Q1 18 Results and Conference Call

Transcription

1 Q1 18 Results and Conference Call May 2, 2018 Materials posted at: investors.fireeye.com/results.cfm

2 2 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on management s beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning: possible or assumed future results of operations, financial metrics and goals; our priorities, plans, initiatives and investments; the threat landscape, industry environment, and customer buying preferences; competitive position; market opportunities; drivers and expectations for growth; new, future and enhanced offerings; go to market strategies; our expectations, beliefs, plans, initiatives and strategies relating to our recent acquisitions; and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as anticipates, believes, could, seeks, estimates, intends, may, plans, potential, predicts, projects, should, will, would or similar expressions and the negatives of those terms. Forwardlooking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management s beliefs and assumptions only as of the date of this presentation. You should read our filings with the SEC, including the Risk Factors set forth therein, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Any future offering, feature, or related specification that may be referenced in this presentation is for information purposes only and is not a commitment to deliver any offering, technology or enhancement. We reserve the right to modify future product and service plans at any time. This presentation includes certain non-gaap financial measures as defined by the SEC rules. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix FireEye

3 Q1'18 Business Highlights Kevin Mandia Chief Executive Officer 3

4 4 Our Mission TO RELENTLESSLY PROTECT OUR CUSTOMERS WITH INNOVATIVE TECHNOLOGY AND EXPERTISE LEARNED ON THE FRONT LINES 2018 FireEye

5 5 Q1'18 Financial Results Frank Verdecanna EVP, Chief Financial Officer and Chief Accounting Officer

6 6 Q1'18 Financial Results 2018 FireEye 1 Q1'18 Q1'17 Y/Y Change Billings 2 $175.1M $145.0M +21% Revenue $199.1M $184.8M +8% Gross Margin 2,3 74% 74% pts Operating Expenses 2,3 77% 78% -1 pts Operating Margin 2,3 (3)% (4)% +1 pts Net Income (Loss) per Share 2 $(0.04) $(0.05) +$0.01 Total Deferred Revenue $886.1M $888.0M % Operating Cash Flow $9.2M $(17.0)M +$26.2M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations to the nearest GAAP metric available in the Appendix. 3. As a % of revenue. 1

7 7 Trended Quarterly Billings and Revenue Q1'18 Billings 1,2 +21% y/y Q1'18 Revenue +8% y/y 2018 FireEye 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations are not available for forward looking metrics.

8 8 Q1 Billings Q1'18 BILLINGS 1,2 MIX Q1 BILLINGS 1,2 WATERFALL BY CATEGORY $175M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations to nearest GAAP metric included in the Appendix FireEye

9 9 Billings Growth Drivers 2018 FireEye

10 Average Contract Length In months RATABLE BILLINGS (Weighted Average) Q1'17 Q2'17 Q3'17 Q4'17 Q1' PRODUCT & RELATED SUBS/SUPPORT Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 CLOUD SUBS & MANAGED SERVICES Q1'17 Q2'17 Q3'17 Q4'17 Q1' FireEye

11 11 Deferred Revenue DEFERRED REVENUE 1 SEQUENTIAL CHANGE IN DEFERRED REVENUE 1 $1,000 $900 $800 $700 $600 $928 $888 $870 $875 $910 $886 Ending Sequential Deferred Revenue Change in $ Millions 12/31/2017 3/31/2018 Deferred Current product, subscription and support $ $ $ (6.9) Current professional services (6.1) Total current deferred $ $ $ (13.0) $500 $400 $300 Non-current product, subscription and support $ $ $ (11.0) Non-current professional services Total non-current deferred $ $ $ (10.9) $200 $100 $0 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Current Non Current Current deferred revenue (13.0) Non-current deferred revenue (10.9) Total deferred revenue (23.9) Total product, subscription and support $ $ $ (17.9) Total professional services (6.0) Total deferred revenue $ $ $ (23.9) 2018 FireEye 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard.

12 Trended Annual Recurring Revenue (ARR) ANNUAL RECURRING REVENUE ($M) YEAR OVER YEAR GROWTH (%) $500 $400 $435 $440 $454 $470 $492 $500 Q1 18 YoY Growth Product & Related Subs/Support 10% Cloud Subs & Managed Services 20% $300 Total ARR 14% $200 $100 We define ARR as the annualized value of all recurring revenue-related contracts in place at the end of the period. $0 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Product & Related Subs/Support Cloud Subs & Mgd Svs 2018 FireEye

13 13 Revenue by Category Q1'18 REVENUE MIX BY CATEGORY Q1 REVENUE 1 WATERFALL BY CATEGORY $199M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard FireEye

14 14 Revenue by Region Q1'18 REVENUE MIX BY REGION Q1 REVENUE 1 WATERFALL BY REGION $199M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard FireEye

15 15 Operating Metrics Gross Profit Margin NON-GAAP GROSS PROFIT AND MARGIN 1,2 Q1 non-gaap gross profit margin consistent with guidance of approximately 74% and Q1'17 Q1 Product, subscription, and support non-gaap gross profit margin of 79%, consistent y/y Q1 Professional services non- GAAP gross profit margin of 51%, up 1 pts y/y 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliation to nearest GAAP metric included in the Appendix FireEye

