Mandiant (MNDT) 5 Feb 202019 Q4 Earnings call transcript

Good day, everyone, and welcome to the FireEye Fourth Quarter 2019 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also this call is being recorded.

At this time, I’d like to turn the call over to Kate Patterson. ahead. go Please

full Good be call Joelle. financial thanks everyone section the website and to for being FireEye’s call Thank live of on broadcast joining afternoon, the us the over the XXXX of for fourth and FireEye’s investors.fireeye.com. XXXX. today on This the is can you, Internet quarter and year accessed to at results Relations discuss Investor

for President, Officer; today’s Bailey, on Mandia, are Financial Frank Accounting Verdecanna, Chief Bill call Robbins, Vice XXXX and President fourth year of FireEye’s today, Manager market quarter and Peter Executive XXXX. Executive General me full With Chief and closed FireEye’s Officer Executive Operating Vice results President, Kevin Chief FireEye Vice issued Officer FireEye; release the and and Officer After press Officer; Chief of the Executive Revenue of Products. a Chief the announcing

plans platform; you statements and relating of capabilities management the let and expectations investments; market Before position; FireEye’s availability business will growth initiatives, that metrics; begin, guidance FireEye’s FireEye’s to call, forward-looking make certain this expectations priorities, and me financial we go-to-market for offerings; and results course the opportunities; including and remind during enhanced new competitive and of and benefits, of expansion and drivers transformation; the changes. and strategies and FireEye’s for organizational statements

the these in of the number no we on and these should cause of some rely views as by as call. uncertainties, obligation statements them representing involve undertake today, which our and those apply our and of after statements you to results actual statements to update forward-looking future, could risks differ not control, These beyond forward-looking which a materially These statements. anticipated are from

documents well of Relations the For these risks please our as ago. be to SEC or the description release a of Investor obtained section our visiting our by Copies the earnings posted SEC of hour may from filings and as an refer detailed uncertainties, website.

financial non-GAAP this discussed certain will measures be on call. Additionally,

directly the these have of earnings financial provided on in We in measures reconciliations the most Investor section well non-GAAP measures the website as as release. for comparable GAAP the financial Relations

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that, call to With Kevin. I’ll the turn over

Kate, you, all Thank to support the employees, appreciate your this you and a We joining and and us as solutions investors, thank appliance as transform partners to to we a vendor company. call. customers comprehensive security our network continue origins interest from on security

full by to details as results highlights the highlights, fourth I’ll begin followed some discussing Frank to priorities quarter in XXXX, expect financial our for XXXX. in achieve of by QX call milestones some year and well we turn discuss our Let to then me the over the XXXX as and

delivered record we XXth For not in delivered the quarter that XXXX, profitability. did revenue QX cash we QX and but billings the exceeded for our revenue, also just the In met the guidance quarter full improved record record for and or quarter, straight we fourth and year. operating in flow, for

solutions this transformation like our emerging offerings contract range billings was continue platform shortfall that. as our However, due in QX business But focus may appliance-based by a of shorter primarily our expected services. to from our our of to fell you on this million business midpoint the to welcome and and contract accelerate shorter of $XX length many our as Verodin guidance products, the and short average trend we our solutions. towards is Frankly, growth and transforms cloud-based Mandiant to approximately future length both security validation

over for XXXX. the had our an of rate growth the the of was range. million, a of increase or million high Billings Revenue quarter first year. accelerated million year-over-year. Revenue $XXX full was above an the for quarter some review $XXX since for the fourth record XXXX. year highlights Billings was end from growth million, the $XXX let’s So X% record quarter the guidance the of increase and we’ve highest $X of a to quarter the X% year-over-year, X%

X% year, revenue the a record, and was million, also For $XXX XXXX. up over

Our strong our above per our and resulted revenue end were in in of performance QX improved range. well high share guided earnings profitability the

well billings as of was posted in our platform, revenue. services, and all category services cloud led growth by revenue which our record Our and billings subscription managed Mandiant as

I’d like first about And speak to services. Mandiant our

in million, record up row in regards quarter. for in to million Mandiant XX% It’s time. Our $XX exceeded Mandiant seventh the another first billings grew Mandiant XX% the In the quarter, quarter services year-over-year year-over-year. fourth organization revenue. a fourth and services had $XX were revenue

While is its the to trusted handle metrics that record financial setting, security important results more what challenges. these are what is Mandiant is represent, complex most

respond Our as how and the also organizations. had in multiple missed we receive the are that world critical to red consultants from security times long me recognized I teaming. exposed incidents, team’s telling in been the at cyber gaps gaps to customers red Mandiant security, our have believe premier by consulting experts best other I been calls their

security world have attacks, highly to in-house the reputation intelligence our their help motion assess just Mandiant for to cloud-based but not extend grown, a global build latest proactively security around complimentary in and relationships footprint called As customers their has breaches solutions also Defense. a against to modernize resilience capabilities. Managed create our customer and These respond operations allow strategic efficient services to sales and the them us

a trusted are point platform, managed in and to our gateway In driving cloud short, our revenue change for efficient our platform. time offerings, service services from to customers and an new Mandiant

customers non-incident engagement. In fact, within who of engage XXXX their X% the Mandiant XX services than more purchased solutions with months of in response

of services growth platform, this managed cloud The our reflects and relationship. category subscription

