FireEye Delivers a Solid First-Quarter Beat

By Steve

FireEye Inc.(NASDAQ: FEYE)announced stronger-than-expected first-quarter 2017 results Tuesday after the market closed, highlighted by the first deliveries of its Helix platform to end users and continued progress with operational efficiency initiatives.

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With shares of FireEye up more than 14% in Tuesday's after-hours trading as of this writing, let's take a closer look at how the cybersecurity specialist kicked off the year.


FireEye results: The raw numbers

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What happened with FireEye this quarter?

  • These results were above guidance provided last quarter, which called for revenue of $160 million to $166 million and an adjusted net loss per share of $0.26 to $0.28.
  • Billings declined 18% year over year to $152.4 million, which wasalso above guidance for $130 million to $150 million.
  • Based on generally accepted accounting principles (GAAP), which include items like stock-based compensation and acquisition expenses, FireEye's net loss was $83 million, or $0.48 per share.
  • Within the top line, product revenue declined 29.6% year over year to $23.7 million, and subscription and services revenue increased 11.7% to $150 million.
  • Added 237 net new customers during the quarter and closed 29 transactions greater than $1 million.
  • Adjusted gross margin was 73%, up from 70% in last year's first quarter, and above guidance for 70%. Adjusted operating margin was negative 7% (narrowed from negative 44% in last year's first quarter), and above guidance for negative 26% to negative 24% of revenue.
  • Generated cash flow from operations of negative $17 million, above guidance for negative $40 million to negative $30 million.
  • Ended the quarter with $875 million in cash and short-term investments.

What management said

FireEye CEO Kevin Mandia stated:

Looking forward

For the second quarter, FireEye expects revenue of $173 million to $179 million, compared to $175 million in the same year-ago period. FireEye also anticipates billings of $155 million to $175 million, adjusted gross margin of 72%, adjusted operating margin of negative 9% to negative 10%, and an adjusted net loss per share of $0.10 to $0.14.

As such, FireEye initiated full-year 2017 guidance for revenue of $724 million to $736 million, billings of $745 million to $775 million, positive adjusted operating income, and an adjusted net loss per share of $0.26 to $0.36. FireEye also expects to generate positive operating cash flow for the year in the range of $1 million to $10 million. For perspective, this guidance easily exceeded investors' expectations for a 2017 adjusted loss of $0.48 per share on revenue of $723.2 million.

All things considered, this was a great quarter, as FireEye steadily grew its customer base and continued to march toward its goal of sustained profitability. With shares down nearly 30% over the past year leading up to this report, it's no surprise to see the market bidding up FireEye stock in response.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.