FEYE - Earnings call transcript Q3 2018

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Operator

Good day, everyone, and welcome to the FireEye Third Quarter 2018 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. Also, this call is being recorded. At this time, I would like to turn the call over to Kate Patterson. ahead. go Please

Kate Patterson

being Officer Good section for call Daniel. results thanks Executive on of Chief on call everyone Executive and the and Frank the Thank be FireEye's can us afternoon, Verdecanna, Vice website investors.fireeye.com. today closed Chief issued FireEye's, Chief After today, With call accessed for XXXX. Officer is a This announcing FireEye. Mandia, third XXXX. joining Accounting me quarter Investor financial the live market to the over press are third Internet Relations Kevin you, quarter of the on the Officer of President, today's and the Financial FireEye broadcast of and discuss for FireEye's results at release

of update views as and should on these FireEye's you certain apply let the statements today, make and for call drivers, number a results including of Before competitive me will during which risks could anticipated course position, future. guidance metrics; FireEye's and no that offerings; these FireEye's financial new statements. go-to-market after enhanced to priorities, for and expectations call. to the you remind benefits, and in and our those the platform of management availability initiatives, by forward-looking forward-looking the statements We expansion cause obligation investments; begin, expectations of capabilities, market differ plans, beyond our strategies. and These as involve results and statements statements These this statements FireEye's and of forward-looking growth; representing not we and opportunities relating the some actual are rely uncertainties, undertake of which control, them materially from to

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

measures in financial most reconciliations non-GAAP comparable the We'd this of like Investor that the financial discussed We've are GAAP standard. certain for section the will metrics in and be the on earnings the this call. financial directly Relations the in well provided Additionally, non-GAAP these ASC on website to as releases earnings call remind included results XXX using as also the revenue you release. measures

we the I'd over that turn have slides With to posted website. the supplemental I'll financial Relations Finally, statements and to point section call of Kevin. like the Investor on the out that,

Kevin R. Mandia

Thank call. would we investors, at done range. long posted metrics. partners you, Kate, we us non-GAAP ranges that billings your company key we and This our all We term. on Revenue, guidance were the our profitability financial margin, high-end second for building the our all and do. quarter. of in continued seventh or a are joining operating results FireEye. Meeting and consecutive I'd And guidance. quarter is cash employees achieved the consecutive like for these And flow to what we for exceeding of the the the have and of are customers this thank We appreciate support said above

to providing delivering intelligence. also addition world-class while security innovation and In product entire to increase portfolio we threat velocity, improve results, our our our services financial continued

few reinforce you moment, take to through Now, from like Frank, message I'd financial our quarters. will the a in last detailed but metrics the

efficiency. FireEye's We tremendous strides productivity have and made improving

and growth products accelerated FireEye and profitability returned have have services. entire our to And increasing cash while portfolio We we across sustainable innovation of flow.

of a power turned an with have FireEye security we with the will platform growth sales a operations. years, from few appliance past into future company sustainable declining company more building efficient the Over software while that

time are we achieving exciting to cycle, intelligence FireEye. this driving and expertise a transformations continuous is innovation an and the With our be with at

moment thank a teamwork this employees take all that to us their the the their and to recognize for point. ingenuity, brought So FireEye I and effort, to want

some discuss let's highlights. Now recent

leverage to continue able find value our diversified growth. security to acquire new customers ways to existing drive is to portfolio to we We and one-dimensional Most and diversified are but companies FireEye deliver are customers.

done this Security, customer We Security, our by a multiple as have Security into Network creating threat services, avenues Helix intelligence, platform. of including base, as Endpoint our E-Mail well

customers. services up-sell. in, many quarter $X have were we So our multiple over that of in year-to-date provision we products Services incidents, the Helix And added We to XX% XX more have XX we internationally. many these or than logo record XXX the XXX more of security FireEye. for transactions assessments provided avenues another solutions. involve more Of proactive or and responded more customers avenues had new third involve quarter Mandiant and expanded for approximately new to And million, three transactions revenue. We security

approximately the and evolved have component We other reports new XX SIEM Helix, within adding capabilities.

our addition signature-list deployments led SIEM capabilities of MalwareGuard, legacy to popular the our displacement have embedded protection Endpoint capability, of intelligence, launched to of to Endpoint some of to class In providers has the SIEM in solutions value the machine-learning adding our to displacement enterprise threat which providers. most We with SIEM customers. orchestration led

responders Beyond the capabilities detects they detecting Endpoint our also Security what arms AV threats comprehensive that detects, misses incident need. AV with and solution forensic

that next security from needs enforcement By practitioners the generation helping world. government courses are personnel, addressing different product pace security intelligence experts and And on XX is law year in our than this of it and than security are train of create but classes experts history. capabilities security training year we note to the important personnel security training not more are any around these more to professionals. the We other just officers, to the

designed In during States. pack a recent and included We thought with from distinguish campaign months impact continue Iranian influence identifying to the leadership public to intelligence. in has threat ourselves of opinion some elections work this United an the first,

Second, global systems. [Technical cyber attackers to crimes industrial attributing financial X:XX) – (X:XX control Korean North Difficulty]

for our deploy. can drive no turn our with test first us we to they click-to-try with no security allows FireEye protect do security we With by the provide FireProof, or Managed assess products. to FireProof And best our made and one to I e-mail at to our hardware organizations service understanding better of Defense, expect easy procedures launching their products tactics e-mail its inform attackers click-to-try can charge responders enables for or security this and cloud our and intelligence tools, software to incident evaluation. in better while the solutions specific We Managed demonstrating and building our its analysts threat had plan them. their Our their in click-to-try Defense customers customers of themselves accessible launched more it FireEye optimize operations for reach quarters our marketplace. expand we the near Endpoint ever. as of will ease need value. our to our we the Security well future. channel leverage a similar due option And to as introduce and

to third-party we marketplace defense of developers had first build FireEye ecosystem of our in we have need Today new XXXX. of Helix, an we platform is it applications month. to by and applications developed FireEye to applications we key our we Helix run released have and marketplace and employees. hundreds know community The plan that open a downloads strategy As the FireEye of early on hundreds our we out partners, customers component in

to We also demand directly closer moved on into expertise putting our products.

