Is FireEye Worth Buying?

FireEye (FEYE) announced second quarter ended June 30, 2016 total revenue of $175.0 million, up 19 percent year-over-year from $147.2 million during the same period last year. Going forward, the company estimates third quarter of 2016 total revenue to be in the range of $180 million to $186 million.

A closer look

FireEye declared second quarter of 2016 non-GAAP net loss of $52.7 million or $0.33 of loss per diluted share compared to non-GAAP net loss of $62.6 million or $0.41 of loss per diluted share in second quarter of 2015.
Moving ahead, the company estimates third quarter of 2016 non-GAAP net loss per share to be in the range of $0.30 to $0.32.

The global cyber security providing company reported continued year-over-year growth in both its top and bottom lines primarily driven by key strengths witnessed in sales of the company’s advanced endpoint security solutions, robust renewal billings and significant addition of new customers for the quarter.

The continued year-over-year billings and revenue growths of FireEye depicts significant customer traction for the company’s advanced online security solutions. A notable over 19% year-over-year growth in second quarter of 2016 total revenue is contributed by a strategic mix of products with 44% of revenue contribution from product subscription, 23% from product (Appliances), 16% contributed by professional services and 17% from support.

FireEye has strategically achieved over 13 points of year-over-year non-GAAP operating margin growth as a % of revenue that include invotas and iSIGHT expenditures. This attractive margins growth is primarily driven by about 13 point year-over-year reduction in net expenses including, iSIGHT and invotas expenditures.

The globally expanding incidents of cyber-attacks has particularly encouraged the customers including, big multinational companies to stay up-to-date on their security front and thus, allowing FireEye to increasingly capture this attractive growth opportunity. Further, the superior cost-optimization initiatives of FireEye has enabled the company to sustain healthy cash position to capture attractive growth opportunities while offering impressive shareholder returns.

Some positives  

FireEye has industry-leading operational metrics with a flat year-over-year gross profit margin of 73%, exceeding the company’s guidance in the range of 70% to 71%. Services and subscription gross margin grew 1 percentage point year-over-year to 74% in addition to an attractive quarterly improvement in product gross margin over last quarter. FireEye reported operational expenditure for second quarter of 2016 of about $176.5 million, down by $14 million compared to the first quarter of 2016 and also includes $2 million of non-recurring credit through G&A.

However, the adjusted operating expense for the quarter grew 5% year-over-year from second quarter of 2015 due to increased headcount from the strategic acquisitions of Invotas and iSIGHT.

FireEye declared 10 percent year-over-year growth in billings for second quarter of 2016 at $196.4 million mainly driven by attractively well-diversified quarterly billings mix with robust renewal billings and addition of over 300 new clients coupled with the closure of nearly 40 key transactions worth over $1 million. Further, FireEye uniquely maintained its average contract length since last one year at about 27 months including, the renewal and fresh support and subscriptions that highlights the company’s superior operational excellence.

FireEye’s focused approach on minimizing the non-core expenses while expanding its strategic investments in developing new and highly advanced cyber security products to increasingly attract new customers is believed to drive sustainable long-term company growth while delivering attractive shareholder returns.


Overall, the investors are advised to “Sell” any equity held in FireEye, Inc. considering the company’s poor near-term and longer term growth prospects with hugely debt-burdened balance sheet and poor cash position.
Published on Aug 11, 2016
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

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