16 16 Non-GAAP Operating Expenses as a % of Revenue NON-GAAP OPERATING EXPENSES 1,2,3 As a % of Revenue Q1'18 Non-GAAP Operating expenses of $153.0 million Increased $6.8 million, or 5%, from Q4'17 Seasonal Increase in employeerelated payroll expense + higher payroll taxes due to higher stock sales (all expense categories) R&D expense reflects acquisitions ( Laundry and X15) Increased $8.5 million, or 6%, from Q1'17 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations to the nearest GAAP metric included in the Appendix. 3. As a % of revenue FireEye

17 17 Operating Expenses and Operating Margin Trends NON-GAAP OPERATING EXPENSES 1,2,3 As a % of Revenue NON-GAAP OPERATING MARGIN 1,2,3 As a % of Revenue 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations to the nearest GAAP metric included in the Appendix. 3. As a % of revenue FireEye

18 18 Q2'18 and 2018 Guidance As of 5/2/18

19 19 Q2'18 Guidance Ranges AS OF 5/2/18 Q2'18 Q2'17 1 Billings 1,2 $180M-$195M $174M Revenue 1 $199M-$203M $192M Gross Margin 1,2,3 ~74% 74% Operating Margin 1,2,3 (2)% to 1% (2)% Interest Expense on Convertible Notes 2 $3M $3M Net Income (loss) per share 1,2 $(0.03) - $0.00 $(0.03) Weighted Average Shares O/S 188M 177M Operating Cash Flow $(15M) - $0M $(11)M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations are not available for forward looking metrics. 3. As a % of revenue FireEye

20 Guidance Ranges 2018 Guidance 2018 Guidance as of 5/2/18 (as of 2/8/18) (as of 5/2/18) 2017 Actual 1 Billings 1,2 $810M-$830M $815M-$835M $762M Revenue 1 $815M-$825M $820M-$830M $780M Interest Expense on Convertible Notes 2 $12.1M $12.1M $12M Provision for Income Taxes 2 $5M-$6M $5M-$6M $1M Net Income (loss) per share 1,2 $ $(0.04) $ $0.04 $(0.05) Diluted Weighted Average Shares O/S 197M 197M 178M Operating Cash Flow $45M - $50M $50M - $60M $18M Capital Expenditures $35M - $40M $35M - $40M $(44)M 1. FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard. 2. Non-GAAP. Reconciliations are not available for forward looking metrics FireEye

21 Appendix GAAP to non-gaap Reconciliations 21

22 22 Billings and Revenue Breakouts 1 FireEye, Inc. BILLINGS BREAKOUT (Unaudited, in thousands) Three Months Ended March 31, Product and related subscription and support billings $ 90,365 $ 76,930 Cloud subscription and managed services billings 57,110 35,349 Professional services billings 27,631 32,691 Non-GAAP billings $ 175,106 $ 144,970 FireEye, Inc. REVENUE BREAKOUT (Unaudited, in thousands) Three Months Ended March 31, Product and related subscription and support revenue $ 121,092 $ 112,184 Cloud subscription and managed services 44,381 41,545 Professional services revenue 33,597 31,030 Total revenue $ 199,070 $ 184, FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard FireEye

23 23 Reconciliation of Billings to Revenue 1 FireEye, Inc. RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE (Unaudited, in thousands) Three Months Ended March 31, GAAP revenue $ 199,070 $ 184,759 Add change in deferred revenue (23,964) (39,789) Non-GAAP billings $ 175,106 $ 144, FireEye adopted Accounting Standards Update , Revenue from Contracts with Customers (Topic 606), effective January 1, 2018 using the full retrospective method. Prior period information has been adjusted to reflect the adoption of the new standard FireEye

24 Adoption of 606 Review of Past Disclosure

25 New 606 Accounting Standard Global Principles-based Five Step Model Step 1 Identify the contract with the customer Step 2 Identify the separate performance obligations in the contract Step 3 Determine the transaction price Step 4 Allocate transaction price to the separate performance obligations Step 5 Recognize revenue when (or as) the entity satisfies the performance obligation 2018 FireEye

26 ASC 606: What Changes Most appliances and software, along with related subscription and support contracts, are determined to provide a single security solution and therefore one performance obligation Most appliances deemed to have value beyond initial contract term Four-year economic life based on historical purchase patterns Revenue from appliances that rely on dynamic threat intelligence updates will be recognized over longer of the economic life (4 years) or the contract term. Exceptions are PX network forensics and CMS Management appliances. Term licenses that do not rely on dynamic threat intelligence updates will be recognized upfront. Revenue from subscriptions and support contracts will be recognized over the contract term. Supplemental data on the mix of billings and revenue will be organized into three categories to avoid separation of performance obligations. Higher % of billings will be recognized ratably; deferred revenue, deferred costs of goods sold, and deferred operating expenses (sales commissions) increase. Cost of sales for most appliances will be deferred and amortized over same period as the related revenue Sales commissions will be capitalized and amortized, typically over 3-4 years for new business or the contract term for renewals FireEye

27 ASC 606: What Does Not Change Revenue from cloud and managed service subscriptions and maintenance contracts continues to be recognized ratably over contract term Revenue from professional services continues to be recognized as delivered While total billings do not change in the aggregate, some billings may be included in different quarters than originally reported due to different treatment of early renewals under 606. Historically, under 605, FireEye typically recognized billings from early renewals in the quarter the subscription expired, rather than the quarter the renewal was booked, unless we received payment for the new subscription. 606 requires recognition in the quarter the renewal is booked. Operating cash flow, capital expenditures 2018 FireEye

