Mandiant Inc. (MNDT) Q3 2021 Earnings Call Transcript

Mandiant Inc. (NASDAQ: MNDT) Q3 2021 earnings call dated Nov. 04, 2021

Corporate Participants:

Barry Stern — Senior Vice President, Finance

Kevin Mandia — Chief Executive Officer and Board Director

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Analysts:

Brian Essex — Goldman Sachs — Analyst

Jonathan Ho — William Blair — Analyst

Hamza Fodderwala — Morgan Stanley — Analyst

Presentation:

Operator

Hello and welcome to the Mandiant’s Quarter Three of 2021 Financial Results Conference Call. My name is Sam and I’ll be your operator for today’s call. I will now turn the call over to Barry Stern, Senior Vice President of Finance at Mandiant. Barry, you may begin.

Barry Stern — Senior Vice President, Finance

Thank you, Sam. Good afternoon and thanks to everyone on the call for joining us today to discuss Mandiant’s financial results for the third quarter of 2021. This call is being broadcast live over the Internet and can be accessed on the Investor Relations section of Mandiant’s website at investors.mandiant.com.

With me on today’s call are Kevin Mandia, Mandiant’s Chief Executive Officer; and Frank Verdecanna, Executive Vice President, Chief Financial Officer and Chief Accounting Officer of Mandiant. After the market close today, Mandiant issued a press release announcing the results for the third quarter of 2021.

Before we begin, let me remind you that Mandiant’s management will make forward-looking statements during the course of this call, including statements relating to the company’s guidance and expectations for certain financial results and metrics. The company’s priorities, initiatives, plans and investments, drivers and expectations for growth and business transformation, expectations, benefits, capabilities, and availability of new and enhanced offerings, market opportunities and go-to-market strategies. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements.

These forward-looking statements apply as of today and you should not rely on them as representing our views in the future. And we undertake no obligation to update these statements after the call. For a detailed description of the risks and uncertainties, please refer to our SEC filings as well as our earnings release posted an hour ago. A copy of these documents may be obtained from the SEC or by visiting the Investors section — Investor Relations section of our website.

Additionally, certain non-GAAP financial measures will be discussed on this call. We have provided reconciliations on these non-GAAP financial measures for the most directly comparable GAAP financial measures in the financial — the Investor Relations section of the website as well as the earnings release.

With that, I’ll turn the call over to Kevin.

Kevin Mandia — Chief Executive Officer and Board Director

Barry, thank you very much. Thank you to all the investors, employees, customers and partners joining us on our first ever earnings call as Mandiant. We have never been more excited about our focus, our execution and the opportunity and we appreciate your interest and support.

During this year, we announced our intent to divestiture of the FireEye Products business. We believe then and we believe even more so now that the separation of the FireEye Products from Mandiant Solutions would unlock high growth and improve our operating leverage. Our goal is to remove complexity and create a singular focus on our most differentiated solutions. And to that end, I’m very pleased that we completed the divestiture of the FireEye Products business on October 8 and rebranded to Mandiant and changed our ticker symbol to MNDT that same week.

With these accomplishments behind us, I believe Mandiant is the company best suited to close the cyber security cap that exist, providing solutions needed to augment security teams in a manner that promotes confidence in their security effectiveness. Our launch of the Mandiant Advantage SaaS platform has enabled us to deliver our industry-leading threat intelligence, our industry-leading security expertise and scale them through software, which is rapidly becoming both our growth driver and the majority of our billings.

Today, I will provide you with a few brief financial and operational highlights to demonstrate our early success in the relaunch of Mandiant. And I will share significant changes we made in the third quarter to accelerate our growth. Please note that my remarks about Mandiant and third quarter performance will refer solely to our continuing operations for the Mandiant Solutions business.

Mandiant delivered positive results against all our guidance ranges, including revenue, gross margin, operating margin and earnings per share. While not formally guiding billings, ARR and cash flow, Mandiant delivered above our expectations in all of those areas as well. Mandiant billings grew 40% year-over-year to $139.3 million, led by platform cloud subscription and managed services billings growing 58% year-over-year to $73.6 million.

