FireEye Execs Say Channel Turnaround Strategy Is Starting To Take Hold

After committing to turnaround its approach to partners last fall, FireEye execs said they are starting to see some progress.

"I'm very pleased with the progress to date," Executive Vice President of Worldwide Sales Bill Robbins said on FireEye's first quarter earnings call Tuesday, referring to the company's channel program and push to drive a high-performing sales culture.

FireEye has worked to drastically renew its commitment to the channel in recent months after years of turmoil and executive changes that included the addition of Robbins. Changes in the past few months have included establishing clear community guiding principles, accelerating growth and profitability, invest in partners, ensure consistent implementation of the channel program and processes, partners in with integrity and respect for partners, and releases products that are partner-ready.

[Related: FireEye Execs Admit Channel Troubles And Pledge To Win Back Partner Trust]

Robbins said FireEye had seen some "meaningful upticks" when it comes to its relationship with partners, both in the feedback from partners and partner-sourced deal registration opportunities in the pipeline.

"This is an exciting development that leaves me optimistic that with our continued focus on partner success. We will ultimately benefit from the productivity leverage that comes from having a strong channel as part of our go to market strategy," Robbins said.

CEO Kevin Mandia said that push towards partners, along with transitions in the product portfolio and cost structure, helped lead to FireEye's strong results for the first quarter, with sales up 3 percent year-over-year to $173.7 million and billings down 18 percent to $152.4 million. Both billings and revenue beat company expectations of between $160 million and $166 million and $130 million and $150 million, respectively.

Gross margin for the third quarter, which ended March 31, was 63 percent, compared to 57 percent in the same quarter last year. Net loss for the quarter was $82.9 million, down from $155.9 million in the third quarter of 2016. FireEye stock jumped drastically after hours, up more than 15 percent to $14.06, prompting the company to halt trading briefly.

Mandia said FireEye also executed on multiple transitions the company promised to undergo, including moving disparate products into a single platform, from APT prevention to a comprehensive prevention company, from on-premises appliances to the cloud, and from products to subscriptions.

"We did what we said we would do in Q1, exceeding our guidance ranges for every financial metric … We also positioned the company to better accelerate our growth in the future," Mandia said.

Those changes come as FireEye also looks to become a profitable company. Mandia said FireEye has also worked to cut costs, reducing non-GAAP operating losses by more than $60 million year-over-year. CFO Frank Verdecanna said FireEye still expects to achieve non-GAAP operating income in the fourth quarter of this year and positive operating cash flow for the year overall.

Mandia highlighted the traction the company is starting to see around its Helix security platform, which it first announced late last year and became available on March 31. He said the company has already closed four deals with the platform and said it represents a "major milestone in the company's transformation" by bringing together network, endpoint and other security technologies from FireEye under a single console. Mandia said he expects to see most of the growth from Helix in the back half of the year.

Mandia said he also expects to see significant growth with the company's upcoming launch of its HX endpoint security solution, which is on track for a full endpoint replacement release in Q3 of this year. Robbins said FireEye has already been working to fully enable the channel around HX. Robbins said a major AV refresh is expected in the second half of the year, which he said is a "market opportunity" for both FireEye and its partners.

"We're putting a lot of effort there. For the second half of the year specifically with the launch around HX, I'm really excited about what we can do with our channel partners," Robbins said.

FireEye said it expects second quarter sales between $173 million and $179 million and billings between $155 million and $175 million. It expects non-GAAP loss per share between $0.10 and $0.14 per share.

For the full year, FireEye said it expects sales between $724 million and $736 million and billings between $745 million and $775 million. It expects positive cash flow from operations of $1 million to $10 million and non-GAAP net loss per share between $0.26 and $0.36 per share.