Business Wire | Oct 27, 2020 04:01PM EDT

FireEye Reports Financial Results for Third Quarter 2020

Oct. 27, 2020

MILPITAS, Calif.--(BUSINESS WIRE)--Oct. 27, 2020--FireEye, Inc. (NASDAQ: FEYE), the intelligence-led security company, today announced financial results for the third quarter ended September 30, 2020.

"Our third quarter results reflect the progress we have made transforming our business," said Kevin Mandia, FireEye chief executive officer. "We delivered record revenue, and record non-GAAP operating income, operating margin, and earnings per share as our revenue mix continued to shift to higher growth Mandiant Solutions compared to the third quarter of 2019."

"We remain focused on innovation that builds upon our competitive advantages in threat intelligence and cyber security expertise. We released our cloud-native Mandiant Advantage platform in October, making our intelligence and expertise easily accessible and actionable to any security organization, regardless of the security controls they deploy. We also announced a collaboration with Microsoft to provide cybersecurity services based on Microsoft security products. Both announcements reflect the technology-agnostic approach of Mandiant Solutions and allow us to expand our addressable market beyond the installed base of current FireEye customers," added Mandia.

Third Quarter 2020 Financial Results

Q3 2020 Q3 2019 Y/Y change

Revenue $238 $226 +6% million million

Annualized recurring revenue^2 $612 $580 +6% million million

GAAP gross margin 65% 65% -

Non-GAAP gross margin^1 71% 73% -2 pts

GAAP operating margin (11)% (24)% +13 pts

Non-GAAP operating margin^1 12% 2% +10 pts

GAAP net income (loss) per share, basic $(0.17) $(0.31) +$0.14and diluted

Non-GAAP net income (loss) per share, $0.11 $0.02 +$0.09diluted^1

Cash flow provided (used) by operating $33 $18 $15activities million million million

Capital expenditures $5 million $10 $(5) million million

1 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." 2 Annualized recurring revenue is defined as the annualized run-rate of active term licenses, subscriptions, and support contracts at the end of a reporting period.

Fourth Quarter and Updated 2020 Outlook

FireEye provides guidance based on current market conditions and expectations. The company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below, including risks and uncertainties associated with the COVID-19 pandemic.

Q4 2020 Outlook Updated 2020 Outlook

Revenue $237 - $241 $930 - $934 million million

Non-GAAP gross margin 70% - 71% 70.5% - 71.5%

Non-GAAP operating margin 10% - 11% 7.5% - 8.0%

Net interest income (expense) $0 - $(1) million $(2) - $(3) million

Provision for non-GAAP income taxes $1 - $2 million $4 - $5 million

Weighted average shares outstanding, 230 million 227 milliondiluted

Non-GAAP net income per share, diluted $0.09 - $0.11 $0.28 - $0.30

Capital expenditures ~ $6 million $27 - $29 million

Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, non-cash interest expense related to the company's convertible senior notes, and other non-recurring items. A reconciliation of non-GAAP guidance measures to the most directly comparable GAAP financial measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability of, the amounts of stock-based compensation expense, amortization of intangible assets, and non-recurring expenses that may be incurred in the future. Stock-based compensation expense is impacted by the company's future hiring and retention needs, as well as the future fair market value of the company's common stock, all of which are difficult to predict and subject to constant change. The actual amount of stock-based compensation expense in the fourth quarter of 2020 and full year 2020 will have a significant impact on the company's GAAP operating margin and net loss per share. Further, amortization of intangible assets, as well as other non-recurring expenses, if any, will also impact results. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the most directly comparable GAAP financial measures for future periods is not available without unreasonable effort.

Conference Call Information

FireEye will host a conference call today, October 27, 2020, at 5 p.m. Eastern time (2 p.m. Pacific time) to discuss its third quarter financial results and the company's outlook for the fourth quarter and full year 2020. Interested parties may access the conference call by dialing 877-312-5521 (domestic) or 678-894-3048 (international). A live audio webcast of the call can be accessed from the Investor Relations section of the company's website at https://investors.fireeye.com. An archived version of the webcast will be available at the same website shortly after the conclusion of the live event.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to future financial results for the fourth quarter and full year 2020, including revenue, non-GAAP gross margin, non-GAAP operating margin, net interest income and expense, provision for non-GAAP income taxes, weighted average shares outstanding, non-GAAP net income per share, and capital expenditures in the section entitled "Fourth Quarter and Updated 2020 Outlook" above, as well as statements regarding plans and opportunities.

