Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page1of21
FIREEYE(FEYE)EarningsReport:Q12016ConferenceCallTranscriptThefollowingFIREEYEconferencecalltookplaceonMay5,2016,05:00PMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
KatePatterson;FireEye;InvestorRelationsDaveDeWalt;FireEye;Chairman&CEOKevinMandia;FireEye;PresidentMikeBerry;FireEye;CFO
OtherPart icipants
ShaulEyal;Oppenheimer&Co.;AnalystSterlingAuty;JPMorgan;AnalystGurTalpaz;StifelNicolaus;AnalystGabrielaBorges;GoldmanSachs;AnalystKenDelaney;Evercore;AnalystGreggMoskowitz;CowenandCompany;AnalystGrayPowell;WellsFargoSecurities,LLC;AnalystJonathanHo;WilliamBlair&Company;AnalystRobBreza;WunderlichSecurities;AnalystMelissaGorham;MorganStanley;AnalystBrentThill;UBS;AnalystSaketKalia;BarclaysCapital;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheFireEyefirstquarter2016earningsresultsconferencecall.
Thiscallisbeingrecorded.WithustodayfromthecompanyischairmanandChiefExecutiveOfficer,DaveDeWalt;ChiefFinancialOfficer,MikeBerry;andvicepresidentofinvestorrelations,KatePatterson.Atthistime,IwouldliketoturnthecallovertoKatePatterson.Pleasegoahead.
KatePatterson (InvestorRelations):
Thankyou,Operator.Goodafternooneveryoneandthankyouforjoiningusontoday'sconferencecalltodiscussFireEye'sfinancialresultsforthefirstquarterof2016.
ThiscallisbeingbroadcastliveovertheInternetandcanbeaccessedontheinvestorrelationssectionofFireEye'swebsiteatwww.investors.fireeye.com.
Withmeontoday'scallareDaveDeWalt,FireEye'schairmanoftheboardandChiefExecutiveOfficer;MikeBerryExecutiveVicePresidentandChiefFinancialOfficerofFireEye;andKevinMandia,FireEye'sPresident.
Afterthemarketclose,FireEyeissuedapressreleaseannouncingtheresultsforthefirstquarterof2016.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page2of21
Beforewebegin,letmeremindyouthatFireEye'sManagementwillmakeforward-lookingstatementsduringthecourseofthiscallincludingstatementsrelatingtoFireEye'smanagementsuccession,FireEye'sguidanceandexpectationsforthesecondquarterof2016andthefullyear2016,FireEye'scontinuedinnovationandnewandenhancedofferings,growthdrivers,marketopportunitiesandopportunitieswithpartners,customerdemandforandadoptionofFireEye'sproductsandservices,continuedgrowthandmomentuminFireEye'sbusinessandtheabilitytoexpandgrowthopportunities,changesinthethreatlandscapeandthesecurityindustry,changesincustomerbuyingpreferences,FireEye'sprioritiesandfutureplans,FireEye'scompetitivepositioninthemarketplace,expectationsregardingthetimeframetoachievecashflowandoperatingtargets,theexpansionofFireEye'splatformandtheavailabilityofnewofferingsandFireEye'spathtoprofitability.
Theseforward-lookingstatementsinvolveanumberofrisksanduncertaintiessomeofwhicharebeyondourcontrol,whichcouldcauseactualresultstodiffermateriallyfromthoseanticipatedbythesestatements.
Theseforward-lookingstatementsapplyasoftoday,andyoushouldnotrelyonthemasrepresentingourviewsinthefuture,andweundertakenoobligationtoupdatethesestatementsafterthecall.
ForadetaileddescriptionoftherisksanduncertaintiespleaserefertoourSECfilingsaswellasourearningsreleasepostedanhouragoonthewebsite.CopiesofthesedocumentsmaybeobtainedfromtheSECorbyvisitingtheinvestorrelationssectionofourwebsite.Additionally,certainnon-GAAPfinancialmeasureswillbediscussedonthiscall.
Wehaveprovidedreconciliationsofthesenon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPfinancialmeasuresintheinvestorrelationssectionofthewebsiteaswellasintheearningsrelease.
Withthat,IwillturnthecallovertoDave.
DaveDeWalt (Chairman&CEO):
Thankyou,Kate.Goodafternoon,everyone.Thankyouforjoiningusonourcalltoday.TodaywehavesomeveryexcitingnewstoshareasmanyofyoumighthavereadbynowwehavemadethreeexcitingannouncementsthatIreallybelievestrengthenandsolidifythefutureofFireEye.
FirstofallwecontinuedourprogressinbuildingthemostcomprehensiveglobalthreatManagementplatform.Webelievethecombinationofintelligence,servicesandtechnologyenablesFireEyetoadvancecybersecurityprotectionaroundtheworld.EarliertodayweannouncedmultipleenhancementstoourplatformincludingournewFireEyesecurityorchestrationproductwhichcamefromourInvotasacquisitionwedidinthefirstquarter.
WealsoaddedenhancementstoouradvancednetworksecurityproductscalledNXthatenableshigh-availabilityandautomaticfailover.ThisenablesFireEyetobeoneoftheonlyprovidersthatcandetectandpreventin-lineandreal-time.
OtherenhancementsincludeupdatestoouremailthreatManagementplatformwhichisnowfullyintegratedintoourFireEyeorchestrationproductorFSO.Wealsoannouncedenhancementstoournetworkforensicsproductaswellasenhancementtoourthreatanalyticscloudproduct.
Thebreadthofthisannouncementillustratesthetremendousprogresswehavemadeoverthepastfewyears.Wehavegonefromasingleappliance-basedsolutiontoacompleteplatformthatcanbemanagedbythecustomerinaself-servicemodelordeliveredasaservicethroughourFireEyeasaservicecapability.Wehavealsocomealongwaywithourcustomers,growingfromjustahandfultonowmorethan4700in70countries.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page3of21
Andthesecustomersincludesomeofthemostimportantcompaniesandgovernmentsaroundtheworld.We'vealsocomealongwaygrowingourbusinessfromacompanyoflessthan$100milliontoacompanyonthepathtodomorethan$1billionthisyear.I'dliketothankthenearly3,500employeesfortheircontinuedhardwork,determinationandconvictionthatFireEyewillbecomethemostimportantcybersecuritycompanyever.ThesecondmajorannouncementisaboutstrengtheningourManagementteamforthefuture.
Today,weareannouncingthatKevinMandiantwillbesucceedingmeasCEOofFireEyeeffectiveJune15.Thisisthedayfollowingourannualshareholdermeeting.KevinandItogetherwithourboardhavediscussedandanticipatedthischangeforquitesometime.Withasolidfoundationofpeople,technology,partnersandcustomersinplace,thisisexactlytherighttimetomakethismove.
WearesofortunatetohaveKevinstepintothisrole.Heistheindustry'sglobalthoughtleaderoncybersecurity,andnooneknowsmoreaboutthethreatlandscapethanKevin.
Andheispassionateaboutourmission.YouwillbeagreatleaderforFireEyeaswecontinueourjourneyonward.IamlookingforwardtomynewroleasexecutivechairmaninwhichIwillremainactive,veryactiveinshapingFireEye'sfuture.InthisnewroleIwillbeworkingwithKevin,theleadershipteamandeveryoneatFireEyetoincreaseadoptionoftheFireEyethreatManagementplatformwithafocusonthecompany'smultichannelgotomarketstrategies.
Iwillcontinuetospeaktoinvestors,partnersandcustomersaboutFireEye'suniquepositioninthemarketaswellasleadFireEye'sBoardofDirectors.IamalsoexcitedtoannouncethatTravisReese,whomanyofyoumetanalystdayandwhohasdonearemarkablejobaspresidentofMandiant,willstepupandbecomepresidentofFireEye.
KevinandTravishaveworkedtogetherformorethan20years.AsateamtheyhaveestablishedMandiantasaleaderinsecurityinternetmanagementandresponseandgrewthecompanytonearly500employeesandmorethan$100millioninrevenuebeforetheacquisition.
I'malsoverypleasedtoannouncethatMikeBerrywhohashadanincredibleimpactstrengtheningourbusinesssincejoiningusasSVPandChiefFinancialOfficerlastyear,willnowtakeonbroaderresponsibilitiesasourChiefFinancialOfficerandourChiefOperatingOfficer.
Mike,wholedfinanceandotheroperationsforanumberoftechnologycompaniesbeforejoiningus,willplayanessentialroleandcontinuetooptimizeourfinancialinfrastructureandtheglobaloperationsthatwillallowustoevolveandscaleourbusinessasweenterthenextphaseofFireEye'sjourney.Wemoveforwardin2016withaverystrongseniorManagementteamandoutstandingleadersacrossallofourfunctionalareas.PleasejoinmeeverybodyincongratulatingKevin,TravisandMike.
WithourmanagementsuccessionassuredandtransformationalproductsonourroadmapIbelieveourfutureisverybright,whichistheperfectseguetoadiscussionofourQ1resultsandtheimportantplatformannouncementswemadeearliertoday.IwanttosharewithyouafewthingsincludingthedetailsbehindourstrongQ1billingsperformance,andI'llalsogiveyouanupdateonourprogressonourplatformroadmapincludingthevirtualandcloud-basedMVXproductswediscussedatanalystdayaswellassomeofourotherrecentlyannouncedpartnerships.
