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FireEye's (FEYE) Q2 Earnings Beat Estimates, 2020 View Up

FireEye, Inc. FEYE reported better-than-expected results for second-quarter 2020. The company’s second-quarter non-GAAP earnings came in at 9 cents per share, while the Zacks Consensus Estimate was pegged at a loss of 2 cents. FireEye’s quarterly earnings also witnessed significant improvement from the year-ago quarter’s loss of a penny.

Revenues increased 6% year over year to $230 million and surpassed the consensus mark of $214.6 million. FireEye’s overall quarterly results benefited from increased demand for cybersecurity solutions amid the coronavirus-induced work-and-learn-from-home trend.

Quarter Details

Segment wise, product, subscription and support revenues increased 2.5% year over year to $177.3 million and revenues from professional services were up 20.9% year over year to $52.6 million.

However, FireEye’s on-premise product and related business revenues decreased 12% year over year. This resulted from the fall in appliance hardware sales in 2016 and 2017, which is still being realized due to the ASC 606 revenue accounting standards.

FireEye, Inc. Price and Consensus

FireEye, Inc. Price and Consensus

FireEye, Inc. price-consensus-chart | FireEye, Inc. Quote

Quarterly billings of $203 million slid 8% year over year. The decline reflects strong year-over-year comparison and a large government contract booked in second-quarter 2019.

Non-GAAP gross margin remained flat year over year at 72%. Non-GAAP operating margin was 10%.

Balance Sheet & Cash Flow

FireEye exited the second quarter with cash and cash equivalents, and short-term investments of approximately $914 million, down from the previous quarter’s $980 million.

The company generated operating cash flow of $15 million in the June-end quarter. In the March-end quarter, FireEye’s cash outflow from operations was $24 million.

Guidance

For third-quarter 2020, FireEye anticipates revenues between $225 million and $229 million. The Zacks Consensus Estimate for revenues currently stands at $220.1 million, calling for a 2.6% year-over-over decline.

The company anticipates non-GAAP gross margin of 70-71%. Non-GAAP operating margin is estimated to be between 7.5% and 8.5%. FireEye expects non-GAAP earnings in the band of 6 cents to 8 cents.

Buoyed by better-than-expected second-quarter results, the company raised the outlook for full-year 2020. FireEye now anticipates revenues in the $905-$925 million band, up from the earlier projection of $880-$900 million. It also expects non-GAAP earnings between 22 cents and 26 cents, much higher than the previously-estimates range of 3-7 cents per share.

Zacks Rank and Key Picks

Currently, FireEye carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Dropbox DBX, Zoom Video Communications ZM and Synaptics SYNA, each flaunting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Dropbox, Zoom and Synaptics is currently pegged at 32.5%, 25%, and 10%, respectively.

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