28 Recognition of Revenue and Costs Product ASC 605 ASC 606 Upfront Primarily ratable 1 (4 year useful life) Product subscriptions Ratable No change Support and Maintenance Ratable No change Professional Services As delivered No change Product COGS Upfront Primarily ratable 1 Subscription COGS Ratable No change Professional Services COGS As incurred No change Commissions Expensed upon booking Capitalized and amortized ratably 1. Revenue and product COGS related to all appliances that rely on DTI updates will be recognized ratably. Revenue and COGS from PX network forensics appliances, CMS appliances, tech fees and FSO term licenses will be recognized up front; in combination, these product lines have historically contributed approximately 20% of total product billings and revenue FireEye

29 Billings and Revenue Breakout Categories ASC 605 ASC 606 Product Offering Supplemental Breakout Categories Revenue Recognition Product Offering Supplemental Breakout Categories Revenue Recognition Historically ~20% of product billings and revenue Term licenses (tech fees, FSO) Management & Forensic Appliances (CMS, PX) Detection/Protection Appliances (NX, EX, FX, AX, HX) Support & Maintenance Dynamic Threat Intelligence (DTI) for NX, EX, FX, AX, HX URL/Attachment Database (EX only) Threat Prevention (ETP), FireEye as a Service/Managed Defense, isight threat intelligence, Helix, Threat Analytics Platform (TAP) Product Support Product Subscription Ratable Up front Ratable over contract term Term licenses (tech fees, FSO) Management & Forensic Appliances (CMS, PX) Detection/Protection Appliances (NX, EX, FX, AX, HX) Support & Maintenance Single performance obligation Dynamic Threat Intelligence (DTI) for NX, EX, FX, AX, HX URL/Attachment Database (EX only) Threat Prevention (ETP), FireEye as a Service/Managed Defense, isight threat intelligence, Helix, Threat Analytics Platform (TAP) Product & Related Subscriptions and Support Cloud Subscriptions and Managed Security Services Up front Ratable (4 years) Ratable over contract term Ratable over contract term 2018 FireEye Mandiant Services Services As Delivered Mandiant Services Services As Delivered Shaded areas = Ratable revenue recognition

