Mandiant Reports Financial Results for Third Quarter 2021

Nov 04, 2021
34 mins read
  • Revenue from continuing operations increased 22 percent from the third quarter of 2020 
  • Annualized recurring revenue for continuing operations increased 26 percent from the end of the third quarter of 2020 to $264 million1
  • Repurchased $32 million in common stock in the third quarter under Board-approved stock repurchase plan

MILPITAS, Calif. – Nov. 4, 2021 – Mandiant, Inc. (NASDAQ: MNDT), the leader in dynamic cyber defense and response, today announced financial results for the third quarter ended September 30, 2021.

“In Q3, we delivered record third quarter billings and annualized recurring revenue for both the Mandiant Solutions and FireEye Products businesses,” said Kevin Mandia, Mandiant Chief Executive Officer.

“A highlight for the quarter was the continued strong demand for Mandiant Solutions. With the divestiture of the FireEye Products business having closed in early October, we look forward to concentrating our efforts on accelerating Mandiant’s growth," added Mandia.

On October 8, 2021, Mandiant completed the sale of the FireEye Products business to McAfee Enterprise, which is backed by a consortium led by Symphony Technology Group. Accordingly, financial results for the FireEye Products business in the third quarter were classified as discontinued operations in the condensed consolidated statements of operations and excluded from continuing operations. Results of discontinued operations include all revenue and expenses directly attributable to the FireEye Products business, and exclude expenses for shared resources and general corporate overhead that remain in continuing operations for Mandiant.

Third Quarter 2021 Financial Highlights for Continuing Operations

  • Revenue of $122 million, an increase of 22 percent from the third quarter of 2020
  • Annualized recurring revenue of $264 million, an increase of 26 percent from the end of the third quarter of 20201
  • Deferred revenue of $315 million, an increase of 29 percent from the end of the third quarter of 2020
  • GAAP operating margin of negative 71 percent, compared to GAAP operating margin of negative 69 percent in the third quarter of 2020
  • Non-GAAP operating margin of negative 27 percent, compared to non-GAAP operating margin of negative 28 percent in the third quarter of 20202
  • GAAP net loss per basic share attributable to common stockholders of 45 cents, compared to GAAP net loss per basic share attributable to common stockholders of 36 cents in the third quarter of 2020
  • Non-GAAP net loss per basic share attributable to common stockholders of 15 cents, compared to non-GAAP net loss per basic share attributable to common stockholders of 13 cents in the third quarter of 20202
  • GAAP and non-GAAP operating margin and net loss per basic share included approximately $15 million in costs from shared resources to support the FireEye Products business and an estimated $3 million in corporate overhead and shared program expenses that would have been allocated to the FireEye Products business under separate reporting for the combined company3

Third Quarter 2021 Financial Highlights for Combined Continuing and Discontinued Operations

  • Revenue of $255 million, an increase of 7 percent from the third quarter of 2020
  • GAAP operating margin of negative 21 percent, compared to GAAP operating margin of negative 11 percent in the third quarter of 2020
  • Non-GAAP operating margin of 8 percent, compared to non-GAAP operating margin of 12 percent in the third quarter of 20202
  • GAAP net loss per basic share attributable to common stockholders of 31 cents, compared to GAAP net loss per basic share attributable to common stockholders of 17 cents in the third quarter of 2020
  • Non-GAAP net income per basic share attributable to common stockholders of $0.06, compared to non-GAAP net income per basic share attributable to common stockholders of $0.11 in the third quarter of 20202

1 Annualized recurring revenue is defined as the annualized run-rate of active term licenses, subscriptions, and support contracts at the end of a reporting period.

2 A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

3 Costs for shared resources incurred prior to the completion of the divestiture of the FireEye Products business on October 8, 2021 are included in the GAAP and non-GAAP operating expenses of continuing operations. The majority of operating costs to support the FireEye Products business that are incurred following the completion of the divestiture will be reimbursed under a Transition Services Agreement with McAfee Enterprise.

Fourth Quarter Outlook for Continuing Operations

The company provides the guidance below for continuing operations based on current market conditions and expectations. The company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below.

 

Q4 2021 Outlook

Revenue

$129 - $133 million

Non-GAAP gross margin

61% - 62%

Non-GAAP operating margin

(20)% - (22)%

Net interest expense

~ $2.5 million

Provision for non-GAAP income taxes

~ $1 million

Weighted average basic shares outstanding

~ 240 million

Non-GAAP net loss per share from continuing operations attributable to common stockholders, basic and diluted

$(0.12) - $(0.13)

Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, restructuring charges, non-cash interest expense related to the company’s convertible senior notes, discrete tax provision (benefit), dividends on Series A convertible preferred stock, accretion of Series A convertible preferred stock, transformation and transition expense, other special non-recurring items, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive. A reconciliation of non-GAAP guidance measures to the most directly comparable GAAP financial measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability of, the amounts of stock-based compensation expense, amortization of intangible assets, and non-recurring expenses that may be incurred in the future. Stock-based compensation expense is impacted by the company’s future hiring and retention needs, as well as the future fair market value of the company’s common stock, all of which are difficult to predict and subject to constant change. The actual amount of stock-based compensation expense in the fourth quarter of 2021 will have a significant impact on the company’s GAAP operating margin and net loss per share attributable to common stockholders. Further, amortization of intangible assets, as well as other non-recurring expenses, if any, will also impact results. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the most directly comparable GAAP financial measures for future periods is not available without unreasonable effort.