These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause FireEye's results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause FireEye's results to differ materially from those expressed or implied by such forward-looking statements include customer demand and adoption of FireEye's products, solutions and services; real or perceived defects, errors or vulnerabilities in FireEye's products, solutions or services; any delay in the release of FireEye's new products, solutions or services; FireEye's ability to realize the expected benefits resulting from its first half 2020 restructuring plans; the potential disruption or perception of disruption to FireEye's business due to the restructuring plans; the impact of the COVID-19 pandemic on FireEye's business, results of operations, liquidity and capital resources; FireEye's ability to react to trends and challenges in its business and the markets in which it operates; FireEye's ability to anticipate market needs or develop new or enhanced products, solutions and services to meet those needs; FireEye's ability to hire and retain key executives and employees; FireEye's ability to attract new and retain existing customers and train its sales force; the budgeting cycles, seasonal buying patterns and length of FireEye's sales cycle; risks associated with new offerings; sales and marketing execution risks; the failure to achieve expected synergies and efficiencies of operations between FireEye and its acquired companies; the ability of FireEye and its acquired companies to successfully integrate their respective market opportunities, technologies, products, personnel and operations; the ability of FireEye and its partners to execute their strategies, plans, objectives and expected investments with respect to FireEye's partnerships; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in FireEye's Form 10-Q filed with the Securities and Exchange Commission on July 31, 2020, which should be read in conjunction with these financial results and is available on the Investor Relations section of FireEye's website at investors.fireeye.com and on the SEC website at www.sec.gov.

All forward-looking statements in this press release are based on information available to the company as of the date hereof, and FireEye does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law. Any future product, service, feature, or related specification that may be referenced in this release is for informational purposes only and is not a commitment to deliver any offering, technology or enhancement. FireEye reserves the right to modify future product or service plans at any time.

Non-GAAP Financial Measures

In this release FireEye has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). These non-GAAP financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures used by other companies. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company's financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable financial information prepared in accordance with GAAP and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP financial measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP gross margin, operating income (loss), operating margin, net income (loss), and net income (loss) per basic and diluted share. FireEye defines non-GAAP gross margin as total gross profit excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, and, as applicable, other special or non-recurring items, divided by total revenue.

FireEye defines non-GAAP operating income (loss) as operating income (loss) excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, restructuring charges, and other special or non-recurring items. FireEye defines non-GAAP operating margin as non-GAAP operating income (loss) divided by total revenue.

FireEye defines non-GAAP net income (loss) as net income (loss) excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, restructuring charges, other special or non-recurring items, non-cash interest expense related to the company's convertible senior notes, and discrete tax provision (benefits). FireEye defines non-GAAP net income per diluted share as non-GAAP net income divided by weighted average diluted shares outstanding. Weighted average diluted shares used to calculate non-GAAP net income per diluted share excludes shares issuable upon conversion of the company's convertible senior notes that are anti-dilutive. FireEye defines non-GAAP net loss per share as non-GAAP net loss divided by weighted average basic shares outstanding, which excludes stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes that are anti-dilutive.

Non-GAAP net income and net income per diluted share in the third quarter of 2020 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, and non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018. Weighted average diluted shares outstanding used to calculate non-GAAP net income per diluted share excluded shares issuable upon conversion of the company's convertible senior notes that were anti-dilutive.

Non-GAAP net loss and net loss per share in the third quarter of 2019 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018, and benefit from income taxes. Weighted average basic shares outstanding used to calculate non-GAAP net loss per share excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes that were anti-dilutive.

FireEye considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, non-cash interest expense related to the company's convertible senior notes, restructuring charges, and other non-recurring and discrete items so that management and investors can compare the company's core business operating results over multiple periods.

There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, these non-GAAP financial measures exclude stock-based compensation expense. Stock-based compensation is an important part of FireEye employees' overall compensation and has been, and will continue to be for the foreseeable future, a significant recurring expense in the company's business. Second, the components of the costs that FireEye excludes in its calculation of these non-GAAP financial measures, including not only stock-based compensation, but also amortization of stock-based compensation expense capitalized in software development costs, non-recurring or non-operating items such as acquisition related expenses, amortization of intangible assets, non-cash interest expense related to the company's convertible senior notes, restructuring charges, and discrete tax provision (benefits), may differ from the components excluded by peer companies when they report their non-GAAP results of operations. FireEye compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures and evaluating non-GAAP financial measures together with their nearest GAAP equivalents.