AndthenfinallyIwillreviewourplatformintegrationandlaunchplansforiSIGHTthreatintelligenceandInvotasorchestrationandautomationtechnologies.OurQ1billingsof$186millionexceededthehighendofourguidancerangedrivenbygrowthinourcloud-basedsolutionsandespeciallyourthreatintelligenceandcloudemailandourFireEyeasaservicecapability.
Thehighermixofrecurringproductsubscriptionswhicharerecognizedratablyresultedinrevenueof
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page4of21
$168milliontowardthelowerendoftheguidancerange,butwestilldeliveredearningspershareaheadofexpectationsand$0.04aheadofthemidpointofourguidance.
OurQ1billingperformanceandourcustomerrelatedmetricsallpointtogrowingdemandforouradvancedsecuritysolutionsandcontinuedstrengthinourbusiness.Weadded261newcustomersinthequarterincludingmorethan50oftheglobal2000.Weclosed28dealsgreaterthan$1million,thesamenumberasinQ12015,butinafardifferentthreatenvironment.Morethan80%oftheseincludedmultipleproducts,andmorethanhalfincludedthreeormoreproducts.
Additionally,morethanhalfincludedFireEyeasaserviceorcloudproducts,andaboutonethirdincludedEndpoint.Thenumberofplatformcustomerswiththreeormoreproductfamiliescontinuestogrowbothinabsolutenumbersandasapercentageoftheinstallbase,anddemandwasdiversifiedacrossverticalmarketsandgeographiesdemonstratingthebreadthanddepthofourtotaladdressablemarket.
ThankyoutoeveryoneintheFireEyefamily,ouremployees,ourpartnersandourcustomersfortheircontributiontotheseoutstandingresultsasthethreatlandscapeandourmarketcontinuestoevolve.Ifyouareviewingourperformanceinthecontextofthepowerfulforcesthatareshapingthesecuritylandscapeshowcases,ourabilitytoadapttocustomerneedsandpivottotheevolvingthreatlandscapeiseminentlyapparent.Weseethreemacrotrendsdrivingchangeinourindustry.
Firstthemigrationtocloud-basedandcloud-enabledsecuritysolutionsisacceleratingandmirrorsthetrendsinthebroadersoftwareindustry.
Atthesametimetheshortageofsecuritytalenthasreachedcrisislevels.Thelackoftalentisdrivinggrowingdemandforservicesandasaservicesolutions,andgrowthinoutsourcesecurityisexpectedtobethefastest-growingsegmentofthesecuritymarketgoingforward.
Finally,thethreatenvironmentcontinuestoevolveastheattacksurfaceexpandsandnewthreatactorsemerge.AlthoughwehaveseentemporarydeclinesinattacksfromtheChinesegovernmentthreatactorsonUStargetsonUSsoil,wehaveseenanincreaseinhacktivismandransomwarearoundtheworldaswellasincreasedactivityfromnewthreatgroupsinIran,Syria,NorthKorea,amongothers.
AttacksoncriticalinfrastructureareagrowingconcerninthewakeoftheRussianattacksonUkrainiantargets,andtheInternetofthingsiscreatingnewattackvectorseverywhere.Theneedforcontinuedvigilance,betterthreatintelligenceandfasterresponsetimesremains,andcustomersareincreasinglylookingbeyondpointproductsanddemandingbestofsuitesolutionsaswellastheflexibilitytodeployonpremise,inthecloudoras-a-service.FireEyeiswellpositionedtodowithinanyoftheseenvironments.
Noothersecuritycompanyhasacombinationoftechnology,expertiseandintelligencetodeliverprotectionfromtheseemergingthreats,andwehavecombinedauniquesetofassetsintoanintelligenceledsecurityplatformthatreducesrisk,masscomplexityandlowersthetotalcostofownershipforourcustomers.
Theshiftfromappliance-basedsolutionstosubscriptionsandcloud-basedsecurityishappeningfasterthanevenweanticipated,andourQ1resultsshowwearenimbleenoughtomovewithandinfactdrivethemarkettoamoreeffectivecloudcentricsecuritymodel.
IthinkacoupleofexampleswillshowyouwhatImean.OurlargesttransactioninQ1wasaneightfigurecloudemaildealintheUSfederalregionprotectingmorethan100,000mailboxes.Ayearagothisdealwouldhavebeenanappliance-basedsolutionwithatleasthalfofitrecognizedasinperiodproductsales.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page5of21
Inanotherexampleawell-knownluxuryretailerisreplacingtheirlegacysimproductwithourthreatanalyticsplatform-basedTAPtoabilitytocutthemthroughthenoiseandhelpthemwithcontextualthreatintelligence.Ourthreatintelligenceandthebreadthofourplatformhelpeduswinanothercompetitivedealwherewearecompetingagainstafirewall-basedsolution.Theentiretransactionshowcasedbothourtechnologyandourexpertiseaspeoplefromlabs,analytics,productmanagementandsalesallcollaboratedtodemonstratethecapabilitiesofoursolution.
Thisfirst-timecustomermadethedecisiontopurchaseNX,orournetworkproductemailandEXandHXwhichisourendpointproductinlessthantwoweeks.FinallyarecentcustomerconversationwillillustratethemagnitudeofthepivottoFireEyeasaserviceandsubscriptionofferings.
IrecentlycalledonthelongtimeFireEyecustomerwhowasconsideringbothEXandETP,andafterwalkinghimthroughourentireproductplatformvisionandexplainingthebenefitsofFireEyeasaservice,theyareconsideringFaaSplusemailandourmobilesecurity.
Theoverallopportunitymorethandoubledeventhoughthemixofproductsalesdecreased.Competitivedisplacementsandadoptionofouras-a-servicesolutionsareacceleratingandgivesmeconfidenceinourfuture.Theunderlyingthemeinallthesewinsisthecombinationofhighfidelitydetectionatalowertotalcostofownershipinherentinourintelligenceledplatform.
WhilethecomponentsoftheFireEyeplatformhavealwayscoordinatedwiththreatintelligence,thenewFireEyesecurityorchestratorautomatesrepetitivetasksandextendsourintelligencetoothersecuritydevices.Itistheconnectivetissueifyouwillthatenablessinglepaneglassvisibilityintoattacks,andIencourageyoutowatchthevideoaboutitonourwebsite.SecurityorchestratoralsocreatesnewpartnershipopportunitiesasweopenupourplatformwithstandardizedAPIs,sharedthreatintelligenceandsecurityworkflowsthrough.Onthepartnerfrontwecontinuetoaddnewstrategicandtechnologypartnerstoourecosystem.
WetoolthefirststepstoextendourtechnologytothecriticalinfrastructurebypartneringwithParsonsEngineeringandBendentodevelopsecurityforICSnetworks.Wealsoexpandedthenumberofpartnersinourcybersecuritycoalitionwithnewmembers,BluecoatandSplunk,amongothers.TheCSChassubstantiallygrowntoincludetheleadingsecurityvendorsintheindustry.IamalsopleasedtoreportthatourgotomarketpartnershipswithF5andHPcontinuetogenerateincrementalopportunitiesandnewlogobusinessesinthequarter.
We'reabouttoalsolaunchasecondproductwithVisashortly,andtheyhaveincreasedtheresourcesdedicatedtosalesoftheFireEyepoweredsolution.InadditiontheFin6reportwhichwepublishedafewweeksagoisagreatexampleofriskpotentiallossesfacedbythepaymentindustry.Wealsoannouncedanexpansionofourinformationsharingnetworkwherewesharehundredsofthousandsofmalwaresamplesonadailybasisandwhereweimplementnewcertification,marketingincentiveprogramsforourbarpartnersdesignedtomakeiteasierforthemtobuildaprofitablebusinesswithFireEye.
Thesemovesextendthereachofourtechnologyandourthreatintelligence.Allinallwehavebeenverybusysincethebeginningoftheyear,andasaresultweenterQ2withhealthypipelineofnewbusiness.ThisincludesagrowingpipelineforNXEssentials,ourNXplusIPSsolution,whichisdesignedforsmallandmediumenterprises,andwealsoaddresssomeofthegotomarketchallengesthatlimitedEssentialsalesinQ1.Andwe'reencouragedbyearlyindicationsthatthissegmentofthemarketrecognizesthedifferentiationandthevalueofourplatform.
Theplatformextensions,expandedpartnerecosystemandnewthreatintelligenceofferingsallsetusupforaccelerationandgrowthinthesecondhalfoftheyearwhenweintroducethevirtualandcloudMVXproductsenabledbyournewarchitectureofMVXthatwereleasedlastQ4.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page6of21
Aswesaidatanalystday,IbelievetheseproductsaretransformationalforFireEyeandfortheindustry.Builtaroundthedeploymentmodelthatincludesvirtuallow-costintelligencecollectorsateveryingressandegresspoint,MVXatthecoreorinthecloud,andTAPasabuiltinanalyticsengine,thesenewsolutionswilltrulydemonstratethepowerofourintelligenceledplatform.
