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Fireeye Reports Record Revenue For Third Quarter 2015

The following excerpt is from the company's SEC filing.

Continued Leverage Drives Year-over-Year Improvements in Cash Flow and non-GAAP Operating Margin

MILPITAS, Calif. November 4, 2015

FireEye, Inc. (NASDAQ: FEYE), the leader at stopping todays advanced cyber attacks, today announced financial results for the third quarter of 2015.

We delivered a solid quarter of overall growth, with revenue up 45 percent and non-GAAP operating margins and earnings per share well ahead of our outlook, said David DeWalt, FireEye chief executive officer and chairman of the board. The new releases of our MVX engine and our HX endpoint platform last month, together with the partnerships we announced during the quarter, further strengthened our ability to detect, prevent and contain advanced threats.

Our role as first responder to todays most significant breaches, combined with our threat research labs and global FireEye as a Service infrastructure, gives us unique visibility into threats as the attackers adapt their tactics. We support our technology, consulting services and threat intelligence leadership with a solid financial foundation and $1.2 billion in cash, cash equivalents and short-term investments. I believe we have never been in a stronger position to help organizations reduce risk as the threat landscape evolves, added DeWalt.

Third Quarter Financial Highlights

Revenue of $165.6 million, an increase of 45 percent from the third quarter of 2014.

Billings of $210.6 million, an increase of 28 percent from the third quarter of 2014.

Current deferred revenue of $265.9 million, up a record $105.1 million, or 65 percent, from the end of the third quarter of 2014.

Total deferred revenue of $454.9 million, an increase of $171.9 million, or 61 percent, from the end of the third quarter of 2014.

GAAP operating margin of negative 74 percent, compared to negative 114 percent in the third quarter of 2014.

Non-GAAP operating margin of negative 32 percent, compared to negative 64 percent in the third quarter of 2014.

GAAP net loss per share of $0.88, compared to a GAAP net loss per share of $0.83 in the third quarter of 2014.

Non-GAAP net loss per share of $0.37, compared to a non-GAAP net loss per share of $0.51 in the third quarter of 2014.

Cash flow used in operations of $8.3 million, an improvement of $38.2 million compared to the third quarter of 2014.

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.

The leverage inherent in our business model was evident in the 32 percentage point improvement in our non-GAAP operating margin and our operating cash flow performance. Our operating margin has improved year-over-year in every

quarter since the second quarter of 2014, as we continue to balance growth with progress on our path to profitability, said Mike Berry, FireEye senior vice president and chief financial officer. Also significant was an improvement in our operating cash flow by nearly $159 million year-to-date, compared to the first nine months of 2014.

While we outperformed on many financial metrics, our billings performance did not meet the expectations we set in late July. The strength evident in our sales to new logo customers, our North American enterprise business and the Asia-Pacific region was partially offset by weakness in Europe. We believe this was due to a combination of macroeconomic factors, as well as the growing pains of a new organization. Additionally, the third quarter of 2014 included a large, five-year transaction that extended the average contract length to 34 months. This created a difficult year-over-year comparison and impacted our year-over-year billings growth rate as the average contract length declined to approximately 30 months in the third quarter of 2015, added Berry.

Fourth Quarter and Updated 2015 Outlook

FireEye provides guidance based on current market conditions and expectations.

For the fourth quarter of 2015, FireEye expects total revenue in the range of $182 to $190 million. Additionally, for the fourth quarter, on a non-GAAP basis, the company expects:

Total billings in the range of $240 to $260 million.

Gross margin in the range of 72 to 74 percent of revenue.

Operating margin in the range of negative 28 to negative 31 percent of revenue.

Interest expense of $3.0 million related to the companys convertible senior notes.

Net loss per share of $0.36 to $0.38, based on estimated weighted average shares outstanding of approximately 156 million.

For 2015, the company currently expects total revenue in the range of $620 to $628 million. Additionally, for 2015, on a non-GAAP basis, the company expects:

Total billings in the range of $780 to $800 million.

Gross margin in the range of 72 to 73 percent of revenue.

Operating margin in the range of negative 38 to negative 39 percent of revenue.

Interest expense of $7.0 million related to the companys convertible senior notes.

Net loss per share of $1.61 to $1.63, based on estimated weighted average shares outstanding of approximately 154 million.

Positive cash flow from operations.

Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, non-cash interest expense related to the companys convertible senior notes, and other non-recurring expenses. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Business Highlights

Business highlights since the release of second quarter 2015 financial results on July 30, 2015 included multiple product announcements, continued expansion of the companys ecosystem of partners, and the discovery of new advanced attacks, including an advanced campaign which appears to target organizations in Bangladesh, India, Nepal and Pakistan seeking information on border disputes and other diplomatic matters.

The company announced that software industry veteran Michael Berry joined the company as senior vice president and chief financial officer and that Deepak Ahuja, Teslas first chief financial officer, joined the FireEye board of directors. Additionally, David Ramirez joined the company as president of global government and Vijaya Kaza joined the company from Cisco as senior vice president of cloud analytics engineering.

Recent accolades and awards for FireEyes technology and security solutions included:

Recognition of FireEye as the leading provider of must have network security technology

for advanced attacks in a report by industry research firm Frost and Sullivan. The report found that the combination of features and 62 percent market share established FireEye as the clear leader of the network security sandbox segment.

Confirmation of FireEyes continued market share leadership

by IDC in its report

Worldwide Specialized Threat Analysis and Protection Market Shares, 2014: Rapidly Evolving Security Defenses

(October 2015, document #259667).

Significant enhancements to the FireEye Threat Prevention Platform included:

The next generation of the companys core MVX architecture,

which tripled analysis speed to improve time to protection and added visibility into SSL encrypted traffic.

The FireEye HX Endpoint 3.0 product,

which extends FireEye Threat Intelligence to the endpoint and adds enterprise search capabilities that enable quick and precise security searches across endpoints to help organizations rapidly find and mitigate threats.

The FireEye Threat Intelligence Engine

, the threat intelligence capability that both powers and leverages the companys threat prevention products and service offerings. The FireEye Threat Intelligence Engine optimizes the intelligence production cycle, capturing, processing, analyzing intelligence and delivering these insights to FireEye customers and analysts.

FireEye continued to expand its global...


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