they challenges is will demand, security for such the obtain our ongoing consumption able malware need believed expertise technology always our services priced of way in have. the technology to basis Security seamless to security to to customers analysis, analysis or and our for believe future organizations intelligence. customers get the address both We advance people forensic security expertise need they have We With as threat need, a Service. on the it quicken a be as most, providing a when in on

and our move response have indispensable. FireEye the a operations and industry results to that toward pace Leveraging able incident to our reflect across differentiate and a evolves. are of and will a efficient And products success that and our automation alone and shifts greater experience a future with fundamental the achieve hybrid expertise a emphasis cloud, the front third virtual, we and a only of and architectures on-premise protect to intelligence ready cloud of we believe versions on to I cybersecurity cybersecurity. our of quarter and threat technology to So our security hours learned as the solve of make lines. relentlessly effective, of experts include an some customers innovative continue drive mission will and cycle gathering more and the solutions, click These of finding technology by services on innovation globe, shifts built problem millions away the cadre not decade recognition with having will become dictated our at integration customers

partners, us thank on the growing us also our enterprises. like who I review with a would Frank, their the Before metrics. safeguard provide the the needs expertise our over who their a of community Frank? organizations to in financial you now to Frank worldwide. I to with to rely put would I trust will of of customers to worked turn call detailed meet like thank and And

Frank E. Verdecanna

and by business continued customers. few said and of our over Kevin, believe the years. financial in past expanded In differentiated our our on Thanks, from dramatic energized threat over and also calls for resulting our increases model. new and we our with and packaging, sustained transformation that commitments that the On growth model best-in-class vision expertise enterprise resonated simplified the logo QX. and were call. with the existing leveraging a The our metrics number positive past intelligence of to hello last to products, supported customers in few an security the underscore path customers, I and everyone two team, into quarters The pricing quarterly business future on I and trends the our our of QX, government

geographies. professional almost with appliances continues non-services for excluding accounted sales. XX% accounted physical approximately year-to-date, momentum through And for billings. our and XXXX In e-mail support on-premise billings QX In our product diversify of families related business their of XXXX, network of appliances. non-services and XX% a-third than were to subscriptions First, for less XXXX, across services, and

Helix is three transformation mix year-to-date and versions attached appliances network such of And XXXX, Endpoint, our virtual This years. subscriptions. XX-XX or products e-mail Intel, than For e-mail about split Managed less the cloud and products. our as and remarkable is a QX network between Defense, and newer

to the of the is Second, products on for billings business. this as for from At mix long-term a slightly appliance-based increasing, stabilized is billings recurring away virtual, hardware even hybrid, our growth support quarter. has cloud time, subscriptions grew of basis and and and year-over-year same shift good which the appliance

We've model. operating XX%. efficiencies gone increased of from all continued solutions, swing to our billings of focus and profile. factors new in and midpoint XXXX drive productivity the our XXXX Third, cloud leverage A implied XX% we X% and guidance, our to higher in are negative operating efficiencies improved of a of a growth growth software in mix margin on at

has Kevin that do and to very proud this companies few part are this able to future. make store so I'm efficiency. earlier, team of turn the excited said to about and operational while the for be increasing able few what's even are I'm As happen a made in

that the I Before let metrics except you referring I'll be to review metrics, revenue. for detailed non-GAAP me remind

measures stock-based debt, recognition model, reflect of most prior-period expense new items. compensation, standard in adoption multiple adjusted XXXX. that convertible the of most significantly been X, ASC non-recurring January of non-cash appliances. and on amortization ratable business to of The changes non-GAAP Our as to interest resulted results of Also exclude the our have adoption our our of the note intangibles, other XXX

questions key and we have over adjust to the last few a will go we detail their QX some As models. I as few heard our quarters the investors through points of address of results, highlight the analysts

and in on-premise support category deployed to subscriptions includes products $XXX and Total related million. end $XXX to all the virtual This billings MVX, and of were security Helix or and up all Cloud orchestrator these Product environments, it and million, physical of guidance support million Turning hybrid billings the related on-premise range appliances, the products. were year-over-year. includes both subscriptions results. at $XXX X% billings our to high

product Cloud further XXXX. subscriptions this this TAP known virtual a subscription X% you the disaggregated X% and of MVX of XX% category have related from quarter. formerly We accounted category recurring the support XXXX. and approximately billings. subscription In increased to QX and subscriptions growth support QX, support view contributor and into product and from Growth increased give in a Product-related approximately significant QX for the to this accounted and product in category versus for and deployments was as XX%

increased Helix services In performance product-related sequentially Managed of and The Defense, cloud and billings of billings. subscriptions grew Intelligence, XX% QX, this and With ongoing for strength and XX% cloud breakout subscriptions category, XX% cloud managed and second category our e-mails. for billings iSIGHT in Reflecting accounted in strong billings. of total stand-alone total XX% or year-over-year. recurring XX% accounted XX% subscriptions, both year-over-year Threat non-services

continue some years. about achieve seen color months The we've about The the The including half We ACL months, ACL XX a month I from XX XXX% additional cross-sell closely cloud down about of so a was about over to was weighted than provide ACL for the and renewal ratable a from product across know down few contract QX is weighted length subscriptions, from greater is year want category, which yields billings category ago. XX average and recurring past trends in XXXX. about down XXXX. related on a for followed, QX months, was to month subscription months, I all all XX up-sell. QX

