Fireeye Conference Call Highlights

Fireeye

reported its third quarter earnings on Wednesday. Shares of the company are down 15 percent. Below are some key highlights from its conference call: Performance: • It's now been almost exactly a year since we hosted our first earnings call following our IPO in September of 2013. • Since then we've scaled our business, expanded our customer base and partner model and significantly built out our product line. • We launched FireEye-as-a-Service offering, signed partnerships with three of the world's largest service providers, and expanded our operations worldwide. • Through internal development and strategic acquisitions, we bought together the people, technologies and threat intelligence necessary to reimagine security. • In the process, we expanded our markets, expanded our technology lead, and created the security company unlike any other. • We've come a long way growing our business with our billings growing more than 10 times in less than three years from $57 million in 2011 to an estimated $580 million in 2014. • With that, I'd like to thank all of the FireEye employees for their dedication and focus on our mission. I believe the best is yet to come. • So going back for a moment to January 2, 2014, that was when we announced the acquisition of Mandiant, we raised our guidance for 2014 revenue by more than 60%, and provided a comprehensive financial model for the full year. • I'm pleased to report that today we have beat that model after nine months and we expect to surpass nearly all major metrics for the full year 2014. Guidance and Performance: • More specifically, in January 2014 we stated that we expected to attain full year billings of $540 million to $560 million. • We're now adjusting that full year range to $573 million to $588 million. • We more than doubled our billings every single quarter this year and this is the fifth consecutive quarter we raised our billings guidance. • We've outperformed against our original revenue guidance for the 2014 of $400 million to $410 million and we're now expecting full year revenue guidance of $418 million to $430 million. • In January, we expected a non-GAAP loss per share of $2 to $2.20 for 2014 and we're now narrowing that range to $2.05 to $2.15. • We also expect to add about 1,500 new customers this year and end the year with more than 1,000 channel partners. • All-in-all, we've consistently performed ahead of expectations and created a strong foundation for the future. • Moreover, I'm pleased to report that we've met and exceeded each of our Q3 guidance metrics and demonstrated continued leverage in our financial model. • Our Q3 billings performance of 45% sequential growth and 133% year-over-year growth was driven by broad demand across multiple industries and customers of all sizes and geographic regions. • Because a significant and a growing portion of our business is subscription-based, we believe our billings are an important indicator of our growth. • Billings drives our cash flow and are a leading indicator of our future revenue growth. • Our revenues increased 168% year-over-year for Q3 and 171% for the nine month period to date. • Our product subscriptions revenue increased 133% as well. • The increase in both the number and severity of advanced attacks is evident in all aspects of our business. • Our incident response teams operate around the clock responding to breaches and we remain active in a record number of engagements worldwide. • The cyber threat landscape has never been more severe, and the incumbent legacy security model has never been weaker. • We estimate that over 90% of all organizations are breached and more and more companies are realizing they need a new, more adaptive security model. • FireEye has 99% accuracy in our alerts. Metrics: • First of all, we closed a record number of transactions greater than $500,000 in value including 23 seven figure deals, compared with 11 million dollar deals in Q3 2013, and seven last quarter. • We closed large transactions with companies in a variety of vertical markets including technology or hi-tech, financial services, retailers, health care, and telecom, as well as U.S. government agencies. • We expanded our install base by nearly 1000 new customers compared with Q3 a year ago. • We've doubled the number of mid-market and smaller customers compared to Q3 2013. • The number of new partners increased from 127 in 2012 to nearly 1000, actually 992 to be exact. • We now have more than 3 million endpoints installed making us the leader in next generation endpoint security. • Our products billings grew 63% year-over-year while our product subscription billings grew 183%. • Given our growing product subscription business, we believe billings for both product sales and subscription services is the best measure of our customer adoption of our technology. • This metric increased 121% year-over-year and we achieved it at a $500 million run rate in billings. • Our recurring subscriptions and support billings grew to $102.6 million from $41.5 million in Q3 of last year. • So for Q4 we expect our revenue to be in the range of $135 million to $147 million with a midpoint of $141 million. • This is a wider range of outcomes than our historical guidance ranges to allow for the impact of this evolving mix shift. • This guidance translates into an annual guidance range of $418 million to $430 million for revenue with a midpoint of $424 million compared to our prior guidance of $423 million to $430 million with a midpoint of $426.5 million. • We expect our Q4 gross margins to be in the range of 70% to 73%. • For operating expenses as a percentage of revenue in Q4, we expect R&D spending to fall in the range of 34% to 37