Mandiant services billings grew 24% year-over-year to $65.7 million. This resulted in a business mix of 53% subscription billings and 47% services billings. Our focus on delivering solutions and services through the Mandiant Advantage platform will further accelerate our transition to subscription-based services and solutions. Our Q3 subscription billings growth was bolstered by our best ever quarter for Mandiant security validation and our largest validation deal ever.

Revenue from Mandiant grew 22% year-over-year to $122 million and annual recurring revenue for Mandiant grew 26% year-over-year to $264 million. And Mandiant deals greater than $1 million grew 79% year-over-year from 14 deals a year ago to 25 deals this past quarter. The total value of these deals greater than $1 million almost doubled, growing from $24 million to $47 million year-over-year. As an example of these larger deals, we added a new Fortune 50 customer, who in addition to our incident response expertise, asked us to help transform their security program through a powered by Mandiant approach that leverages our full suite of intelligence, validation and the Mandiant Advantage platform. We are pleased with these financial results, but we are even more excited by the operational highlights and go-to-market changes we are making to accelerate our growth.

I would now like to discuss some of Mandiant’s innovation. We continue to make great progress on our Mandiant Advantage platform, mainly the advantages, a multi-vendor XDR platform delivered as a SaaS offering and it contains modules such as threat intelligence, security validation, automated defense and now added in the third quarter attack surface management. We are innovating on the platform at great speed. I’m going to highlight four examples for you.

First, we now offer multi-vendor managed defense. Customers have asked for Mandiant expertise in threat intelligence to back their security teams for years. With the divestiture of the FireEye Products business, Mandiant will be supporting more technologies as a multi-vendor XDR capability. Previously, to leverage our managed defense, customers also had to rely on and purchase FireEye technology. Now our customers can rely on Mandiant expertise and intelligence to leverage the controls and vendors that they choose.

Second, we plan to launch Active Breach and Intel Monitoring in the first quarter of 2022. This capability enables visibility into Mandiant threat intelligence in real time. It is the functional equivalent of collaborating with our incident responders in the field, proactively checking our customers’ environment with the most up-to-date intelligence available as we respond to the new and novel cyber attacks.

Third, we plan to roll out what I consider to be the most comprehensive and reliable Ransomware Defense Validation solution available in the market. Ransomware preparedness is a boardroom topic and executives and directors want to know if they can withstand ransomware attacks that occur every day. Mandiant’s ransomware defense validation test the customers’ ability to defend against the ransomware attacks we are seeing in the field and provides unvarnished truth about an organization’s readiness to various ransomware actors. And we have been performing ransomware assessments for years, but this service is built to be more technology-enabled so we can deliver a high velocity, channel-ready and competitively priced offering to reach new markets for Mandiant.

And fourth, we also innovated inorganically in the third quarter by acquiring Intrigue. Intrigue allows Mandiant to deliver Attack Surface Management, or ASM, as another module in the Mandiant Advantage platform. ASM identifies how organizations could be compromised by identifying applications that are visible, vulnerable and exportable and we point that out in minutes. We have already derived significant value in our services business from this capability and we plan to integrate Attack Service Management into the Mandiant Advantage platform in the first quarter of 2022.

In addition to these four innovations, we also added new functionality to our Automated Defense module in Mandiant Advantage that codifies our human expertise into machine learning and analytics. Specifically, in addition to numerous improvements to our machine learning decision models to automate and scale our expertise to more confidently identify security events that matter, we added new functionality to our EDR-focused models. These new models allow us to more robustly assess metadata of various attacks and improve our ability to find the proverbial needle in the haystack at machine speed. With each data science improvement we make to Mandiant Automated Defense, I believe we are measurably improving our automated detection and response capabilities and improving our journey to automating our expertise.

Now, I’d like to provide some services highlights. Mandiant professional services continue to be in high demand. We had a record third quarter for Mandiant Consulting revenue at $61.7 million, representing 20% year-over-year growth while growing deferred revenue to $113.1 million. We now have over 600 professional consultants worldwide and we continue to have great success recruiting talent as we believe our mission of being trusted advisors to some of the most important organizations in the world attracts great talent.

While we continue to respond to very prominent and well publicized security breaches globally, we also continue to maintain a healthy balance across our services portfolio, scheduling proactive and strategic services well into 2022. Our security transformation practice grew revenues approximately 40% year-over-year. We also launched Mandiant Academy, expanding our education offerings with a full range of options designed to close the mounting cybersecurity skills gap.

