense related to convertible senior notes issued in June 2015, and legal settlement costs. Diluted weighted average shares outstanding used to calculate non-GAAP diluted net income per share excluded shares issuable upon conversion of convertible senior notes that are anti-dilutive.

Non-GAAP diluted net income and net income per share for 2018 excluded stock-based compensation expense, amortization of intangible assets, acquisition-related expenses, change in the fair value of contingent earn-out liability, non-cash interest expense related to convertible senior notes issued in June 2015, and legal settlement costs. Weighted average shares outstanding used to calculate non-GAAP net loss per share excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of convertible senior notes that are anti-dilutive.

Non-GAAP net loss and net loss per share for 2017 excluded stock-based compensation expense, amortization of intangible assets, acquisition-related expenses, change in the fair value of contingent earn-out liability, non-cash interest expense related to convertible senior notes issued in June 2015, and legal settlement costs. Weighted average shares outstanding used to calculate non-GAAP net loss per share excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of convertible senior notes that are anti-dilutive.

FireEye considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, non-cash interest expense related to the company’s convertible senior notes, amounts deemed repayment of accreted debt discount on repurchased convertible senior notes, change in fair value of contingent earn-out liability, restructuring charges, and other non-recurring and discrete items so that management and investors can compare the company's core business operating results over multiple periods.

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 is an important part of FireEye employees' overall compensation and has been, and will continue to be for the foreseeable future, a significant recurring expense in the company's business. Second, the components of the costs that FireEye excludes in its calculation of these non-GAAP financial measures, including not only stock-based compensation, but also amortization of stock-based compensation expense capitalized in software development costs, non-recurring or non-operating items such as acquisition related expenses, legal settlement costs, amortization of intangible assets, non-cash interest expense related to the company’s convertible senior notes, amounts deemed repayment of accreted debt discount on convertible senior notes, non-cash losses related to the retirement of convertible senior notes prior to maturity, change in fair value of contingent earn-out liability, restructuring charges, and discrete tax benefits, may differ from the components excluded by peer companies when they report their non-GAAP results of operations. FireEye compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures and evaluating non-GAAP financial measures together with their nearest GAAP equivalents.

About FireEye, Inc.

FireEye is the intelligence-led security company. Working as a seamless, scalable extension of customer security operations, FireEye offers a single platform that blends innovative security technologies, nation-state grade threat intelligence, and world-renowned Mandiant® consulting.  With this approach, FireEye eliminates the complexity and burden of cyber security for organizations struggling to prepare for, prevent, and respond to cyber attacks. FireEye has over 7,700 customers across 67 countries, including more than 50 percent of the Forbes Global 2000.

© 2019 FireEye, Inc. All rights reserved. FireEye and Mandiant are registered trademarks or trademarks of FireEye, Inc. in the United States and other countries. All other brands, products, or service names are or may be trademarks or service marks of their respective owners.

Media contact:

Dan Wire
FireEye, Inc.
415-895-2101
dan.wire@fireeye.com

Investor contact:

Kate Patterson
FireEye, Inc.
408-321-4957
kate.patterson@fireeye.com   

Source: FireEye

 

FireEye, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

December 31, 2018

 

December 31, 2017*

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

409,829

 

$

180,891

Short-term investments

706,691

 

715,911

Accounts receivable, net

157,817

 

146,317

Inventories

6,548

 

5,746

Prepaid expenses and other current assets

100,295

 

93,799

Total current assets

1,381,180

 

1,142,664

Property and equipment, net

89,163

 

71,357

Goodwill

999,804

 

984,661

Intangible assets, net

143,162

 

187,388

Deposits and other long-term assets

82,769

 

72,767

Total assets

$

2,696,078

 

$

2,458,837

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

26,944

 

$

35,684

Accrued and other current liabilities

29,797

 

19,569

Accrued compensation

63,808

 

59,588

Deferred revenue, current portion

556,815

 

546,615

Total current liabilities

677,364

 

661,456

Convertible senior notes, net

962,577

 

779,578

Deferred revenue, non-current portion

378,013

 

363,485

Other long-term liabilities

27,730

 

22,102

Total liabilities

2,045,684

 

1,826,621

Stockholders' equity:

 

 

 

Common stock

20

 

19

Additional paid-in capital

3,152,159

 

2,891,441

Treasury stock

(150,000)

 

(150,000)

Accumulated other comprehensive loss

(2,299)

 

(2,881)

Accumulated deficit

(2,349,486)

 

(2,106,363)

Total stockholders’ equity

650,394

 

632,216

Total liabilities and stockholders' equity

$

2,696,078

 

$

2,458,837

 

* Certain prior period amounts have been adjusted as a result of adoption of the ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on a full retrospective basis, effective January 1, 2018.