Share Buyback Update

Mandiant repurchased approximately $32 million in Mandiant common stock during the third quarter of 2021 under the Board-approved stock repurchase plan announced in June 2021. Through September 30, 2021, the company has repurchased approximately $100 million in Mandiant common stock. There remains authorization of an additional $400 million of Mandiant common stock under the $500 million common stock repurchase program.

CFO Future Retirement

The company also today announced that Frank Verdecanna, Mandiant’s Executive Vice President, Chief Financial Officer, and Chief Accounting Officer, notified the company of his intention to retire in 2022, effective after Mandiant has hired his replacement to ensure a smooth and orderly transition of responsibilities.

“On behalf of the Board of Directors and the entire Mandiant organization I want to thank Frank for his leadership and many contributions,” said Mandia. “Frank has been instrumental in scaling our business over the past nine years while leading the company through significant milestones, and I look forward to his continued partnership into next year.”

Fourth Quarter 2021 Conference Participation and Investor Events

In addition, Mandiant today announced conference participation and investor events for the fourth quarter of 2021:

Date

Presentation Time (PDT)

Conference/Event

November 30, 2021

TBD

Credit Suisse Annual Technology Conference, Mandiant Presenters: John Watters, President and COO and Frank Verdecanna, CFO

December 9, 2021

10:00 a.m. - 10:45 a.m.

Mandiant December Threat Briefing for Investors and Financial Analysts

The above presentations will be webcast. Links to live and archived audio webcasts for these events will be available on the Investor Relations section of the company’s website at https://investors.mandiant.com.

Conference Call Information

Mandiant will host a conference call today, November 4, 2021 at 5 p.m. Eastern time (2 p.m. Pacific time) to discuss its third quarter financial results and the company’s outlook for the fourth quarter continuing operations. Interested parties may access the conference call by dialing 844-200-6205 (toll free) or 646-904-5544 (toll) and entering passcode 006053. A live audio webcast of the call can be accessed from the Investor Relations section of the company's website at https://investors.mandiant.com. An archived version of the webcast will be available at the same website shortly after the conclusion of the live event.

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to future financial results for the fourth quarter, including revenue, non-GAAP gross margin, non-GAAP operating margin, net interest expense, provision for non-GAAP income taxes, weighted average basic shares outstanding, and non-GAAP net loss per share from continuing operations attributable to common stockholders in the section entitled “Fourth Quarter Outlook for Continuing Operations” above, as well as statements regarding plans, expectations, opportunities and growth.

These forward-looking statements involve risks and uncertainties, as well as assumptions which, if they do not fully materialize or prove incorrect, could cause Mandiant’s results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause Mandiant’s results to differ materially from those expressed or implied by such forward-looking statements include the effect of the sale of the FireEye Products business on Mandiant's retained businesses and offerings; retention of existing executive leadership team members; difficulties in improving go forward execution and development of offerings during transitions; the ability of Mandiant to successfully execute strategic plans; the ability of Mandiant to maintain customer and partner relationships; the ability of Mandiant to achieve its cost and operating efficiency goals; the anticipated growth of certain market segments; Mandiant’s sales pipeline and business strategy; the timing and market acceptance of new offerings and upgrades; the successful development of new offerings and the degree to which these offerings gain market acceptance; whether and when Mandiant further executes on its stock repurchase program; customer demand and adoption of Mandiant’s offerings, solutions and services; real or perceived defects, errors or vulnerabilities in Mandiant's offerings, solutions or services; any delay in the release of Mandiant's new offerings, solutions or services; the impact of the COVID-19 pandemic, including but not limited to the new federal vaccination mandate and other governmental actions, on Mandiant's business, results of operations, liquidity and capital resources and its ability to retain key employees; Mandiant's ability to react to trends and challenges in its business and the markets in which it operates; Mandiant's ability to anticipate market needs or develop new or enhanced products, solutions and services to meet those needs; Mandiant’s ability to hire and retain key executives and employees, including but not limited to a new CFO to replace Mr. Verdecanna; Mandiant’s ability to attract new and retain existing customers and train its sales force; the budgeting cycles, seasonal buying patterns and length of Mandiant’s sales cycle; risks associated with new offerings; sales and marketing execution risks; the failure to achieve expected synergies and efficiencies of operations between Mandiant and its acquired companies; the ability of Mandiant and its acquired companies to successfully integrate their respective market opportunities, technologies, products, personnel and operations; the ability of Mandiant and its partners to execute their strategies, plans, objectives and expected investments with respect to Mandiant’s partnerships; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Mandiant’s Form 10-Q filed with the Securities and Exchange Commission on August 9, 2021, which should be read in conjunction with these financial results and is available on the Investor Relations section of Mandiant’s website at investors.mandiant.com and on the SEC website at www.sec.gov.

All forward-looking statements in this press release are based on information available to the company as of the date hereof, and Mandiant does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law. Any future product, service, feature, or related specification that may be referenced in this release is for informational purposes only and is not a commitment to deliver any offering, technology or enhancement. Mandiant reserves the right to modify future product or service plans at any time.