in The appliance the decline absolute and in average product total as across percentage impacted all dollars ratable also billings. weighted First, ACL and has declining billings. both of a billings ACL sales the trend weighted in the has related in appliance the decrease for reflected

at However, recurring since in growth. meaningful that XX an overall and you point. not tailwind the ACL the contract length to contract average or months metric if billings XXXX. stability the important is reoccurring look The a suggest exclude billings, this This for averaged headwind has length just about is billings the appliances average

and FireEye's indicators yield same in trends growth up ACL For best customers' the indicate the the future do I commitment not the subscriptions that change into the technology new any and are to on commit willingness retention to in renewal; today preferences meaningful rate; or customers' customers. one, technology. reason, believe the for of two, customer to three FireEye

more approximately XX% remains QX and did rate retention we at customers we customer in QX Our XXXX. than added in new XXXX

new and all reflected cross-sell the in retention, on metric. annual or performance Our revenue recurring business are ARR

XX%, and Straight-up million or of ARR increase of We it to an just renewals recurring without ended must with the an of million, new pool quarter in this the increase, in a the increase expand. X% revenue, XX% segment managed business. sequentially. both would second and annual $XX keep breakout For are increased recurring business increased. subscriptions more than million, cloud ARR we services for categories for year-over-year of for reflecting or customer subscriptions flat. momentum for $XX or year-over-year up-sell in the the quarter ARR subscriptions seeing $XXX row,

Revenue prior of $XXX the Turning revenue to to with of million range $XXX million from or the statement. up million million revenue recognized non-services X% in Approximately income our deferred and quarter $XXX associated revenue, guidance our year-over-year. XX% current quarter $XXX billings. was was in above

revenue year-over-year decrease operating quarter revenue in taxes. COGS record X%. on XXXX. with payroll operating to margin strong from from increase income, the allowing and Our by $XXX,XXX was expenses down in about discipline primarily us QX of total performance The achieve expense fully The to in was lines expenses lower continued was second and due accompanied the cost reflected operating

the balance flow. sheet Turning and to cash

they billings XX We revenue you continue of calculated prior change XXX adjust are quarter a on adding XXX low from appliance recognizing current the billings, I deferred me the to of was months. in very with many revenue, we below periods XX deferred target back revenue in short-term and term. to our XX are as recognize $X.X We standard, of changes $XXX days. million billion, the appliance million, split end revenue than than impacting Under know to slightly let prior go we million current sheet higher about of to recurring current DSOs long appliance between track a of approximately the in range contract ended were bit detail way it increase quarter. length sales balance in average sales revenue. quarter. on ASC appliance maintain the the our take XX-XX of a over deferred in of And from investments receivables the and deferred currently $XX adoption revenue today, moment more how cash for healthy days, a are $XXX and we Because into an with from little more of XX is current Since of

result, current a in and was offset decrease year ago. related As calculate balance result areas that sheet. net in can QX $X $X million revenue million QX from revenue from increase than and sequential in current deferred more of a million of increases is by QX you deferred and revenue product $XX the a declined other current by deferred approximately This The from our business.

you revenue changes year-over-year year deferred deferred $X If from sequentially in and sales, approximately million the past revenue $XX and current exclude deferred Total associated have approximately a from have appliance increased $XX ago. increased million million would revenue $XX product related sequentially. and would million

reflects [our our strong guidance, to now Turning which QX performance. XXXX

$XXX to of prior billings is XXXX the $X Our guidance million million, an from range now increase million midpoint. $XXX

we $XXX $X For end are million. raising midpoint high by the bringing the The increases low of the to million implied and range up the to the end revenue, of $XXX million. of range range

million earlier the to midpoint associated the expect convertible guidance]. flow CapEx million above is Based million, the the $XX million $X.X is cash range million. free to the $XX.X XXX to be cash midpoint in $XX guidance million million associated retirement diluted shares or positive also and operating achieve is X% includes the of $XX million. to prior approximately be $X.XX and our $XX [of expected of with non-cash notes expected repurchase flow item range $X.XX excluding a range the $XX of our our to our for retirement range this GAAP the margin year. expected to as to compared $XX with item X% and to headquarters and million of to at non-cash target increase on between move on to convertible to We operating per be outstanding based excludes the $XX CapEx our flow, raising year. cash with XXXX in notes in the for we are Non-GAAP operating X%, to share million.] QX, new earnings of associated reported average which

the for ranges on by quarter. guidance provided fourth essentially outlook annual third Our we last implied quarter outlook from unchanged the quarter is

For of in million plus to X% transaction, QX expect from transaction be billings growth at midpoint. XXXX, that billings XXXX QX, year-over-year the excluding $XX we the the million, the QX our Recall X%. implying midpoint range would million the a of range million $XXX growth plus $XXX $XX QX at guidance included rate

We $XXX million the of million, implying growth $XXX revenue year-over-year at midpoint. in expect to range the X%

and X% revenue of per this XXX of expect based Given between average to operating on diluted fully we and earnings $X.XX X% approximately range, weighted share margin count $X.XX million. share

That reflects Our expected is expense cash and million. interest the flow your between million take Operating $X.X approximately and We'll and to expense remarks. be flow now quarter. million Operator? million $X $X to prepared it cash we earnings of million to $XX share free generate guidance $XX of cash my questions. per in the expect tax concludes fourth range in

Operator

from Piper Nowinski question with first Jaffray. Our Andrew comes

open. now is line Your

Andrew James Nowinski

much quarter. on another very and good you Thank congrats

Kevin R. Mandia

Andrew. Thanks,

Andrew James Nowinski

if give us a could demand got you you any quarter on to tracked I've and the a just and your start Maybe color just that according if U.S. question a federal just follow-up, – this expectations? how Kevin, one

Kevin R. Mandia

to exactly exceeded do, bit. little what a Yes. in It wanted we fact, expectations tracked it

value. to what go halves government team some and of a to because technology found especially a And equation, love have with we great sales can of with services I've our We U.S., in have buy great here it. buyers along along experience, more federal lot provide the we that the with both

strong So in and bottom to we expected to line, do our business business. we have federal did a what regards we federal with,

Andrew James Nowinski

with then to And Great. endpoint. regard the

vendors, I mentioned some think those... are legacy displaced you you

Kevin R. Mandia

Yes.

