Stock investment – FireEye Has Sustained Profitability in Its Sights — The Motley Fool

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FireEye Inc. (NASDAQ:FEYE) announced strong second-quarter 2017 results on Tuesday after the market closed, with the cybersecurity specialist beating expectations on nearly every metric and significantly narrowing operating losses as it moves toward sustained profitability.

Let’s have a closer look at how the company capped the first half, as well as what to expect in the coming quarters.

Image source: Getty Images. 

FireEye results: The raw numbers

Metric

Q2 2017

Q2 2016


Earnings (YOY)

Revenue

$185.5 million

$175.0 million

6%

Non-GAAP net income (loss)

($7.3 million)

($52.7 million)

N/A

Non-GAAP earnings (loss) per share

($0.04)

($0.33)

N/A

Data source: FireEye Inc. 

What happened with FireEye this quarter?

  • These results were above guidance provided last quarter, which called for lower revenue of $173 million to $179 million, and a wider adjusted net loss per share of $0.10 to $0.14.
  • Billings declined 12% year over year to $172 million, near the high end of guidance for billings in the range of $155 million to $175 million.
  • Based on generally accepted accounting principles (GAAP), which includes items such as stock-based compensation and amortization of intangibles, FireEye’s net loss was $70.7 million, or $0.40 per share, narrowed from a net loss of $139.3 million, or $0.86 per share, in the same year-ago period.
  • Adjusted gross margin was 74%, above guidance for 72%, and adjusted operating margin was negative-3%, above guidance for a range of negative-9% to negative-10%.
  • Product revenue declined 23.5% year over year to $31.2 million
  • Subscription and services revenue grew 14.9% year over year to $154.3 million.
  • FireEye added 221 new customers during the quarter and closed 29 transactions greater than $1 million. 
  • Cash flow from operations came in at negative-$11.5 million, above guidance for operating cash flow in the range of negative-$17 million to negative-$21 million.

What management said

FireEye CEO Kevin Mandia stated:

We executed well against our priorities in the second quarter, delivering billings, revenue, earnings per share, and operating cash flow above expectations. We have made great progress rationalizing our cost structure and reduced our operating losses by more than $100 million in the first six months of the year compared to the first six months of 2016. As we look forward to the second half of 2017, we are focused on new opportunities to expand our customer base with our Helix platform, our next-generation endpoint protection, and innovations in our network and email security solutions.

Looking forward

For the third quarter, FireEye anticipates revenue of $183 million to $189 million, billings of $190 million to $205 million, and an adjusted net loss per share in the range of $0.06 to $0.09. FireEye also expects adjusted operating margin to be in the range of negative-4% to negative-6% and to generate positive cash flow from operations of $1 million to $10 million.

Finally, for the full year of 2017, FireEye increased its guidance to call for revenue of $734 million to $746 million, up from $724 million to $736 million previously, which should result in an adjusted net loss per share of $0.19 to $0.24, an increase from previous guidance for a net loss per share of $0.26 to $0.36. Meanwhile, FireEye reiterated its outlook for 2017 billings in the range of $745 million to $775 million and positive 2017 operating cash flow of $1 million to $10 million.

In the end, this was another strong beat-and-raise scenario from FireEye, as the company accelerated its goals of right-sizing its cost structure and achieving sustained, profitable growth by the end of the year. So even with shares up around 24% year to date heading into this report, it was no surprise to see FireEye stock rising in after-hours trading.

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