FireEye said it plans to cut costs in the current quarter to improve operating performance and increase investment in the growth areas of the business.
The platform security vendor said its board of directors Thursday approved US$10 million to US$15 million in restructuring expenses in connection with a plan to reduce FireEye’s headcount by approximately 6 percent. FireEye employed 3,400 people at the end of 2019, according to financial filings, meaning that just over 200 employees could be affected by the cost-cutting efforts.
“While there is never an ideal time for this type of action, I believe it was necessary to take the steps now to continue to transform our business to a comprehensive Security-as-a-Service company,” FireEye CEO Kevin Mandia told investors Tuesday.
The workforce reduction will occur primarily in FireEye’s mature, appliance space product areas, Mandia said. Planning for the restructuring was in motion long before the coronavirus outbreak, according to Mandia.
FireEye took a restructuring charge of US$11 million in the first quarter and is expected to incur an additional US$10 million to US$15 million of restructuring costs this quarter, according to Frank Verdecanna, the company’s chief financial officer and chief accounting officer. The costs consist of severance and other one-time termination benefits, and are primarily cash-based, according to the company.
The cuts are expected to reduce FireEye’s non-GAAP operating expenses by at least US$25 million in 2020 compared to 2019, Verdecanna said. Additional year-over-year cost savings are expected due to lower travel as a result of the coronavirus pandemic, according to Verdecanna.
In conjunction with the restructuring, Mandia said FireEye has evolved its business operations to make the company more efficient and easier to do business with. More flexible pricing, modern licensing schemas, and the ability to transact and provision software and services in minutes will help FireEye shift from supporting an appliance business to supporting an as-a-Service offering, according to Mandia.
FireEye has additionally unified its validation, threat intelligence, managed defense, and expertise on demand offerings under the Mandiant Solutions umbrella to make the transition from the company’s services to its Security-as-a-Service offerings a more seamless experience for customers, Mandia said. This should help convey the relationship between FireEye’s services and its subscription offerings.
“We recently took several additional steps as a company that we believe will allow us to increase our momentum,” Mandia said. “I believe these efforts will be more important than ever in the aftermath of the COVID-19 pandemic.”
FireEye sales for the quarter ended March 31 climbed to US$224.7 million, up 6.7 percent from US$210.5 million the year prior. The results beat Seeking Alpha’s estimate of US$221.4 million.
The company recorded a net loss of US$76.3 million, or 35 cents per diluted share, 1.2 percent worse than a net loss of US$75.4 million, or 38 cents per diluted share, last year. On a non-GAAP basis, net loss improved to US$4.1 million, or 2 cents per diluted share, 30.7 percent better than the net loss of US$5.9 million, or 3 cents per diluted share, the year before. That beat Seeking Alpha’s net loss projection of 4 cents per share.
FireEye’s stock price dropped 49 cents (4.29 percent) to US$11.06 in after-hours trading. Earnings were announced after the market closed Tuesday.
Product, subscription and support revenue for the quarter inched ahead to US$174.1 million, up 2.5 percent from US$169.9 million the year prior. And professional services revenue jumped to US$50.6 million, up 24.6 percent from US$40.6 million last year.
For the coming quarter, FireEye expects to record a non-GAAP net loss of 1 cent to 3 cents per share on sales of between US$213 million and US$217 million. Analysts were expecting net income of 2 cents per share on revenue of US$221.8 million, according to Seeking Alpha.