Andrew James Nowinski

coming Endpoint, Yes, primarily to your addition and bringing are customers customers deploying you as are a seeing or FireEye? that win those solutions in other now new FireEye are stand-alone in your existing FireEye at solution Endpoint in

Kevin R. Mandia

to was the in we at a look customer So a three endpoint when ways logos, that do several the I legacy antivirus is in of one general, bringing endpoint. solutions. new that's came one that. replaced mind where on that bought But our top we of It the

Andrew James Nowinski

up Keep Thanks. the good Okay. work.

Kate Patterson

Thanks.

Kevin R. Mandia

Thank you, Andrew.

Operator

our comes And you. next Barclays Capital. Thank from question with Kalia Saket

line now Your is open.

Saket Kalia

are you? for Thanks taking guys. How Hey, my questions here.

Kevin R. Mandia

Saket. Hey,

Saket Kalia

Hey, takes next iSIGHT Frank, there little into there love I'd billings slightly puts to a cloud got think a that kind comparable. renewals, quarter maybe of quarter, just you are subscription quarter-to-quarter, few a said bit, think line fewer you, I maybe we've and I dig for different were last

growth shift we cloud you see item in so factors? And can your think more to products more as line that especially long the is, to question – of us help over see term, about a point, form the cloud and

Kevin R. Mandia

what's had Analytics a in all and third item. Saket, QX our to Yes, Defense think that was from takeout, see I a in quarter, related kind Managed line of think coming got email Threat see the line is on you've also you're cloud But that to which On-Demand. coming strong that reasons of It and we subscriptions the the our and include would both our of saw are subscription. item, our line growth continue I It would where line which that growth you're Threat of in given the which one subscriptions going item. going Intelligence into item nice about that and that a XXXX our includes SIEM most into drivers quarter you think if is Helix Expertise include to really that lot Helix, rolling growth

Saket Kalia

lot this a That you on the for to A elections. federal. FireEye you're U.S. one vertical year around of with. follow-up clearly Maybe earlier Kevin connected the it. sense. media strong related in kind on makes that security for Got Clearly, focus of question just

Kevin R. Mandia

Right.

Saket Kalia

how true of the and terms is or that year is scrutiny I just And spending? guess maybe the season relatedly, maybe driving vertical, next I non-election elections that strength example? two is like year that part for in security election then sustainable in question more a in guess slower

Kevin R. Mandia

Yeah.

I information in think, in the not just trying operations opinion, just not cybersecurity, answered broadly. just, importance and you the question I impact the to of at or democracy you with democracy. that self-driving condition have talk, the going look cars, to can tamper as to the rising public systems trying more And this threat you promote even or watches see that look of not. on sway But you're at medical

We of more the been connected, are connections have living all ergo important. importance more trusting never those

Star term elections That up lots efforts. in effort behind elections, of I production So past right this into getting it right, risk election from sub-bucket increasing getting being now a right to human where use nation that with put don't Trek organizations elections. outcomes said, energy straight a on self-driving security of the a the get what's security the of the community of cars, just the the shields and it's defense we and importance of if health, at

So I be we'll that feel confident this election. just fine

Saket Kalia

helpful. Got guys. Very it. Thanks,

Operator

Thank our from question next you. And Citi. Walter with Pritchard comes

now is Your line open.

Walter H. Pritchard

next having of growth Kevin. business you you're talk out Could headwind if on? the faster. at those and stuff think of business, about the you think business talking look maybe you'll sounds that still little bit to do relative is can a going a wonder little a will success – more of were into rate to adjust growing you or Hi. still headwind clean incremental we you like Thanks, look sort And product your number the non-product to back? it underlying most product a seeing at then year, of I about a that within few expectations growth if talk bit be be the months about as

Kevin R. Mandia

Yeah.

of What to expertise to want best three products. So Defense that's and and overcome those regards to We always we behind going in some Managed email years ability with products a to few security one we're ago network we added IPOed quarters always products decelerate I look years ago, be get them things its is things it. had the and first outside endpoint to of start ever on and our at the looking at. core core new

getting that but else Our great company. company were expand endpoint into you else and everybody detects missed. to what That's well this detecting over we've everybody important what got a detected time, into as protection endpoint the niche be adjacencies for We like the malware good. we was to that have and launching About idea in in, is, what of that's going done love that means Walter, endpoint, bullish are we're the thing into is On-Demand, we doing I'm on I that on most email Expertise the XXXX, analysts. and what about great

maintain We have resources all to their different every speak folks have for on that are analysts, great XX own. we threat company forensic intelligence languages. These expensive

selling think that's well. processes. able going those the our when into already We that analysis be chat I We've growth have want think only things analyst, grow our click to and malware as a way I click consumption-based, can but in forensic to right product it's And can done. thought bring we they good most. and to with now, more for engage of been I more to a driver be and a a put a be to I can seamless expect that to now extension quarter us us more sell it, everybody because more into see need that get it for security to products customers And as operations. us they we about create Right

want always we think to what test the at my exercises. I senior companies, to advise doing testing but important. I it. your answered to well, way hopefully I is get threat Managed only of Red services, is intelligence this I very doing The it's they call emails is it cloud-based I way well question, our Defense, – Teaming So of look security truth also how and got when and leaders do to know And you unvarnished think good inside

you mean I Red organization is just the customer the for hot reality to particular CEO or not break-in see. that if need I get and in to to exercise do for Teaming. service, mean doesn't but an break data, threat can of break to get a a see right if now, Teaming, when that into an see become as it's break security test of and prospects, somebody's organization, email, to Red make you the I So kind want some and go and there or feel And I can in

is looking in best their feels of like particularly nations, travel best to always think specifics I the I you're and buyers, in government our for hot seeing, and we're We've some security having minds me other as right year and if want to around, So now they that, the a us training in that service ever folks. train I'm important. trained

going, So could provided there, think I've I'll but I enough. I stop keep

Walter H. Pritchard

one just Kevin. there follow-up And

Kevin R. Mandia

Sure.