30 Historical Financial Tables Recast for ASC 606

31 GAAP Income Statement Y/Y Change Q/Q Change Annual Y/Y Change Q1 Q2 Q3 Q4 Q1 Q Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) % ($000) % ($000) ($000) ($000) % Revenue: Product, Subscription and Support 153, , , , ,473 11,744 8 % (5,492) (3)% 584, ,965 61, % Professional Services 31,030 33,625 34,192 34,836 33,597 2,567 8 % (1,239) (4)% 121, ,683 12, % Total revenue 184, , , , ,070 14,311 8 % (6,731) (3)% 705, ,648 73, % Cost of revenue: Product, Subscription and Support 46,423 47,636 48,438 48,289 47,429 1,006 2 % (860) (2)% 192, ,786 (1,750) (1)% Professional Services 19,324 20,158 20,628 20,751 20,500 1,176 6 % (251) (1)% 78,424 80,861 2,437 3 % Total cost of revenue 65,747 67,794 69,066 69,040 67,929 2,182 3 % (1,111) (2)% 270, , % Total gross profit 119, , , , ,141 12, % (5,620) (4)% 435, ,001 72, % Product, Subscription and Support gross margin 70 % 70 % 70 % 72 % 71 % 2 % (0)% 67 % 70 % 3 % Professional Services gross margin 38 % 40 % 40 % 40 % 39 % 1 % (1)% 35 % 40 % 4 % Total gross margin 64 % 65 % 65 % 66 % 66 % 1 % (1)% 62 % 65 % 4 % Research and development 58,352 60,747 64,316 59,858 66,196 7, % 6, % 279, ,273 (36,321) (13)% Sales and marketing 98,988 92,413 92,105 95,772 97,251 (1,737) (2)% 1,479 2 % 437, ,278 (58,241) (13)% General and administrative 27,615 27,805 29,823 40,306 28, % (11,888) (29)% 139, ,549 (14,242) (10)% Restructuring charges 27,630 (27,630) (100)% Total operating expenses 184, , , , ,865 6,910 4 % (4,071) (2)% 884, ,100 (136,434) (15)% Operating loss (65,943) (57,037) (57,944) (59,175) (60,724) 5,219 (8)% (1,549) 3 % (449,499) (240,099) 209,400 (47)% Operating margin (36)% (30)% (29)% (29)% (31)% 5 % (2)% (64)% (31)% 33 % Interest income 2,032 2,168 2,468 2,655 2, % % 6,582 9,323 2, % Interest expense (12,245) (12,385) (12,611) (12,525) (12,717) (472) 4 % (192) 2 % (47,869) (49,766) (1,897) 4 % Other expense, net 232 (120) (122) (276) (508) (219)% (154) 126 % (3,247) (10) 3,237 (100)% Other income (expense), net (9,981) (10,337) (10,143) (9,992) (10,053) (72) 1 % (61) 1 % (44,534) (40,453) 4,081 (9)% Loss before income taxes (75,924) (67,374) (68,087) (69,167) (70,777) 5,147 (7)% (1,610) 2 % (494,033) (280,552) 213,481 (43)% Provision (benefit) for income taxes 1, ,127 1,247 1,053 (240) (19)% (194) (16)% (8,721) 4,632 13,353 (153)% Net loss attributable to common stockholders, basic and diluted (77,217) (68,339) (69,214) (70,414) (71,830) 5,387 (7)% (1,416) 2 % (485,312) (285,184) 200,128 (41)% Net loss per share, basic and diluted $ (0.45) $ (0.39) $ (0.39) $ (0.39) $ (0.39) $ 0.06 (14)% $ 0.00 (0)% $ (2.97) $ (1.60) $ 1.37 (46)% Weighted average shares, basic and diluted 172, , , , ,456 14,220 8 % 4,175 2 % 163, ,757 14,546 9 % Non-GAAP Adjustments: Stock-based Compensation Product, Subscription and Support cost of revenue 4,360 4,017 4,767 5,105 3,622 (738) (17)% (1,483) (29)% 16,684 18,249 1,565 9 % Professional Services cost of revenue 3,672 3,375 3,544 3,816 3, % 86 2 % 15,220 14,407 (813) (5)% Cost of revenue 8,032 7,392 8,311 8,921 7,524 (508) (6)% (1,397) (16)% 31,904 32, % R&D 14,525 14,057 14,400 13,738 14,353 (172) (1)% % 64,755 56,720 (8,035) (12)% S&M 14,015 10,219 11,674 10,858 12,977 (1,038) (7)% 2, % 57,750 46,766 (10,984) (19)% G&A 7,317 7,729 7,821 7,327 7,294 (23) (0)% (33) (0)% 43,343 30,194 (13,149) (30)% Restructuring 1,144 (1,144) (100)% Total 43,889 39,397 42,206 40,844 42,148 (1,741) (4)% 1,304 3 % 198, ,336 (32,560) (16)% Amortization of Intangibles Product, Subscription and Support cost of revenue 10,178 10,176 10,177 10,156 8,662 (1,516) (15)% (1,494) (15)% 45,431 40,687 (4,744) (10)% Professional Services cost of revenue Cost of revenue 10,178 10,176 10,177 10,156 8,662 (1,516) (15)% (1,494) (15)% 45,431 40,687 (4,744) (10)% R&D (5) (3)% (100) (39)% % S&M 4,447 4,448 4,447 4,541 3,795 (652) (15)% (746) (16)% 17,978 17,883 (95) (1)% G&A Total 14,787 14,787 14,786 14,954 12,614 (2,173) (15)% (2,340) (16)% 64,027 59,314 (4,713) (7)% Other expenses Acquisition-related expenses (176) (40)% 2, (2,853) (82)% Change in fair value of contingent earn-out liability 13 (67) (13) (100)% 2,356 (54) (2,302) (102)% Restructuring 27,630 (27,630) (100)% Non-cash interest expense 9,226 9,340 9,457 9,575 9, % % 35,782 37,598 (73,380) 5 % Change in Fair Value of Warrants Litigation settlement-related expense 12,500 (12,500) (100)% 12,500 (12,500) Discrete benefit from income taxes (382) (382) (382) (11,839) 11,839 (100)% Total Non-GAAP Adjustments 67,915 63,457 66,449 78,313 64,338 (3,577) (5)% (13,975) (18)% 318, ,134 (594,255) (13)%