QX category year. was the up growth cloud for billings example, XX% in platform, quarter subscriptions and year-over-year. the managed in XX% full For Revenue platform year-over-year our for and services accelerate to fourth the and in XX% grew continued

This to we consecutive XXXX, XX% record a in and annual platform quarter category. cloud growth XX% greater of revenue category. our $XXX the this platform Moreover, growth than ARR the generated second is year-over-year for grew XX% and million. cloud recurring For

consultation in and in end strength mature cloud platform, services category. refresh increasingly the and The decline decline as of form cycle related on-premise and the hardware well product third for a and controls. and cloud-based especially service appliance-centric around managed this delivered the reflects offset appliances, billings our as trends virtual our revenue The generation in industry vendor category factors, security towards as

transformation began in continue is in we positioned XXXX, accelerate trends market to possibly to believe to FireEye the I expect these We and the as well the future. thrive Due process evolves.

on-premise. business took two-thirds modernize XXXX, declining And year-over-year. our When CEO over plans and appliance-based profitability as At solutions growth. the time, we that nearly was products to our in transform our business laid was sustained our category and I to performance and in out deployed achieve of

solutions as pleased accelerated I’m assume for time on-premise quarter for and to fourth our announce widen that gap appliance will our the third platform, a categories in XXXX in the in This billings business exceeded the and outlook business solutions this trend of continue. mature emerging the services business for quarter XXXX. our cloud the first

ARR be milestone FireEye point an will category cloud about. our marks is eclipse to FireEye transformation. clear, a billings, the anticipate revenue, important our Mandiant many services believe and have for the for that asked that churn and products XX years continue FireEye’s we investors managed This for critical ago. and I platform, this To And me that Services pioneered is

model. of specific some review our business that the to fundamental like I’d this we actions are enabling transformation of took

in we customers across capabilities cloud of introduced First, we subscription our pricing new greater flexibility all decoupling our in IP invested offerings. and our offerings. appliances, from and our detection go-to-market simplified then deployment enabling We giving

an and integrates a to Helix, introduced cloud-based products We operations with more that third-party security XXX it serves today. platform our than intelligence expertise open our portal as and

We available We continue add next to subscription. going our to demand we’re made standalone expertise a Helix RSA. and the on about Helix through release and I’m excited launch features to at as that

customers market. a most Dip] The and container across differentiator natural is cloud environments, we as the and and it to and Expertise Verodin, security in On Helix for technology And leader acquired clear our platform. [Audio control Demand a momentum the Cloudvisory. rapidly multiple emerging We visibility solutions. provides extension our validation continues gain acquire recently, with of

FireEye modernize business. perpetual licensing threats all changes, went we advanced to to strategic. our portion our on-premise transactional summary, now from to safeguarding does to with how from where these business. have point profitable, And solutions hardware from and hybrid, kinds We to and our In crossed unprofitable of the our larger from emerging customers are software, to growth from the from cloud we categories from threats, subscription, of

transformation, our we’re accelerate next our the together. parts take steps business To to bringing of

and under unifying platform, Bill and and First, go-to-market customer execute to continue work of success, products, with a services growth the marketing organizations Robbins. will cohesive while He our emphasizing Grady offerings. our ensure Vasu cloud to we strategy, we are sales closely

December, the Bailey, with role, tell to support feelings day our he that Chief job from Operating leadership will be to you And FireEye been our joined finally, is growth in Second, in has I’m pleased mixed at Travis driving next And very that retiring I FireEye. Reese transformation. accelerate that announce this be appointed Peter necessary Officer. who operational will discipline and his month

to Air thank had command stay friend Force stay for to we in close nearly for our this and in family mission, years my XXXX have he mission. agreed of United him He’s to XXXX. I first a met to with the has in people the the Travis to close all become to since been our The States Travis member good Board, and the that friend has privilege part has who been close serve a is XX and my done. want news Advisory in and second me, Mandiant FireEye of Travis stay since and

XXXX to Now you to I’d talk about our priorities. like

objectives is Our clear. are customers our our protect and remains to mission relentlessly unchanged

to First, in be services and our threat best than We at incident response, to leading about FireEye cyber more the attacks intelligence. in threat intend continue knows Teaming Red and anyone. ensure intelligent industry world

Second, threat detection extend to to infrastructure. continue and defend dynamic expertise our we cloud-based

deliver technology, Demand point security we them seamlessly intend be need our best where at most. in Expertise our the finally, And available through validation. are On customers when Third, experts the world to at

one expertise to simple, customers security that their we continuous to intelligence customers, with I operationalizes be question Verodin our I attack, the our of help address and number is, are The that with and process measure answer. can platform question meet made ask binary a platform process validation they fix, effectiveness. repeat, test and believe When measure, threat the And the commonplace. secure? Verodin needs

continuous of platform our either security validation. the Team I customers continuous and our their internal validation offering in in clearly or hunt services platform. As the use Verodin our Red their assessments, managed environment engagements believe our with we to validation elegance teams can will on Customers for actors increasingly rely enable see security threat

customers our progress to value a accelerate scenarios, customers. innovate It from the to at the solutions in rapid ability continue and customers comprehensive In services, to both threat solution advantage will to model to helping it recurring our subscriptions, engagements the for our transformation pace our lies believe, of a our company. I We is environment it’s adapt a great adversary. as strategic delivering to changes.

response customers’ controls first market a validate fact threats of a incident attackers the needs production are Given within customers the continuously against most in desperately by security known retargeted that our environment. model the year, that

resources our will doing leadership need. I on industry deliver believe, focusing are And scale. We consistent we with at growth this so, by