Non-GAAP Financial Measures

In this release Mandiant has provided financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). These non-GAAP financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures used by other companies. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company's financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable financial information prepared in accordance with GAAP and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP financial measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP gross margin. Mandiant defines non-GAAP gross margin as total gross profit excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, and, as applicable, other special or non-recurring items, divided by total revenue.

Non-GAAP operating income (loss) from continuing operations and non-GAAP operating margin from continuing operations. Mandiant defines non-GAAP operating income (loss) from continuing operations as operating income (loss) from continuing operations excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, restructuring charges, and other special or non-recurring items. Mandiant defines non-GAAP operating margin as non-GAAP operating income (loss) divided by total revenue.

Non-GAAP operating income (loss) from combined continuing and discontinued operations and non-GAAP operating margin from combined continuing and discontinued operations. Mandiant defines non-GAAP operating income (loss) from combined continuing and discontinued operations as operating income (loss) from continuing operations plus operating income from discontinued operations, excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, restructuring charges, and other special or non-recurring items. Mandiant defines non-GAAP operating margin from combined continuing and discontinued operations as non-GAAP operating income (loss) from continuing operations plus non-GAAP operating income from discontinued operations, divided by revenue from continuing operations plus revenue from discontinued operations.

Non-GAAP net loss from continuing operations attributable to common stockholders. Mandiant defines non-GAAP net loss from continuing operations attributable to common stockholders as net loss from continuing operations excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, restructuring charges, and other special or non-recurring items.

Non-GAAP net income (loss) attributable to common stockholders. Mandiant defines non-GAAP net income (loss) attributable to common stockholders as net income (loss) from continuing operations plus net income (loss) from discontinued operations, excluding stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, restructuring charges, non-cash interest expense related to the company’s convertible senior notes, discrete tax provision (benefit), dividends on Series A convertible preferred stock, accretion of Series A convertible preferred stock, and other special or non-recurring items.

Non-GAAP net income (loss) per basic share  from continuing operations attributable to common stockholders. Mandiant defines non-GAAP net loss per basic share from continuing operations attributable to common stockholders as non-GAAP net loss from continuing operations attributable to common stockholders divided by weighted average basic shares outstanding, which excludes stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive.

Non-GAAP net income (loss) per basic share attributable to common stockholders. Mandiant defines non-GAAP net income per basic share attributable to common stockholders as non-GAAP net loss from continuing operations attributable to common stockholders plus non-GAAP net income from discontinued operations, divided by weighted average basic shares outstanding. Weighted average basic shares used to calculate non-GAAP net income per basic share attributable to common stockholders excludes stock options, restricted stock units, performance stock units, shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that are anti-dilutive.

Non-GAAP net income attributable to common stockholders and non-GAAP net income per basic share attributable to common stockholders in the third quarter of 2021 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition-related expenses, transformation and transition expense, non-cash interest expense related to convertible senior notes issued in June 2015 and the third quarter of 2018, and dividends on Series A convertible preferred stock. Weighted average basic shares outstanding used to calculate non-GAAP net income per basic share attributable to common stockholders excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes and Series A convertible preferred shares that were anti-dilutive.

Non-GAAP net income attributable to common stockholders and non-GAAP net income per basic share attributable to common stockholders in the third quarter of 2020 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, and non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018. Weighted average basic shares outstanding used to calculate non-GAAP net income per basic share attributable to common stockholders excluded stock options, restricted stock units, performance stock units, and shares issuable upon conversion of the company's convertible senior notes that were anti-dilutive.

Mandiant considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, acquisition related expenses, restructuring charges, transformation and transition expense, non-cash interest expense related to convertible senior notes issued in June 2015 and the second quarter of 2018, dividends on Series A convertible preferred stock, and other non-recurring and discrete items so that management and investors can compare the company's core business operating results over multiple periods.

There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, these non-GAAP financial measures exclude stock-based compensation expense. Stock-based compensation is an important part of Mandiant employees' overall compensation and has been, and will continue to be for the foreseeable future, a significant recurring expense in the company's business. Second, the components of the costs that Mandiant excludes in its calculation of these non-GAAP financial measures, including not only stock-based compensation, but also amortization of stock-based compensation expense capitalized in software development costs, non-recurring or non-operating items such as amortization of intangible assets, acquisition related expenses, restructuring charges, non-cash interest expense related to the company’s convertible senior notes, and dividends on Series A convertible preferred stock, may differ from the components excluded by peer companies when they report their non-GAAP results of operations. Mandiant compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures and evaluating non-GAAP financial measures together with their nearest GAAP equivalents.

About Mandiant, Inc.

Since 2004, Mandiant® has been a trusted partner to security-conscious organizations. Effective security is based on the right combination of expertise, intelligence, and adaptive technology, and the Mandiant Advantage SaaS platform scales decades of frontline experience and industry-leading threat intelligence to deliver a range of dynamic cyber defense solutions. Mandiant’s approach helps organizations develop more effective and efficient cyber security programs and instills confidence in their readiness to defend against and respond to cyber threats.

© 2021 Mandiant, Inc. All rights reserved. Mandiant is a registered trademark of Mandiant, Inc. in the United States and other countries. All other brands, products, or service names are or may be trademarks or service marks of their respective owners.