And now I’d like to discuss some steps we have taken to accelerate Mandiant’s growth because Mandiant is now vendor agnostic after the divestiture of the FireEye Products business. We are in a far better position to eliminate friction with our channel partners, expand technology partnerships and improve channel relationships. Our goal is to not only deliver dynamic cyber defense to our customers, but also to other security companies that want our intel and expertise to augment their capabilities. Because of such an immediate broadening of possibilities from Mandiant to partner, we established a strategic operations group under industry veteran Rob Potter to bring significant leverage to our business model and we implemented five main components of this strategy in the third quarter.

First, we created a technical alliances group to connect our intelligence expertise and advantage platform to other security product companies. As an example of our efforts, we’ve recently announced a strategic partnership with Splunk that enables Splunk customers to first operationalize Mandiant Threat Intelligence for adversary detection; second, interact directly with Mandiant experts for incident response; and third, validate their security posture against emerging and novel attacks.

The second endeavor we have to leverage our newly gained vendor agnostic position is, we created a new group focused on strategic alliances for system integrators and MSSPs. We plan to enable integrators and MSSP to use the Mandiant Advantage platform to deliver security transformation and modernization programs for their customers. And third, we created an industry-aligned expert team to help us navigate and deliver tailored strategic services to various industry sectors such as finance, healthcare, defense, utilities among others addressing their specific requirements based on mission, regulations and the risk profile.

Fourth, we hired a new leader to create our strategic alliance program targeting partnerships with global governments. We are leveraging her knowledge, expertise and network connections to focus and expand managed relationship with important government agencies. And fifth, we hired a new channel lead to create, manage a channel program that addresses the middle market in an efficient way. And this was purposely timed with the new solutions announced at our Cyber Defense Summit in October. We are combining our technology and talent to deliver relevant solutions through our Advantage platform and these offerings were created specifically to fuel our middle market growth, provide channel leverage and enable a high velocity sales model.

Also in the third quarter, we have Vikram Ramesh is our new Chief Marketing Officer. Vikram has helped us relaunch Mandiant and he is a bold plan to amplify our capabilities and brand. And as you can see, we have made important changes to take advantage of the Mandiant opportunity. We believe our strategy will elevate and accelerate Mandiant’s growth. And we are in the midst of Mandiant’s first quarter as a standalone business. We believe we are uniquely positioned to address an enormous market need.

We intend to continue automating Mandiant’s expertise to create a scalable, more effective platform for the next generation of security operations. I believe we were at the onset of the convergence of security automation, managed services, XDR and security consulting. And this convergence is necessary to help deliver the outcome organizations want. They want a comprehensive, effective and efficient security program that instills confidence that the organization is secure from the latest cyber threats.

Finally, it is with some sadness that I share with you that our CFO, Frank Verdecanna, has announced his intent to retire next year once we select and appoint his successor. I’ve spent many years working with Frank to transform FireEye. He has been a formidable positive force and unwavering partner for me. Until he retires, Frank will continue to help the team grow Mandiant, while also helping us find the right successor for the next leg of the journey. Frank, we are all deeply appreciative of your commitment and contributions and we all wish you well with your eventual retirement. You will be missed.

And with that, over to you, Frank.

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Thanks, Kevin. And I appreciate the kind words. It has been a privilege to work with you and the entire Mandiant team. I’m very proud of our mission and what we’ve achieved over my nine years here. For today’s discussion, I will focus on our continuing operations and take you through the walk from our Q3 results for continuing operations and how the divestiture, which was completed on October 8, is expected to impact our Q4 results.

Our guidance for the third quarter focused on continuing operations and I’m pleased to say that we met our guidance ranges for all metrics and our revenue was at the top end of our guidance range. In addition, we have very solid performance in our last full quarter of discontinued operations. As always, I will be referring to non-GAAP metrics except when discussing revenue and cash flow. Our non-GAAP measures exclude stock-based compensation, amortization of intangibles, non-cash interest expense on our convertible debt and convertible preferred equity, restructuring charges, accretion of Series A convertible preferred stock and other non-recurring items.

