Earnings Preview: What to expect from FireEye Q4 earnings

FireEye (NASDAQ: FEYE) is scheduled to report its Q4 2018 results tomorrow after the bell. The cybersecurity firm has been transforming itself from appliance-based firm to subscription-based security firm over the last three years. The fourth-quarter results would indicate investors how the transformation is taking shape to tackle competition and have sustainable growth to report profits.

From the street point of view, FireEye is expected to report top-line growth of 7.2% touching $216.7 million over last year. Adjusted EPS is forecasted to come in at $0.05 compared to $0.01 reported last year.

It’s worth noting that last quarter the company has guided Q4 revenue to be between $214 million and $218 million and adjusted earnings in the range of $0.04 to $0.06 per share. Billings were projected to be in the $245 million to $255 million range.

Last quarter, FireEye narrowed its loss primarily due to a reduction in expenses with growing revenues. However, the Q3 results surpassed street estimates reflecting that the transition is working for the firm. The solid results across all products and regions helped FireEye to raise its 2018 sales and earnings outlook, which was seen as a good signal for sustainable growth from the shareholders’ point of view.

What to Watch?

Apart from the headline numbers, investors would be interested to see whether FireEye is able to continue the momentum from last quarter on both its reporting segments. In Q3, Product, Subscription and Support division reported a growth of more than 7% while Professional Services grew 5.3%.

The company is expected to see solid growth from its virtual security products and cloud-based offerings. When it comes to cloud-related services, the company would continue to benefit from Helix platform, Managed Defense service, and iSIGHT.

Related: Symantec stock jumps after Q3 earnings

Billings is another key business metric tracked by the street. Last quarter, the security firm reported 8% improvement in billings after two-quarters of a slump, which was a relief for shareholders. Since Billings takes into account future contractual revenues, investors get visibility into the future trends and health of the company.

In addition, it would be interesting to see whether FireEye is able to improve its retention rate from last quarter. In Q3, the company reported a 90% retention rate with new customer additions compared to prior year period. With improved retention rates and growth in customers, recurring revenues are expected to increase.

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With cybersecurity market expected to grow at double-digits over the next five years, FireEye has good potential to benefit from the growing market. The shift to subscription-based security firm along with acquisitions would help the firm to tackle competition and return to profitability in 2019.