Contacts

Media Inquiries
Media.Relations@mandiant.com

Investor Inquiries
Investor.Relations@mandiant.com

Source: Mandiant

 

Mandiant, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

September 30, 2021

 

December 31, 2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

384,700 

 

 

$

664,679 

 

Short-term investments

845,637 

 

 

624,824 

 

Accounts receivable, net

67,553 

 

 

69,398 

 

Prepaid expenses and other current assets

44,342 

 

 

39,913 

 

Current assets held for sale

573,486 

 

 

163,431 

 

Total current assets

1,915,718 

 

 

1,562,245 

 

Property and equipment, net

60,772 

 

 

64,336 

 

Operating lease right-of-use assets, net

35,550 

 

 

36,728 

 

Goodwill

1,060,023 

 

 

1,050,962 

 

Intangible assets, net

90,715 

 

 

120,555 

 

Deposits and other long-term assets

18,841 

 

 

18,084 

 

Long-term assets held for sale

— 

 

 

392,974 

 

Total Assets

$

3,181,619 

 

 

$

3,245,884 

 

 

 

 

 

Liabilities, Convertible preferred stock and Stockholders' equity

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

13,854 

 

 

$

4,027 

 

Operating lease liabilities, current

13,567 

 

 

14,556 

 

Accrued and other current liabilities

22,467 

 

 

19,730 

 

Accrued compensation

67,261 

 

 

78,842 

 

Convertible senior notes, current, net

445,732 

 

 

— 

 

Deferred revenue, current

248,140 

 

 

226,356 

 

Current liabilities held for sale

686,072 

 

 

410,233 

 

Total current liabilities

1,497,093 

 

 

753,744 

 

Convertible senior notes, non-current, net

549,733 

 

 

960,896 

 

Deferred revenue, non-current

66,536 

 

 

57,897 

 

Operating lease liabilities, non-current

54,571 

 

 

41,802 

 

Other long-term liabilities

4,672 

 

 

12,339 

 

Long-term liabilities held for sale

— 

 

 

285,251 

 

Total liabilities

2,172,605 

 

 

2,111,929 

 

Commitments and contingencies:

 

 

 

Series A convertible preferred stock

414,738 

 

 

401,050 

 

Stockholders' equity:

 

 

 

Common stock

24 

 

 

24 

 

Additional paid-in capital

3,671,356 

 

 

3,623,243 

 

Treasury stock

(80,000)

 

 

(80,000)

 

Accumulated other comprehensive income

656 

 

 

3,834 

 

Accumulated deficit

(2,997,760)

 

 

(2,814,196)

 

Total stockholders’ equity

594,276 

 

 

732,905 

 

Total Liabilities, Convertible preferred stock and Stockholders' equity

$

3,181,619 

 

 

$

3,245,884 

 

Mandiant, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

Platform, cloud subscription and managed services

$

60,249 

 

 

$

48,613 

 

 

$

168,184 

 

 

$

141,966 

 

Professional services

61,721 

 

 

51,439 

 

 

182,384 

 

 

147,470 

 

Total revenue

121,970 

 

 

100,052 

 

 

350,568 

 

 

289,436 

 

Cost of revenue: (1)(2)(3)

 

 

 

 

 

 

 

Platform, cloud subscription and managed services

28,725 

 

 

27,431 

 

 

83,581 

 

 

79,788 

 

Professional services

36,380 

 

 

29,660 

 

 

104,134 

 

 

85,501 

 

Total cost of revenue

65,105 

 

 

57,091 

 

 

187,715 

 

 

165,289 

 

Total gross profit

56,865 

 

 

42,961 

 

 

162,853 

 

 

124,147 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development (1)(2)(3)

44,814 

 

 

31,316 

 

 

127,649 

 

 

89,059 

 

Sales and marketing (1)(2)

65,899 

 

 

55,459 

 

 

190,130 

 

 

167,045 

 

General and administrative (1)

32,760 

 

 

24,485 

 

 

87,131 

 

 

79,342 

 

Restructuring charges (5)

— 

 

 

822 

 

 

1,927 

 

 

19,597 

 

Total operating expenses

143,473 

 

 

112,082 

 

 

406,837 

 

 

355,043 

 

Operating loss

(86,608)

 

 

(69,121)

 

 

(243,984)

 

 

(230,896)

 

Other expense, net (6)

(14,141)

 

 

(12,034)

 

 

(40,418)

 

 

(37,056)

 

Loss before income taxes from continuing operations before income taxes

(100,749)

 

 

(81,155)

 

 

(284,402)

 

 

(267,952)

 

Provision for income taxes (7)

498 

 

 

458 

 

 

2,441 

 

 

1,464 

 

Loss from continuing operations

(101,247)

 

 

(81,613)

 

 

(286,843)

 

 

(269,416)

 

Net income from discontinued operations, net of income taxes

33,025 

 

 

42,494 

 

 

103,279 

 

 

100,716 

 

Net loss

$

(68,222)

 

 

$

(39,119)

 

 

$

(183,564)

 

 

$

(168,700)

 

Dividend on series A convertible preferred stock (8)

(4,613)

 

 

— 

 

 

(13,688)

 

 

— 

 

Accretion of series A convertible preferred stock (9)

— 

 

 

— 

 

 

(82)

 

 

— 

 

Net loss attributable to common stockholders

$

(72,835)

 

 

$

(39,119)

 

 

$

(197,334)

 

 

$

(168,700)

 

Net loss per share attributable to common stockholders, basic and diluted:

 

 

 

 

 

 