Walter H. Pritchard

e-mail the the feel how do can do about sort you talk deployed business in you it defense behind product? of sort you're new you what On being percentage – or think side, versus a in in frequent the primary is, of there

Kevin R. Mandia

defense emails still. are think I second of now, primarily in Right layer we

Walter H. Pritchard

Thank Okay. you.

Operator

question next Borges our Gabriela from Sachs. comes with Goldman And you. Thank

Your line is now open.

Gabriela Borges

some adding update you on my taking layer the an top Could question. the additional in for their us displacement SIEM for give of you of an if are landscape. Thanks Kevin, One how that maybe prepared the customers versus remarks? about afternoon. thinking on SIEM about Good on I you talked as opportunities may,

Kevin R. Mandia

Sure.

Gabriela Borges

functionality space? versus is the incumbents standing in And Thanks. out what some of the types of

Kevin R. Mandia

Yeah.

make it, security data necessarily capacity. was the aggregator sure the action present take automated that the let's at you orchestration, the at generation data data with some SIEM to and operations, on second some least you but some not are compliant So when me smooth then to SIEM and And then traditional action. look allow I – was the aggregated

noticing to a build that to and meaningful in added and what with context SIEM other action, way And go we We're that app fix, presents it takes take I'm SIEM and we're create process. Center, it to reports and As common answers. threat did. that I we sitting can call kind to the are in it what that Helix Helix, to always folks go Security in we the fix of we're is, to Operations building to first-gen which and apps alert as a building so building the just that event compliance And data, that have it, happens intelligence data Gabriela, is it. provide you the from app, it of the that so the a format then

in prospect, a security the is takeout can't we doesn't the Helix So aggregate I value threat many of That to got orchestrate sources. adding it's you Well, workflow, to countermeasures know automate answer and It's we Helix better intelligence. from to And noticed can provide question operation know as center, to to you answer a on questions, it's be have able on to in we're what your SIEM expertise automate. meaning the do all top your able value point security got do? be you our data reality. We operations it take context the offer from minimization able SIEM want to where is, sidesaddle and can a our and and your we We does like mean, as a current alerts almost what kind analytics. different and security can that. of should have adding do already the intelligence building threat data the next-gen by a what It SIEM, to based getting management be if SIEM that to the you do can in we've it. provide Helix, keep SIEM to provide

we offer have Helix SIEM out SIEMs we there. regards need build and We say, features to recognized also and of SIEMs don't top out we pre-existing threat we in tear we've in orchestration as those and value in are. context. But So to here on go

Gabriela Borges

The That's into Thank the forward-looking for now have the the revenue a I you question the And follow-up helpful. on growth? could give changes what been been now much a could. you. versus really had us year-over-year billings pipeline been have year is, disclosure was how just you. update million Thank product for you an been visibility is have you you ago have what that have implemented? Frank, I go-to-market for recognition. that the on it change feel not would deferred that if $XX all would short-term helpful sense thought for in Do

Frank E. Verdecanna

you yes, in the not that sales and managed ASC I relieving the and got started respect just slide And made more to to areas we've big that that. revenue Sure. then through of we into services back and with But product up then – the headwind that see current we've from a for with impact adding other team. can to and than XXX change, got think subscriptions the that that much think respect And decline. the show providing the mature that pipeline, going from given leadership metric look business, that down you as deferred cloud as primarily I

very perspective, in I a you've our achieving much a forecasting row. the think seven our think methodology have us in in about and I with consistent that pipeline, a the pipeline from numbers seen quarters last we results

the so obviously, beyond we into few today, kind about visibility beyond feel kind feel few our And pipeline. visibility have about much really we of next that, of ton obviously next really the as here sit But a good I of the we don't quarters. into good pipeline quarters,

Gabriela Borges

the appreciate color. I

Operator

And you. Cowen with next comes question our Company. Moskowitz and Gregg from Thank

now Your open. is line

Gregg Moskowitz

good and I you Thank well. Okay. congratulations as my afternoon much, guys. add will very

the just new roughly revenue to wondering recognize First there way billings question the is for is had impact what model if on Frank, in quarter? and measure any subscription

Frank E. Verdecanna

model third with came still subscription really would of impact the second it's just So the early had I days. new the an and quarter. the out pricing beginning really We quarter, very but new say in that at

we subscription that pipeline a from quarter, uptick new those in contribution more good the to the but offerings. importantly, some in pretty saw saw we relating third So significant

Gregg Moskowitz

always (XX:XX) just and have of the perfect. you. curious, Okay, seeing with Thank then guys? around Kevin, just respect And I specifically with EDR thing next-gen market for think sort pricing, to hearing you what or you're

Kevin R. Mandia

always the very I with to pleased in we went seen the and that's signature-less we've detection haven't believed Endpoint pricing. what signature-based we MalwareGuard. had a – the shift I've on then with the results I'm that felt next-gen with our does. And

the to absolutely it. I into Protection next-gen are. was now. think just with people which capabilities So we capability We into it. company. to are hardest signature We detection yes, signature-based the like the things most And to in this build, Endpoint Endpoint don't We forensics tough then backed as the of FireEye opportunity, and FireEye use new first, have built an Endpoint we that think got the we're not I'd

I August it and to in in on this working QX, on but had we've results of have believe just we got year timeframe, the We XXXX, models protection. XXXX we it the market, getting since love been and we're

the the pricing, On a not shift to next-gen directly, felt have in Endpoint. pricing answer question on your I

Gregg Moskowitz

Okay. That's Kevin. helpful. Thanks,

Operator

comes James. Thank from Raymond our you. next Michael question with And Turits

Your open. now line is

Michael Turits

evening. good Hey guys, Two questions.

