FireEye Reports Financial Results for First Quarter 2019

FireEye, Inc. (NASDAQ: FEYE), the intelligence-led security company,
today announced financial results for the first quarter ended March 31,
2019.

“We met or exceeded our guidance ranges for all key financial metrics in
the first quarter, and demand for our technology, intelligence, and
expertise remains strong,” said Kevin Mandia, FireEye chief executive
officer.

First Quarter 2019 Financial Results

• Revenue of $211 million increased 6 percent from the first quarter of
  2018 and was within the guidance range of $208 million to $212 million.
• Billings of $182 million increased 4 percent from the first quarter of
  2018 and were above the guidance range of $170 million to $180 million.¹
• GAAP gross margin was 66 percent of revenue, compared to 66 percent of
  revenue in the first quarter of 2018.
• Non-GAAP gross margin was 74 percent of revenue, compared to 74
  percent of revenue in the first quarter of 2018, and was consistent
  with the guidance of approximately 74 percent of revenue.¹
• GAAP operating margin was negative 30 percent of revenue, compared to
  negative 31 percent of revenue in the first quarter of 2018.
• Non-GAAP operating margin was negative 3 percent of revenue, compared
  to negative 3 percent of revenue in the first quarter of 2018, and was
  within the guidance range of negative 3 percent to negative 1 percent
  of revenue.¹
• GAAP net loss per share was $0.38, compared to GAAP net loss per share
  of $0.39 in the first quarter of 2018.
• Non-GAAP net loss per share was $0.03, compared to non-GAAP net loss
  per share of $0.04 in the first quarter of 2018, and was within the
  guidance range of non-GAAP net loss per share of $0.02 to $0.04.¹
• Cash flow generated by operations was $24 million, compared to cash
  flow generated by operations of $9 million in the first quarter of
  2018, and was above the guidance range of $10 million to $15 million.

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.”

Second Quarter and Updated 2019 Outlook

FireEye provides guidance based on current market conditions and
expectations.

For the second quarter of 2019, FireEye currently expects:

• Revenue in the range of $212 million to $216 million.
• Billings in the range of $205 million to $220 million.
• Non-GAAP gross margin as a percent of revenue in the range of 74
  percent to 75 percent.
• Non-GAAP operating margin as a percent of revenue in the range of 1
  percent to 3 percent.
• Non-GAAP diluted net income per share between $0.01 and $0.03.
• Cash flow generated by operations between negative $5 million and
  negative $10 million.
• Capital expenditures between $10 million and $15 million.

Non-GAAP diluted net income per share for the second 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 diluted shares
outstanding of approximately 207 million.

For 2019, FireEye currently expects:

• Revenue in the range of $880 million to $890 million.
• Billings in the range of $915 million to $935 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 $95 million and $115 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
weighted average diluted 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 second 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, April 30, 2019, at 5 p.m.
Eastern time (2 p.m. Pacific time) to discuss its first quarter
financial results and the company’s outlook for the second 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 second 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 diluted net income per share, weighted average
diluted shares outstanding, cash flows generated by operations, and
capital expenditures in the section entitled “Second Quarter and Updated
2019 Outlook” above.

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-K
filed with the Securities and Exchange Commission on February 25, 2019,
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, 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, acquisition-related expenses,
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, acquisition-related expenses,
restructuring charges, other special or non-recurring items, non-cash
interest expense related to the company’s convertible senior notes, and
discrete tax provision (benefits). FireEye defines non-GAAP diluted net
income per share as non-GAAP net income divided by weighted average
diluted shares outstanding. Weighted average diluted 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 weighted average basic 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 free cash flow as cash flow generated by (used in)
operations, less purchases of property and equipment and demonstration
units.

Non-GAAP net loss and net loss per share in the first quarter of 2019
excluded stock-based compensation expense, amortization of intangible
assets, amortization of stock-based compensation expense capitalized in
software development costs, restructuring charges, non-cash interest
expense related to convertible senior notes issued in June 2015 and the
second quarter of 2018, and discrete provision for income taxes.
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 the company’s
convertible senior notes that are anti-dilutive.

Non-GAAP net loss and net loss per share in the first quarter of 2018
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 discrete provision
for income taxes. 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
the company’s 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 7,900 customers
across 103 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.

Source: FireEye

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