 

Continuing operations

$

(0.45)

 

 

$

(0.36)

 

 

$

(1.27)

 

 

$

(1.22)

 

Discontinued operations

0.14 

 

 

0.19 

 

 

0.44 

 

 

0.46 

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.31)

 

 

$

(0.17)

 

 

$

(0.83)

 

 

$

(0.76)

 

Weighted average shares used in computing net loss per share, basic and diluted

237,168 

 

 

224,807 

 

 

236,404 

 

 

221,329 

 

Mandiant, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

Nine Months Ended September 30,

 

2021

 

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss from continuing operations

$

(286,843)

 

 

$

(269,416)

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

67,190 

 

 

56,447 

 

Stock-based compensation

111,295 

 

 

82,102 

 

Non-cash interest expense related to convertible senior notes

34,570 

 

 

35,480 

 

Deferred income taxes

(106)

 

 

91 

 

Other

1,154 

 

 

1,514 

 

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:

 

 

 

Accounts receivable

2,010 

 

 

16,928 

 

Prepaid expenses and other assets

6,897 

 

 

3,691 

 

Accounts payable

8,731 

 

 

(9,961)

 

Accrued liabilities

910 

 

 

(1,456)

 

Accrued compensation

(11,582)

 

 

20,125 

 

Deferred revenue

30,423 

 

 

(29,617)

 

Other long-term liabilities

(9,827)

 

 

(8,205)

 

Net cash provided by (used by) used in operating activities - continuing operations

(45,178)

 

 

(102,277)

 

Net cash provided by operating activities - discontinued operations

135,073 

 

 

125,778 

 

Net cash provided by operating activities

89,895 

 

 

23,501 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of property and equipment and demonstration units

(16,809)

 

 

(16,554)

 

Purchases of short-term investments

(647,949)

 

 

(305,180)

 

Proceeds from maturities of short-term investments

414,952 

 

 

355,820 

 

Proceeds from sales of short-term investments

2,008 

 

 

28,208 

 

Business acquisitions, net of cash acquired

(11,970)

 

 

(6,284)

 

Purchase of investment in privately held company

— 

 

 

(1,000)

 

Lease deposits

(233)

 

 

(222)

 

Net cash provided by (used in) investing activities - continuing operations

(260,001)

 

 

54,788 

 

Net cash used in investing activities - discontinued operations

(15,962)

 

 

(12,018)

 

Net cash used in investing activities

(275,963)

 

 

42,770 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Repurchase of convertible senior notes

— 

 

 

(96,392)

 

Share repurchases

(100,001)

 

 

— 

 

Accretion of series A convertible preferred stock

(82)

 

 

— 

 

Payment related to shares withheld for taxes

(10,514)

 

 

(8,802)

 

Proceeds from employee stock purchase plan

12,335 

 

 

12,300 

 

Proceeds from exercise of equity awards

4,351 

 

 

6,270 

 

Net cash used in financing activities

(93,911)

 

 

(86,624)

 

Net change in cash and cash equivalents

(279,979)

 

 

(20,353)

 

Cash and cash equivalents, beginning of period

664,679 

 

 

322,828 

 

Cash and cash equivalents, end of period

$

384,700 

 

 

$

302,475 

 

Mandiant, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

GAAP operating loss

$

(86,608)

 

 

$

(69,121)

 

 

$

(243,984)

 

 

$

(230,896)

 

Stock-based compensation expense (1)

39,122 

 

 

29,279 

 

 

111,266 

 

 

81,788 

 

Amortization of stock-based compensation capitalized in software development costs (3)

547 

 

 

501 

 

 

1,540 

 

 

1,286 

 

Amortization of intangible assets (2)

11,132 

 

 

10,025 

 

 

33,241 

 

 

30,420 

 

Transformation and transition expense (10)

3,179 

 

 

— 

 

 

6,369 

 

 

— 

 

Acquisition related expenses (4)

224 

 

 

— 

 

 

224 

 

 

— 

 

Restructuring charges (5)

— 

 

 

822 

 

 

1,927 

 

 

19,597 

 

Non-GAAP operating income (loss)

$

(32,404)

 

 

$

(28,494)

 

 

$

(89,417)

 

 

$

(97,805)

 

GAAP gross margin

47 

%

 

43 

%

 

46 

%

 

43 

%

Stock-based compensation expense (1)

%

 

%

 

%

 

%

Amortization of intangible assets (2)

%

 

%

 

%

 

%

Non-GAAP gross margin

61 

%

 

57 

%

 

60 

%

 

57 

%

GAAP operating margin

(71)

%

 

(69)

%

 

(70)

%

 

(80)

%

Stock-based compensation expense (1)

32 

%

 

29 

%

 

32 

%

 

28 

%

Amortization of stock-based compensation capitalized in software development costs (3)

— 

%

 

%

 

— 

%

 

— 

%

Amortization of intangible assets (2)

%

 

10 

%

 

%

 

11 

%

Transformation and transition expense (10)

%

 

— 

%

 

%

 

— 

%

Acquisition related expenses (4)

— 

%

 

— 

%

 

— 

%

 

— 

%

Restructuring charges (5)

— 

%

 

%

 

%

 

%

Non-GAAP operating margin

(27)

%

 

(28)

%

 

(26)

%

 

(34)

%

GAAP net loss attributable to common stockholders

$

(72,835)

