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FireEye Earnings: The Guidance Says A Lot

Feb. 08, 2019 2:14 PM ETAlphabet Inc. (GOOG)FFIV, CHKP, FTNT, PANW16 Comments
Hervé Blandin profile picture
Hervé Blandin


  • Q4 earnings above expectations but disappointing guidance.
  • The guidance reveals the challenges for FireEye to compete with established and aggressive IT security companies.
  • Considering the uncertainties, investing in FireEye is risky at the current stock price.

After having raised the yearly guidance three times in 2018, FireEye (FEYE) delivered Q4 and yearly results above expectations. Also, the company achieved full year non-GAAP profitability for the first time.

Despite this performance, the stock price dropped by more than 12%. The market didn't like the weak guidance as it reveals the company is struggling to improve its fundamentals.

Before getting into the details of the troubling guidance, let's have a closer look at the Q4 earnings.

Computer securityImage source: TheDigitalWay via Pixabay

Q4 results above expectations

As usual, management presented the results in a table that shows only non-GAAP figures (except for the revenue).

FireEye Q4 results

Source: Presentation Q4 earnings

The company delivered some results within the guidance and some other results above the guidance.

During the earnings call, management gave more details about the drivers of the growth within the "Product and related subscription and support revenue" segment. The email security and endpoint solutions offset the 11% decline of the legacy appliance hardware business. The two other segments, cloud and services, also contributed to the revenue growth with an increase of 12.7% and 11.1%.

Total operating expenses improved as they represented 84.8% or the revenue against 95.2% the year before.

Also, the CEO highlighted in the press release:

“The fourth quarter was a strong finish to a record year for FireEye. [...] We posted double-digit billings growth for the quarter and the year, and achieved full-year non-GAAP profitability for the first time in our history.”

All these non-GAAP results look promising but they don't reveal the whole story to the shareholders. Some of the items excluded from the non-GAAP results like stock-based compensation represent a real and high cost to the shareholders. Non-GAAP adjustments amounted to $59.9 million during Q4.

The company still generated important losses as net losses amounted

ChartData by YCharts
ChartData by YCharts

ChartData by YCharts

This article was written by

Hervé Blandin profile picture
I leverage my 15-year career as an IT engineer to write mostly about tech stocks with a long-term perspective.Disclaimer: Anything I write isn't investment advice and will for sure contain errors and inaccuracies. Any investment decision you make should be based solely on your own research and judgment.

Analyst’s Disclosure: I am/we are long CSCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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