FireEye (FEYE) Quarter Saved By the iSIGHT Acquisition - Piper Jaffray
Piper Jaffray analyst, Andrew Nowinski, took a critical view of FireEye, Inc (NASDAQ: FEYE) preannounced results and reduced his price target to $19 (from $27). FQ4(Dec) results are now expecting revenue to come in modestly below the mid-point of guidance. More importantly, management guided for organic billings growth of 20% in 2016, well below the Street’s 28% estimate. However, the acquisition of iSIGHT will add ~$50M in billings to 2016, partially offsetting the guide down. The firm maintained a Neutral rating.
FireEye preannounced FQ4(Dec) results, expecting revenue of $184-185M (cons $186.8M), which was modestly below the mid-point of management’s guidance range of $182-190M. However, management expects billings of $256-257M, which was at the upper-end of the guidance of $240-260M. Management said the company had a record number of transactions greater than $1M (47) and added a record number of new customers (375).
FireEye paid $200M in cash and a $75M performancebased earn-out to acquire iSIGHT, which generated approximately $50M in billings and $40M in revenue in 2015. Management said the deal will be “slightly accretive” to operating income and cash flow in 2016. The deal will be financed with cash, leaving the company with ~$1B in cash following the transaction close.
iSIGHT was founded in 2007 and has over 300 employees in 17 countries, focused on providing customers with threat intelligence on the attacker. By leveraging this intelligence, customers can block attacks before they occur, creating an early warning system for attacks. It is an interesting acquisition, which complements the company’s product portfolio and is accretive to the model.
The analyst is reducing his FQ4 revenue estimate and raising the billings estimate to align with management’s preannounced results. However, he is also reducing the FY16 billings estimate by $41M (3.9%) and reducing the FY16 revenue estimate by $12M (1.4%) to adjust for management’s new guidance, calling for organic billings growth of 20%. The new billings estimate equates to 26% y/y growth, but that includes ~$50M from iSIGHT
For an analyst ratings summary and ratings history on FireEye, Inc click here. For more ratings news on FireEye, Inc click here.
Shares of FireEye, Inc closed at $14.87 yesterday.