 

 

$

(39,119)

 

 

$

(197,334)

 

 

$

(168,700)

 

Continuing operations:

 

 

 

 

 

 

 

Stock-based compensation expense (1)

39,122 

 

 

29,279 

 

 

111,266 

 

 

81,788 

 

Amortization of stock-based compensation capitalized in software development costs (3)

547 

 

 

501 

 

 

1,540 

 

 

1,286 

 

Amortization of intangible assets (2)

11,132 

 

 

10,025 

 

 

33,241 

 

 

30,420 

 

Acquisition related expenses (4)

224 

 

 

— 

 

 

224 

 

 

— 

 

Restructuring charges (5)

— 

 

 

822 

 

 

1,927 

 

 

19,597 

 

Non-cash interest expense related to convertible senior notes (6)

11,663 

 

 

11,113 

 

 

34,570 

 

 

35,480 

 

Adjustment to provision (benefit) from income taxes (7)

(342)

 

 

— 

 

 

(142)

 

 

(315)

 

Dividend on series A convertible preferred stock (8)

4,613 

 

 

— 

 

 

13,688 

 

 

— 

 

Accretion of series A convertible preferred stock (9)

— 

 

 

— 

 

 

82 

 

 

— 

 

Transformation and transition expense (10)

3,179 

 

 

— 

 

 

6,369 

 

 

— 

 

Discontinued operations:

 

 

 

 

 

 

 

Non-GAAP adjustments for discontinued operations (11)

18,515 

 

 

13,251 

 

 

54,794 

 

 

42,485 

 

Non-GAAP net income attributable to common stockholders

$

15,818 

 

 

$

25,872 

 

 

$

60,225 

 

 

$

42,041 

 

GAAP net loss per share attributable to common stockholders, basic and diluted

$

(0.31)

 

 

$

(0.17)

 

 

$

(0.83)

 

 

$

(0.76)

 

Continuing operations:

 

 

 

 

 

 

 

Stock-based compensation expense (1)

0.16 

 

 

0.13 

 

 

0.47 

 

 

0.37 

 

Amortization of stock-based compensation capitalized in software development costs (3)

— 

 

 

— 

 

 

0.01 

 

 

0.01 

 

Amortization of intangible assets (2)

0.05 

 

 

0.04 

 

 

0.14 

 

 

0.14 

 

Acquisition related expenses (4)

— 

 

 

— 

 

 

— 

 

 

— 

 

Restructuring charges (5)

— 

 

 

— 

 

 

0.01 

 

 

0.09 

 

Non-cash interest expense related to convertible senior notes (6)

0.05 

 

 

0.05 

 

 

0.15 

 

 

0.16 

 

Adjustment to provision (benefit) from income taxes (7)

— 

 

 

— 

 

 

— 

 

 

— 

 

Dividend on series A convertible preferred stock (8)

0.02 

 

 

— 

 

 

0.06 

 

 

— 

 

Accretion of series A convertible preferred stock (9)

— 

 

 

— 

 

 

— 

 

 

— 

 

Transformation and transition expense (10)

0.01 

 

 

— 

 

 

0.03 

 

 

— 

 

Discontinued operations:

 

 

 

 

 

 

 

Non-GAAP adjustments for discontinued operations (11)

0.08 

 

 

0.06 

 

 

0.23 

 

 

0.19 

 

Non-GAAP net income per share attributable to common stockholders, basic and diluted

$

0.06 

 

 

$

0.11 

 

 

$

0.27 

 

 

$

0.20 

 

Weighted average shares used in per share calculation for Non-GAAP, basic and diluted

237,168 

 

 

224,807 

 

 

236,404 

 

 

221,329 

 

 

 

 

 

 

 

 

 

(1) Includes stock-based compensation expense as follows:

 

 

 

 

 

 

 

Cost of platform, cloud subscription and managed services revenue

$

(3,451)

 

 

$

2,667 

 

 

$

(9,752)

 

 

$

7,532 

 

Cost of professional services revenue

(6,253)

 

 

4,722 

 

 

(17,574)

 

 

12,470 

 

Research and development expense

(9,644)

 

 

6,232 

 

 

(27,387)

 

 

16,598 

 

Sales and marketing expense

(10,176)

 

 

9,706 

 

 

(31,605)

 

 

26,749 

 

General and administrative expense

(9,598)

 

 

5,952 

 

 

(24,948)

 

 

18,439 

 

Total stock-based compensation expense

$

(39,122)

 

 

$

29,279 

 

 

$

(111,266)

 

 

$

81,788 

 

 

 

 

 

 

 

 

 

(2) Includes amortization of intangible assets as follows:

 

 

 

 

 

 

 

Cost of platform, cloud subscription and managed services revenue

$

(7,159)

 

 

$

6,313 

 

 

$

(21,296)

 

 

$

19,285 

 

Sales and marketing expense

(3,973)

 

 

3,712 

 

 

(11,944)

 

 

11,136 

 

Total amortization of intangible assets

$

(11,132)

 

 

$

10,025 

 

 

$

(33,240)

 

 

$

30,421 

 

 

 

 

 

 

 

 

 

(3) Includes amortization of stock-based compensation capitalized in software development costs as follows:

 

 

 

 

 

 

 

Research and development expense

(547)

 

 

501 

 

 

(1,540)

 

 

1,286 

 

