FireEye revenues hampered by cloud upgrades and renewal rates, stock falls

FireEye Inc. said Tuesday afternoon that higher than expected costs from migrating data to the cloud and headwinds from smaller customers moving to updated services outweighed earnings and forced the cybersecurity company to lower its year-over-year forecast.

FireEye

FEYE, -0.49%

shares fell about 13% in immediate trading after demand for release of results, after a 0.5% decline in the regular session to close at $ 16, 10. The stock was 12% ahead of the market Wednesday.

The company was having trouble getting some customers to upgrade from a product it no longer supported, CEO Kevin Mandia said in an interview Tuesday.

"The devices we published five, six years ago, we got headwinds there and some of the renewals with smaller customers," Mandia said.

"What we had to do is continue the platform of our cloud offering, and we just had to grow them faster, so you're going to see me invest more and more in the future of the company while balancing some of the renewal challenges we have with the smaller customers, "said Mandia. [1[ads1]9659002] The company reported a loss in the second quarter of $ 67.3 million, or 33 cents per share, compared with a loss of $ 72.9 million, or 38 cents per share, in the year Previously, FireEye reported an adjusted loss of one penny per share, analysts surveyed by FactSet had forecasted a penny per share, and FireEye had projected adjusted second-quarter earnings at break-even to 2 cents per share. [19659002] Revenues increased to $ 217.6 million from $ 202.7 million the year before, while Street had estimated revenues of $ 215.2 million according to FireEye's $ 213 million guide to $ 217 million.

Adjusted invoicing increased to $ 221.4 million from $ 196.1 million a year ago. Wall Street was looking for $ 213.8 million, according to FireEye's $ 207 million to $ 222 million billing forecasts.

Customers who had subscribed to FireEye's third-generation security service, released in 2012, had to upgrade to the company's fifth-generation service, resulting in lower-than-expected renewal, especially from smaller customers, said Frank Verdecanna, FireEye's chief financial officer, an interview.

Faster than expected internal data upgrades for FireEye's traffic also resulted in higher costs.

"We actually moved all our traffic on our cloud services from our internal data centers to a public cloud provider, and we did it fairly quickly," said Verdecanna, with primary cloud provider Amazon.com Inc. & # 39; s

AMZN, -0.73%

AWS. "It basically increased our costs because we are still running the costs of the internal data center for a few quarters."

Also, high commissions paid to sellers to bring in new customers compared to those paid for renewals also ate FireEye's bottom line.

"So we are over planned for the year in new business, and we are under planned for the year on renewals," Verdecanna said.

For the third quarter, FireEye expects break-even revenue to 2 cents a share of revenue of $ 217 million to $ 221 million, and invoices of $ 245 million to $ 255 million. Analysts had projected earnings of 7 cents per share on revenue of $ 228.4 million and invoicing of $ 249.4 million.

For the year, FireEye projected a break-even revenue of 4 cents, a share of revenue of $ 865 million to $ 875 million and invoices. at $ 935 million to $ 955 million. Wall Street was looking for a 15-cent consensus on $ 893.5 million in revenue and $ 943.1 million in invoices.

At the end of May, FireEye said it purchased security instrument company Verodin, after which there were forecasts for full-year adjusted earnings prospects of 12 cents to 16 cents a share of revenue of $ 890 million to $ 900 million, and invoices of $ 935 million to $ 955 million.