Now let’s look at the reported results for continuing operations for the Mandiant Solutions business. Mandiant billings increased 40% from Q3 of ’20 with strong performance in platform, cloud subscription and managed services and professional services. We ended the quarter with record deferred revenue of $315 million. The platform cloud subscription and managed services category grew billings by 58% year-over-year in the third quarter. We achieved this with a slight one-month decline in average contract length, which was approximately 22 months for the quarter.

Growth in the platform, cloud subscription and managed services billing was driven by solid demand for Mandinant’s Intel, Managed Defense and Validation subscriptions. Mandiant Validation had its best quarter ever. While we encourage you to look at revenue as the best metric to evaluate our professional services performance, it’s still worth noting that professional services billings were up 24% year-over-year in the quarter.

Last quarter, I indicated that we expected to see annual recurring revenue accelerate during the second half of 2021 to the mid-20% levels. I’m pleased to report that ARR for Mandiant Solutions increased 26% from the end of Q3 of ’20 to $264 million. ARR will be an essential metric for Mandiant Solutions as we continue to transition to more of a SaaS business model. For continuing operations, we added 212 new logo customers, up 14% from Q3 of ’20 and closed 25 transactions greater than $1 million compared to 14 in Q3 of ’20.

Turning to the translation of our strong billings and ARR performance into revenue. Mandiant revenue increased 22% from Q3 of 2020 with a strong performance in platform, cloud subscription and managed services and professional services. Our revenue of $122 million was at the top end of our guidance range we provided in last quarter’s earnings release. The platform, cloud subscription and managed services category grew revenue 24% year-over-year in the third quarter. Professional services revenue increased 20% year-over-year in the third quarter. Given Q3 has significant seasonality due to summer vacations, we saw professional services sequentially flat compared to Q2, as we had anticipated.

Now let’s look at our gross margin and operating margin. Our 60% gross margin for the third quarter slightly exceeded our guidance range and operating margin of negative 27% for the third quarter was at the top end of our guidance range. The platform, cloud subscription and managed services gross margin was 70% in the third quarter, up from 66% last quarter and 62% from Q3 of 2020, driven by increased scale in our subscription business. Professional services gross margin was 51% in the third quarter, down slightly from 53% last quarter, primarily due to increased vacation during the summer months.

As a reminder from last quarter, accounting for discontinued operations related to the sale of the FireEye Products business requires aggregating all revenue and directly attributable costs into net income from discontinued operations, which is what you see on the face of our financial statements. Expenses for shared resources and shared programs, including nearly all general and administrative and IT employees as well as shared events and marketing campaigns, are included in expenses of continuing operations even if they support or benefit discontinued operations.

Included in Q3 operating expenses of continuing operations are approximately $15 million in expenses incurred to support the FireEye Products business and a further $3 million in expenses for shared programs and other overhead that would have been allocated to FireEye Products business under segregated reporting for the combined company. The $18 million swing has the effect of reducing the operating margin for the Mandiant Solutions business by approximately 15%. As a result, our operating margin for continuing operation was negative 27%. The allocation of these cash expenses to continuing operations also reduced the reported cash flow for continuing operations. Now that the transaction is closed, most of the cost of shared resources incurred to support the FireEye Products business will be reimbursed to Mandiant under the transition services agreement.

Now let’s turn to our current outlook for Q4. For Q4, we expect revenue to be in the range of $129 million to [Technical Issues] million. On a year-over-year basis, the midpoint of our guidance range implies revenue growth of approximately 19%. We are expecting the mix between SaaS and services to be approximately 50-50 and year-over-year growth rates for both SaaS and services to be in the range of 18% to 20%. Similar to Q2 and Q3, we expect an increasing percentage of new validation deals to be cloud versus on premise in Q4 relative to last year. This is expected to reduce the Q4 year-over-year SaaS growth rate by approximately 5 percentage points.

As a reminder today, any cloud validation deals are 100% ratable recognition and any on-premise deals are recognized with a significant portion of the revenue recognized upfront. This is expected to change in January of 2022 when even our on-premise validation deals will be 100% ratable. This is a result of changes to on-premise validation deployments, which will enable customers to receive real-time intel updates as part of the Mandiant Advantage platform.