Total amortization of stock-based compensation capitalized in software development costs

$

(547)

 

 

$

501 

 

 

$

(1,540)

 

 

$

1,286 

 

 

 

 

 

 

 

 

 

(4) Includes acquisition related expenses as follows:

 

 

 

 

 

 

 

General and administrative expense

$

224 

 

 

$

— 

 

 

$

224 

 

 

$

— 

 

 

 

 

 

 

 

 

 

(5) Includes restructuring charges as follows:

 

 

 

 

 

 

 

Restructuring charges

$

— 

 

 

$

822 

 

 

$

1,927 

 

 

$

19,597 

 

 

 

 

 

 

 

 

 

(6) Includes non-cash interest expense related to convertible senior notes as follows:

 

 

 

 

 

 

 

Other income, net

$

11,663 

 

 

$

11,113 

 

 

$

34,570 

 

 

$

35,480 

 

 

 

 

 

 

 

 

 

(7) Includes income tax effect of non-GAAP adjustments as follows:

 

 

 

 

 

 

 

Adjustment to provision (benefit) from income taxes

$

(342)

 

 

$

— 

 

 

$

(142)

 

 

$

(315)

 

 

 

 

 

 

 

 

 

(8) Dividend on series A convertible preferred stock

$

4,613 

 

 

$

— 

 

 

$

13,688 

 

 

$

— 

 

 

 

 

 

 

 

 

 

(9) Accretion of series A convertible preferred stock

$

— 

 

 

$

— 

 

 

$

82 

 

 

$

— 

 

 

 

 

 

 

 

 

 

(10) Transformation and transition expense

$

3,179 

 

 

$

— 

 

 

$

6,369 

 

 

$

— 

 

 

 

 

 

 

 

 

 

(11) Includes non-GAAP adjustments for discontinued operations as follows:

 

 

 

 

 

 

 

Stock-based compensation expense

$

12,479 

 

 

$

11,069 

 

 

$

38,330 

 

 

$

31,491 

 

Amortization of intangibles

— 

 

 

983 

 

 

1,221 

 

 

3,792 

 

Amortization of stock-based compensation capitalized in software development costs

537 

 

 

533 

 

 

1,618 

 

 

1,779 

 

Restructuring charges

— 

 

 

666 

 

 

— 

 

 

5,423 

 

Divestiture related costs

5,499 

 

 

— 

 

 

13,625 

 

 

— 

 

 

$

18,515 

 

 

$

13,251 

 

 

$

54,794 

 

 

$

42,485 

 

 

 

 

 

 

 

 

 

Mandiant, Inc.

SUMMARY OF CONTINUING OPERATIONS, DISCONTINUED OPERATIONS, AND COMBINED OPERATIONS

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

 

Three Months Ended September 30, 2021

 

Continuing

 

Discontinued

 

Combined

 

 

 

 

 

 

Revenue

$

121,970 

 

 

$

132,842 

 

 

$

254,812 

 

Cost of revenue

65,105 

 

 

28,126 

 

 

93,231 

 

Total gross profit

56,865 

 

 

104,716 

 

 

161,581 

 

 

 

 

 

 

 

Research and development

44,814 

 

 

31,358 

 

 

76,172 

 

Sales and marketing

65,899 

 

 

35,114 

 

 

101,013 

 

General and administrative

32,760 

 

 

4,631 

 

 

37,391 

 

Restructuring charges

— 

 

 

— 

 

 

— 

 

GAAP operating income (loss)

(86,608)

 

 

33,613 

 

 

(52,995)

 

Non-GAAP adjustments

54,204 

 

 

18,515 

 

 

72,719 

 

Non-GAAP operating income (loss)

$

(32,404)

 

 

$

52,128 

 

 

$

19,724 

 

 

 

 

 

 

 

Other income and expense, provision for income tax & dividends on series A convertible preferred stock

$

(19,252)

 

 

$

(588)

 

 

$

(19,840)

 

Net loss attributable to common stockholders

$

(105,860)

 

 

$

33,025 

 

 

$

(72,835)

 

 

 

 

 

 

 

GAAP operating margin

(71)

%

 

25 

%

 

(20)

%

Non-GAAP adjustments related to operating income (loss)

44 

%

 

14 

%

 

28 

%

Non-GAAP operating margin

(27)

%

 

39%

 

8%

 

 

 

 

 

 

Non-GAAP Adjustments:

 

 

 

 

 

Stock-based compensation expense

$

39,122 

 

 

$

12,479 

 

 

$

51,601 

 

Amortization of intangible assets

11,132 

 

 

— 

 

 

11,132 

 

Amortization of stock-based compensation capitalized in software development costs

547 

 

 

537 

 

 

1,084 

 

Restructuring charges

— 

 

 

— 

 

 

— 

 

Acquisition related cost

224 

 

 

— 

 

 

224 

 

Divestiture related costs

— 

 

 

5,499 

 

 

5,499 

 

Transformation and transition expense

3,179 

 

 

— 

 

 

3,179 

 

Non-GAAP adjustments related to operating income (loss)

$

54,204 

 

 

$

18,515 

 

 

$

72,719 

 

 

 

 

 

 

 

Non-cash interest expense related to convertible senior notes

$

11,663 

 

 

$

— 

 

 

$

11,663 

 

Dividend on series A convertible preferred stock

4,613 

 

 