With efforts. all FireEye thank employees their continued that, want to I deeply for

we and modern security believe, the I on we As all to focus change progress. game I have defense. pieces our leading to continued in necessary look the forward cyber

to Financial Now I’d the over Verdecanna. call turn our like Officer, Frank to Chief

Thanks, everyone on call. the and Kevin, to hello

for our Before revenue guidance QX that in remind me let and you XXXX, QX operating onto non-GAAP except I’ll flow. of be details metrics, we move the to and for referring cash results

convertible non-cash non-recurring of our debt, charges Our non-GAAP compensation, exclude amortization expense intangibles, and on interest measures, other restructuring items. stock-based

QX best operating that income, one quarters and results, billings, all to revenue, the me free emphasizing operating in levels in was QX our highest at With our of start cash Turning history. history. cash flow our let the by

below were about million our $XXX I momentum the are range metrics and revenue, matter guidance continued million, in that subscription showed we by believe the of billings operating although of most, which importantly, leverage. ARR, midpoint the billings, $XX More

the revenue a yield managed high, performance billings decrease guidance Our forecast we with net outperformance contract our our to the period fourth was in in our to subscription and relative line shifted above length mix the primarily guidance dollar quarter basis, outperformance flowed expectations. This helped average an operating of to expenses due above $X record The range. which absolute resulted was offerings drive to generated implied on services of with platform, overall. million quality and the bottom and revenue cloud our guidance in billings directly our midpoint of income. line, and as and revenue

our services, year-over-year, endpoint year-over-year accelerated constant the a platform, performance Every million increases XX% ACL the subscription approximately have a Taking ARR XXX%. would the year-over-year than one the this the three $XXX approximately by and managed ARR adjusting to more portfolio to our at security billings with recurring declined metrics would for closer in length, though cloud have XX% for been $XXX rate look of related categories; short and for cloud a at even average revenue healthy cloud Annual subscription increased by solutions million. category been contract billings a growth XX%. the and ACL, posted billings highest to months. year-over-year

of majority reoccurring, XX% categories in sequentially of driven but expertise note and on include to any the growth also all-time not Please at with ARR the million. finished million. deferred ARR. XX% consulting The $XX these billings a increase million in in third was we year-over-year services high tend grew an to services Mandiant $XX expected Verodin increasing one $XX some and our record of by be for strategic as level these to demand. within about revenue of about services year calculations. accounted do services was this billings

Finally, our as continue incremental stabilize, with show sales category year to related for and were hardware appliance-based for down preference although billings a the XX% the decline majority The a business product to in continue cloud-based total solutions appliance customers for compared deployments. and ago. of virtual was

If I on-prem average and all detection look across to – that ARR contract the while expand category in This fundamental point most we was was related factors, form sequentially. A to want sequential emphasize product detection down level a really basis. one-month ARR I technology a the the slightly at also on important and detection at our ARR was, the factor, and shows in factors. our most in of decrease that length at a for and sequential X% different up just products continue the is solutions deployment form our growth

accelerated range midpoint subscriptions cloud of by the record revenue cloud early the year-over-year revenue, since a X% to growth as platform, managed reflecting revenue, services year-over-year exceeded Turning $XXX deferred the to million hardware. ARR growth and from The XXXX. was in in $X million. of billings, ratable platform our strong rate appliance we growth revenue growth recognition headwind guidance in rate and revenue XX% offset accelerated to of million and $XX a quarter. the experienced have the the

year-over-year. high $XX to – growth XX% technology The Mandiant the professional delivery all-time well quarter for million the and capacity high expansion in services fifth as at as services through revenue efficiencies of revenue a enablement. services increased growth accelerated also consecutive was reflects

and revenue XXXX years subscriptions revenue million. year-over-year deferred and about years, as recognize appliance this to ratably support under been appliance or XX% $XX decline decrease was off revenue a for accounting standard. driven over quick the $XXX QX from recognized four but XXX related related as a talking revenue while, product by revenue balance and in million Product a prior sheet. the in current decreased we reminder, amortizes We’ve the from

more backward services QX. is in revenue than news dynamic accelerating looking offset in platform, and cloud the good the growth subscriptions this The that lines again

profit beyond. was in revenue to amortization factor in from less decrease was headwind XXXX to expect services. the XXXX consistent professional in quarter, We a gross of a as appliance and range. of related mix be QX and the our percentage peak margin with higher the XXXX XX% of from guidance primarily The

than the decreased if Mandiant consistent sequential primarily a of sequentially. margin, payroll The to that with, services $X is employee business. our areas Total lower expenses although not about Note gross taxes. at higher contribution million operating are decline was services lower related other

revenue substantially R&D in the increased of expenses due than operating the team. increase largely X%, basis, just of addition year-over-year to a X%. Verodin was less on R&D, biggest our growth the

to above discipline with allowed range we $X.XX margin generated $XX.X of income record $X.XX, and flow partially offsetting operating quarterly of to the overperformance $X.XX. continued operating translated of other our operating income Our per and revenue to profit operating income through million. net taxes, of well $XX million to share guidance earnings