This change will provide customers the benefits of more real-time access to the latest breach intel, which we believe will further increase the efficacy of our validation platform. The change will also simplify our financial model going forward because 100% of our platform, cloud subscription and managed services category will be ratable. This change will create a headwind in 2022 for recognized revenue but will dissipate in 2023 as a buildup of deferred revenue amortizes into 2023. Our best estimate at this point is that the headwind will be approximately $30 million of recognized revenue in 2022.

We expect gross margins between 61% and 62% in Q4, which is up both sequentially and year-over-year as the SaaS portion of our business scales up. We expect an operating margin of between negative 20% and negative 22%, implying approximately $2 million of the sequential increases in operating expenses primarily due to the Mandiant branding, relaunch cost in Q4 and increased commission expense related to typical seasonal increases in bookings for Q4. This will be partially offset by the reimbursement for G&A and IT costs attributable to continuing operations that support the FireEye Products business during the portion of the quarter following the closing of the divestiture.

We expect earnings per share between negative $0.12 and negative $0.13. While we are not providing 2022 guidance until our Q4 earnings call, I would like to discuss a few items which will help you understand our expectations of the Mandiant business exiting 2022. We expect we will exit 2021 with year-over-year ARR growth rate at the mid-20% level and expect our year-over-year growth rates to progress throughout 2022 and exit the year near 30% year-over-year growth rates.

From an operating margin perspective, we expect to see some leverage in 2022 but not a significant amount given 2022 will include approximately $30 million headwind from moving to ratable recognition for validation. Additional branding cause for the Mandiant re-launch and some stranded costs relating to IT facilities and the expected wind down of the TSA operations.

For 2023, we currently expect to be non-GAAP operating margin positive. I look forward to explaining our 2022 expectations in more detail as part of our Q4 earnings call and laying out the bridge to our long-term model as part of the Analyst Day we plan to hold in the first quarter of 2022.

In closing, I’d like to reiterate that the sale of the FireEye Products business, which was completed on October 8, will enable us to concentrate on our efforts on growing the Mandiant business. We remain more confident than ever that this will focus will result in financial and go-to market changes that we believe will make Mandiant stronger and drive value for our customers and investors.

I will now turn the call over to the operator for questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Brian Essex of Goldman Sachs. Brian, your line is now open. Please go ahead.

Brian Essex — Goldman Sachs — Analyst

Great. Good afternoon and thank you for taking the question. And I guess upfront, Frank, congratulations on the retirement. [Technical Issues] finance is the note I ever wrote. So, you’re making me feel old. Maybe if we can kind of start on transition expected ahead as you’re shifting from on-prem to cloud from a revenue recognition perspective and also from an operational perspective, how is this handled with customers? Is this a forced migration and what is the structure of the contracts of those on-premise customers and how is it going to be viewed from their perspective?

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Yeah. I think, the vast majority of customers upon renewal and upon release of the new software will be getting real time updates from the Mandiant Advantage platform. So, those real-time updates really increase the ongoing efficacy of the deployment and get us to a position where we could recognize that ratably rather than upfront.

Brian Essex — Goldman Sachs — Analyst

Okay. So let’s be a rolling migration as they come up for renewal throughout the course of the year?

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Well, for any customers that have already on-premise in the first place, we’ve already recognized the majority of that revenue at the time of the sale. And so. when they come up for renewal rather than recognize another year or two upfront, it will just go ratable from that point forward.

Brian Essex — Goldman Sachs — Analyst

Got it. Got it. That’s helpful. And what is the — I guess, is there — can you make the decision not to do it and stay on the current platform or are there certain customers that prefer to have revenue recognition or early pay out upfront?

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Yeah, the payment actually won’t drive whether it’s recognized ratably or upfront. It will really be whether they’ve been through [Phonetic] the Mandiant Advantage platform and getting real-time access to the intelligence. And it should be a huge win for the customers. So, our expectation is that upon renewal, the vast majority of customers will move over and that’s how we’ve modeled assuming that they’ve all kind of moved over to Mandiant Advantage. There may be one or two government customers that for whatever reason cannot have a ongoing access to real-time intel. So — but the vast majority from a modeling perspective, I think, we feel very comfortable that the headwind won’t be more than the $30 million that we have projected.

