It has been about a month since the last earnings report for FireEye (FEYE). Shares have added about 6.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is FireEye due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

FireEye reported break-even earnings in second-quarter 2018 against the Zacks Consensus Estimate of a loss of a penny and the year-ago quarter loss of 3 cents per share.

Revenues totaled $202.7 million, which increased 9.3% year over year and outpaced the Zacks Consensus Estimate of $201 million.

Notably, the company’s second-quarter performance indicates that its turnaround efforts, which include shifting the business model to a subscription-based one, are apparently paying off. Per management, improvement in sales execution coupled with a simplified go-to-market strategy, a revamped pricing model and increased partner engagement are the key growth drivers.

Revenues

Product, subscription and support revenues (82.6% of total) increased 5.9% year over year to $167.4 million, including cloud subscription and managed services revenues, which grew 15.5% to $45 million. Product and related subscription, and support revenues rose 2.9% to $122.4 million.
Revenues from Professional Services     (17.4%) were up 5.1% from the year ago quarter to $35.3 million.

Further, billings climbed 13% year over year to $196 million driven by growth in all geography and products. Also, the company witnessed substantial increase in cross-sell and multi-product adoption of Enterprise products.

Increase in billings for Product and related subscription can be attributed to new logo customers and strong renewals by cross-sell and upsell. Network Security grew year over year for the second consecutive quarter and on-premise Email showed double-digit growth. Growth in cloud Email, cloud Endpoint, and Helix drove billings of Cloud subscriptions and managed services.
 
Additionally, FireEye closed 37 transactions, with individual value of more than $1 million. The company also added 274 new customers in the second quarter, which reflects nearly 24% increase from the year-ago quarter. 75 new customers were added to its helix Platform.

Innovation in its Network and Email Security products is boosting adoption of cloud and virtual appliances, which is reflected in the growing number of new and renewal customers.

Operating Results

Non-GAAP gross profit increased approximately 7.2% from the year-ago quarter to $152 million. Non-GAAP gross margin expanded 100 basis points (bps) to 75%.

The company posted non-GAAP operating profit of $3.5 million compared to the year-ago quarter’s loss of $2.9 million. Non-GAAP operating margin was 1.7% in the quarter compared to negative 2% in the year-ago quarter.

We believe improved operational efficiency and sales productivity are driving the company’s operating results.

Balance Sheet & Cash Flow

FireEye exited the second quarter with cash and cash equivalents, and short-term investments of approximately $1.08 billion, up from $886.4 million posted at the end of the previous quarter.

During the quarter, the company used $712K of cash in operating activities.

Guidance

For the third quarter, FireEye anticipates revenues to be between $206 million and $210 million. Billings are projected at $210-$220 million. Non-GAAP operating margin is estimated in the band of 2.5-3.5%.

The company forecasts non-GAAP bottom-line results to be in the 1-3 cents range.

For 2018, the company maintains its revenues estimates of $820-$830 million. Billings are now projected at $825-$845 million, higher than the prior guidance of $815-$835 million.

Non-GAAP operating margin is still estimated in the band of 1-2%.