We balance billion. targeted at investments XX to flow, than $XXX with short-term about of with of approximately the the the and of billings million, our and at of the healthy XX to the days, $XX from year-end an XXXX. $XX $XX Turning sheet were deferred. end $XX more quarter on Total we very QX. maintain end of increase sheet and $X the approximately end receivables ended were days. to $XX of of of million calculated million, cash in XX continue low cash million DSOs days from sequentially of million which million revenue balance $XXX range deferred was million an increase increase was current a

from $XX $XX resulting a free We due flow record record. generated quarter, to was million, about XXXX. million, for free in of our bit primarily quarter billings. about $XX below $XX and $X was million flow cash lower for XXX% year. million This guidance a the range, operating year, cash a was the in in cash for the the flow CapEx million also up

and sales technology QX consistent a of year we with in of transformation operational the solid kept our transformation. business all, our results performance our continued in as parallel All model

accelerate stage profitability in and and for As the growth steps Kevin future. transformation this set to the increasing mentioned, we are taking

external forces progress. internal our Our outlook and XXXX for driving reflects the

total hardware of dollars we expect guidance virtual currently in the lower and a average decline at in to factors and assumes attached absolute length to of hardware. outlook mix as decline cloud million. both $XXX virtual customers be continued contract the in billings and reflects full-year A continue a tend expansion the subscriptions Looking $XXX billings appliance of contract which mix opt first, a higher XXXX to and in three-month new to subscriptions for million The sales, cloud range in this of percentage deployment. form to two for decline length, average billings the

have achieved flow we we that billing SaaS now behavior. changes than have this to leaders. to consistent we of positive compensation sales Additionally, to operating basis, gross and encourage other gradually in the billings industry transitioning annual are cycles our an shift cash annual objectives and on consistent us leverage This some with growth our to made rather ARR allows plans practices

expanding While periodic cross term a make our billings attractive billing it’s more TAM, it sell growth, positive our long-term solutions business. creates at headwind smaller to does customers, Not a to only conversations for frequent near more up our it sell and encourages intervals.

teens guidance midpoint The associated growth the for the the assumes from Finally, plus average Working XXXX. in and by record through the the ARR in our XXXX length. And XX% sustainable of growth services platform ARR. growth a range growth in the acceleration mid-teens to X% growth X% of year-over-year ACL. constant after contract the growth in contraction billings low-to-mid an with cloud at a rate implies a math our rate in guidance driven

of the at expect X% million midpoint we at XXXX. XXXX $XXX of the range revenue, to million, compared an in Looking $XXX revenue increase to

in category and It revenue rate the and revenue of assumes at growth about year. cloud subscription the Our for and the negative XX% category. product for the outlook related the revenue assumes mid-teens platform support growth remains

metrics category, year earlier, worst is XXXX. in our final to this that compared XXXX was the XXXX mentioned appliance We from for amortization revenue included As growth revenue that sales. year XXXX I revenues appliance peak because of the call this for the

revenue. teens Finally, record reflecting of we and expect services the mid-to-high current revenue capacity growth the level expanded deferred in the

motions. reflecting million math, an X% between structure expenses margin decrease we in margin a of continued compared of you’ll expect million to expense $XX that XXXX, align with implies When as operating the our see XX% and about cost optimization of gross with $XX sales operating you and evolution do mix and efforts We the our our billings this X%.

year-over-year expense We be operating expect QX savings in in of the QX. realized most and decrease will

be focused more either to We expect have across growth. but much the are the areas expense in realized or declining savings slower business, the that

the revenue with allow to year in a expect Finally, consistent digits, to we operating four with mid-single growth the should leverage to margin exit show range. XX% as quarters the XX% through the we increasing in progress This an across operating year. us

for million $X $XX $XX cash looking we and year flat for quarter CapEx to XXXX $XX flow are year. the be – and approximately per $XX or Finally, of operating million, for million approximately between with million the million

in are we $XXX the million. billings range expecting of For $XXX to QX, million

implies and were appliance refresh to Our year-over-year QX the we of support XX% Recall XX% mix, about low-to-mid for total year subscriptions Overall of due guidance assumes QX billings. last and that XX% contribute billings decrease account to up billings third-generation QX of appliance teens of similar a year-over-year. related This sales the XXXX. to XX% expect of product sales our to appliances.

in range. in and assumes XX% billings guidance XX% assume to QX continuous services subscription growth growth the categories. XX% managed services platform, the cloud plus also And strong

XX% two a the we within in would been assuming we ACL, of flat midpoints length average of normal have last three based are a the contract constant range. in year year, below QX year-over-year, XXXX decrease will linearity We At and slightly to relatively QX, bill of but estimate on in approximately this the a billings implies months. billings,

million revenue expect million. to of $XXX range We $XXX the in

to QX. in year-over-year. XXXX, from growth and XXs mid-to-high the to but revenue related We the to appliances mid-to-high last teens were rate. grow to expect as decline revenue to And remain services to XX% of in continue the revenue to Platform XXXX XX% amortized product grow

in than we be greater deferred sequential decline the billings current because a we revenue that, Note in expect QX, revenue. see will

calendar withholding normal expenses taxes restart other the as related new seasonal for and expenses margin gross year. of the XX% employee expect in increase operating We and

range $X.XX higher result, we $X million lower QX of With the positive loss to post to negative with the cash we X% in for an expect quarter. operating compared $X.XX. and loss expect per million expenses operating flow of range a $X XXXX, X% to cash to share of As billings the in of and

our is know for That of ranges a of detail all and in in there guidance be summarized I open slides. lot the assumptions. here, we the take of Operator, our concludes questions. will section you we to my so assumptions have now review math guidance the your calls –

comes Thank you. first Our [Operator JPMorgan. Instructions] question Auty with from Sterling

now line is Your open.