Brian Essex — Goldman Sachs — Analyst

Yeah. Okay, that’s helpful. And then, I guess, with regard to the support cost for the product side of the business, I guess I’ll skip that. With regard to the re-launch costs, how persistent are they and at what point might we kind of hit a regular stride where we’ll have a very, I guess, predictable migration with better scale of the platform where we can envision a pathway to better profitability?

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Yeah, it’s really in 2023 and that’s why when we felt very confident saying that we’re going to be operating margin positive from a non-GAAP perspective in 2023 because there is significant Mandiant re-launch costs that happened in Q4 and carried through 2023. We also have a lot of the TSA operations that we have to keep up and running for a period of time as well, including running our old ERP and new ERP system. We also do have stranded costs for some facilities that we’re exiting as well. So, there is a little bit more noise in 2022, but 2023, we feel very good that you will start seeing pretty significant leverage each and every quarter going forward.

Brian Essex — Goldman Sachs — Analyst

Got it. That’s helpful. I have more but I’ll step back in the queue. Thanks, Brian.

Operator

Our next question comes from Jonathan Ho of William Blair. Jonathan, your line is now open. Please go ahead.

Jonathan Ho — William Blair — Analyst

Hi. Good afternoon and congratulations, Frank, on the retirement. We’ll definitely miss working with you. I just wanted to maybe start out with a little bit more color on what’s giving you the confidence that we can see this acceleration back to 30% by the end of 2022. Can you just maybe help us kind of bridge the gap between the beginning and end of the years?

Kevin Mandia — Chief Executive Officer and Board Director

Well, Frank and I just alternate question, so I’ll take this one to Frank. Couple of things. One, tremendous advantage, having a sales team going from selling nine things down to really one, the Mandiant Advantage platform. So with that focus will automatically come better efficiency with the sales force, let’s train them on and way more alignment as to how to deliver the message and get that done.

Second thing you’re going to get is, we are building towards technology-enabled services as well where you get more leverage from the consultants. What that means is, as our consultants use the platform more and more to deliver things like ransomware assessments or as we learn to scale managed defense with other products through our own platform, you get to see the margins increase, gross margin will get better. And at the same time frame, you just see more leverage there and more scalability. We can deliver things quicker and faster, which leads to growth. And then that’s why I talked about five go-to market changes Jonathan during the earnings call.

We were surrounded as FireEye. We were email security, network security, we had a SIM [Phonetic], we had a endpoint, we had services, managed services, Intel. We were in every single business and it made it very hard to have frictionless partners. So we have a very aligned strategic operations group to get leverage from partnerships that historically we haven’t had any. So that’s a big advantage for Mandiant when it’s vendor agnostic. I can’t emphasize how important Mandiant being vendor agnostic is. It literally allows us — we are getting inbound calls to partner for the first time since about 2015. So now we’ve got leverage from partners that’s possible, we get leverage from technology-enabled services, which is possible and we are only talking about going from 26% to 30% and our whole go-to-market was aligned about appliances three months ago, six months ago. So, I’m very confident in that top-line.

Jonathan Ho — William Blair — Analyst

Fantastic. And just to build on your point around the partnerships. Now that you are vendor agnostic, when can we expect to maybe see some of these new partnerships or opportunities emerge and how much can it accelerate?

Kevin Mandia — Chief Executive Officer and Board Director

Yeah. So, great question. So we had Microsoft kind of as our first supported endpoint in managed defense. We added a strong partnership in Q3, but I expect you’ll see one or more virtually every quarter that we announce. And you’re going to see them and go, hey, that makes total sense. You know, so we’re going to — the timeframe for all of us to contribute will be multiple quarters out, but we are laying the foundations now to get the upside later and realize we could not do this 90 days ago. So this is pretty exciting. So, I think, you ‘re going to see most of the uplift in leverage beginning. We’re already getting deals with the Microsoft Endpoint partnership.

The Splunk partnership that we just announced in Q3, we’ll see how that pans out. But without a doubt, by the second half of ’22, we’re going to start seeing a contribution to the things that we’re announcing. And we’ve got a couple of strategic partnerships in line right now that you’ll see announced between now and the end of the year that I’m confident are going to move the leverage for us.