Therolloutitsplannedoverthenext18monthswiththefirstintelligentsensorsavailableinQ3.MVXwasapurposebuiltdetectiontechnologyforadvancedthreats,andrealworldtestsshowthatMVXdeliverslowertotalcostofownershipwithsuperioradvancedthreatdetectionandfewerfalsepositives.Withthesenewproductswewillhavetheflexibilitytodeliverdetection,responseandanalyticsthroughanonpremiseappliance,inthecloudorasaserviceoranycombinationofthethree.
ForthefirsttimethedetectionandpreventioncapabilitiesofMVXwillbeavailabletocustomersatpricepointsthatallowthemdeployourtechnologytotheveryedgesoftheirnetworks.Wewillprovidemoredetailaswegetclosertolaunch,butIhopeyoucantellhowexcitedIamabouttheincrementalopportunitiesrepresentedbythesenewextensionsofourplatform.
WiththesenewMVXsolutionsaswellasourotherrecentproductannouncements,wecontinuetoexecuteonourvision,todeliverthebestprotectionfromcyberattackstothegreatestnumberoforganizationsworldwide.Webuiltaplatformthatenablesthefutureofsecurityoperationsandtheleadershipteamwiththetalenttorealizeourvisit.IamproudtobeapartofeverythingwehavebuiltatFireEye,andIlookforwardtohelpingtoleadFireEyeforwardaswecontinueonourjourney.
WiththatI'llturnthecallovertoKevinMandiaforsomebriefremarksbeforeweturnitovertoMikeformoredetailonourfinancialresults.Takeitaway,Kevin.
KevinMandia(President):
Dave,thankyouverymuch.
I'mgoingtobeginthisthesamewayasI'mgoingtoendit.IamabsolutelyexcitedandhonoredbytheopportunityIhavetobeCEOofFireEye.Daveisanincredibleleader.Hehasbeeninamentorofmineforfouryears.
Ihavealwaysadmiredhisintensity,hispassionforourmission,hisrespectforouremployeesandhiscommitmenttoourcustomersandworkingtogetherwithDaveandwithourentireleadershipteam,I'meagertocontinuethejourneywearealreadyon.DaveandIsharethesamevisionforFireEye.We'reonajourneytobuildthebestsecuritycompanyintheworld,period.
We'veworkedtogetherfortwoandahalfyears,andthewholetimetheimperativesthere'sbeenalignment.Whatweneedtoaccomplishhasbeeninalignment.Andthegoodnewsiswehaveassembledthetechnology,theintelligenceandtheexpertiseourcustomersneedtodefendthemselvesagainstthemyriadofthreatsfacingcorporationsandgovernmentsaroundtheworld.
Andwhilewehavemadegreatprogress,andIamveryhappywiththeprogresswehavemade,ourmissionisfarfromover.SoI'mgoingtotouchonafewthings.Icouldprobablytalkforfourhours,butIwouldjusttouchonfivethingsthatIthinkareabsolutelyimportantanddeartome.Firstwehavetocontinuetofocusonourinnovation.
ThisisaCompanythatisalwaystransformingitself.Werecognizethatinsecurityyouhavetomovefast,youhavetothinkfast,andspeedcountsbecausethethreatsareeverpressing.We'realwaysgoingtofocusoninnovation.We'realwaysgoingtoevolve.We'realwaysgoingtotransform.AndIknowthedemandsonourengineerswillbesignificant,butIknowwe'reupforthetask.
Wearegoingtocontinuetoextendandstrengthenourcapabilities.Wehavedoneagreatjob
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page7of21
assemblingthepuzzlepiecesrequiredtodefendourcustomers.WestartedwithFireEye.WebroughtinMandia,nPulse,iSIGHTandnowInvotassecurityorchestrationintotheFireEyefamily.
Travis'sleadershiphasbeenamajorreasonforbringingthesecompaniestogether,andwewillseeevengreaterintegrationandcoordinationacrossthesebusinesslineswithhimasPresidentofFireEye.Wewillcontinueonourpathtoprofitability.Theefficienciesintroducedbyadditionalintegration,ourrecenteffortstooptimizeacrossthecompanyandourgeneralshifttowardsameanerleanerFireEyealldemonstrateourcommitmenttoarrivingatprofitabilityquickly.
AndwithMikeleadingoureffortsinhisdualroleasCFO&COO,Iamabsolutelyconfidentinourabilitythatwewillacceleratethisprogress.Wehavetocontinueourinternationalexpansion.
Ihavegottentotraveltheworldoverthelasttwoandahalfyears,andeventheUnitedStateswasoneoftheearliestcountriesattackedincyberspacethisisaworldwideproblem.TherearehotzonesontheInternetinAsia,inEuropeandallacrosstheglobe.
Localpresenceiskeytotrustedcustomerrelationships,andwearegoingtocontinuetoexpandourglobalpresencetomeetagrowingdemandforourproductsandservicesaroundtheworld.Andweneedtoworkwithpartnerstostrengthenourecosystemrelationshipswithourcustomers.FireEyeisanambitiousCompanywithambitiousgoals.
Whatwewanttoachievecannotbedonewithoutstrongpartners,andwearefocusedonestablishingandstrengtheningtheserelationshipsthatwillultimatelyenableustobecomethebestsecurityCompanyintheworld.Iamhonoredbythisopportunity.
Iamexcitedbythisopportunity,butnowIhavetostepbackandturnitovertoMikefortheCFOupdate.
MikeBerry(CFO):
Thankyou,Kevin.Andaverygoodafternoontoeveryoneonthecall.
BeforeweturntotheQ1resultsandourupdatedoutlook,IwanttotakeamomenttothankDavefortheopportunitytoserveasFireEye'sCFOunderhisleadership.Althoughit'sbeenlessthanayearsinceIjoinedFireEye,Ihavelearnedatremendousamountaboutbusiness,leadershipandquitefranklylifeingeneralwhileworkingforDave.
IhavereallyenjoyedourCEOCFOpartnershipandlookforwardtocontinuingtoworkwithDavewhenwetransitiontoournewrolesinmid-June.IalsowanttocongratulateKevinandTravisontheirnewroles,andIappreciatethesupportandconfidencefromtheBoardofDirectorsinaddingtheCOOresponsibilitiestomyrole.
Theseareexcitingtimesasweexpandourplatformandextendourreachintonewmarkets,andIamlookingforwardtoworkingmorecloselywithKevinandTravisaswemoveintothenextchapterofgrowthforFireEye.
Iamalsoveryexcitedtoworkhand-in-handwiththedifferentoperationalteamstohelpdriveourgrowthinitiativeswhilecontinuingthejourneyonourpathtoprofitability.Okay,let'sturntothereviewofthefirstquarterresultsandoursecond-quarterandupdatedfull-year2016outlook.
Iwanttoremindyouthat,exceptforrevenuewhichisaGAAPmetric,Iwillbeusingnon-GAAPmetricstodiscussourfinancialresultsandguidanceranges.Iwillgointomoredetailoneachoftheseitemsbutoverallwewerepleasedwithourstrongbillingresults,theperformanceofoursubscriptionofferingsandthepositiveimpactofourcontinuedfocusoncostoptimization.Importantly,wearemaintainingourfull-yearguidanceforbillings,non-GAAPEPSandcashflowfromoperations.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page8of21
Ournon-GAAPlosspersharewas$0.04betterthanthemidpointofourguidancerangeeventhoughrevenuecameinatthelowendofourrange.Whilecashflowfromoperationswasabitlowerthanexpected,thiswasprimarilyduetosomeone-timeitemsrelatedtopreacquisitionexpensesofiSIGHTandInvotasplusaslightdecreaseinworkingcapital.Billingsfinishedaboveouroutlookat$186millionforayear-over-yeargrowthrateof23%.
OurbillingsperformancereflectedthecontinuedstrengthofoursubscriptionproductsandtheoverallindustrytrendsDavediscussedduringhiscomments.IampleasedtotellyouthatwehavebeenabletointegrateiSightsofferingsintoourgotomarketandsales(motions).BecauseofthissynergywesawseveraldealsthatincludedmultipleproductsincludingiSIGHTwhichresultedinbetterthanexpectedcontributiontoourbillingsinthefirst-quarter.
Lookingatplatformbillingswhichisproductplusproductsubscription,itisameasureofthegrowingadoptionofourplatform.Regardlessofformfactor,wecontinuetoseestrongperformanceinourcloudemail,Endpoint,forensics,FaaSandadvancedthreatintelligenceproducts.Asaresult,productsubscriptionbillingsgrew39%fromQ12015.Additionally,althoughappliancesalesdeclinedoverall,ourrenewalrateremainsstrongatapproximately90%.
Ourtotalaveragecontractlength--whichincludesrenewalsaswellasnewsales--wasapproximately31monthsconsistentwiththe30monthsweexperiencedinthefirstquarter2015.Totalrevenuefinishedatapproximately$168milliona34%increaseversusthefirstquarterof2015.