About FireEye, Inc.

FireEye is the intelligence-led security company. Working as a seamless, scalable extension of customer security operations, FireEye offers a single platform that blends innovative security technologies, nation-state grade threat intelligence, and world-renowned Mandiant(r) consulting. With this approach, FireEye eliminates the complexity and burden of cyber security for organizations struggling to prepare for, prevent, and respond to cyber attacks. FireEye has over 9,600 customers across 103 countries, including more than 50 percent of the Forbes Global 2000.

(c) 2020 FireEye, Inc. All rights reserved. FireEye and Mandiant are registered trademarks or trademarks of FireEye, Inc. in the United States and other countries. All other brands, products, or service names are or may be trademarks or service marks of their respective owners.

FireEye, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

September 30, 2020 December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents $ 314,250 $ 334,603

Short-term investments 627,892 704,955

Accounts receivable, net 133,897 171,459

Inventories 5,371 5,892

Prepaid expenses and other current assets 97,207 96,827

Total current assets 1,178,617 1,313,736

Property and equipment, net 83,997 93,812

Operating lease right-of-use assets, net 51,604 58,758

Goodwill 1,213,454 1,205,292

Intangible assets, net 105,856 134,420

Deposits and other long-term assets 70,994 84,468

TOTAL ASSETS $ 2,704,522 $ 2,890,486



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 6,095 $ 26,271

Operating lease liabilities, current 18,109 18,437

Accrued and other current liabilities 21,333 24,496

Accrued compensation 86,276 59,513

Convertible senior notes, current, net - 117,288

Deferred revenue, current 567,201 603,944

Total current liabilities 699,014 849,949

Convertible senior notes, non-current, 949,648 893,273 net

Deferred revenue, non-current 326,414 370,623

Operating lease liabilities, non-current 61,882 70,481

Other long-term liabilities 4,404 4,494

Total liabilities 2,041,362 2,188,820

Stockholders' equity:

Common stock 23 22

Additional paid-in capital 3,513,618 3,457,359

Treasury stock (80,000 ) (150,000 )

Accumulated other comprehensive income 5,114 1,180

Accumulated deficit (2,775,595 ) (2,606,895 )

Total stockholders' equity 663,160 701,666

TOTAL LIABILITIES AND STOCKHOLDERS' $ 2,704,522 $ 2,890,486 EQUITY

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenue:

Product, subscription and support

$

183,836

$

179,823

$

535,224

$

523,828

Professional services

54,624

46,091

157,858

130,238

Total revenue

238,460

225,914

693,082

654,066

Cost of revenue: (1)(2)(3)

Product, subscription and support

54,933

54,272

162,095

155,938

Professional services

29,473

24,948

84,889

72,243

Total cost of revenue

84,406

79,220

246,984

228,181

Total gross profit

154,054

146,694

446,098

425,885

Operating expenses:

Research and development (1)(2)(3)

61,662

68,857

189,762

203,790

Sales and marketing (1)(2)

93,961

98,355

284,202

303,745

General and administrative (1)

23,096

27,717

75,806

83,019

Restructuring charges (5)

1,488

6,481

25,020

10,280

Total operating expenses

180,207

201,410

574,790

600,834

Operating loss

(26,153

)

(54,716

)

(128,692

)

(174,949

)

Other expense, net (6)

(12,032

)

(10,239

)

(37,056

)

(29,982

)

Loss before income taxes

(38,185

)

(64,955

)

(165,748

)

(204,931

)

Provision for income taxes (7)

933

540

2,952

3,262

Net loss

$

(39,118

)

$

(65,495

)

$

(168,700

)

$

(208,193

)

Net loss per share, basic and diluted

$

(0.17

)

$

(0.31

)

$

(0.76

)

$

(1.02

)

Weighted average shares used in per share calculations, basic and diluted

224,807

212,207

221,329

204,855

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Product,subscription $ 183,836 $ 179,823 $ 535,224 $ 523,828 and support