 

 

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2018

 

2017*

 

2018

 

2017*

Revenue:

 

 

 

 

 

 

 

Product, subscription and support

$

178,827

 

$

170,965

 

$

687,382

 

$

645,965

Professional services

38,706

 

34,836

 

143,568

 

133,683

Total revenue

217,533

 

205,801

 

830,950

 

779,648

Cost of revenue: (1)(2)(9)

 

 

 

 

 

 

 

Product, subscription and support

47,984

 

48,289

 

188,301

 

190,786

Professional services

21,846

 

20,751

 

84,174

 

80,861

Total cost of revenue

69,830

 

69,040

 

272,475

 

271,647

Total gross profit

147,703

 

136,761

 

558,475

 

508,001

Operating expenses: (1)(2)

 

 

 

 

 

 

 

Research and development (9)

62,251

 

59,858

 

254,142

 

243,273

Sales and marketing

97,218

 

95,772

 

380,962

 

379,278

General and administrative (3)(4)(5)

24,935

 

40,306

 

105,773

 

125,549

Total operating expenses

184,404

 

195,936

 

740,877

 

748,100

Operating loss

(36,701)

 

(59,175)

 

(182,402)

 

(240,099)

Other expense, net (6)(7)

(10,316)

 

(9,992)

 

(55,197)

 

(40,453)

Loss before income taxes

(47,017)

 

(69,167)

 

(237,599)

 

(280,552)

Provision for income taxes (8)

1,380

 

1,247

 

5,524

 

4,632

Net loss attributable to common stockholders

$

(48,397)

 

$

(70,414)

 

$

(243,123)

 

$

(285,184)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.25)

 

$

(0.39)

 

$

(1.27)

 

$

(1.60)

Weighted average shares used in per share calculations, basic and diluted

194,593

 

182,281

 

190,803

 

177,757

 

* Certain prior period amounts have been adjusted as a result of adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on a full retrospective basis, effective January 1, 2018.

 

 

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

Year Ended December 31,

 

2018

 

2017*

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(243,123)

 

$

(285,184)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

86,505

 

103,417

Stock-based compensation

153,675

 

166,336

Non-cash interest expense related to convertible senior notes

43,273

 

37,598

Loss on repurchase of convertible senior notes

10,764

 

Deemed repayment of convertible senior notes attributable to accreted debt discount (10)

(43,575)

 

Change in fair value of contingent earn-out liability

 

(54)

Deferred income taxes

(309)

 

(1,287)

Other

4,715

 

7,170

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:

 

 

 

Accounts receivable

(11,605)

 

(14,434)

Inventories

(5,216)

 

(3,333)

Prepaid expenses and other assets

(13,779)

 

5,365

Accounts payable

(8,205)

 

6,040

Accrued liabilities

10,234

 

(3,659)

Accrued compensation

4,220

 

2,565

Deferred revenue

24,728

 

(17,649)

Other long-term liabilities

5,700

 

14,749

Net cash provided by operating activities

$

18,002

 

$

17,640

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of property and equipment and demonstration units

(50,831)

 

(43,779)

Purchases of short-term investments

(479,862)

 

(409,358)

Proceeds from maturities of short-term investments

487,141

 

397,483

Proceeds from sales of short-term investments

 

3,620

Business acquisitions, net of cash acquired

(5,861)

 

(4,300)

Purchase of investment in private company

 

(2,500)

Lease deposits

275

 

(489)

Net cash used in investing activities

(49,138)

 

(59,323)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Net proceeds from issuance of convertible senior notes

584,405

 

Purchase of capped calls

(65,220)

 

Repurchase of convertible senior notes

(286,817)

 

Payments for contingent earn-outs

 

(38,928)

Payment related to shares withheld for taxes

 

(1,408)

Proceeds from employee stock purchase plan

20,816

 

20,094

Proceeds from exercise of equity awards

6,890

 

19,149

Net cash provided by (used in) financing activities

260,074

 

(1,093)

Net change in cash and cash equivalents

228,938

 

(42,776)

Cash and cash equivalents, beginning of period

180,891

 

223,667

Cash and cash equivalents, end of period

$

409,829

 

$

180,891

 

* Certain prior period amounts have been adjusted as a result of adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on a full retrospective basis, effective January 1, 2018.

