A month has gone by since the last earnings report for FireEye . Shares have lost about 7.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is FireEye due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FireEye Q4 Earnings & Revenues Surpass Estimates
FireEye reported fourth-quarter 2019 non-GAAP earnings of 7 cents per share, beating the Zacks Consensus Estimate by 75%. The bottom line also increased from the prior-year quarter’s earnings of 6 cents per share.
Revenues totaled $235 million, which increased 8% year over year and outpaced the consensus mark of $226 million.
This rally was led by strong growth in platform and cloud subscriptions, and managed defense services. Moreover, significant momentum in Mandiant Professional Services was a tailwind for the top line.
Quarter Details
Product and related subscription, and support revenues decreased 11% year over year to $114.1 million, reflecting a decline in the opening current deferred revenue balance for the segment. This stemmed from a fall in appliance hardware sales in 2016 and 2017 but is still realized due to the ASC 606 revenue accounting standards.
Sales of appliances were in low to mid-teens range as a percentage of total billings. Appliance-based product and related annual recurring revenues (ARR) continued to grow more than 30% year over year.
Quarterly billings of $274 million increased 3% year over year. The upside was led by strong sales of cloud endpoint and cloud email security solutions, threat intelligence, the Helix platform, and Managed Defense. Verodin also displayed strong momentum in the quarter.
However, billings were about $16 million lower than expectations due to a shorter average contract length, as FireEye’s business continues to undergo a transformation from appliance-based solutions to platform and cloud-based products, including security validation offerings like Verodin and Mandiant services. This trend of shorter contract length is expected to continue in the near term as the company ramps up business transformation.
Mandiant Professional Services also performed well in the fourth quarter. Revenues from this segment were up 29% from the year-ago quarter.
Operating Results
Non-GAAP gross margin contracted 200 basis points (bps) year over year to 73%.
Non-GAAP operating margin was 7%, up 200 bps owing to a $5-million sequential decrease in operating expenses related to lower employee payroll taxes.
Balance Sheet & Cash Flow
FireEye exited the fourth quarter with cash and cash equivalents, and short-term investments of approximately $1.04 billion, up from $997 million at the end of the previous quarter.
The company’s cash flow from operations was $40 million compared with $18.5 million in the third quarter.
Full-Year Highlights
For 2019, FireEye reported revenues of $889 million, up 7% year over year.
Billings were $926 million, growing 8% from 2018.
Non-GAAP earnings of 5 cents declined 4.7% year over year.
Guidance
For first-quarter 2020, FireEye anticipates revenues between $222 million and $226 million. The Zacks Consensus Estimate for revenues currently stands at $226.5 million, implying 4.1% growth from the year-ago quarter’s reported figure.
Billings for the quarter are expected to be $165-$175 million, lower than revenues. Hence, a sequential decline in current deferred revenues is expected.
Also, seasonal growth in operating expenses is expected. As a result, an operating loss of 3-5% is expected.
Additionally, due to lower billings and higher expenses as compared with the first quarter of 2019, operating cash outflow of $5 million at worst, and cash flow of $5 million at best is expected.
Product and related revenues are likely to decline 10-15% as the last of the 2015 appliances were amortized in fourth-quarter 2019. Platform revenues are expected to continue to grow in mid-to-high 30s year over year. Services revenues are projected to grow at a mid-to-high teens growth rate.
Non-GAAP loss per share is expected in the 3-5 cents range.
For 2020, the company expects revenues of $935-$945 million. Billings are expected in the range of $930-$950 million.
FireEye expects non-GAAP earnings between 20 cents and 24 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -28.45% due to these changes.
VGM Scores
Currently, FireEye has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FireEye has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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FireEye (FEYE) Down 7.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for FireEye . Shares have lost about 7.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is FireEye due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FireEye Q4 Earnings & Revenues Surpass Estimates
FireEye reported fourth-quarter 2019 non-GAAP earnings of 7 cents per share, beating the Zacks Consensus Estimate by 75%. The bottom line also increased from the prior-year quarter’s earnings of 6 cents per share.
Revenues totaled $235 million, which increased 8% year over year and outpaced the consensus mark of $226 million.
This rally was led by strong growth in platform and cloud subscriptions, and managed defense services. Moreover, significant momentum in Mandiant Professional Services was a tailwind for the top line.
Quarter Details
Product and related subscription, and support revenues decreased 11% year over year to $114.1 million, reflecting a decline in the opening current deferred revenue balance for the segment. This stemmed from a fall in appliance hardware sales in 2016 and 2017 but is still realized due to the ASC 606 revenue accounting standards.
Sales of appliances were in low to mid-teens range as a percentage of total billings. Appliance-based product and related annual recurring revenues (ARR) continued to grow more than 30% year over year.
Quarterly billings of $274 million increased 3% year over year. The upside was led by strong sales of cloud endpoint and cloud email security solutions, threat intelligence, the Helix platform, and Managed Defense. Verodin also displayed strong momentum in the quarter.
However, billings were about $16 million lower than expectations due to a shorter average contract length, as FireEye’s business continues to undergo a transformation from appliance-based solutions to platform and cloud-based products, including security validation offerings like Verodin and Mandiant services. This trend of shorter contract length is expected to continue in the near term as the company ramps up business transformation.
Mandiant Professional Services also performed well in the fourth quarter. Revenues from this segment were up 29% from the year-ago quarter.
Operating Results
Non-GAAP gross margin contracted 200 basis points (bps) year over year to 73%.
Non-GAAP operating margin was 7%, up 200 bps owing to a $5-million sequential decrease in operating expenses related to lower employee payroll taxes.
Balance Sheet & Cash Flow
FireEye exited the fourth quarter with cash and cash equivalents, and short-term investments of approximately $1.04 billion, up from $997 million at the end of the previous quarter.
The company’s cash flow from operations was $40 million compared with $18.5 million in the third quarter.
Full-Year Highlights
For 2019, FireEye reported revenues of $889 million, up 7% year over year.
Billings were $926 million, growing 8% from 2018.
Non-GAAP earnings of 5 cents declined 4.7% year over year.
Guidance
For first-quarter 2020, FireEye anticipates revenues between $222 million and $226 million. The Zacks Consensus Estimate for revenues currently stands at $226.5 million, implying 4.1% growth from the year-ago quarter’s reported figure.
Billings for the quarter are expected to be $165-$175 million, lower than revenues. Hence, a sequential decline in current deferred revenues is expected.
Also, seasonal growth in operating expenses is expected. As a result, an operating loss of 3-5% is expected.
Additionally, due to lower billings and higher expenses as compared with the first quarter of 2019, operating cash outflow of $5 million at worst, and cash flow of $5 million at best is expected.
Product and related revenues are likely to decline 10-15% as the last of the 2015 appliances were amortized in fourth-quarter 2019. Platform revenues are expected to continue to grow in mid-to-high 30s year over year. Services revenues are projected to grow at a mid-to-high teens growth rate.
Non-GAAP loss per share is expected in the 3-5 cents range.
For 2020, the company expects revenues of $935-$945 million. Billings are expected in the range of $930-$950 million.
FireEye expects non-GAAP earnings between 20 cents and 24 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -28.45% due to these changes.
VGM Scores
Currently, FireEye has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FireEye has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.