Theacquisitionscontributedapproximately$7millionin--I'msorry$9millioninrevenue,inproductsubscriptionrevenueinthequarter.Letmedothatagain.Theacquisitionscontributedapproximately$9millioninproductsubscriptionrevenueinthequarter.
Evenifyouexcluderevenuefromthenewacquisitions,revenuestillgrewbynearly27%onayear-over-yearbasisreflectingtheincreasingadoptionofourcloudandsubscriptionproducts.Totalplatformrevenuewhichcomprisesproductandproductsubscriptionrevenuegrewby29%.Productsubscriptionrevenuegrowthof71%morethanoffsetthe16%declineinproductrevenue.
Wesawcustomerpreferenceforcloudandsubscriptionofferingspickupsteaminthesecondhalfof2015,buttheaccelerationinthefirstquarterof2016causedamoredramaticmixshiftthanweexpectedwhenweentered2016.Sincethisisanimportantinflectionpointinourbusinessmodel,letmeexpandonthistrendalittlebit.Asyouknow,wewereexpectingproductbillingsandrevenuetobebasicallyflatonayear-over-yearbasis.
BasedonwherewestoodattheendofFebruaryandmoreimportantlyourpipelineforMarch,weweretrackingclosetoourexpectations.However,duringthelastfewweeksofthequarterwesawafairlysignificantchangeinthecompositionofthefirstquarterproductpipelineasmanyoftheproductheavydealspushedintofuturequarters.
Whileweexpectsomeofthesetransactionstoultimatelycloseasproductdeals,wealsoexpectthatsomewillswitchtoFaaSandothersubscriptionofferings.Whileitisnotuncommontoseechangesinthecompositionofourpipelineinthelastfewweeksofaquarter,theimpactonproductheavydealswasgreaterinthefirstquarterthaninpreviousquarters,andthemixofsubscriptionandtotalbillingswashigherthanweexpectedwhenwefirstissuedourQ1guidance.
Asaresultwefinishedtowardsthelowendofourtotalrevenuerangeeventhoughweoverachievedontotalbillings.Whilethenear-termrevenueimpactofchangesinthepipelinecompositioncanbedifficulttoforecastaswesawinthefirstquarter,webelievethetrendofrecurringsubscriptionsispositiveforusinmanyways.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page9of21
Notonlydowebelievetheinitialdealsizestendtobelargerandthelifetimevalueofacustomerhigher,buttheexpandedpoolofrecurringbusinesscreatesasolidfoundationforfuturegrowth.Okaymovingondowntheincomestatement,totalgrossprofitmarginfinishedat70%inthefirstquarterbasicallyflatonayear-over-yearbasisandconsistentwiththeexpectationsweoutlinedonlastquarter'scall.
Wecontinuetoseestronggrossmarginexpansioninsubscriptionandservicesaswebegantoachieveeconomiesofscalewiththeexpansionofourcustomerbase.Comparedtothefirstquarterof2015thegrossprofitmarginfromsubscriptionandservicesincreasedbyapproximatelytwopercentagepoints.
Onasequentialbasisthedecreasefromthefourth-quarter2015reflectedtheadditionofiSIGHTcostofgoodssoldandnormalfirstquarterincreasesinpayrollexpensesforthreatresearchers,securityanalystsandconsultants.Althoughwewerestillabletoachieveatotalgrossprofitmargininlinewithourguidance,productgrossmarginwasbelowourinternalexpectationsbyabouteightpercentagepoints.
Thisvarianceinproductmarginfromourexpectationswasduetothecombinationoffixedcostsbeingspreadoveralowerappliancesalesvolumeandalsoapproximately$800,000ofone-timecostofgoodsrelatedexpensesmainlyduetohigherthannormalinventorycostadjustmentsandbreakdowns.Weexpectproductmarginstoreboundtotheupper60%rangeinthesecondquarterasproductbillingsandrevenueincreasedsequentially.
AsImentionedearlierwecontinuetoimplementoperatingefficienciestoaccelerateourpathtoprofitability.Evenwiththeadditionofapproximately$8millionofoperatingexpensesfromthetwoacquisitionswewereabletokeepoperatingexpensesbasicallyflattothefourthquarter2015.
Atapproximately$191millionthiswas$7millionto$8millionbelowthe$197millionto$199millionweoutlinedontheFebruarycall.Thebigputsandtakesonasequentialbasisversusthefourthquarter2015wereareductionincommissionswhichwaspartiallyoffsetbytheadditionalcostofoursalesandpartnerkickoffaswellasourassaywhichtookplaceandthefirstquarterthisyear.
TheadditionalcostfromacquisitionswerebalancedwithbettercostManagementacrosstheremainderoftheFireEyebusiness.Allthreeexpenselinessawimprovementonayear-over-yearbasisasmeasuredasapercentofrevenuewithR&DandG&Aimprovingbybetween300and150basispointsrespectivelyandsalesandmarketingimprovingbynearly900basispoints.
AgaintheseamountsincludetheimpactoftwoandahalfmonthsofiSIGHTandtwomonthsofInvotasexpenses.ThecombinationofloweroperatingexpensesthroughoptimizationandafavorableFXadjustmentthatreducedotherexpensesallowedustodelivernon-GAAPlosspershareof$0.47betterthanourexpectedlossof$0.49to$0.53pershare.
TheFXadjustmentreflectedthereevaluationinourcashbalances,heldoverfeestopayoperatingexpensesinourinternationalregions.Turningtothebalancesheet,Idon'tthinkthereareanyrealsurprises,butIwanttowalkyouthroughacoupleofacquisitionrelateditems.Firstwebroughtoverapproximately$21millionindeferredrevenuefromiSIGHTandInvotaswhichshowsupprimarilyincurrentsubscriptionandservicesdeferredrevenue.
Althoughthisamountisnotmaterialtototaldeferredrevenue,ifyourmodelcalculatesbillingsasrevenueplusthechangeindeferredyouwillneedtomakethisadjustmenttoyourfirstquarterbillingnumber.
Excludingtheacquireddeferredrevenueweendedthequarterwithtotaldeferredrevenueof$544millionanincreaseof44%comparedtotheendingbalanceonMarch31,2015.
Themixbetweencurrentandlong-termwasconsistentwiththemixattheendofthefirstquarterof2015
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page10of21
andwiththefourthquarterof2015reflectingstabilityintheaveragecontractlength.Theacquisitionsreducedourcashbalancesbyapproximately$205millionrepresentingthenetcashpurchaseprice,andweendedwiththequarterwithjustover$921millionincashandshort-terminvestments.
Inadditiontotheadjustmentsindeferredrevenueandcashdeclinedrelatingtothepurchaseprice,werecordedaccruedcompensationofapproximately$35millionforthecashportionoftheiSIGHTearnout.WeendedthequarterwithbillingsbaseDSOsof69days.
Thisisnearthemidpointofourtargetedrangeof65to75daysbutisalittlehigherthanweexpectedinthefirstquarterreflectinglinearitywithinthequarter.Slightlyhighercashpaymentsofaccruedexpensesplusthepaymentofapproximately$8millionofiSight'sandInvotas'dealrelatedexpensesimpactedouroperatingcashflowsinthequarter,andwefinishedatanegative$22.5million.Pleasenotethattheseexpensesaredifferentthantheoperatingexpenseswejustdiscussed.
TheseexpensesrepresentiSIGHTandInvotas'bankingandlegalfeesassociatedwiththetransaction.TheywereincurredbeforetheacquisitionclosedandthusarenotincludedintheFireEyeP&L.However,fromanaccountingperspectivetheseexpenseswereclassifiedasFireEyeliabilitieswhenthefinancialstatementswereconsolidatedinsteadofinclusionaspartofthepurchaseprice.
Asaresultwewererequiredtoshowthepaymentasanoutflowintheoperatingsectionofthecashflowstatementratherthantheinvestingsection.Sothatyoucanreadilyidentifythiscashpayment,wehavebrokenitoutonaseparatelineiteminthecashflowstatement.Excludingthesedealrelatedexpenses,operatingcashflowwouldhavebeenjustunder$15millionandmodestlybelowtherangewediscussedonourFebruarycall.
Itisalwayshardtoforecastquarterlycashflowspreciselyduetothetimingofinflowsandoutflowsandchangestoworkingcapital,soIencourageyoutofocusontheannualnumberinstead.Forthefullyearwestillexpecttogenerateoperatingcashflowsof$75millionfortheyeargiveortake$5million.
Okay.Beforemovingontotheoutlookfor2016,Iwanttodiscusstheimpactoftheongoingcostoptimizationactivitieswepreviewedatanalystday.Weareseriously--weareseriousaboutacceleratingourpathtoprofitability,andwecontinuetolookatoverlappingfunctions,infrastructureinvestmentsanddiscretionaryspendingtoensurethatweareoptimizingourcoststructurewhilestillfundingourgrowthinitiatives.
Tothatendweimplementedseveralcostsavingsinitiativesinthefirstandsecondquartersincludinganetreductionofapproximately200existingandplannedpositionedCompany-wide.Wealsoreduceddiscretionarythroughoutthecompany,andthesesavingsarealreadyflowingintoouroperatingexpenseperformanceforthefirstquarter.