 

FireEye, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2018

 

2017*

 

2018

 

2017*

GAAP operating loss

$

(36,701)

 

$

(59,175)

 

$

(182,402)

 

$

(240,099)

Stock-based compensation expense (1)

35,309

 

40,842

 

153,675

 

166,336

Amortization of stock-based compensation capitalized in software development costs (9)

707

 

 

1,828

 

Amortization of intangible assets (2)

12,424

 

14,954

 

50,328

 

59,315

Legal settlement costs (5)

 

12,500

 

 

12,500

Acquisition related expenses (3)

 

440

 

264

 

440

Change in fair value of contingent earn-out liability (4)

 

 

 

(54)

Non-GAAP operating loss

$

11,739

 

$

9,561

 

$

23,693

 

$

(1,562)

GAAP gross margin

68

%

 

66

%

 

67

%

 

65

%

Stock-based compensation expense (1)

3

%

 

5

%

 

4

%

 

5

%

Amortization of stock-based compensation capitalized in software development costs (9)

%

 

%

 

%

 

%

Amortization of intangible assets (2)

4

%

 

5

%

 

4

%

 

5

%

Non-GAAP gross margin

75

%

 

76

%

 

75

%

 

75

%

GAAP operating margin

(17)

%

 

(29)

%

 

(22)

%

 

(31)

%

Stock-based compensation expense (1)

16

%

 

21

%

 

19

%

 

21

%

Amortization of stock-based compensation capitalized in software development costs (9)

%

 

%

 

%

 

%

Amortization of intangible assets (2)

6

%

 

7

%

 

6

%

 

8

%

Legal settlement costs (5)

%

 

6

%

 

%

 

2

%

Acquisition related expenses (3)

%

 

%

 

%

 

%

Change in fair value of contingent earn-out liability (4)

%

 

%

 

%

 

%

Non-GAAP operating margin

5

%

 

5

%

 

3

%

 

%

GAAP net loss

$

(48,397)

 

$

(70,414)

 

$

(243,123)

 

$

(285,184)

Stock-based compensation expense (1)

35,309

 

40,842

 

153,675

 

166,336

Amortization of stock-based compensation capitalized in software development costs (9)

707

 

 

1,828

 

Amortization of intangible assets (2)

12,424

 

14,954

 

50,328

 

59,315

Legal settlement costs (5)

 

12,500

 

 

12,500

Acquisition related expenses (3)

 

440

 

264

 

440

Change in fair value of contingent earn-out liability (4)

 

 

 

(54)

Loss on repurchase of convertible senior notes (7)

 

 

10,764

 

Non-cash interest expense related to convertible senior notes (5)

11,635

 

9,575

 

43,273

 

37,598

Adjustment to provision (benefit) from income taxes (7)

(142)

 

 

(622)

 

Non-GAAP net income (loss)

$

11,536

 

$

7,897

 

$

16,387

 

$

(9,049)

GAAP net loss per common share, basic and diluted

$

(0.25)

 

$

(0.39)

 

$

(1.27)

 

$

(1.60)

Stock-based compensation expense (1)

0.19

 

0.22

 

0.80

 

0.94

Amortization of stock-based compensation capitalized in software development costs (9)

 

 

0.01

 

Amortization of intangible assets (2)

0.06

 

0.08

 

0.26

 

0.33

Legal settlement costs (5)

 

0.08

 

 

0.07

Acquisition related expenses (3)

 

 

 

Change in fair value of contingent earn-out liability (4)

 

 

 

Loss on repurchase of convertible senior notes (7)

 

 

0.06

 

Non-cash interest expense related to convertible senior notes (6)

0.06

 

0.05

 

0.23

 

0.21

Adjustment to provision for (benefit from) income taxes (8)

 

 

 

Non-GAAP net income (loss) per common share, basic

$

0.06

 

$

0.04

 

$

0.09

 

$

(0.05)

Non-GAAP net income (loss) per common share, diluted

$

0.06

 

$

0.04

 

$

0.08

 

$

(0.05)

Weighted average shares used in per share calculation for GAAP, basic and diluted

194,593

 

182,281

 

190,803

 

177,757

Weighted average shares used in per share calculation for Non-GAAP, basic

194,593

 

182,281

 

190,803

 

177,757

Weighted average shares used in per share calculation for Non-GAAP, diluted

203,440

 

189,974

 

198,851

 

177,757

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities

$

31,203

 

$

33,575

 

$

18,002

 

$

17,640

Deemed repayment of convertible senior notes attributable to accreted debt discount (10)

 

 

43,575

 

Non-GAAP net cash provided by operating activities

$

31,203

 

$

33,575

 

$

61,577

 

$

17,640

Purchase of property and equipment and demonstration units

(13,811)

 

(17,855)

 

(50,831)

 

(43,779)

Free cash flow

$

17,392

 

$

15,720

 

$

10,746

 

$

(26,139)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes stock-based compensation expense as follows:

 

 

 

 

 

 

 

Cost of product, subscription and support revenue

$

3,446

 

$

5,104

 

$

14,178

 

$

18,249

Cost of professional services revenue

3,343

 

3,815

 

14,184

 

14,407

Research and development expense

11,252

 

13,738

 

49,503

 

56,720

Sales and marketing expense

10,714

 

10,858

 

47,592

 

46,766

General and administrative expense

6,554

 

7,327

 

28,218

 

30,194

Total stock-based compensation expense

$

35,309

 

$

40,842

 

$

153,675

 

$

166,336

 

 

 

 

 

 

 

 

(2) Includes amortization of intangible assets as follows:

 

 

 

 

 

 

 

Cost of product, subscription and support revenue

$

8,505

 

$

10,156

 

$

34,600

 

$

40,688

Research and development expense

135

 

257

 

560

 

744

Sales and marketing expense

3,784

 

4,541

 

15,168

 

17,883

Total amortization of intangible assets

$

12,424

 

$

14,954

 

$

50,328

 

$

59,315

 

 

 

 

 

 

 

 

(3) Includes acquisition related expenses as follows:

 

 

 

 

 

 

 

General and administrative expense

$

 

$

440

 

$

264

 

$

440

 

 

 

 

 

 

 

 

(4) Includes change in fair value of contingent earn-out liability as follows:

 

 

 

 

 

 

 

General and administrative expense

$

 

$

 

$

 

$

(54)

 

 

 

 

 

 

 

 

(5) Includes legal settlement costs as follows:

 

 

 

 

 

 

 

General and administrative expense

$

 

$

12,500

 

$

 

$

12,500

 

 

 

 

 

 

 

 

(6) Includes non-cash interest expense related to convertible senior notes as follows:

 

 

 

 

 

 

 

Other expense, net

$

11,635

 

$

9,575

 

$

43,273

 

$

37,598

 

 

 

 

 

 

 

 

(7) Includes non-cash loss on repurchase of convertible senior notes as follows:

 

 

 

 

 

 

 

Other expense, net

$

 

$

 

$

10,764

 

$

 

 

 

 

 

 

 

 

(8) Includes income tax effect of non-GAAP adjustments as follows:

 

 

 

 

 

 

 

Benefit from income taxes

$

(142)

 

$

 

$

(622)

 

$

 

 

 

 

 

 

 

 

(9) Includes amortization of stock-based compensation capitalized in software development costs as follows:

 

 

 

 

 

 

 

Cost of product, subscription and support revenue

$

198

 

$

 

$

582

 

$

Cost of professional services revenue

100

 

 

292

 

Research and development expense

409

 

 

954

 

Total amortization of stock-based compensation capitalized in software development costs

$

707

 

$

 

$

1,828

 

$

 

 

 

 

 

 

 

 

(10) Includes deemed repayment of convertible senior notes attributable to accreted debt discount as follows:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

 

$

 

$

(43,575)

 

$

                               

 

* Certain prior period amounts have been adjusted as a result of adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on a full retrospective basis, effective January 1, 2018.

 

FireEye, Inc.

RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE

(Unaudited, in thousands)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2018

 

2017*

 

2018

 

2017*

GAAP revenue

$

217,533

 

$

205,801

 

$

830,950

 

$

779,648

Add change in deferred revenue

47,673

 

34,763

 

24,728

 

(17,649)

Non-GAAP billings

$

265,206

 

$

240,564

 

$

855,678

 

$

761,999

 

FireEye, Inc.

BILLINGS BREAKOUT

(Unaudited, in thousands)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2018

 

2017*

 

2018

 

2017*

Product and related subscription and support billings

$

134,081

 

$

129,548

 

$

451,973

 

$

414,809

Cloud subscription and managed services

77,816

 

69,349

 

243,903

 

194,939

Professional services billings

53,309

 

41,667

 

159,802

 

152,251

Non-GAAP billings

$

265,206

 

$

240,564

 

$

855,678

 

$

761,999

 

FireEye, Inc.

REVENUE BREAKOUT

(Unaudited, in thousands)

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2018

 

2017*

 

2018

 

2017*

Product and related subscription and support revenue

$

128,497

 

$

126,308

 

$

498,992

 

$

479,521

Cloud subscription and managed services revenue

50,330

 

44,657

 

188,390

 

166,444

Professional services revenue

38,706

 

34,836

 

143,568

 

133,683

Total revenue

$

217,533

 

$

205,801

 

$

830,950

 

$

779,648

 

* Certain prior period amounts have been adjusted as a result of adoption of  ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on a full retrospective basis, effective January 1, 2018.