Hi, guys. thanks. Yes,

the around we curious shortening I surprise? If does So with that the back of as the there the we the mentioned. XXXX, duration refresh. a is guess where impact was look the impact question come quarter you had on that into why

that where passed there or want is to things billings another due watch revenue? Gap] [Audio point that should or business either element now that us, we could Now stabilize for impact

on but but impact accelerating that were is not we’re it is is have are the something that forward pushing this impact, expecting revenue, from we that I a surprise, and The Frank. an think headwind shorter that wasn’t we’re actually that to – we impact duration think contract it certainly I expecting transformation. Well, on billings expecting

growth you cloud, business we So of you XX% and at subscription ended, ended that see platform, the would in look be can managed QX and services, and if our where with services. areas that,

transformation bigger kind shorter which plans our a ARR, contract a but ARR, – also, is offerings. And subscription length. higher quicker of focus on seeing operating help had think comp will I to what to we drive So in you’re

follow the up I all just billings the a just direction encouraged it’s but I got push that, little guidance quarter. it in to just why than if an quality having revenue adjustment think mix surprise, billings the we’re by rather it. not we that wasn’t wondering where the bit, saw the the headed, back And in to of maybe to a and

that’s of if, Yes, than you at deals greater $X down. because coming results results, to I – million QX the QX see contract think and duration you’re and less starting if look is

of that is especially growth I comp And probably data coming being the think the two at kind plan QX one now we point do we business guidance, in coming we’re having just subscription the see from, that got it’s because you you anticipate had feel, of the we if moving we’ve in where And shorter-terms. didn’t from offerings points. changes in that look direction. the and QX data with

Got it. you. Thank

Sterling. Thanks,

Thank you.

next line question is comes Stifel. Talpaz Gur Our open. your with from now

Okay, great. you Thanks one Frank. you taking my for Kevin for questions. One for and

up For duration, have we bit automated the around about to Verodin, step of can validation the back little aside Kevin, potential Verodin with about more and here then you the security engagements. from changed the talk a just from piece business this then a And efforts Mandiant taking assumptions sell broadly, contribution customers talked year? post

Yes.

ever XX we So think will I a couple over speak of languages. never sell that things – we intel be on replicated, the Verodin the platform, over which time

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remains for $XX at for part our million in second billings. Gur, Verodin question, XXXX the to of your And expectations

with great. Perfect. Any duration That’s adjustment? more the

has are deals one-year so annually. deal, there build multi-year that primarily been Correct. Verodin

question And for then Okay. just additional you.. Frank, one

go sorry, I’m ahead.

Yes.

growth, with delta product the offered support the implied you at and you Analyst would the of to see reflection relative talk around business this call what next the So like more you cloud you’re can Day this year for you XX% platform, in a decline a to more adjustment, the as billing the for conservatism even about reflect there and flattish shift duration would or managing. changes towards making broader

seeing and and services are the we services. think a shift I platform, broader Yes, managed cloud towards

there. QX at not that and I are in We’re can model, this you point, updating anticipating but see XXXX the our guidance but a quicker long-term guidance think we transformation

you. Thank Okay.

you. Thank

Moskowitz from Our next Gregg question Mizuho. comes with

open. now is Your line

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wondering anything if was aware potentially as just we year a might in-period the is should to or of business that this it conservatism? else be headwind about relates So there act perhaps little on bit just it as a revenue

– of just it’s think mix difference. little I little a a a bit

upfront are a a kind – yes, if subscription shift a products. revenue you XXXX, have products that based more look do our We of for of products there’s of and more we at mixed upfront have to expectations couple those from

see On for with that you And Kevin, for around are bigger Kevin, from commits XXXX? customers did was Expertise so – looking with thanks. you then Okay, to Demand, How given this EOD? customers ahead engaging

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very Great. much. you Thank

Thank you.

comes Our Michael next with from question Turits James. Raymond

is now line open. Your

is things; primarily a shift this function mix more that is it Hey just demand guys. or way? the is back you, shifting wanting side – to driven Frank, customers is more model you one, to evening, or by and – from terms – this of the Good in it Two is this duration. for guys go

Yes.

would I think, I both. say, it’s Michael,

subscription, also multi-year reluctance the a midmarket front. the quicker shift in we’re to opportunity because We’re we channel our up seeing in but bill to a market expanding kind of seen and reluctance have a

there’s an changing to a to by some with comp ARR on focus for the changes is from of controls or hardware by on the conversions, more allow have move on ARR duration and put that subscription natural three bigger will and we of bit have degradation little so, that usually two. years renewals appliance kind that just tweaking plans that much year a kind know and things a on of impact the typically along And

surprised to any incenting it’s is the of could an where I’m go risk more And term? downside that there’s demand not it year. two and that I I you’re and it that guess, side there this mean, months longer to if driver, three impact

obviously, think, we good we always would changes that, upside made I say and driving. to downside an with with But it. Well, the pretty guidance I a feel there’s

say comp that wouldn’t I but needle way. aren’t a would The changes drastic impact, an plan the of the enough quickly it Somewhat drastic move other that impact.

from And longer does your each perspective? it term, go year? does continue I Where mean, eventually this

Yes.

up do to paid and focus length. on kind continue we think and selling appliances and still see downwards term still a deals focus I going to be general some we term incentive longer and on I we as contract think, product of trend on front. of are sell ARR, longer which you’ll subscription But do

gradual, one going think to months I a So transformation. it’s any be is think but year, in I to two three more pretty significant

Right.