Atanalystdayweprojectedouroptimizationactivitieswouldreduceour2016operatingexpensesbyapproximately$8million$to$10millionprimarilyinthesecondhalfoftheyear.IamhappytosaythatthroughthegreatworkofeveryoneatFireEye,wehaveexceededthoseprojectionsandnowexpecttheoptimizationactivitiestoyieldmorethan$30millioninrealizedsavingsduring2016includingtheapproximately$7millionofsavingsalreadyrealizedinthefirstquarter.
Thesesavingsarereflectedinoursecond-quarterandupdated2016guidanceranges.Wewillcontinuetofundourgrowthinitiatives,butthisreductionfromourpreviouslyprovidedexpenseoutlookwillbeakeyfactorinourdrivetowardsprofitability.Theseactivitiesresultedinarestructuringchargeof$1.7millioninthefirstquarter,andweareexpectingadditionalrestructuringchargesofatleast$3millioninthesecondquarterof2016.
Withthatdiscussionasabackground,let'smoveontotherevisedoutlookfor2016.Ourbillingsrange
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page11of21
remainsthesameat$975millionto$1.055billion,butwenowexpectahighermixofsubscriptionsthanwedidinFebruary.Sincebillingshelpdrivecashflow,ourfull-yearcashflowprojectionsalsoremainthesameat$70millionto$80million.
Movingontorevenue,wearerevisingouroutlookdownwardbyabout4%or$35millionatthemidpointtoreflectlowerproductbillingswhicharelargelyrecognizedinperiod.Wenowexpect2016totalrevenuetobebetween$780millionand$810millionorayear-over-yeargrowthrateof25%to30%.
Withintherevenuelinewecurrentlyexpect2016platformrevenuetoincreaseover2015byapproximately25%to30%drivenbycontinuedstronggrowthinsubscriptionandsupportrevenueandadeclineinproductrevenueof10%to12%.
Theimpactoflowerproductandtotalrevenueontheincomestatementisoffsetbyincreasedcostsavingsfromoptimization,andthuswearemaintainingourfull-yearEPSrangeforalossof$1.20to$1.27.Thisincludesnetinterestandotherexpenseofapproximately$10millionandaprovisionfortaxesof$6millionto$7million.
Wecontinuetoexpectfull-yeargrossprofitmarginsofabout73%withproductgrossmarginsinthehigh60%rangeandservicesmarginsinthemid70%range.
Totaloperatingexpensesareexpectedtobebetween$765millionand$770millionoranincreaseofabout$75millionatthemidpointcomparedto2015.Forthefullyear2016wecurrentlyexpectthefollowingasapercentageoftotalrevenue,R&Dat30%to32%,salesandmarketing52%to54%andG&A13%to14%.Thisbringsfull-yearoperatingmarginstonegative22%tonegative24%.
Westillexpecttoexitthefourthquarterof2016withoperatingincomemarginsofapproximatelynegative10%.Okay,let'sshiftourguidancetothesecondquarter.Wecurrentlyexpecttotalbillingstobebetween$200millionand$215millionforagrowthrateof12%to21%.
Weexpecttotalrevenuetobebetween$178millionand$185millionorayear-over-yeargrowthrateof22%to26%.Embeddedinthisguidanceisayear-over-yeardecreaseinproductrevenueofabout15%reflectingtrendsincustomer'sbuyingbehavioraswellasthegrowoverimpactofthelargeproductdealsoneyearago.Weexpecttotalgrossmargintobeintherangeof70%to71%andtotaloperatingexpensesbetween$188millionand$190millionaswecontinuetorealizethebenefitsofourcostoptimizationefforts.
Onapercentageoftotalrevenueweexpectoperatingexpensestobe33%to34%forR&D,salesandmarketingat55%to57%andG&Aat14%to15%.Thisresultsinoperatingmarginbetweennegative31%andnegative33%andanon-GAAPEPSlosspersharebetween$0.38and$0.40.WeexpectoperatingcashflowinthesecondquartertobenegativelargelyreflectingtheseasonalityasyoubeginwithalowerARbalancefromfirst-quarterbillingsandthefirsthalfinterestpaymentonourconvertibledebt.Rememberthatsincethemajorityofcollectionswithinaquarterarefromthepriorquarter'sbillings,cashflowlags--cashflowseasonalitylagsbillingseasonalitybyaquarter.
Thismeansthatthesecondquarteroperatingcashflowistypicallythelowestoftheyear.Cashflowisprojectedtoturnpositiveinthesecondhalfof2016asthesequentialgrowthinbillingsisexpectedtobewellabovetheprojectedsequentialgrowthincashexpenses.
AsImentionedbeforeitcanbedifficulttoforecastcashflowforaquarterwithaccuracyduetotimingofinflowsandoutflows,butthisisaveryhigh-levelwaytothinkaboutourquarterlycashflowpatterns.
Theimportantnumberhereistheannualguidanceof$70millionto$80million.BeforeIconcludeIwanttomakeafewcommentsaboutthesecondhalfof2016guidanceimpliedbythenetofoursecond-
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page12of21
quarterandannualguidanceranges.Fromatoplineperspectiveourlinksguidanceisconsistentwithourhistoricalseason--seasonalpatternwhichhasbeenabout35%to40%ofbillingsinthefirsthalfoftheyearand60%to65%inthesecondhalf.Wehaveseveralgoodreasonstobelievethepatternwillbethesamefor2016.OurpipelineofbusinessremainstrongwithagrowingcontributionfrominternationalmarketsaswellasourpartnershipswithF5,HP,Visaandothers.Wearewellpositionedagainstthefundamentalmarkettrendsincludingthetrendfromself-servicetoas-a-serviceandthemigrationtoprivateandpublicclouds.
OurinvestmentsinFaaSandcloudmeansthatthesetrendsrepresentabillingstailwindratherthanaheadwindforus.Additionally,thelaunchofthenewMVXproductsDavediscussedrepresentsanincrementalopportunitywithbothnewandexistingcustomers.Weareveryexcitedaboutthepotentialfortheseproducts.
Asyouflowtheoperatingexpenseguidelines--guidancethroughyourmodels,youwillseewefeelverygoodaboutourabilitytorealizeoperatingleverage.AswesaidatanalystdayIamconfidentwehavethecoststructuretosupportour2016growthtargets,andasaresultweexpectthemajorityofthetoplinegrowthin2016toflowdirectlytocashflowandoperatingmargin.
Finally,andImeanitthistime,finally,IwanttogiveyouaheadsupthataspartofourcostoptimizationeffortswearelookingatseveraloptionstoconsolidateourfivebuildingshereinMalpitasintoonebuildingsometimebeforetheseleasesexpireattheendof2017.Wearestillevaluatingouroptionsbutbelievethatafacilityconsolidationwouldcreateabetterworkingenvironmentforouremployeesandgiveusabettercoststructureovertime.
Asoftodaywestillexpectourcapitalexpenditurestobeapproximately$35millionin2016.Inconclusion,Iwillreiteratethatoverallwewerepleasedwithourstrongbillingresults,theperformanceofoursubscriptionofferingsandthepositiveimpactofcostoptimizationinourP&Landoperatingcashflow.
WeviewtheincreasedmixofproductsubscriptionsinourbillingsandrevenueasapositiveforthefutureforallthereasonsDaveandKevindiscussed.Andwelookforwardtorealizingthelong-termbenefits.IwillnowturnthecallbacktoDave.
DaveDeWalt (Chairman&CEO):
Okay,everybody.Thankyouverymuch,andaswesawfromMike'sreportandKevin'sandmineQ1resultsreallydemonstrateourabilitytoadaptparticularlyinthisevolvingmarketdynamicandnewthreatenvironmentandstilldeliverthetoplinebillingsgrowthandbottomlineEPS,justahugecredittotheFireEyeemployees.I'mveryproudofyouall.Thankyouforyourhardworkandyourdedication.
Wehavealotofopportunitiesinfrontofus.Ithinkthefutureisincrediblybright.Wehavegotagreatcreditroadmap.Wehavegotagreatteam.We'vegotagreatintelligenceledofferingmodel,andIreallythinkthefutureisgoingtobemuchbetteraswegoforward.
SowiththatIwillturnitbackovertoOperatorforquestions,andwecanopenuptheline.Operator?
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
ShaulEyal,Oppenheimer&Co.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page13of21
ShaulEyal(Analyst-Oppenheimer&Co.):
WithoutadoubtFaaS,goodquarter,certainlybecomingagoodgrowthdriver.DidyouthinkthatcustomersoptingfortheFaaSratherthantheproductcouldbebehindmaybetheslightlylowerrevenueforthequarter?Isthatthecase?
DaveDeWalt (Chairman&CEO):
DaveDeWalthere.Absolutely.Wetalkedaboutthatalittlebit.YouhavethesetwomajorsecuritydriversintheindustrythatIthinkreallyhasFireEyewellpositioned.Numberoneisyouhavethispremisetocloudsortoftransformationthat'soccurring.Wecontinuetoseetheacceleration.