32 GAAP to Non-GAAP Reconciliations Annual Q1 Q2 Q3 Q4 Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) ($000) Product and related Subscription and Support Revenue 112, , , , , , ,521 Plus change in deferred revenue (35,254) (23,499) (9,198) 3,240 (30,727) 62,298 (64,711) Less deferred revenue assumed (20,852) Non-GAAP Product and related Subscription and Support Billings 76,930 95, , ,548 90, , ,810 Cloud Subscription and Managed services 41,545 38,990 41,252 44,657 44, , ,444 Plus change in deferred revenue (6,196) 280 9,719 24,692 12,729 61,371 28,495 Less deferred revenue assumed Non-GAAP Cloud Subscription and Managed services Billings 35,349 39,270 50,971 69,349 57, , ,939 Product, Subscription and Support Revenue 153, , , , , , ,965 Plus change in deferred revenue (41,450) (23,219) ,932 (17,998) 123,669 (36,216) Less deferred revenue assumed (20,852) Non-GAAP Product, Subscription and Support Billings 112, , , , , , ,749 Professional Services Revenue 31,030 33,625 34,192 34,836 33, , ,683 Plus change in deferred revenue 1,661 5,079 4,997 6,831 (5,966) 14,210 18,568 Less deferred revenue assumed (235) Non-GAAP Professional Services Billings 32,691 38,704 39,189 41,667 27, , ,251 Total Revenue 184, , , , , , ,648 Plus change in deferred revenue (39,789) (18,140) 5,518 34,763 (23,964) 137,879 (17,648) Less deferred revenue assumed (21,087) Non-GAAP Billings 144, , , , , , ,000 Cost of Product, Subscription and Services Revenue 46,423 47,636 48,438 48,289 47, , ,786 Stock based compensation (4,360) (4,017) (4,767) (5,105) (3,622) (16,684) (18,249) Amortization of intangibles (10,178) (10,177) (10,177) (10,156) (8,662) (45,431) (40,688) Non-GAAP cost of Product, Subscription and Services revenue 31,885 33,442 33,494 33,028 35, , ,849 Cost of Professional Services Revenue 19,324 20,158 20,628 20,751 20,500 78,424 80,861 Stock based compensation (3,672) (3,375) (3,544) (3,816) (3,902) (15,220) (14,407) Amortization of intangibles Non-GAAP cost of services revenue 15,652 16,783 17,084 16,935 16,598 63,204 66,454 Total Cost of Revenue 65,747 67,794 69,066 69,040 67, , ,647 Stock based compensation (8,032) (7,392) (8,311) (8,921) (7,524) (31,904) (32,656) Amortization of intangibles (10,178) (10,177) (10,177) (10,156) (8,662) (45,431) (40,688) Non-GAAP cost of revenue 47,537 50,225 50,578 49,963 51, , ,303 Gross profit - Product, Subscription and Support 107, , , , , , ,179 Stock based compensation 4,360 4,017 4,767 5,105 3,622 16,684 18,249 Amortization of intangibles 10,178 10,177 10,177 10,156 8,662 45,431 40,688 Gross profit - Product, Subscription and Support 121, , , , , , ,116 Gross profit - Professional Services 11,706 13,467 13,564 14,085 13,097 42,686 52,822 Stock based compensation 3,672 3,375 3,544 3,816 3,902 15,220 14,407 Amortization of intangibles Non-GAAP gross profit - Professional Services 15,378 16,842 17,108 17,901 16,999 57,906 67,229 Total Gross profit 119, , , , , , ,001 Stock based compensation 8,032 7,392 8,311 8,921 7,524 31,904 32,656 Amortization of intangibles 10,178 10,177 10,177 10,156 8,662 45,431 40,688 Non-GAAP total gross profit 137, , , , , , ,345 Research and development 58,352 60,747 64,316 59,858 66, , ,273 Stock based compensation (14,525) (14,057) (14,400) (13,738) (14,353) (64,755) (56,720) Amortization of intangibles (162) (163) (162) (257) (157) (618) (744) Non-GAAP research and development 43,665 46,527 49,754 45,863 51, , ,809 Sales and marketing 98,988 92,413 92,105 95,772 97, , ,278 Stock based compensation (14,015) (10,219) (11,674) (10,858) (12,977) (57,750) (46,766) Amortization of intangibles (4,447) (4,448) (4,447) (4,541) (3,795) (17,978) (17,883) Non-GAAP sales and marketing 80,526 77,746 75,984 80,373 80, , ,629 General and administrative 27,615 27,805 29,823 40,306 28, , ,549 Stock based compensation (7,317) (7,729) (7,821) (7,327) (7,294) (43,343) (30,194) Amortization of intangibles Acquisition related costs (440) (264) (2,413) (440) Legal settlement-related expense (12,500) (12,500) Change in fair value of contingent earn-out liability (13) 67 (2,356) 54 Non-GAAP general and administrative 20,285 20,143 22,002 20,039 20,860 91,679 82,469 Restructuring charges Restructuring (27,630) Total operating expenses 184, , , , , , ,100 Stock based compensation (35,857) (32,005) (33,895) (31,923) (34,624) (165,848) (133,680) Amortization of intangibles (4,609) (4,611) (4,609) (4,798) (3,952) (18,596) (18,627) Acquisition related costs (440) (264) (2,413) (440) Legal settlement-related expense (12,500) (12,500) Change in fair value of contingent earn-out liability (13) 67 (2,356) 54 Restructuring charges (27,630) Non-GAAP total operating expenses 144, , , , , , ,907 Operating loss (65,943) (57,037) (57,944) (59,175) (60,724) (449,499) (240,099) Stock based compensation 43,889 39,397 42,206 40,844 42, , ,336 Amortization of intangibles 14,787 14,788 14,786 14,954 12,614 64,027 59,315 Acquisition related costs , Legal settlement-related expense 12,500 12,500 Change in fair value of contingent earn-out liability 13 (67) 2,356 (54) Restructuring charges 27,630 Non-GAAP operating loss (7,254) (2,919) (952) 9,563 (5,698) (155,321) (1,562) Other income (expense), net (9,981) (10,337) (10,143) (9,992) (10,053) (44,534) (40,453) Non-cash interest expense 9,226 9,340 9,457 9,575 9,694 35,782 37,598 Non-GAAP other income (expense), net (755) (997) (686) (417) (359) (8,752) (2,855) Tax provision 1, ,127 1,247 1,053 (8,721) 4,632 Discrete provision (benefit) from income tax ,839 Non-GAAP tax provision 1, ,127 1,247 1,435 3,118 4,632 Net loss attributable to common stockholders, basic and diluted (77,217) (68,339) (69,214) (70,414) (71,830) (485,312) (285,184) Stock based compensation 43,889 39,397 42,206 40,844 42, , ,336 Amortization of intangibles 14,787 14,788 14,786 14,954 12,614 64,027 59,315 Acquisition related costs , Legal settlement-related expense 12,500 12,500 Change in fair value of contingent earn-out liability 13 (67) 2,356 (54) Restructuring charges 27,630 Non-cash interest expense 9,226 9,340 9,457 9,575 9,694 35,782 37,598 Change in fair value of warrants Discrete benefit from income taxes (382) (11,839) Non-GAAP net loss (9,302) (4,881) (2,765) 7,899 (7,492) (167,191) (9,049)