Okay. Kevin. Thanks, Frank. lot. Thanks a Thanks

you. Thank

you. Thank

Our next question UBS. Boolani with comes from Fatima

is open. now line Your

are you? how Hey,

you I’ll you. you – with one start you, I’m for How Good and for Frank you? taking have are the Kevin. I you for morning. great, for taking the questions. Kevin, Thank Thank Kevin.

Just XXXX you had pretty under kind of and digging into Travis’s retirement, effort a significant Travis I over reorganization Grady. know

how very So role the at and about appreciating think here? level, And expanded a should sort we on continuity new COO. of from Bill’s succession high

So can if the you contextualize around us succession. help just

sure. Yes,

our and not brain Travis. foremost, Travis and I this XX complimenting shared – years. is either first complimenting So and or for something me I’ve

of habits spirit my mean, knew workplace. So wife’s so a knew we sound a happens alike. in Travis, will that’s the I like This his I more than think better much thought what strange habits. I comment, but I

and front with we’re When years working advisor. the porch, an still He’ll we’ll talking always about old XX be he’s be me. on So FireEye.

So there’s the be put forward. mission continuity and total going to to the things you

seven week XXXX. and February time, time step river We’ve XX doing in. for that when a say, you’re things for And hours a hey, And time happen. out of can been long this a of in and step an and be a lot a me since joined time. of days me there the Travis a in you comes where day, advisor it’s to putting back for while

motion all going I we in So together anticipate all. my in work will not will And opinion, he’s motion. guidance. over stranger at benefit put things and to always always that years together, are his the stay the do a I Travis from

span it’s what have execute. as years roll. new execute and goes And career, what you organization. of you doing And as reduce military. guess do obviously just the And execute first we’re operationally and my to that’s and you’ve quickly, to ROTC of an into the I eight I to his When there, schedule, we between and your control he five got

We’re going chart execute we’re kind quicker. most senior the tightening executives of to to org and

So I’m those that’s where doing changes.

it’s a by But and to of the for stay that all big we still is this lot – companies, when six But him. get XX-year respect. to to a were later and And that you something do folks get you’re when this point, and going is in run Travis is and can bought folks, connected a it. startup is been in years and I salute here we’re

dynamics that what product and appreciate Gen the of discussed relates appliance declines Frank, put segment can would it Day? helpful – revisit just X to and a as accelerating finer be related there. could I really the on we can us declining I color. at we relative If or to we Gen for in disparity just me. if the it And for rates, you. that’s point that for Thank some X, you appreciate if category the the refresh to in you, around that refreshes better so Analyst that

forced of generation third end kind for last the life XXXX so March of in year, the at Fatima, Yes. end QX of did we have the of appliances.

of have did product that outsize kind of QX So impact kind in of an XXXX.

XX% QX year-over-year. you grew if of recall So product XXXX, in

now of kind refresh we so a of year-over-year converse because significant of more forced don’t happening And decline the a of seeing QX you’re kind have XXXX. that in having

the of at As we significant cloud just business. and see our we the part look at the we in pipeline, subscription growth look year opportunities platform,

look really you Now point. multi-year because on-prem from what’s is the three-year this showing the just think that from good deal up down metric event, we’re from I a still being at the thing, even transformation cloud. of can see you if built And with at customers, getting commitments coming that annual just strength in it’s overall growth typically front billings contract to more length perspective, ARR,

year-over-year grew for and endpoint, cloud XXX% in example, ARR. Our cloud

that areas expected, probably the quicker seeing grow growth strongly. are think a I transformation of business. thing the we but we good our little continue are business. for They than So very bit it’s a Those to

Thank you.

you. Thank

comes Stanley. Melissa next Morgan from Our with question Franchi

Your line is open.

capacity was for at taking quarter. to product when talked a think guys you for and The And with Great. near you for operating I or strength Thanks you, that quarter, this start really services question. segment related last just was I’ll said question my Kevin. utilization. Mandiant a notable

just hiring XXXX? you outperformance? from And what a and kind expectation and for talk you’re drove what in seeing So, billing that about of strength can perspective rate a

bet. You

if reality, the here’s So it grows, we simple. that hire,

how it. probably the Mandiant exactly many metric chargeability. And for is to people hourly three more bit into hot got, call, But – growth adding single right – the the where a response. every rate tied you is now, that’s folks is you things, business especially little be. component and you mix. of got Services want You haul we its in only It’s rate the Chargeability directly it to is incident fact

And the have expanded plus, we services.

Strategic leading We have Carmakal Charles Services.