Professional 54,624 46,091 157,858 130,238 services

Total revenue 238,460 225,914 693,082 654,066

Cost ofrevenue: (1)(2) (3)

Product,subscription 54,933 54,272 162,095 155,938 and support

Professional 29,473 24,948 84,889 72,243 services

Total cost of 84,406 79,220 246,984 228,181 revenue

Total gross 154,054 146,694 446,098 425,885 profit

Operating expenses:

Research anddevelopment (1) 61,662 68,857 189,762 203,790 (2)(3)

Sales andmarketing (1) 93,961 98,355 284,202 303,745 (2)

General andadministrative 23,096 27,717 75,806 83,019 (1)

Restructuring 1,488 6,481 25,020 10,280 charges (5)

Total operating 180,207 201,410 574,790 600,834 expenses

Operating loss (26,153 ) (54,716 ) (128,692 ) (174,949 )

Other expense, (12,032 ) (10,239 ) (37,056 ) (29,982 ) net (6)

Loss before (38,185 ) (64,955 ) (165,748 ) (204,931 ) income taxes

Provision forincome taxes 933 540 2,952 3,262 (7)

Net loss $ (39,118 ) $ (65,495 ) $ (168,700 ) $ (208,193 )

Net loss pershare, basic $ (0.17 ) $ (0.31 ) $ (0.76 ) $ (1.02 ) and diluted

Weightedaverage sharesused in pershare 224,807 212,207 221,329 204,855 calculations,basic anddiluted

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(168,700

)

$

(208,193

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

71,238

76,238

Stock-based compensation

113,593

117,162

Non-cash interest expense related to convertible senior notes

35,480

35,768

Deferred income taxes

91

(661

)

Other

6,836

463

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:

Accounts receivable

36,148

5,929

Inventories

1,576

29

Prepaid expenses and other assets

13,476

4,824

Accounts payable

(17,292

)

2,127

Accrued liabilities

(4,902

)

1,206

Accrued compensation

26,763

2,448

Deferred revenue

(80,952

)

(2,172

)

Other long-term liabilities

(9,854

)

(7,146

)

Net cash provided by operating activities

23,501

28,022

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment and demonstration units

(22,198

)

(38,615

)

Purchases of short-term investments

(305,180

)

(493,038

)

Proceeds from maturities of short-term investments

355,820

502,100

Proceeds from sales of short-term investments

28,208

-

Business acquisitions, net of cash acquired

(12,948

)

(127,249

)

Purchase of investment in privately held company

(1,000

)

-

Lease deposits

68

637

Net cash provided by (used in) investing activities

42,770

(156,165

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of convertible senior notes

(96,392

)

-

Payment related to shares withheld for taxes

(8,802

)

-

Proceeds from employee stock purchase plan

12,300

12,315

Proceeds from exercise of equity awards

6,270

3,159

Net cash provided by (used in) financing activities

(86,624

)

15,474

Net change in cash and cash equivalents

(20,353

)

(112,669

)

Cash and cash equivalents, beginning of period

334,603

409,829

Cash and cash equivalents, end of period

$

314,250

$

297,160

FireEye, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended September 30,

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (168,700 ) $ (208,193 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 71,238 76,238

Stock-based compensation 113,593 117,162

Non-cash interest expense related to 35,480 35,768 convertible senior notes

Deferred income taxes 91 (661 )

Other 6,836 463

Changes in operating assets and liabilities,net of assets acquired and liabilities assumed in business acquisitions:

Accounts receivable 36,148 5,929

Inventories 1,576 29

Prepaid expenses and other assets 13,476 4,824

Accounts payable (17,292 ) 2,127

Accrued liabilities (4,902 ) 1,206

Accrued compensation 26,763 2,448

Deferred revenue (80,952 ) (2,172 )

Other long-term liabilities (9,854 ) (7,146 )

Net cash provided by operating activities 23,501 28,022

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment and (22,198 ) (38,615 ) demonstration units

Purchases of short-term investments (305,180 ) (493,038 )

Proceeds from maturities of short-term 355,820 502,100 investments

Proceeds from sales of short-term investments 28,208 -

Business acquisitions, net of cash acquired (12,948 ) (127,249 )

Purchase of investment in privately held (1,000 ) - company

Lease deposits 68 637

Net cash provided by (used in) investing 42,770 (156,165 ) activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of convertible senior notes (96,392 ) -