33 Non-GAAP Income Statement Y/Y Change Q/Q Change Annual Q1 Q2 Q3 Q4 Q1 Q Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) % ($000) % ($000) ($000) Y/Y Change Rounded ($000) % 144, , , , ,106 30, % (65,458) (27)% 822, ,000 (60,787) (7)% Revenue: Product, Subscription and Support 153, , , , ,473 11,744 8 % (5,492) (3)% 584, ,965 61, % Professional services 31,030 33,625 34,192 34,836 33,597 2,567 8 % (1,239) (4)% 121, ,683 12, % Total revenue 184, , , , ,070 14,311 8 % (6,731) (3)% 705, ,648 73, % Cost of revenue: Product, Subscription and Support 31,885 33,442 33,494 33,028 35,145 3, % 2,117 6 % 130, ,849 1,428 1 % Professional services 15,652 16,783 17,084 16,935 16, % (337) (2)% 63,204 66,454 3,250 5 % Total cost of revenue 47,537 50,225 50,578 49,963 51,743 4,206 9 % 1,780 4 % 193, ,303 4,678 2 % Total gross profit 137, , , , ,327 10,105 7 % (8,511) (5)% 512, ,345 68, % Gross Margin: Product, Subscription and Support 79 % 79 % 79 % 81 % 79 % (0)% (2)% 78 % 80 % 2 % 2 % Professional services 50 % 50 % 50 % 51 % 51 % 1 % (1)% 48 % 50 % 2 % 5 % Total gross margin 74 % 74 % 74 % 76 % 74 % 1 % (2)% 73 % 75 % 2 % 3 % Research and development 43,665 46,527 49,754 45,863 51,686 8, % 5, % 214, ,809 (28,412) (13)% Sales and marketing 80,526 77,746 75,984 80,373 80,479 (47) (0)% % 361, ,629 (47,162) (13)% General and administrative 20,285 20,143 22,002 20,039 20, % % 91,679 82,469 (9,210) (10)% Total operating expenses 144, , , , ,025 8,549 6 % 6,750 5 % 667, ,907 (84,784) (13)% Operating Income/(loss ) (7,254) (2,919) (952) 9,563 (5,698) 1,556 (21)% (15,261) (160)% (155,321) (1,562) 153,759 (99)% Operating margin (4)% (2)% (0)% 5 % (3)% 1 % (8)% (22)% (0)% 22 % Other income (expense), net (755) (997) (686) (417) (359) 396 (52)% 58 (14)% (8,752) (2,855) 5,897 (67)% Income/(Loss) before income taxes (8,009) (3,916) (1,638) 9,146 (6,057) 1,952 (24)% (15,203) (166)% (164,073) (4,417) 159,656 (97)% Provision (benefit) for income taxes 1, ,127 1,247 1, % % 3,118 4,632 1, % Income/(Loss) attributable to common stockholders (9,302) (4,881) (2,765) 7,899 (7,492) 1,810 (19)% (15,391) (195)% (167,191) (9,049) 158,142 (95)% Net income/(loss) per share Basic $ (0.05) $ (0.03) $ (0.02) $ 0.04 $ (0.04) $ 0.01 (20)% $ (0.08) (200)% $ (1.02) $ (0.05) $ 0.97 (95)% Diluted $ 0.04 $ Weighted-average shares outstanding (0.05) Basic 172, , , , ,456 14,220 8 % 4,175 2 % 163, ,757 14,546 9 % Diluted 189, ,968 % of Revenue: Product, Subscription and Support cost of revenue 21 % 21 % 21 % 19 % 21 % 0 % 2 % 22 % 20 % (2)% Professional services cost of revenue 50 % 50 % 50 % 49 % 49 % (1)% 1 % 52 % 50 % (2)% Total cost of revenue 26 % 26 % 26 % 24 % 26 % 0 % 2 % 27 % 25 % (2)% Research and development 24 % 24 % 25 % 22 % 26 % 2 % 4 % 30 % 24 % (7)% Sales and marketing 44 % 41 % 38 % 39 % 40 % (3)% 1 % 51 % 40 % (11)% General and administrative 11 % 11 % 11 % 10 % 10 % (1)% 1 % 13 % 11 % (2)% Total operating expenses 78 % 75 % 75 % 71 % 77 % (1)% 6 % 95 % 75 % (20)%