Helix, First as wondering, a on you could follow-up. out for third-party I automation. of – monetary outlook if what talk what as then for the capabilities new I've Helix? was now with point the you the is conversions well data think about a And

Frank E. Verdecanna

Yes, Michael.

subscription Analytics. So in about customers, close included quarter, those a the over we did Threat Helix of for XXX the third

per able customers basis. to those and us on are if to about So an ingest second basically think up events paying you products Helix they're signing third-party into be

on-demand, earlier other talked a one of monetization that's chat click one expertise the as which about basically Kevin Helix. to things to within model, is was be the but launching of the button So going

to so and monetization as significant well. selling pretty top just stream started on Helix a have we And we that really expect of that

Kevin R. Mandia

me is found where absolutely break the to my they a to to has people in throughout can extent when the absolutely when do full the just in who company's and what that and someone did matters. you you it matters, that color. career it we Yeah. I surprised contacts those normally compromise, some person the What subscribed marry And center, get the bringing can intelligence third up operation one

risk So that not as right a can to bring market consume the but to Helix. ability it subscription in we also and our directly, just make you assess have to intelligence easier

Michael Turits

Great. you metrics. the me And – And that some wanted then I double-digit. to commented for that my growth last to nice was we you said, have quarter, your believe just pipeline double-digit follow-up, I billings

to again us still that top This that cloud where through around and we subscription. line Can on is maybe walk comment pipeline quarter at point is see and can both the doing level? driving you that billings double-digit actually how

Frank E. Verdecanna

Yeah.

next So the very I think, very again, much growing quarter current the been has quarter and we pipeline the I nicely. And thereafter. focus on mean

we into that managed much the you aren't cloud But Beyond next tool at as few people subscriptions data as put beyond as – think look quarters. the don't the services, I and the when been nicely at those and innovation have growing been there. we growth the double-digits seeing that has new we've newer and that double-digit products launched you see on can look products,

Michael Turits

Thanks.

Operator

next you. with our comes UBS. from Boolani Fatima question Thank And

Your line is open now

Fatima Boolani

environment for for of as sort that's domestic organization Mandiant there the into of capacity with demand a thank for a know change maybe It's questions. Frank. strong or bit were been I for. and I'm any follow-up just have than But afternoon pretty being a constrained, Consulting you was on we start curious with an what function Good consulting taking the Kevin, a you to And this little is your internationally if if you I quarter business looking question Mandiant. and lighter Services?

Kevin R. Mandia

change what to at I and around look to but Yes. product we're the looked I lines. feel and being we its company, Yes, how the chargeability work I I services do. I to it don't But I expected and performance. it the and feel were. our get what we by doing And and take advantage love products need seat front our we look that responded building think, breaches call what that, the row we the and don't it. front on it expectations Incident at and don't we innovating that at of any your maintaining know I did we're a – when what foremost, in abated, and I feel help for I point, Vantage demand to out Response that processes matter try first technologies where

Frank E. Verdecanna

Fatima, services actually had a record revenue Yes, we quarter.

and keep in you think contracts. fixed services billings in the a of to mind referring mix and I is thing were bid always material billings services different is, there versus to time

versus always will that billings be as number It's built of compromise matter after as on change of would deals and the a upfront. time bid how – are which the based has assessments demand materials, are so fixed just many delivery And been billed mix ever. strong

Kevin R. Mandia

to we our then business hiring more are responding in don't a in last needed basis. the an year-to-date, this we're prepared was lot of can like the my from a international. And on reiterate than down expansion doing I reported it you break but feel earlier remarks and third to yet, we're consultants – quarter have internationally about consultants beach. assessments didn't breaches We and as the as the of that to past. more And I than the quarter remarks, past

So but hiring services streets, on power the the right curve there, your keep growth you people doing that's a way maybe – we regards have the found just the you run in work. sometimes behind we're organization, to get

Fatima Boolani

a makes And Frank, and ton you, a of one there. just ARR digging quick the That into sense. for trajectory

way their form transition the your other and that's them? products. deployment, proactive of of sort extent deployment, agreements and How deployment. as either for So you and do And more programs ARR to to think existing business maintenance to product bucket? then factors a support customers your support or your as out stabling in them what kind have we help within product plateauing appliance the extent, of and hybrid should about To the think the of sort best reactive trajectory you've about cloud customers virtual functionality elect we had suited consume

Frank E. Verdecanna

Sure.

and should growth the the of the effect up business subscriptions to subscription on at. we'd related should kind to in offerings. coming services a rates our So with additional and negligible have stay with ARR. we they're that what's other in then the same would renewal managed and the growth if ARR subscriptions new cloud ARR renewing exactly respect assuming see of and ongoing renewal, you're Basically for where appliance That maintenance to – keep kind continue

when do at us as moving drive look that spend annual our because is with legacy impact than to cloud higher on-prem positive – some are ARR spend. you a were what of That's going far that. on We the have various to As and that continues legacy customers going the have support be to offering. subscription components customers your to

have a continued on place And moving the playbook have cloud. So impact we positive for that ARR. customers do that are to in should

easy have solution. to We for way go to them on-premise our cloud an from

Fatima Boolani

Frank. Thank That's very you, helpful.