Payment related to shares withheld for taxes (8,802 ) -

Proceeds from employee stock purchase plan 12,300 12,315

Proceeds from exercise of equity awards 6,270 3,159

Net cash provided by (used in) financing (86,624 ) 15,474 activities

Net change in cash and cash equivalents (20,353 ) (112,669 )

Cash and cash equivalents, beginning of period 334,603 409,829

Cash and cash equivalents, end of period $ 314,250 $ 297,160

FireEye, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

GAAP operating loss

$

(26,153

)

$

(54,716

)

$

(128,693

)

$

(174,949

)

Stock-based compensation expense (1)

40,369

36,688

113,593

117,162

Amortization of stock-based compensation capitalized in software development costs (3)

1,034

916

3,063

2,556

Amortization of intangible assets (2)

11,008

14,334

34,213

39,412

Acquisition related expenses (4)

-

-

-

597

Restructuring charges (5)

1,488

6,481

25,020

10,280

Non-GAAP operating income (loss)

$

27,746

$

3,703

$

47,196

$

(4,942

)

GAAP gross margin

65

%

65

%

64

%

65

%

Stock-based compensation expense (1)

3

%

3

%

4

%

4

%

Amortization of intangible assets (2)

3

%

5

%

3

%

4

%

Non-GAAP gross margin

71

%

73

%

71

%

73

%

GAAP operating margin

(11

)

%

(24

)

%

(19

)

%

(27

)

%

Stock-based compensation expense (1)

17

%

16

%

17

%

18

%

Amortization of stock-based compensation capitalized in software development costs (3)

-

%

1

%

-

%

-

%

Amortization of intangible assets (2)

5

%

6

%

5

%

6

%

Restructuring charges (5)

1

%

3

%

4

%

2

%

Non-GAAP operating margin

12

%

2

%

7

%

(1

)

%

GAAP net loss

$

(39,118

)

$

(65,495

)

$

(168,700

)

$

(208,193

)

Stock-based compensation expense (1)

40,369

36,688

113,593

117,162

Amortization of stock-based compensation capitalized in software development costs (3)

1,034

916

3,063

2,556

Amortization of intangible assets (2)

11,008

14,334

34,213

39,412

Acquisition related expenses (4)

-

-

-

597

Restructuring charges (5)

1,488

6,481

25,020

10,280

Non-cash interest expense related to convertible senior notes (6)

11,113

12,068

35,480

35,768

Adjustment to provision (benefit) from income taxes (7)

-

(681

)

(315

)

(904

)

Non-GAAP net income (loss)

$

25,894

$

4,311

$

42,354

$

(3,322

)

GAAP net loss per common share, basic and diluted

$

(0.17

)

$

(0.31

)

$

(0.76

)

$

(1.02

)

Stock-based compensation expense (1)

0.18

0.17

0.51

0.57

Amortization of stock-based compensation capitalized in software development costs (3)

-

-

0.01

0.01

Amortization of intangible assets (2)

0.05

0.07

0.15

0.19

Acquisition related expenses (4)

-

-

-

-

Restructuring charges (5)

0.01

0.03

0.11

0.05

Non-cash interest expense related to convertible senior notes (6)

0.05

0.06

0.16

0.18

Adjustment to provision (benefit) from income taxes (7)

-

-

-

-

Non-GAAP net income (loss) per common share, basic

$

0.12

$

0.02

$

0.18

$

(0.02

)

Non-GAAP net income (loss) per common share, diluted

$

0.11

$

0.02

$

0.19

$

(0.02

)

Weighted average shares used in per share calculation for GAAP, basic and diluted

224,807

212,207

221,329

204,855

Weighted average shares used in per share calculation for Non-GAAP, basic

224,807

212,207

221,329

204,855

Weighted average shares used in per share calculation for Non-GAAP, diluted

227,496

217,037

224,286

204,855

(1) Includes stock-based compensation expense as follows:

Cost of product, subscription and support revenue

$

4,245

$

3,590

$

12,037

$

11,501

Cost of professional services revenue

5,015

3,289

13,366

10,639

Research and development expense

11,830

10,718

33,236

35,031

Sales and marketing expense

13,306

12,252

36,202

38,019

General and administrative expense

5,952

6,839

18,438

21,972

Restructuring charges

21

-

314

-

Total stock-based compensation expense

$

40,369

$

36,688

$

113,593

$

117,162

(2) Includes amortization of intangible assets as follows:

Cost of product, subscription and support revenue

$

6,772

$

10,135

$

21,511

$

27,311

Research and development expense

109

109

327

336

Sales and marketing expense

4,127

4,090

12,375

11,765

Total amortization of intangible assets

$

11,008

$

14,334

$

34,213

$

39,412

(3) Includes amortization of stock-based compensation capitalized in software development costs as follows:

Cost of product, subscription and support revenue

$

44

$

193

$

152

$

592

Cost of professional services revenue

22

97

76

296

Research and development expense

968

626

2,835

1,668

Total amortization of stock-based compensation capitalized in software development costs

$

1,034

$

916

$

3,063

$

2,556

(4) Includes acquisition related expenses as follows:

General and administrative expense

$

-

$

-

$

-

$

597

(5) Includes restructuring charges as follows:

Restructuring charges

$

1,488

$

6,481

$

25,020

$

10,280

(6) Includes non-cash interest expense related to convertible senior notes as follows:

Other income, net

$

11,113

$

12,068

$

35,480

$

35,768

(7) Includes income tax effect of non-GAAP adjustments as follows:

Benefit from income taxes

$

-

$

(681

)

$

(315

)

$

(904

)

FireEye, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

GAAP operating $ (26,153 ) $ (54,716 ) $ (128,693 ) $ (174,949 ) loss

Stock-basedcompensation 40,369 36,688 113,593 117,162 expense (1)

Amortization ofstock-basedcompensationcapitalized in 1,034 916 3,063 2,556 softwaredevelopmentcosts (3)

Amortization ofintangible 11,008 14,334 34,213 39,412 assets (2)

Acquisitionrelated - - - 597 expenses (4)

Restructuring 1,488 6,481 25,020 10,280 charges (5)

Non-GAAPoperating $ 27,746 $ 3,703 $ 47,196 $ (4,942 ) income (loss)

GAAP gross 65 % 65 % 64 % 65 %margin

Stock-basedcompensation 3 % 3 % 4 % 4 %expense (1)

Amortization ofintangible 3 % 5 % 3 % 4 %assets (2)

Non-GAAP gross 71 % 73 % 71 % 73 %margin

GAAP operating (11 ) % (24 ) % (19 ) % (27 ) %margin

Stock-basedcompensation 17 % 16 % 17 % 18 %expense (1)

Amortization ofstock-basedcompensationcapitalized in - % 1 % - % - %softwaredevelopmentcosts (3)

Amortization ofintangible 5 % 6 % 5 % 6 %assets (2)

Restructuring 1 % 3 % 4 % 2 %charges (5)

Non-GAAPoperating 12 % 2 % 7 % (1 ) %margin

GAAP net loss $ (39,118 ) $ (65,495 ) $ (168,700 ) $ (208,193 )

Stock-basedcompensation 40,369 36,688 113,593 117,162 expense (1)

Amortization ofstock-basedcompensationcapitalized in 1,034 916 3,063 2,556 softwaredevelopmentcosts (3)

Amortization ofintangible 11,008 14,334 34,213 39,412 assets (2)

Acquisitionrelated - - - 597 expenses (4)

Restructuring 1,488 6,481 25,020 10,280 charges (5)

Non-cashinterestexpense related 11,113 12,068 35,480 35,768 to convertiblesenior notes(6)

Adjustment toprovision(benefit) from - (681 ) (315 ) (904 ) income taxes(7)

Non-GAAP net $ 25,894 $ 4,311 $ 42,354 $ (3,322 ) income (loss)

GAAP net lossper common $ (0.17 ) $ (0.31 ) $ (0.76 ) $ (1.02 ) share, basicand diluted

Stock-basedcompensation 0.18 0.17 0.51 0.57 expense (1)

Amortization ofstock-basedcompensationcapitalized in - - 0.01 0.01 softwaredevelopmentcosts (3)

Amortization ofintangible 0.05 0.07 0.15 0.19 assets (2)

Acquisitionrelated - - - - expenses (4)

Restructuring 0.01 0.03 0.11 0.05 charges (5)