Bushar, things of more it’s strategic folks, well. expansion work more right efforts. hired line government Ron if our got as now. who XX folks, now, And we’ve little bottom have now. bit XX good, a If for we work my a have we right them We The of side lot them leads hired for into we the just right more

of build of that fact kind things the one able to than been is Melissa, that that And delivering. we’ve more drive helping the we’re

we’ve what bunch is so team. like between do give, with in with even services’ a work revenue can professional does constantly Expertise deferred And increase major of projects, On have we any And the that things we Demand. been to able existing the

services’ deferred so to QX. up And revenue million got $XX in

for it the that’s able on to focus So I to resources the business really gives hiring just to because right be think on us continue healthy that. the to ability deliver

That’s great.

term guidance. for you, XXXX I follow-up in for one contextualize of to guidance light And Frank, your your wanted Okay. longer just

initially XX% so. XX% for just while you to still longer guide XXXX? CAGR your normalize to So first billings And stands then and beyond I if got guide XXXX, Can looking whether we help for us it billings and guiding the for contract that’s the the you look then what like understand, secondly, we CAGR X% think and drives to believe. acceleration at the term you’re growth I at length,

Sure.

of quickly, term we overall look CAGR. growing you areas that CAGR, that billings if where at very is XX% business the guidance. heading, updated above this haven’t at in So growing But rates the five-year basically, long is are

XXXX of and as the business. we you’ll into much part what move is year bigger overall and move your of is so that growth the the And see part continue throughout XXXX, business

going the to much so is that be for rate significant. growth overall business more And

where look at you we billings ended billing, product overall expect billings. product I our at, of mean, and if XX%

business. piece much our smaller So while becoming of declining, that overall has been it’s a

go through expect as growth would go because of a your go portion. I the your year bigger rate And the is just year, and as we much next part the growth so will up that we business through overall

Thank helpful. you. Very

Thank you.

Patrick Colville question next comes with Research. Our from Arete

is line now open. Your

much quarter I was because I my taking Can just that through, be XXXX, for possible, – and impressive Thank we’re So could profitability in in fiscal can if you the guidance? that switch that in area, inflection not you profitability? for a talk last pretty increase in question. over given really years and both me mean seeing two this your to profitability, why

Yes.

go I today. relatively think, a focus having lot where on Patrick, it of they expenses are the from down is just

And year-over-year. XXXX, been $XX OpEx are overall so $XX million digits we’re really the from by in slower before. an parts of QX. we we’re the down And growth to $XX in think ultimately, is, million margin impressive I have And even of million though growth, end operating double $XX XX% enabled which the in to the the business to areas getting we’re in in the what’s other that expecting investing out anywhere to of business haven’t million $XX year XX% to pulling million roughly us

that’s think shows business. really the leverage in I the So

expected from very clear. fiscal Yes. XXXX you third-generation headwind just you what the been the kind out of worst that being the circle talked is versus expectations? And had I pushed Or about has guidance? That’s appliances much. And and a revenue can back the your actually that fiscal of Thank so very the previously? to prior headwind. you troughing I XXXX mean, back little bit

was us going appliances QX and QX. in to was mean, amortization and back knew fact we the XXXX There appliance Yes. into sold to the we the less less add I from continue that, that in pool. impacting

about surprise good in beyond. of kind doesn’t that headwind the – news dissipates and is that that XXXX us. again, It’s So

in hits its So it kind XXXX. of peak

the still having we’re of overall of while X% an guidance that able growth headwind, show there. So revenue to kind

Great. Thank you.

Thank you.

comes question next Our Owens with Rob Piper from Sandler.

is Your open. now line

basis. down you bit, drill half did million And on year-over-year were number of to fact Great. guys. for the for the on I my And little want touch taking that the back thanks questions XXXX, transactions. in dollar Frank, a a number they of on one,

QX? some XXXX to of to would that expect your So it throughout how of when is lapse Or that long persist changes? you in itself last? given in view, Is headwind this the kind going

going over deals. we’re business. from probably because that see deals I transaction to contract – the million impact able length to get we’re that deals going within less of two-year that you’re mean, expectation going the dollar seeing greater deals. level in velocity are down, just an to we’re because But going grow three-year the to With the to of they’re

that’s flat and some switching I then Okay, a the acquisition, of not actually logos just looked actually transaction guess I’m basis the would the acquisition of it of if XXXX sure it enough. new in new see Are And your could Verodin, But was thoughts when XXXX? of driving the number your us lines customer acquisition year-over-year to how terms like the throughout you acquired were along you through reported. new on – on logos? and for fair just should walk customer with kind that for not. velocity impact maybe compensation? what or we in

Yes.

good that, to if customer we’re our going existing customers, a upsell continue new you Our sell expectation cross and because job that. our base, on do of is really to look at ability focusing we

important. future think I is those really the seeds So for planting

at should and you a Verodin traction I you I think customer the well comp there some If perspective. the of the logo fit very newer like changes, if look from they think products we see look plan channel some some new of at and

All right, thanks.

you. Thank

Ho with Jonathan comes question William Blair. Our from next

Your line is now open.

around little what are and wanted better XXXX? for to good you with maybe Cloudvisory, maybe out understand afternoon. I trends securing to the sort of prioritization just in bit multi-cloud start Hi, seeing trying acquisition a

thoughts that. couple Yes. on of A

multi-cloud need get want right? visibility you place. and So, if that’s First, very place, controls be then can you to able Azure, interface, also Cloud, all-in-one valuable. OXXX, one one in secure you Google to in security And the AWS,

place time-to-time the to it. up then that actually and the more visibility test people will and they from on is this, AWS for are cloud into that’s climb know the the security faster fun I controls they always most your adjust. importantly, go So, in FireEye, know it’s are. us enterprises bottom even at watch – here than need companies line need And want they to

rules these Azure, and do Cloudvisory OXXX means visibility Google, to gives it FireEye based us what four and AWS, and we on see. into controls

visibility, So, some things it’s let’s those all defenses. just log edit ingestion get providers from you can and go ingestion a log we perfect that in kind from of of the some Helix and to change and orchestrate now

us, cloud So ours that’s line, that that how going going, every take is fits that’s out, it of with to – bottom customer need every capability. in the vendor

the just the cloud go Got then platforms? cost make business customers maybe, it, force maybe, sort you And to both to you. discontinue or to hardware discussion; support back any if what got need would be of point, savings to and meaningful the sense it. didn’t there at it does Thank hardware to just