Operator

And comes our question Morgan from with Franchi Melissa next you. Thank Stanley.

is line now Your open.

Anjelo D. Austria

this Hi, for my taking is for Thanks Melissa. Austria Anjelo in question.

there question showing showing going strong internationally. First just on, another regions wanted to promise is outside strength quarter any in comment Were you mentioned QX forward? or particular

Kevin R. Mandia

Yeah.

think to regards a it services our effort international and States Traditionally, are we've been the started, internationally concentrated United to, it's geography, year-over-year. I Kevin that's we overall is services every in where expanding our to all in part. most regards our regards growing expectations in heralds for this with in it services, referring In think almost it line expanding of from it it we where and I are was speaking, to it performance had – our business internationally and of very and is our a growing component. strong about we was quarter a-third but been with in in the that's last

Anjelo D. Austria

little decelerating Got a new bit a although Thank adds really quarter customer And another logo expectations? strong QX. growth it. your that on of just you. year-over-year growth How's from new versus add come

Frank E. Verdecanna

used we customer are growth quarter for that come which see services get logos business we it's like nice So as mentioned we that well. the and have from then logos few e-mail, logos the network a Kevin from actually logos consecutive the Endpoint, new think coming second saw do different to I network tip now, can new some side also year-over-year and see in – you areas, new we still spear. new customer is Right not of we're from seeing to of is the be what the seeing

Anjelo D. Austria

you. Thank Got it.

Frank E. Verdecanna

you. Thank

Operator

our And next with you. Eyal Thank question Oppenheimer. Shaul from comes

now is line Your open.

Shaul Eyal

legacy is not things as perception, of as probably observed well and, Endpoint results. is a views Good you. set specific the or Congrats you is end name, Sure. on In front? perspective, perception-wise market guys, so, maybe just company share. again, a guys, on afternoon, market who market that which gaining And donor? respect are that some the your view, beginning Thank the guys. with to major see to if my FireEye Kevin, of any solid the of Is one category displacements? from more

Kevin R. Mandia

when share. Yeah. as I'm you're not saying market perceived what referring we're not to sure gaining

We our actors most and single intelligence, security we're platform to than have feel depends shown growing the threat e-mail breach we one virtually which network. up our about with growth, products for security our still against. growing – more respond our know year-over-year it every Endpoint's what anyone has on are I as We been our even to that matters. that quarters, threat

several market we So which you're different in specifically markets. talking because about play

Shaul Eyal

Fair enough.

try front. it, the me network rephrase on Let maybe and

Kevin R. Mandia

Yeah.

it. need safeguards their layer not layers and features is designed at Network to missed. network the had behind two had security as the our traditional based of the continually firewall But analysis – traditionally two are defense in for refer do platform stabilize detection niches a traffic it On It's the a network. as and we're want product. reality that news or we a it with multilayer not about I a business that of we're XXXX. onset competitor whether it is front, is that What adding into a The we that threats to is we really years into – been other what east-west you safeguard. miss traffic I'm we've to, firewall declined network seen it. good we've to signature-less the security that showing is other as We're going areas. the there's get and in found sales sure detect in We value like people way on over

Frank E. Verdecanna

to guess, just it. Shaul, I add to

the October, where One we in replaced quarter, us. that for seven the we in the a big providers legacy traditionally of actually figure first deal lot closed we to actually things deal a the replaced legacy also Helix been pretty actually moved where we SIEM SIEM. figure next-gen – AV defense really opened have has that fact of third seven we our some about is another opportunities excited vendor. a We've line some cases sales we And of are and in up replacing had

So be to I think the helped go existing which for folks those that helped. really has in movement has and us able on and compete innovation budget,

Shaul Eyal

elaborated follow-up the year. to head a Frank, versus you prior consultants what the the maybe on the Thank reply. down on the overall beach, with comment just that by end avoid Kevin's And last will How's respect it. as to environment? count trying overall for Got quarter hanging of hiring

Frank E. Verdecanna

because It's slightly the that's to most up, selling of been what probably been adding deliver. news we've we've year-and-a-half, I'd on the you more we've Shaul. say to to last we at focus than been able if good last, for continually And is able areas folks over do the one that part look the services

these we trained, services. on can opportunities so And backlog we hired and go compromise primarily a we of and actually assessments and deliver where we've created testing those penetration in once can on get folks

those that great machine not that and going, folks and that process hiring that to on finding retaining talent – those come keep I think easy but continually we've are we – that's a job So done by, also talent.

Shaul Eyal

Great. Good luck. Keep great that job. up

Frank E. Verdecanna

you. Thank

Kevin R. Mandia

you, Shaul. Thank

Operator

with And JPMorgan. you. comes next Thank Sterling our from Auty question

line is open. Your now

Sterling Auty

of looking I'm Yeah. are several over quarter in curious what quarters? Thanks. average this you're seeing Hi, in the what last terms deals the discounts guys. versus like

Frank E. Verdecanna

across the it's in Hey, on controls and pricing. place. We've the have – remarkably place products even and when pretty consistent rate Sterling, just tended have new to in at processes we discount actually look we

that need get typical there's thresholds involved. So people to more

And last so it's been couple the relatively really. consistent years over

Sterling Auty

in And the billings from happen growth et you revenue then of shift of do forward? cetera. double-digit think consistent see Great. right. to All appliances, and with needs FireEye all to talk moving the What terms

Kevin R. Mandia

this the to thing seen a product. the to think and had was growth. And I happen Well, stabilization Sterling return XXXX first we've is that over that year on why that's

continue grow I the to think you really going look, forward, product as new nicely.

our we're in think about more and and that XX% bigger the prepared importantly, overall products overall of we start they're becoming my remarks the a newer of are – sales. business, now talked piece I

bigger that expected. will help rate, of it the business think becomes kind we're part and I we fact overall exactly of the tracking So where our had a just that growth

of of continue about innovation continue to products kind we good those products. the And and so and those competitiveness we'll – feel the really on

Operator

And our Thank question Stifel. from you. Talpaz Gur comes next with

now is line open. Your

Gur Yehudah Talpaz

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

in is your the an One question. especially less defense, a philosophical like I'm in over as as areas SIEM. few of a willingness like your a serve first and noticing Kevin, augmentation quarters of tone sort and layer greater Endpoint past line in especially, So thing commentary, to more

to kind you that just of can about bit talk you So that, sort here of deals strike beyond tone giving you're the a what's handful confidence of referencing?