Ialludedinmyscriptwehadourlargestsingletransactioncomefromemailcloudover100,000mailboxes.We'realsoseeingclientswanttogofromaself-serviceormanageitthemselvestoanas-a-service,andwefitreallywellinthatmodel.Weseeacceleratedproductsubscriptionsinthatareaofourplatform,andIthinkwearethelargestandfastest-growingCompanyforSAASorsecuritiesasaserviceandcloudsecurity,sowearedoingverywellinthat,butwhatdoesthatdo?
Itdrivesmoreproductsubscriptionandmorebillingsinthatareaversusrevenueinperiod,andhencewhyweconfirmthebillingsforthefullyearbuthadtolowertherevenueabit.Soabsolutelytoyourquestion.It'sdrivingit,andhonestlyIthinkwenowaccountforitbutatthesametimethisisthefasttransformationacrossthelotofapplicationsandworkloadmovingtothecloud,andIthinkit'saprettyfasttransformationtomanagedservicemodelforsecurityaswell.WetalkedalotaboutourFaaSofferingsandwhatwe'redoinginthatarea,andtheycontinuetobethebiggestdriverofthecompany'sgrowth.
Thankyou.Goodquestion.
Operator :
SterlingAuty,JPMorgan
SterlingAuty(Analyst-JPMorgan):
FirstcongratulationstoKevin,MikeandtoTyler.Dave,wanttoaskthequestionIthinkthat'sinalotofpeople'smind.Iknowyougavesomeexplanationforthetimingofwhythechange.I'mgoingtoaskitinabluntfashion.Ithinkthere'sanumberofpeoplethatarereadingintothisthatperhapsyoutriedtosellthecompany,itdidn'thappen,andthenyoudecidedtomakethisshift.Canyoujustatsomecolortothatandtowhythetiming?
DaveDeWalt (Chairman&CEO):
Suresterling.I'llbebluntrightback.YouknowIthinkwehavecomealongway,I'llstartoutbysayingherewithFireEye.Ican'ttellyouhowproudIam.Westartedwithreallyjustasmallapplianceandgrewthisbusiness.
We'rewellontrackfor$1billionhere.OneofmygoalsasafourthtimearoundhereasaCEO,now17yearsduringthis,30yearsinIT,fouryearshereatFireEye.IwastogetthecompanyIPOdandgetthecompanytoabillion-dollartrack,andalotofthoseaccomplishmentswehavebeenabletoachievehereatthecompany.Ithinkwe'reassemblingthemostpowerfulcybersecurityCompanyintheworld.Itjustis.Firewallvendorsandantivirusvendorsreallyaren'tnearlyascapableandimportantandstrategicasthisCompanyisparticularlyasMandiantandiSIGHTcapabilitieswithdetectioncapabilities.
Reallywhatwe'vegottodonowisputitalltogether.Partofmygoalherewastoassemblethestrongest
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page14of21
teamintheindustry.IthinkKevinMandiaisthatindividual.Hasmany,manyyearsincybersecurity,mostofhiscareer.
NineyearsbuildingMandiant,noteasytobuildaCompanyfromzeroto$100millioninrevenue,noteasytobuildthereputationandbrandthatMandianthad.TravisReese,hiscohortandcofounder,nowbeingpresidentofthecompany.MikeBerryaschiefoperatingofficer,measanexecutiveandemployeeofthecompanyaschairman.EnriqueSalem,asyoumightreadinthepressreleasesmovingtotheLIDorleadindependentrolewithEnrique'sbackgroundwithSymantec,mybackgroundwithMcAfeeandFireEye,Kevin's,Travis',Mike'swehavereallyputtogetheraManagementteamofthefuture,aboardofdirectorsofthefuture.
Itreallyisagoodwindow.Whenisagoodwindowtodothis?Probablyeitherattheannualshareholdermeetingwhichisonceayearormaybeattheendofafiscalyear.Sothiswasgoodtimingforusall.
KevinhasbeenheretwoandahalfyearsnowwithFireEyeaspartofthecompany.Heknowsandintegratedwitheverythingwearedoing,andIthinkthisreallysetsustothefuture.Iamexcitedaboutmyrolesgoingforwardherewiththecompany.Iamexcitedabouthowfarthecompanyhascome.
ButIreallybelievethebestisyettocomeforthecompanyaswegettotheotherside,andwereallyshowtheworldwhatwecandoherewithallthepiecesthisCompanyhascreated.Goodquestion,Sterling.Thanksforaskingthat.
Operator :
GurTalpaz,Stifel.
GurT alpaz (Analyst-StifelNicolaus):
Firstoff,Dave,thanksforallyourhelpoverthepastfewyears,andKevinandMike,congratulationonthepromotion,Travisaswell.GivingthegrowingemphasishereonasaservicemodelscanyoutalkabouttheresponseyouhavegottenforFireEyeasaservice2.0.Ourcustomerswantingtofeedothersecurityproductalertsintoyoursolution,andthenperhapstalkaboutyourgrowingwellhereasasecurityorchestrator.Thankyou.
DaveDeWalt (Chairman&CEO):
Yes,I'lltakethefirstpart.Maybe,Kevin,youhavealotofpassionforsecurityautomationandorchestrationandhelpusleadtheInvotasmoves.Ireallyseethefutureofsecurityas-a-servicemodel.Whenyoulookatalltheindustriesarounduswhetherit'shelpdeskwithwhatservicenowhasdoneorCRMorHRas-a-servicemodelsarethefuture.FireEyeasaservicesreallydevelopingwell.We'vegottheproduct,we'vegotthecapabilities.Wehavenowgotacompletesetofdeliverynowacrosstheworld,andnowwhatweareabletodoisreallyautomatesomeofthecapabilitiesand,Kevin,maybejustspendasecond.HowimportantisiSIGHT,Invotastoallofthisandwhatdoyousee?
KevinMandia(President):
Absolutely,peoplewanttobeabletoleveragetheirpriorspendwhenweshowupandFaaSasanoverlay.Ifpeoplewanttosendalertstous,whattheywanttotapintoisourabilitytoapplyanalytics,applythreatdata,applyourexpertise,applydynamicanalysisof(excueball)isthatgoodorbadornot.Thisisallnerdylanguageforpeoplewantintegrationandefficacyandsimplicity.
AndasweexpandthisFireEyesecurityorchestrationplatform,that'sexactlywhatwe'redoing.Wearesayinggiveustheevents,andwe'regoingtotellyouwhichonesarebad,andwe'regoingtodothatwiththosethreethingsanalytics,machinelearningandthatthreatdata.That'sthefuturethat'sa
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page15of21
naturalprogressionofwhatcybersecurityoperationsisgoingtobe,andwewantogetoutinfrontofthat.
DaveDeWalt (Chairman&CEO):
Thankyouverymuch.Nextquestionplease.
Operator :
GabrielaBorges,GoldmanSachs.
GabrielaBorges (Analyst-GoldmanSachs):
Thankssomuchfortakingmyquestion.Mike,justaquickone.Youmentionedhowit'sdifficultto(sill)coststhemixshiftbetweenproductandsubscriptionanygivenquarter.Justcuriousasyoulookouttothefull-yearguidancewhatyourassumptionsareintermsofthattransitionoccurringandmaybejustwhenthecustomerischoosingbetweentakingyourproductupfrontsubscriptionwhataresomeoftheeconomicsfactorsthatthey'relookingatwhenmakingthatdecision?Thankyou.
MikeBerry(CFO):
Sure,I'llanswerthelastonefirst.Therearecertainlyeconomics,andtheydependondotheyhavecapitalbudget,dotheyhaveoperatingbudgetthat'sabigpieceofit.Alotofthattoalsodependsonwhethertheycanrunitthemselves,ordotheyneedustorunit.Sothere'sbothIthinkafinancialandanoperatingpieceofthat.
So,Gabriela,whatweincludedintheguidanceforthefullyearisproductrevenuedowncallitaround10%or12%andreallythedifferencebetweenthatandwhatwethoughtwouldbeflatisreallyagainthatshiftthatweareseeing,andasIsaidinmypreparedremarksweviewthislong-termasagoodthing.Wecontinuetothinkthatthosedealsareactuallylargeraswellashavehigherlong-termvalueforthecustomer.
Sowedoexpectthattocontinue.Andthenandwehaven'ttalkedabout2017yet,butaswegothroughtherestoftheyeartherolloutofthecloudandthevirtualsolutionforMVXisgoingtoaccelerateitaswell.Aswelookintonextyear,we'resuperexcitedabouttheabilitytodriveincrementalbillingsfromthatandexpandintoanincrementalTAM.Thosewillalsobesubscriptionlikelyaswell.Hopethathelped.
Operator :
(KenDelaney),Evercore.
KenDelaney(Analyst-Evercore):
Thanksfortakingmyquestion.Justfollowinguponthemixshiftinyourbusiness.Iwaswonderingdirectionallyhowshouldwethinkaboutcashflowgrowthin2017andbeyond.Let'sassumethatyourbillingsareupversus2016,andthetrendsyou'reseeingrightnowremainasexpected.