— 

 

 

4,613 

 

Accretion of series A convertible preferred stock

— 

 

 

— 

 

 

— 

 

Non-GAAP adjustments below operating income (loss)

$

16,276 

 

 

$

— 

 

 

$

16,276 

 

Total non-GAAP adjustments

$

70,480 

 

 

$

18,515 

 

 

$

88,995 

 

 

 

 

 

 

 

GAAP net income (loss) per share attributable to common stockholders, basic

$

(0.45)

 

 

$

0.14 

 

 

$

(0.31)

 

Non-GAAP net income (loss) per share attributable to common stockholders, basic

$

(0.15)

 

 

$

0.21 

 

 

$

0.06 

 

Weighted average shares used in per share calculation for non-GAAP, basic

237,168 

 

 

237,168 

 

 

237,168 

 

 

 

Three Months Ended September 30, 2020

 

Continuing

 

Discontinued

 

Combined

 

 

 

 

 

 

Revenue

$

100,052 

 

 

$

138,407 

 

 

$

238,459 

 

Cost of revenue

57,091 

 

 

29,654 

 

 

86,745 

 

Total gross profit

42,961 

 

 

108,753 

 

 

151,714 

 

 

 

 

 

 

 

Research and development

31,316 

 

 

27,470 

 

 

58,786 

 

Sales and marketing

55,459 

 

 

37,649 

 

 

93,108 

 

General and administrative

24,485 

 

 

— 

 

 

24,485 

 

Restructuring charges

822 

 

 

666 

 

 

1,488 

 

GAAP operating income (loss)

(69,121)

 

 

42,968 

 

 

(26,153)

 

Non-GAAP adjustments

40,627 

 

 

13,251 

 

 

53,878 

 

Non-GAAP operating income (loss)

$

(28,494)

 

 

$

56,219 

 

 

$

27,725 

 

 

 

 

 

 

 

Other income and expense, provision for income tax & dividends on series A convertible preferred stock

$

(12,492)

 

 

$

(474)

 

 

$

(12,966)

 

Net loss attributable to common stockholders

$

(81,613)

 

 

$

42,494 

 

 

$

(39,119)

 

 

 

 

 

 

 

GAAP operating margin

(69)

%

 

31 

%

 

(11)

%

Non-GAAP adjustments related to operating income (loss)

41 

%

 

10 

%

 

23 

%

Non-GAAP operating margin

(28)

%

 

41 

%

 

12 

%

 

 

 

 

 

 

Non-GAAP Adjustments:

 

 

 

 

 

Stock-based compensation expense

$

29,279 

 

 

$

11,069 

 

 

$

40,348 

 

Amortization of intangible assets

10,025 

 

 

983 

 

 

11,008 

 

Amortization of stock-based compensation capitalized in software development costs

501 

 

 

533 

 

 

1,034 

 

Restructuring charges

822 

 

 

666 

 

 

1,488 

 

Acquisition related costs

— 

 

 

— 

 

 

— 

 

Divestiture related costs

— 

 

 

— 

 

 

— 

 

Transformation and transition expense

— 

 

 

— 

 

 

— 

 

Non-GAAP adjustments related to operating income (loss)

$

40,627 

 

 

$

13,251 

 

 

$

53,878 

 

 

 

 

 

 

 

Non-cash interest expense related to convertible senior notes

$

11,113 

 

 

$

— 

 

 

$

11,113 

 

Dividend on series A convertible preferred stock

— 

 

 

— 

 

 

— 

 

Accretion of series A convertible preferred stock

— 

 

 

— 

 

 

— 

 

Non-GAAP adjustments below operating income (loss)

$

11,113 

 

 

$

— 

 

 

$

11,113 

 

Total non-GAAP adjustments

$

51,740 

 

 

$

13,251 

 

 

$

64,991 

 

 

 

 

 

 

 

GAAP net income (loss) per share attributable to common stockholders, basic

$

(0.36)

 

 

$

0.19 

 

 

$

(0.17)

 

Non-GAAP net income (loss) per share attributable to common stockholders, basic

$

(0.13)

 

 

$

0.24 

 

 

$

0.11 

 

Weighted average shares used in per share calculation for non-GAAP, basic

224,807 

 

 

224,807 

 

 

224,807 

 

Mandiant, Inc.

RECONCILIATION OF NON-GAAP BILLINGS TO REVENUE

(Unaudited, in thousands)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

121,970 

 

 

$

100,052 

 

 

$

350,568 

 

 

$

289,436 

 

Add: deferred revenue, end of period

314,677 

 

 

243,623 

 

 

314,677 

 

 

243,623 

 

Less: deferred revenue, beginning of period

(297,326)

 

 

(244,084)

 

 

(284,253)

 

 

(273,241)

 

Billings (non-GAAP)

$

139,321 

 

 

$

99,591 

 

 

$

380,992 

 

 

$

259,818 

 

Mandiant, Inc.

BILLINGS BREAKOUT

(Unaudited, in thousands)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Platform, cloud  subscription and managed services billings

$

73,624 

 

 

$

46,676 

 

 

$

186,956 

 

 

$

121,044 

 

Professional services billings

65,697 

 

 

52,915 

 

 

194,036 

 

 

138,774 

 

Billings (non-GAAP)

$

139,321 

 

 

$

99,591 

 

 

$

380,992 

 

 

$

259,818