Non-cashinterestexpense related 0.05 0.06 0.16 0.18 to convertiblesenior notes(6)

Adjustment toprovision(benefit) from - - - - income taxes(7)

Non-GAAP netincome (loss) $ 0.12 $ 0.02 $ 0.18 $ (0.02 ) per commonshare, basic

Non-GAAP netincome (loss) $ 0.11 $ 0.02 $ 0.19 $ (0.02 ) per commonshare, diluted

Weightedaverage sharesused in pershare 224,807 212,207 221,329 204,855 calculation forGAAP, basic anddiluted

Weightedaverage sharesused in per 224,807 212,207 221,329 204,855 sharecalculation forNon-GAAP, basic

Weightedaverage sharesused in pershare 227,496 217,037 224,286 204,855 calculation forNon-GAAP,diluted





(1) Includesstock-basedcompensation expense asfollows:

Cost ofproduct,subscription $ 4,245 $ 3,590 $ 12,037 $ 11,501 and supportrevenue

Cost ofprofessional 5,015 3,289 13,366 10,639 servicesrevenue

Research anddevelopment 11,830 10,718 33,236 35,031 expense

Sales andmarketing 13,306 12,252 36,202 38,019 expense

General andadministrative 5,952 6,839 18,438 21,972 expense

Restructuring 21 - 314 - charges

Totalstock-based $ 40,369 $ 36,688 $ 113,593 $ 117,162 compensationexpense



(2) Includesamortization ofintangible assets asfollows:

Cost ofproduct,subscription $ 6,772 $ 10,135 $ 21,511 $ 27,311 and supportrevenue

Research anddevelopment 109 109 327 336 expense

Sales andmarketing 4,127 4,090 12,375 11,765 expense

Totalamortization of $ 11,008 $ 14,334 $ 34,213 $ 39,412 intangibleassets



(3) Includesamortization ofstock-basedcompensationcapitalized in softwaredevelopmentcosts asfollows:

Cost ofproduct,subscription $ 44 $ 193 $ 152 $ 592 and supportrevenue

Cost ofprofessional 22 97 76 296 servicesrevenue

Research anddevelopment 968 626 2,835 1,668 expense

Totalamortization ofstock-basedcompensation $ 1,034 $ 916 $ 3,063 $ 2,556 capitalized insoftwaredevelopmentcosts



(4) Includesacquisitionrelated expenses asfollows:

General andadministrative $ - $ - $ - $ 597 expense



(5) Includesrestructuring charges asfollows:

Restructuring $ 1,488 $ 6,481 $ 25,020 $ 10,280 charges



(6) Includesnon-cashinterestexpense related to convertiblesenior notes asfollows:

Other income, $ 11,113 $ 12,068 $ 35,480 $ 35,768 net



(7) Includesincome taxeffect of non-GAAPadjustments asfollows:

Benefit from $ - $ (681 ) $ (315 ) $ (904 ) income taxes

FireEye, Inc.

REVENUE BREAKOUT

(Unaudited, in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Product and related subscription and support revenue

$

108,731

$

117,835

$

318,223

$

353,773

Platform, cloud subscription and managed services revenue

75,105

61,988

217,001

170,055

Product, subscription and support revenue

183,836

179,823

535,224

523,828

Professional services revenue

54,624

46,091

157,858

130,238

Total revenue

$

238,460

$

225,914

$

693,082

$

654,066

FireEye, Inc.

REVENUE BREAKOUT

(Unaudited, in thousands)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Product and relatedsubscription and support $ 108,731 $ 117,835 $ 318,223 $ 353,773 revenue

Platform, cloudsubscription and managed 75,105 61,988 217,001 170,055 services revenue

Product, subscription and 183,836 179,823 535,224 523,828 support revenue

Professional services 54,624 46,091 157,858 130,238 revenue

Total revenue $ 238,460 $ 225,914 $ 693,082 $ 654,066

ANNUALIZED RECURRING REVENUE BREAKOUT

(Unaudited, in thousands)

As of September 30,

2020

2019

Product and related subscription and support

$

298,040

$

313,035

Platform, cloud subscription and managed services

313,869

266,762

Total annualized recurring revenue

$

611,909

$

579,797

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006160/en/

CONTACT: Media inquiries: Media.Relations@fireeye.com

CONTACT: Investor inquiries: Investor.Relations@fireeye.com