MikeBerry(CFO):
Ken,thisisMike.IthinkoneofthethingsweincludedintheslidesisareconciliationofourQ1cashflow.SohowIwouldlookatthatisIwouldlookatbillingsgrowth,assumethatcertainlysomepercentageofthatisgoingtoconverttocash.Itvariesbyquarterdependingonthosecollectioncycles,andlinearityplaysabigroleinthat.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page16of21
IthinkIsaidanalystdaythatweexpectedsomewherebetween90%and95%ofbillingstypicallytoconverttocollections,andthenwhenyoutakealookatOpExcertainlyhaven'tguidedfor2017yet,butaswecontinuedownthatpathtoprofitabilitywewillbemindfuloftheincrementaldollarsthatwespend.Soasyoumodelyourcashflow,IwouldfocusonbillingsandthenIwouldfocusonnon-GAAPoperatingexpensesasthekeydrivers.
KenDelaney(Analyst-Evercore):
Okaygreat.Thankyouverymuch.
Operator :
GreggMoskowitz,CowenandCompany.
GreggMoskowitz (Analyst-CowenandCompany):
Thanksverymuchandgoodafternoon,everyone.JustwonderingifyoucouldelaborateonthegotomarketchallengesaroundEssentialsinQ1andwhatyou'vedonetohopefullyfixthatgoingforward.
DaveDeWalt (Chairman&CEO):
Sure,Gregg,DaveDeWalthere.Acouplethingsessentialandourpowerlaunchwasveryrecent,soweweren'texpectingawholelotforQ1.WeannouncedthatreallylateJanuaryearlyFebruaryaswewentintooursaleskickoffandtrainingevent.SubsequentlywetrainedalotofthepartnersinQ1,gotthemotivationsandrewardforvalueprogramsthatwe'vehad.
Wehavestartedtoseesomepickup.WeareencouragedbywhatweareseeingherewiththeEssentialslinenowinQ2.Itjusttakesalittlebitoftime.Wealwayslikesomethingtohappenprettyquickly.Obviouslysegmentationlikethattakesabitoftime.
Havingsaidthat,somethingIalludedtoGreggthatwearelaunchinghereinthesecondhalfisimportanttofurthersegmentationofourNXproductlineandthat'sbothwithavirtualsensoraswellasacloudsensor.SoyouwillseeevenmoreproductsubscriptionandgrowthopportunityforthecompanyaswemoveintotheMVXeverywhere,andwe'rerightontrackforthat.WethinkduringtheQ3quarterwecandelivermostofthatproductlineatleastinformfactorsofvirtualandthencloudinthefourthquarter.
Nicepartisitreallyletsusgetintotheedgesmore,getsintodownmarketmore,expandourtotaladdressablemarket,sothecombinationofthehardwaresegmentationwithEssentialsinpowerfurthersegmentationwassoftwareandcloudreallygivesusaprettywidescalemodelforourfrontenddetectiontools.Goodquestion.Thankyou.
Operator :
GrayPowell,WellsFargoSecurities.
GrayPowell(Analyst-WellsFargoSecurities,LLC):
Ihaveamulti-partquestionhere.Hopefullyit'snottoocomplicated.Butcanyouhelpusthinkthroughthedynamicsofanexistingcustomerrefresh,specificallyforcustomerscallitfouryearsold,theycomeuptorefreshanappliance.Aretheytypicallybuyingsomethingthat'smoreexpensivetodayversusthatinitialpurchase?Andthenhowdoesthatrefreshlookifacustomerreplacesanoldappliancewithanewapplianceversusreplacingthatoldappliancewithacloudformfactor?Thanks.
DaveDeWalt (Chairman&CEO):
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page17of21
Sure,Gray.Thismighttakeawhile.Iwillmakeabrief.Certainlythereisalotofflexibilityforourclientbase.Ithinkthegoodnewsthatweareseeingistherenewalratesandtheadoption,andcross-sellinghasneverbeenstrongerforevenourflagshipNXproduct.
Therenewalrateswerefantasticinthequarter.Theycontinuetogrow.OneofthelimitationsthatwehavehadwiththatflagshipNXproductisreallyitgoesintothebiggestegresspointsthatarethedatacenteregresspoints,andwehaveonlyhadhardwareforthosebigegresspoints.Sothefirstsegmentationwithessentialsisanoptionforpeople.Theycertainlycanrenewthequoteunquoteclassicversiontoapowereditionwhichwouldbemore.
Theycanalsoaddonsomesubscriptionstotheirappliance,andnowgoingforwardtheywillbeabletoupgradethosecapabilitiestobackendclusterproductaswellasavirtualsensorproduct.Long-windedwayofsayingthere'salotofoptionsforourclientstorefresh.
Ithinkthegoodnewsistheyareverysatisfiedwithourproducts.Theyarerenewingthoseproducts,andweareseeingalotofcrosssellopportunitywhenwedotherenewal.Soithasgivenusmoreandmoreoptionsaswetalktoouralmost5000customersnowwithwhatwe'redoing.Thankyou.
Operator :
JonathanHo,WilliamBlair.
JonathanHo (Analyst-WilliamBlair&Company):
Ijustwantedtogetalittlebitofsensearoundyourcommentsregardinglinearityforthequarter,andisthereanythingthatweshouldreadintointermsofashiftmoretoservicesattheendofthequarter?Doesthispotentiallyindicatesomeslowingorsofteningintermsofspend,orwasthatmoreoperationaldecisionstoswitchmoretothesubscriptions?
MikeBerry(CFO):
Jonathan,it'sMikeBerry.Iwouldn'treadanythingintotheoveralldemandenvironmentQ1thecalendaryearalwaysisrelativelyback-endloaded.PeopledoalltheirbudgetingandstuffinJanuary.Itwasn'tsomethingthatwedidnotexpect.Candidlyfromaserviceorproductperspectiveit'snotlikeoneofthosearedifferentfromalinearityperspective.It'sreallyallwrappedupintothatcustomerdecision-makingprocess.
Operator :
RobBreza,Wunderlich.
RobBreza(Analyst-WunderlichSecurities):
Asyouarenowsteppingintothenewroleifyoucouldtalkabouthowyouthinkaboutrestructuringthinkingaboutplacingpeopleintheirrespectivepositions,howdoyouthinkabout12,18monthsfromnowwheredoyouthinkthestructureofpeopleandplacementsare?Thanks.
KevinMandia(President):
Well,Igetthejobinamonthand15days,soI'llprobablyaddressalotofthatthen.ButinfairnessIalsowanttositdownwithmyleadershipteam,andthisCompanyisgoingtocontinuallyevolve.ThestrengthsthatIbringisIknowourmarketplacereallywell.I'vetraveledtheworld.Idoover100,000milesonairplaneseveryyear.
Idonothundredsbutprobablyinthelastfewyearsthousandsofcustomervisits.Whatbasicallyitcomes
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page18of21
downtoiswhatdoesthemarketneed?Wearegoingtoprovidethatasfastaswecan,continuetoevolveasmarketneedsevolve,butwe'regoingtostaywithinourcorecompetenceaswellastowhatwe'regoodat.
Weknowhowtofindevilonnetworks.We'vegottofindevileverywhereinthecloud,onmobile,acrossenterprisesaregettingmoremultinational.Sowe'regoingtoincreasethatreach.RightnowIdon'tlikethewordrestructure.We'vegottheteaminplace.I'mexcitedabouttheteamwehave.
DaveandIhaveworkedtogetherreallyaboutfouryears.Heassembledthisteam.Wehavehadalike-mindedvision.I'vebeenexcitedaboutthevisionallalong.Givemesometime,butattheendoftheday,restructureisthewrongword,butwewillcontinuetoevolveanddowhatwe'vegottodotobuildwhatthemarketneeds.
Operator :
MelissaGorham,MorganStanley.
MelissaGorham(Analyst-MorganStanley):
Thanksfortakingmyquestionandcongratseveryoneontheirnewroles.Mike,IjustwantedtoparticularlyaddressyournewroleasCOO.I'mjustwonderingifyoucouldmaybetalkaboutwhyitmadesensetocarve-outtheCOOroleandputitalongsideyourresponsibilities,andthenwhatareyourtopprioritiesasyouaretakingonthatposition?
MikeBerry(CFO):
Sure,Iamhappytotakethat,althoughDavemaywanttojumpinaswell.Aswelooktogoingforwardandwiththechangesthatwehaveannouncedtoday,oneofthethingsthatwehave,Melissa,iswe'retryingtospendalotoftimearoundourdifferentoperationsgroupsbeatalltheinfrastructurethatsupportsthebusiness,alltheplanningandoperations.Andwe'retryingtocallitblowthroughsomeofthosesilosandreallyhaveaconsolidatedviewofthebusiness.
Sothat'sreallyinyourlastquestionmygoalistobringtoKevinandDaveandtherestoftheManagementteamaverynimbleandcost-effectivewaytodeliverourproducts,tomakesurethatweunderstandlookingforwardnotjustlookingbackbutlookingforwardwhatweseeinthebusinessfrompipelineallthedemandgenandeverythingandthenreallymakesurewesetupthatstructuresothatourpeoplecansucceed.Iamreallyexcitedaboutit.
