FireEye Cuts Guidance; Shareholders See Red

By Joe

Source: FireEye.

FireEye reported third-quarter results on Nov. 4, 2015. The cybersecurity leader's shares sank about 20% after the company projected full-year billings and revenue below its previous forecast.

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Second-quarter revenue jumped 45% year over year, to $165.6 million. That was within FireEye's previously issued guidance range of $164 million to $168 million.

However, billings -- an important measure of future revenue -- fell short of FireEye's forecast of between $225million and$230 million, increasing 28%, to $210.6 million. FireEye also cut its full-year revenue and billings guidance to $620 million to $628 million (down from $630 million to $645 million), and $780 million to $800 million (down from $840 million to $850 million), respectively.

In the earnings release and subsequent conference call, Chairman and CEO David DeWalt listed weakness in Europe as the primary cause of the billings shortfall:

DeWalt also said that "emergency spending" on advanced cybersecurity is slowing due to the recent cyber peace initiatives between the U.S and China. However, DeWalt warned that this likely short-term trend should not be taken as a sign that the threat has diminished:

Moreover, there were some bright spots in the quarter. Customer renewal rates remained above 90%, and non-GAAP gross margin, excluding stock-based compensation and certain other expenses, increased to 73%, up from 71% in Q3 2014.

Operating margins and cash flow also improved, with CFO Mike Berry adding:

All told, non-GAAP net loss per share narrowed to $0.37, down from a loss of $0.51 per share in the year-ago period, and better than FireEye's guidance for a loss between $0.44 and $0.48 per share.

Looking aheadFor the fourth quarter, management now expectsrevenue in the range of$182 million to$190 million. Additionally, on a non-GAAP basis, the company is forecasting:

  • Billings in the range of$240 million to$260 million
  • Gross margin in the range of 72% to 74%
  • Operating margin in the range of negative 28% to negative 31%
  • Net loss per share of$0.36to$0.38

"Our role as first responder to today's most significant breaches, combined with our threat research labs and globalFireEyeas a Service infrastructure, gives us unique visibility into threats as the attackers adapt their tactics," commented CEO DeWalt. "We support our technology, consulting services, and threat intelligence leadership with a solid financial foundation and$1.2 billionin cash, cash equivalents, and short-term investments. I believe we have never been in a stronger position to help organizations reduce risk as the threat landscape evolves."

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