34 Y/Y Change Q/Q Change Balance Sheet 12/31/2016 3/31/2017 6/30/2017 9/30/ /31/2017 3/31/2018 3/31/2018 3/31/2018 Rounded Rounded Rounded ($000) Rounded ($000) Rounded ($000) Rounded ($000) Rounded ($000) Rounded ($000) ($000) % ($000) % Assets Current assets: Cash and cash equivalents 223, , , , , ,850 4,476 3 % (13,041) (7)% Short term investments 712, , , , , ,536 6,899 1 % 2,625 0 % Accounts receivable, net of allowance for doubtful accounts 133, , , , , ,056 (7,943) (7)% (43,261) (30)% Inventories, net 5,955 6,195 5,837 5,368 5,746 6, % 1, % Prepaid expenses and other current assets 84,580 89,623 95,823 94,566 93, ,851 13, % 9, % Total current assets 1,159,946 1,081,828 1,089,150 1,106,944 1,142,664 1,099,099 17,271 2 % (43,565) (4)% Property and equipment, net 61,852 60,814 60,122 67,147 71,357 76,579 15, % 5,222 7 % Goodwill 978, , , , , ,920 21,660 2 % 15,259 2 % Intangible assets 244, , , , , ,875 (48,370) (21)% (6,513) (3)% Deposits and other long-term assets 82,002 76,289 71,695 69,804 72,767 69,912 (6,377) (8)% (2,855) (4)% Total assets 2,526,092 2,426,436 2,413,685 2,421,826 2,458,837 2,426,385 (51) (0)% (32,452) (1)% Liabilities, convertible preferred stock and stockholders equity (deficit) Current liabilities: Accounts payable 20,269 25,487 27,910 32,487 35,684 30,749 5, % (4,935) (14)% Accrued liabilities 22,997 22,067 20,387 22,083 19,569 23,817 1,750 8 % 4, % Accrued compensation 96,004 50,083 50,142 59,117 59,588 54,020 3,937 8 % (5,568) (9)% Deferred revenue, current portion 508, , , , , ,540 34,876 7 % (13,075) (2)% Total current liabilities 647, , , , , ,126 45,825 8 % (19,330) (3)% Convertible senior notes, net 741, , , , , ,272 38,066 5 % 9,694 1 % Deferred revenue, non-current portion 419, , , , , ,596 (36,700) (9)% (10,889) (3)% Other long-term liabilities 7,087 8,320 15,438 15,200 22,102 22,957 14, % % Total liabilities 1,816,086 1,745,123 1,744,243 1,774,227 1,826,621 1,806,951 61,828 4 % (19,670) (1)% Stockholders equity (deficit): Common stock, par value $ per share % % Additional paid in capital 2,682,909 2,731,108 2,787,551 2,834,744 2,891,441 2,952, ,977 8 % 60,644 2 % Treasury stock (150,000) (150,000) (150,000) (150,000) (150,000) (150,000) % % Accumulated other comprehensive income (loss) (1,742) (1,419) (1,393) (1,214) (2,881) (4,476) (3,057) 215 % (1,595) 55 % Accumulated deficit (1,821,178) (1,898,394) (1,966,734) (2,035,949) (2,106,363) (2,178,194) (279,800) 15 % (71,831) 3 % Total stockholders equity 710, , , , , ,434 (61,879) (9)% (12,782) (2)% Total liabilities, convertible preferred stock and stockholders equity 2,526,092 2,426,436 2,413,685 2,421,826 2,458,837 2,426,385 (51) (0)% (32,452) (1)%

35 Cash Flows Statement Y/Y Change Q/Q Change Annual Q1 Q2 Q3 Q4 Q1 Q Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) Rounded ($000) ($000) % ($000) % ($000) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (77,217) (68,339) (69,214) (70,414) (71,830) 5,387 (7)% (1,416) 2 % (285,184) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 26,365 26,408 25,839 24,805 22,389 (3,976) (15)% (2,416) (10)% 103,417 Stock-based compensation 43,889 39,397 42,206 40,844 42,148 (1,741) (4)% 1,304 3 % 166,336 Non-cash interest expense related to convertible senior notes 9,226 9,340 9,457 9,575 9, % % 37,598 Change in FV of contingent earn-out liability 13 (67) (13) (100)% (54) Deferred income taxes 251 (304) (1,234) (60) (311) (124)% 1,174 (95)% (1,287) Other 2,120 1,347 1,629 2,074 1,342 (778) (37)% (732) (35)% 7,170 Changes in operating assets and liabilities: Accounts receivable 22,021 (5,823) (12,041) (18,591) 42,986 20, % 61,577 (331)% (14,434) Inventories (1,090) 517 (1,317) (1,443) (1,373) (283) 26 % 70 (5)% (3,333) Prepaid expenses and other assets 630 (2,135) 5,033 1,837 (6,330) (6,960) (1,105)% (8,167) (445)% 5,365 Accounts payable 3, (4,753) 7,000 (5,354) (8,685) (261)% (12,354) (176)% 6,040 Accrued liabilities (930) (1,680) 1,697 (2,746) 4,254 5,184 (557)% 7,000 (255)% (3,659) Accrued compensation (7,006) 125 8, (5,568) 1,438 (21)% (6,038) (1,285)% 2,565 Deferred revenue (39,789) (18,140) 5,517 34,763 (23,965) 15,824 (40)% (58,728) (169)% (17,649) Other long-term liabilities 1,234 7,118 (238) 6, (380) (31)% (5,781) (87)% 14,749 Net cash provided by (used in) operating activities (16,952) (11,470) 12,487 33,575 9,187 26,139 (154)% (24,388) (73)% 17,640 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of business, net of cash acquired (4,300) (5,977) (5,977) (1,677) 39 % (4,300) Purchase of property and equipment and demonstration units (8,483) (8,829) (8,612) (17,855) (14,487) (6,004) 71 % 3,368 (19)% (43,779) Proceeds from sale of property and equipment Purchase of short-term investments (98,480) (124,430) (92,716) (93,732) (109,469) (10,989) 11 % (15,737) 17 % (409,358) Maturity of short-term investments 94, ,825 90,528 93, ,711 10, % 11, % 397,483 Sale of short-term investments 3,620 (3,620) (100)% 3,620 Purchase of investment in private company (2,500) 2,500 (100)% (2,500) Lease deposits (70) (74) (307) (38) (116) (46) 66 % (78) 205 % (489) Net cash provided by (used in) investing activities (8,724) (14,508) (11,107) (24,984) (25,338) (16,614) 190 % (354) 1 % (59,323) CASH FLOWS FROM FINANCING ACTIVITIES: Payments for contingent earn-outs (38,928) 38,928 (100)% (38,928) Payment related to shares withheld for taxes (590) (414) (404) 404 (100)% (1,408) Proceeds from employee stock purchase plan 10,764 9,330 (9,330) (100)% 20,094 Proceeds from exercise of stock options 4,311 6,872 5,399 2,567 3,110 (1,201) (28)% % 19,149 Net cash provided by (used) in financing activities (34,617) 17,046 4,985 11,493 3,110 37,727 (109)% (8,383) (73)% (1,093) Net change in cash and cash equivalents (60,293) (8,932) 6,365 20,084 (13,041) 47,252 (78)% (33,125) (165)% (42,776) Cash and cash equivalents, beginning of period 223, , , , ,891 (42,776) (19)% 20, % 223,667 Cash and cash equivalents, end of period 163, , , , ,850 4,476 3 % (13,041) (7)% 180,891