It'ssomethingthatagain,asKevinsaid,Iwon'tgetthatroleforabout40days,soIgetalittlebitoftimeaftergoingtochatwithallofyoufolksforthenextfiveweeks.ButIthinkaswegothrough2016IamgoingtofocusonthegoalsthatIjustwentthrough.
DaveDeWalt (Chairman&CEO):
Melissa,I'lljustaddon.ThisisDaveDeWalt'svoice.Mikehasreallyprovenhimselfsincehehascometothecompany.Hopefullyyouseethatasyouinteractwithhim,veryhonest,veryhard-working,veryhumbleman.Hehaslearnedouroperationshere.Hehaslearnedthebusiness.
Iwaslisteningacutelytouscustomeranswersaswell,andheislearningtheproductsrealwell.ThegreatpartaboutwhatwehavewithMikeiswecanreallyunifyouroperationsunderhim.Wecanstreamlinethoseoperations,andcandidlywe'vegotalotofopportunitytooptimizehereatthecompany.WehavebeenaCompanyfocusedaspartofourjourneyongrowthandreallytakingmarketshare.
WealsocanbalancethatwithbeingastrongefficienciesCompanyandoptimizeourinfrastructureatthe
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page19of21
sametime.ThenextphaseweareinIthinkwe'vegotgreatleadershipwithKevinandvision.Ithinkwe'vegotgreatleadershipwithMikeandTravisinoperations.That'stheplatformyouwanttolookatifyouareachairmanlikemenow.AndonelastcommentKevinandIhaveworkedtogetheraschairmanandCEObeforewithMandiant,greattobebackinthatcapabilityandwe'vehadquiteafewyearsworkingtogether.
Ithinkwewillbeprettyseamlessaswegoforward.Ithinkthewholeteamisexcitedaboutsomeofthenewthingsthatweareembarkingon.Thanks,MelissaGoodquestion.
Operator :
BrentThil,UBS.
BrentT hill(Analyst-UBS):
Justontheproductrevenue.Youareseeingatrendthatmanyothersaren'tseeing,anditseemslikeaconsciousinitiativetodelivermoreas-a-serviceandsubscription,butjustcurioushowyouarethinkingaboutthisevenfurtherout.Areproductsreallygoingtobeasrelevant,ordoyoufeellikeyou'rejustgoingtomakethepivotalotmoretoservices,andifso,Dave,doyoufeellikeyou'releavingthesalesteamkindofintherighttrain,therightcompplanallthosethingsyouhavebeendoingforsolonggettingtheseguysorientedaroundtheshift.Justtryingtounderstandthedynamicshere.
DaveDeWalt (Chairman&CEO):
Sure,Brent,thisasDave.Iamabigbelieverthatweareseeingwearejustinthefirstandsecondmaybethirdinningofasignificanttransformationofthesecurityindustry.Iamjustconvinced.IknowKevinseesitthesameway.
Traditionaldefenseindepthontheperimeterwithnow6,7,8,10layersofdefenseisreallychanging.Wearenowseeingthoseworkloadcyclesmovetothecloud.We'reseeingtheperimeterchangeddramatically.What'straditionalegresspointsforthefirewallandanIPSandaDLPsolution,APTsolutionischanging.It'sjustafact.It'sjustamatteroftimeforallthoseothercompaniestofeelthesamechangeIamseeing.
Isjustafactfirewallswon'tsellonpremiseliketheyaretoday.Emailsgateways,webgateways,theyarejustchanging.Alotofourconsumerizationmodelsareforcingthat.Whatevercompanygetstotheothersideandhasacloudandsecurityasaservicemodelwillwinthenextgame.
AndsoIbelievethatthisCompanyhasputthosepiecesinplace.Whenyoulookatourtrends,yes,theyareawayfromproduct.Theyareconsciouslyalwaysfromproduct.Webuiltalmosteveryformfactorthatwehavedevelopedfrombeginningnowinvirtualandcloudformfactorsinsubscriptionsandasaservice.Sothat'sthepowerIbelieveofthenextgenerationCompany,andIthinkalotofCSOSandprofessionalsaroundtheworldareinundatedwithalerts.They'reinundatedwithvendors.TheaverageCompanygetsmillionsofalertsofday,hashundredsofsecurityvendorsisdrowninginthesethings,andthey'restillgettingbreachedallthetime.
Sohowdowesolvethenextgenerationthing?IamabigbelieverthatthisCompanyisputtingthosepiecesinplace.Ireallybelievemostofthoseothervendorsthatyoualltrackaren't.IbelievethisCompanyisfaraheadoftheminthethinkingofthenextgeneration.
Yes,we'reinthemiddleofatransformationaswegofromproducttoproductsubscriptionfrompremisetocloudbutIthinkweareracingtoitmuchfasterthananybodyelseisdoing.Kevindowanttocomment,youseethisthingasmuchasIdo.
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page20of21
KevinMandia(President):
Yes,thishasbeenatrend,Brent.Inmyopinionit'sbeenhappeningforyears.Wesawfirewallscameout.Theycouldn'tdo(dpacket)inspectionsoyouhadIDS,andthatmissedeverythingallthetime.Oryouhadtocreaterulesetsandmanagethousandsofrules.AndthenFireEyecreatesthisvirtualexecutionenginethatcoulddetectwithhighfidelitythatwastrendonthenetwork.
Peoplegetsims,becamebitbucketsforbillionsofalerts.Theyweregreatcompliancedashboards,butpeoplewantedtogofromsimtofix,andyou'reseeingorchestrationmove.Andanothertrendispeoplecan'tfindtheexpertise.Theycan'tfindthepeople.Theycan'tmanagethethreatintelligence.We'vegotthepiecestotakeallthesealertsandgofromalerttofixwiththeplatformwe'rebuilding,thethreatintelligencethatwehave,orthepeopleiffolksdon'thaveaninternalteam,wecanapplytheoperatorsnecessarytodefendnetworks.ThatisthetrendIhaveseen.
Nobodywantstowalkdownthehallwayandhuganappliancethat'sgotablinkinglightonit.Theywanttobeabletohitabuttonandsaywhatisthisblinkinglightfor.Whatisthecontextbehindit,anddoweneedhelpornot?Andhowdoweprioritizeit?Thosearethethings.
BrentT hill(Analyst-UBS):
Kevin,Iappreciatethatview.Iguessjustfromwhatwehaveseentheproductcomponentmisswherethestreetnumbersareat.Iguessjustfromaperspectiveoftheguidancenow,andIknowMikehasleftmuchmoreconservativeguidanceonproductforthesecondquarter,butdoyoufeelnowthatyouhavedeemphasizethatalotinthepipelineatleastinthestreetnumbersthatnumberismoreaccuratelysetnowversuswhatwehavehadinthepast?
MikeBerry(CFO):
Hey,Brent,it'sMike.Aswehavetalkedabout,wefeltgoodgoingintotheyearintermsofwherewethoughtwewere.Wecontinuetoseethatevolution.WhatwehavedoneforQ2aswehavelookedatthepipeline.Wehavespentalotoftimewiththesalesteam,theproductteam,understandingthenewlaunches,what'sinthere.Sowecertainlyhopethatwesentinanappropriatenumber.We'vedonethebestwecanwiththeinformationthatwehaveinfrontofusatthistime.
KatePatterson (InvestorRelations):
Justonemorequestionplease.
Operator :
SaketKalia,Barclays.
SaketKalia(Analyst-BarclaysCapital):
Congratstoallofyouonthechanges.OnequestionforyouMike,Ithinkit'sanimportantone,butbasedonthemixshiftthatwe'reseeing.DowestillexpectprofitabilityforallofFY18andalsostillthinkaboutthe15%to20%longtermoperatingmargingiventhemixshift?
MikeBerry(CFO):
Yessointermsofwhatweprovided,Saket,forthelong-termmodelasIthinkyourememberIbakedinaprettysignificantcontinuedshiftwhereproductrevenuewouldcontinuetodecreaseasapercent,soaswesitheretodaywestillfeelgoodaboutit.Icertainlydon'thaveanydifferentviewoftheoperatingmargin.Istillfeelgoodaboutthat.Howfastitgoeswhenwegetthereisit2017,2018,2019,2020?Wewillcertainlyhavetotakeahardlookatit.ButIdon'thaveanyreasonnottodoubtthelong-termoperating
CompanyName:FireEyeIncCompanyTicker:FEYESector:T echnologyIndustry:ComputerSof tware&Services
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.69BPriceasofEventDate:15.98
©2014TheStreet,Inc.Al l R ightsReserved Page21of21
modelnumber.
SaketKalia(Analyst-BarclaysCapital):
Gotit.Veryhelpful.Thanksguys.
DaveDeWalt (Chairman&CEO):
Okaywellthankyou,everyone,forjoiningusonourQ1earningscalltoday.Appreciateit.We'lllookforwardtoseeingyouagainatsomeoftheinvestorconferencescomingupinthesecondquarter.Andwiththat,Operator,thankyouandthatconcludesthecall.
Operator :
Ladiesandgentlementhankyouforparticipatingintoday'sconference.
Allrightsreserved(c)2014TheStreet,Inc.
Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.
THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.
THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.