Jonathan Ho — William Blair — Analyst

Thank you.

Kevin Mandia — Chief Executive Officer and Board Director

Thanks, Jonathan.

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Thank you.

Operator

Our next question comes from Hamza Fodderwala of Morgan Stanley. Hamza, your line is now open. Please go ahead.

Hamza Fodderwala — Morgan Stanley — Analyst

Hey, guys. Good evening. Thank you for taking my question and congrats, Frank, on the retirement. Just on the — I had a question about the sales force execution and the hiring trend. Obviously you have been at Mandiant now for 90 days. Can you talk about some of the improvements you’ve seen in the go-to market front now that you don’t have your salespeople distracted by selling any multiple products. I understand some of them likely went to what’s now with FireEye Products business, but just curious if there’s been any sort of efficiency improvement there?

Kevin Mandia — Chief Executive Officer and Board Director

Yeah. So, couple of thoughts. First and foremost, efficiency of sales starts with maniacal focus and that’s what we have now. So, for the first time ever, instead of going into sales force, here’s the nine products you’ve gotten. And by the way, selling endpoint versus selling network, it’s pretty darn different. You factor talking to a different fired [Phonetic], you’re talking to network ops on one side or the desktop folks from the other or maybe the security professionals. So, there is — you’re talking about something that will take a couple of quarters to see the efficiencies grow. So I’m starting with looking at our PMs, looking at our training, looking at our enablement and recognizing the company is 100% aligned. This is what we’re building, this is who we are, this is how we’re resourced. And for the first time in our history, we can actually invest in everything we’re doing because when we had nine products, we were funding three at the expense of the other six sometimes and trade-offs with resourcing.

So it’s too soon to tell and measure the efficiency. And again, until the end of the year, the sales folks that went with FireEye products are still incented to sell Mandiant and vice versa. Mandiant sales folks are still incented and we’re holding the comp plan together till the end of the year. So that will also skew a little bit of a performance, but we have an aggressive plan for our January kick off — sales kick-off we are training and we’ll measure that efficiency. And it can’t go backwards when you are just focused, period. You will now have a dedicated sales force with one message, one platform, that is absolutely advantageous and better than nine.

Hamza Fodderwala — Morgan Stanley — Analyst

Let me just a quick follow-up for Frank. Can you tell us how much of the bookings were influenced by incident response services this quarter?

Frank Verdecanna — Executive Vice President, Chief Financial Officer and Chief Accounting Officer

So it’s been pretty consistent this year on the services — of the pure services revenue. It’s been in that 35% to 40% range for the last — really for the last three quarters.

Hamza Fodderwala — Morgan Stanley — Analyst

Thank you.

Kevin Mandia — Chief Executive Officer and Board Director

Thank you, Hamza.

Operator

[Operator Instructions] We have a follow-up question from Brian Essex of Goldman Sachs. Brian, your line is now open. Please go ahead.

Brian Essex — Goldman Sachs — Analyst

All right, great. Yeah, thanks. Thanks for circling back. Frank, I had a question, because I had a number of questions on this over the past couple of quarters, but I guess now that the Products business is spun, do you have a good sense of what the total dilution could be if you were profitable given that you probably had some options paid out, some transferred, employees went to go to the products company, just trying to get a sense for what makes that end case dilution rate might be within the share count?

Kevin Mandia — Chief Executive Officer and Board Director

Yeah. And well, I guess, always point in time and depending obviously on stock price for the treasury method. But — yeah, we could go through a bunch of different sensitivity analysis that we can walk through, but we can probably take that offline and I can come walk you through a couple of different scenarios and different dilution. It’s probably easier.

Brian Essex — Goldman Sachs — Analyst

Yeah, when we catch up later, we can walk you that kind of thing. Thank you. I appreciate it.

Kevin Mandia — Chief Executive Officer and Board Director

Thank you.

Operator

There are no further questions. I’ll hand back to the management team for any closing remarks.

Kevin Mandia — Chief Executive Officer and Board Director

Thank you, Sam. I want to thank everybody for joining us on this call today. Mandiant is just getting started folks. We are very excited about the path in front of us. And I look forward to speaking to all of you over the next few days and 90 days from now with the new update. Until then, thank you very much.

Operator

[Operator Closing Remarks]