36 Revenue Metrics Y/Y Change Q/Q Change Annual Y/Y Change Q1 Q2 Q3 Q4 Q1 Q Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) % ($000) % ($000) ($000) ($000) % Revenue: Product and Related Subscriptions and Support 112, , , , ,092 8,908 8 % (5,216) (4)% 437, ,521 42, % Cloud Subscription & Managed Services 41,545 38,990 41,252 44,657 44,381 2,836 7 % (276) (1)% 147, ,444 18, % Professional Services 31,030 33,625 34,192 34,836 33,597 2,567 8 % (1,239) (4)% 121, ,683 12, % Total Revenue 184, , , , ,070 14,311 8 % (6,731) (3)% 705, ,648 73, % Revenue Mix: Product and Related Subscriptions and Support 61 % 62 % 62 % 61 % 61 % 0 % (1)% 62 % 62 % (0)% Cloud Subscription & Managed Services 22 % 20 % 21 % 22 % 22 % (0)% 1 % 21 % 21 % 0 % Professional services 17 % 18 % 17 % 17 % 17 % 0 % (0)% 17 % 17 % (0)%

37 Billings Metrics Y/Y Change Q/Q Change Annual Q1 Q2 Q3 Q4 Q1 Q Q Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) % ($000) % ($000) ($000) Y/Y Change Rounded ($000) % Billings: Product and Related Subscriptions and Support 76,930 95, , ,548 90,365 13, % (39,183) (30)% 478, ,810 (63,874) (13)% Cloud Subscriptions and Managed Services 35,349 39,270 50,971 69,349 57,110 21, % (12,239) (18)% 209, ,939 (14,079) (7)% Professional Services 32,691 38,704 39,189 41,667 27,631 (5,060) (15)% (14,036) (34)% 135, ,251 17, % Total Billings 144, , , , ,106 30, % (65,458) (27)% 822, ,000 (60,787) (7)% Billings Mix: Product and Related Subscriptions and Support 53 % 55 % 56 % 54 % 52 % (1)% (2)% 58 % 54 % (4)% Cloud Subscriptions and Managed Services 24 % 23 % 25 % 29 % 33 % 8 % 4 % 25 % 26 % 0 % Professional Services 23 % 22 % 19 % 17 % 16 % (7)% (2)% 16 % 20 % 4 % Total Billings 100 % 100 % 100 % 100 % 100 % % % 100 % 100 % %

38 Deferred Revenue Metrics Y/Y Change Q/Q Change 12/31/2016 3/31/2017 6/30/2017 9/30/ /31/2017 3/31/2018 Rounded Rounded Rounded Rounded Rounded Rounded ($000) ($000) ($000) ($000) ($000) ($000) 3/31/2018 3/31/2018 Rounded ($000) % Rounded ($000) % Deferred revenue: Current Deferred Revenue: Product, Subscriptions and Support 477, , , , , ,264 23,935 5 % (6,954) (1)% Professional Services 31,599 33,335 38,489 43,561 50,397 44,276 10, % (6,121) (12)% Current deferred revenue 508, , , , , ,540 34,876 7 % (13,075) (2)% Non-Current Deferred Revenue: Product, Subscriptions and Support 418, , , , , ,269 (36,699) (9)% (11,044) (3)% Professional Services (1) (0)% % Non-current deferred revenue 419, , , , , ,596 (36,700) (9)% (10,889) (3)% Total deferred revenue 927, , , , , ,136 (1,824) (0)% (23,964) (3)% Current deferred revenue % 55 % 56 % 57 % 59 % 60 % 60 % 4 % 0 % Non-current deferred revenue % 45 % 44 % 43 % 41 % 40 % 40 % (4)% (0)% Product Subscriptions and Support Deferred Revenue 895, , , , , ,533 (12,764) (1)% (17,998) (2)% Professional Services Deferred Revenue 32,002 33,663 38,741 43,737 50,569 44,603 10, % (5,966) (12)% Product Subscriptions and Support Deferred Revenue % 97 % 96 % 96 % 95 % 94 % 95 % (1)% 1 % Professional Services Deferred Revenue % 3 % 4 % 4 % 5 % 6 % 5 % 1 % (1)%