Yes.

from are customer perspective, industries, of still there’s think, I a appliances on-prem’s where lot important. a

those intention So, always customers. would our be support to

have we hardware. – the we’re pretty think streamlined I a kind They’re of supporting organization.

an it’s important various straight part savings think or force verticals. So, movement believe I the cloud of to a it be the customer cloud. wouldn’t move I huge Yes, to to

Thank you.

you. Thank

next... Our

on-prem. to And Jon, point. recognizing the change there’s cloud-based pace clear rate helix too. just customers advance different our Grady mean, fact is to the that’s be have I on I going this at just no with and of this on and that been a question at than phone the

of costless, So, at and that’s obviously rare history something some in point you the cloud get the providing to that’s got where be. cheaper and It in time, can simple. better going world; platforms puck’s infrastructures is to you go actually that to better it’s

that as embrace we got it people embrace as So, change, well.

look to for been from Grady get he And that’s the in a and as for he So at a why headlock that faster. innovation now we’re there internally, change bias he’s role years doing, the nine you when has it’s has bias cloud. cloud putting first and me has

as keep we getting we’ll there So, fast can. as

get the as We’re done the but that playing and ingestion there already, we moving well. wanted Cloudvisory already to had log shows to We the the visibility done. controls

operate the we to So, of the cloud. of there. got get there how our We’ll need trifecta validation kind in we

but able cloud, in one, thing actually be there, going for things, to cloud, know fast. it would hey growth areas We do Can want to me? say, going that in FireEye’s; two run can great hey, great say, what, one ought people I’m that. out be think to Defense man, a the the we growth You I for cloud. just to already Managed you security validation I’m will secure you the our

FireEye’s where website security got the thing in say, we’d cloud to infrastructure this, our transacting like our do I do sure to assessments cloud to doing a to can innovators And is and is tests my We company. to And it the cloud. agreements, second we licensing there’s through like for I imagine and the own click third lied, to thing. you menus, come security. day make and and And want I’ll that you SaaS click run can so, through technology, through a your validate a validate that started just to the me like push cloudvisory. and validate buy

So, we’ll keep that as our aspiration.

think I please. one for time question, more have Operator, we

with from our And Brian Essex Sachs. Goldman you. comes Thank next question

open. now is line Your

you more meaningful in get ask adoption cloud focused how adoption maybe terms here platform there? right. think growth another noted have three getting just customers about, is or products. I better platform trending you for on traction of is or at with squeezing we’re real in. gear could relative you to, Analyst Are there Thank you Day, about here managed All quick XX% and platform, if of services, if you I business me Kevin, as a

Yes.

believe First period. always I off, another I so, there’s – gear

waved I captain Grady call you as I over give just the as updates. So yes, him helix to

Grady? So,

but customers adoption’s I shared would about before, the CAGR. this goes we’ve just continues and well, going with see or that XX% three we yes. segments say more

the our you’re announcements, see to door, is additional pieces. manage ability just also product at once customers those adding to RSA Kevin in some that we So, phase the appliances the and service to and your customers I’d products the shift, alluded add anymore expect of hardware. getting in of that how we quickly to adopt – kind helix, need words, don’t through don’t on-premise be platform; controller manage you which you other on-prem on-prem the on a

So, it’s big us. for really a step forward

of on provide changes helpful. organization. super lot the you of side the think had if noted and update, the roles shift greater on I can line, you development could That’s an that you it. maybe, Got here, you’re a while when maybe, the we

related Frank kind the Is maybe, or on-premise of just or any terms reduction of I that around In and think of rationalizing legacy these that coming efficiency had to. and of cost strictly business? the to from expenses product-attached alluded all development R&D side,

more a specific than bit that. I’ll Yes, definitely in Frank to But actually it just hand back questions to organization. answer the Yes.

really that it’s Brian, business, but Yes. it growing. and tailored across to much are more areas the focused is the not

more platform, but solutions, the think we some more mature are there, look a costs products. products. mature if of So, if you cloud of more we and in the category kind quite the pulling bit are out investing you actually of at kind

So, those, scale be guess, I any R&D would incremental to efficiencies.

included That would be in incremental.

you Thank it. got Okay, very much.

to the Thank remarks. to call any you. This Kevin like now over closing for turn Mandia concludes our question-and-answer back session. I would

– got it in in FireEye back in lot a we’ve coming there business. was the going QX you turn.” We you’re that towards and way And this up even of quick. those more FireEye. be that portion my for see in half and to, us our becoming more areas. and on thank again pivoting “the We four will QX. did it growth now of the and mind; business, a years to to of organization. larger overcoming we of there’s business, of CEO appointed There’s might growth called focus I you want defined in arrived I I and ago, a was see be the these Yes, interest excitement your I had years just the ago three I knew can

is of check portion first the the mark So, transformation complete.

more side of to even it’s the faster that more and business can growth on our relevant. time much. grow deliver be very Thank Now, you

gentlemen, call. for participating. and Thank you today’s Ladies concludes this conference

now disconnect. may You