Kevin R. Mandia

so Well, but I'm are doing of proponent we a Gur, things I mean, well. other as it,

in And spoke So, network, we I Endpoint. saying, question then Frank any you sometimes lose and bear the our as value, end inside you hour I spoke-on-spoke Helix team. so meaning that And a on and into last either an I'm obviously that half have a could the go I Expertise doing lot call probably love the visibility knife fight, knife by better any to . with on the evolve On-Demand, intelligence, opportunity, e-mail, Endpoint have you spoke-on-spoke when talk greater or when Endpoint don't up company But to it. our interface, got we what or bring we versus fights with for

I prepared to everything FireEye with a make this have that's my and business do to easier quarter. click Our think engineers in We're make have job said a And did I major great we click-to-buy, difference. click-to-try. pushing to to click-to-try, button remarks, a going

those okay? the a our to We're when we in email. tougher value do can for transformational lot We're next to a growth have expertise interface. the but broke we did beyond. and combine anybody from the than daily it's network going Helix have over far with So have our with which into updates some the when with on products these layer a still see and may makes what capability, and point what Endpoint, time some getting get that of witnessed lot story. we're spoke and for need the We together On ineffective network, when quarters how intelligence be Helix I going one visibility we planet. Endpoint. a the to all estimate a to on email our on our are effective response together, basis, If People me experiences. that's of circumvented, spoke-on-spoke, So of there's the the we with you And the firewall know future of headline. under that down, four people not layer hours don't updates offer it lot witnessing as great a business, based or It's us through as incident are I doing a you is process two on network, be our what we products pretty challenge. how more have bring So be bullish the we learning we're safeguards us. that products feel more build vantage common of

Gur Yehudah Talpaz

sort of you Analyst that. about Day guide thank to just you the near Frank, How rather to want still pushing into great for near March, do to Is a you do looking you the to of recognizing you to the color. appropriate and sort XXXX. that feel think? long-term, That's XXXX Kevin, for kind framework know framework. mid-term. you But that looking guidance that don't back of back that an gave

Frank E. Verdecanna

Yeah.

and difference those related kind product the framework. been an the hybrid and have and significant are one MVX that winding Analyst being of of in seeing Day on deployed appropriate line it's Cloud up environments. ultimately virtual the are items. amount is, probably things support from that I the a And subscription think I appliances mean only we of

more a you've less seen because really classification. the of that's a I subscription little strength on little So bit change. that and real strength cloud think just there the But only

I been on talked fact much what we've think guided target of very about XXXX every at is we've tracked much and or metric. above, in pretty major

Gur Yehudah Talpaz

Thanks congrats. a and lot helpful. That's

Frank E. Verdecanna

Gur. Thanks,

Kate Patterson

question, more for please? have We one time

Operator

comes ISI. from you. Talanian And Ken last Thank with Evercore our question

is now line Your open.

Fenn Hoffman

Hoffman Hi. could little bit was I talk cash thinking margin about wondering a taking maybe you're the This for Fenn you just Ken. flow Thanks if about is questions. XXXX? for on conceptually how free for

Kevin R. Mandia

great Frank. a for like Sounds question

Frank E. Verdecanna

Yes.

QX XXXX has our the more is margin year. average on of operating So we a give because but bit our flow ahead guidance, call, end margin we'll cash – have of the fact been of traditionally term free that our little contract than one

and expect I model we think to on growth So in of cash free both see leverage continued our and QX QX guidance. the you in flow the started in

Fenn Hoffman

half great. about talk you're as a And of just with follow-up versus little of kind this bit first the channel Can maybe the traction Kevin. for Okay, you year? what a seeing

Kevin R. Mandia

channel. modifications pricing expect the channel – a quarter-over-quarter. campaigns. some I just product how – I in on policies I is leadership increasing we that We've since with and senior And that working brought got incremental the the done on with in I some we leverage what there better is think and my on What what Bill call have observables would is FireEye, we're consistent sentiment

Fenn Hoffman

Okay, great, thanks.

Operator

and our over remarks. to for today's the now that would Kevin session for gentlemen, further back Ladies Mandia like you. call. question-and-answer concludes turn to call I any Thank

Kevin R. Mandia

we're I'm FireEye, like matter I learning from I to those. proud we're the lines, and learning thank that to everybody that the responding When attending call. very breaches front on would observe this for

We security most. are matters cyber the trusted advisors when

the worldwide the tomorrow what threat company excited do we and people I'm the engineering I'm and learn and from days XX has thing We going they're around to what actors single everybody the we're are taking other and that on what to are probably exactly look protect Internet I team of customers our galvanized next building. every customers. just are And deploying to any relentlessly forward automating software about front I'm from Helix And of. with talking more can Thank we days proud for our the how protecting we're to by lessons in you. learned today aware XX our to doing the than today. lines

Operator

wonderful participating of in disconnect. square you for IR account which program. the they gentlemen, requests, and indicate had technical edit came the you a the day. conclude difficulty Everyone, inserted on from Ladies brackets call. company thank does directly all have And may ***Text conference. today's today's during in This

Mandiant (MNDT) 30 Oct 182018 Q3 Earnings call transcript