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Mandiant Reports Financial Results for Second Quarter 2022

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RESTON, Va., August 02, 2022--(BUSINESS WIRE)--Mandiant, Inc. (NASDAQ: MNDT) today announced financial results for the second quarter ended June 30, 2022. Unless otherwise noted, all 2021 results in this release, including the financial tables and reconciliations, reflect only continuing operations.

Second Quarter 2022 Financial Highlights

  • Revenue of $138 million, an increase of 21 percent from the second quarter of 2021

  • Annualized recurring revenue of $306 million, an increase of 25 percent from the end of the second quarter of 20211

  • Deferred revenue of $408 million, an increase of 37 percent from the end of the second quarter of 2021

  • GAAP operating margin of negative 63 percent, compared to GAAP operating margin of negative 74 percent in the second quarter of 2021

  • Non-GAAP operating margin of negative 20 percent, compared to non-GAAP operating margin of negative 26 percent in the second quarter of 20212

  • GAAP net loss per basic share attributable to common stockholders of 41 cents, compared to GAAP net loss per basic share attributable to common stockholders of 44 cents in the second quarter of 2021

  • Non-GAAP net loss per basic share attributable to common stockholders of 13 cents, compared to non-GAAP net loss basic share attributable to common stockholders of 14 cents in the second quarter of 20212

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."

Business Outlook and Conference Call

Given the announcement made on March 8, 2022, regarding the company’s entry into a definitive agreement to be acquired by Google LLC, Mandiant will not be providing financial guidance for the third quarter of 2022 or updated financial guidance for the full-year 2022. The company’s previously issued full-year 2022 financial guidance should no longer be relied upon.

Due to the pending transaction with Google LLC, Mandiant will not host a conference call in conjunction with this release. For further detail and discussion of the company’s financial performance, please refer to Mandiant's upcoming quarterly report on Form 10-Q for the second quarter ended June 30, 2022.

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) and non-GAAP operating margin. Mandiant defines non-GAAP operating income (loss) as operating income (loss) 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 net loss attributable to common stockholders. Mandiant defines non-GAAP net loss attributable to common stockholders as net loss 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-GAAP adjustments for discontinued operations, 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 loss per basic share attributable to common stockholders. Mandiant defines non-GAAP net loss per basic share attributable to common stockholders as non-GAAP net loss 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 loss attributable to common stockholders and non-GAAP net loss per basic share attributable to common stockholders in the second quarter 2022 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 second quarter of 2018, and dividends on Series A convertible preferred stock. Weighted average basic shares outstanding used to calculate non-GAAP net loss 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 loss attributable to common stockholders and non-GAAP net loss per basic share attributable to common stockholders in the second quarter 2021 excluded stock-based compensation expense, amortization of stock-based compensation expense capitalized in software development costs, amortization of intangible assets, restructuring charges, 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, transformation and transition expenses, and non-GAAP adjustments for discontinued operations. Weighted average basic shares outstanding used to calculate non-GAAP net loss 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, adjustment to provision from income taxes, dividends on Series A convertible preferred stock, accretion of Series A convertible preferred stock, non-GAAP adjustments for discontinued operations 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.

© 2022 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.

Mandiant, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

June 30, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

562,212

$

1,154,458

Short-term investments

1,074,826

1,039,339

Accounts receivable, net

113,535

146,460

Prepaid expenses and other current assets

58,980

73,079

Total current assets

1,809,553

2,413,336

Property and equipment, net

56,000

46,329

Operating lease right-of-use assets, net

27,227

25,768

Goodwill

1,060,023

1,060,023

Intangible assets, net

62,224

79,511

Deposits and other long-term assets

24,225

26,220

Total Assets

$

3,039,252

$

3,651,187

Liabilities, Convertible preferred stock and Stockholders' equity

Current Liabilities:

Accounts payable

$

29,362

$

32,585

Operating lease liabilities, current

14,733

13,306

Accrued and other current liabilities

80,881

105,886

Accrued compensation

49,696

71,660

Convertible senior notes, current, net

451,030

Deferred revenue, current

318,969

307,611

Total current liabilities

493,641

982,078

Convertible senior notes, non-current, net

626,735

556,240

Deferred revenue, non-current

88,944

102,717

Operating lease liabilities, non-current

51,476

52,132

Other long-term liabilities

7,557

7,376

Total liabilities

1,268,353

1,700,543

Commitments and contingencies:

Series A convertible preferred stock

428,894

419,404

Stockholders' equity:

Common stock

23

23

Additional paid-in capital

3,238,180

3,511,444

Treasury stock

(80,000

)

Accumulated other comprehensive income

(17,946

)

(2,172

)

Accumulated deficit

(1,878,252

)

(1,898,055

)

Total stockholders’ equity

1,342,005

1,531,240

Total Liabilities, Convertible preferred stock and Stockholders' equity

$

3,039,252

$

3,651,187

Mandiant, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Revenue:

Platform, cloud subscription and managed services

$

62,056

$

51,936

$

119,685

$

107,935

Professional services

75,864

61,974

148,379

120,663

Total revenue

137,920

113,910

268,064

228,598

Cost of revenue: (1)(2)

Platform, cloud subscription and managed services

29,704

28,243

59,825

54,856

Professional services

45,806

35,282

87,887

67,754

Total cost of revenue

75,510

63,525

147,712

122,610

Total gross profit

62,410

50,385

120,352

105,988

Operating expenses:

Research and development (1)(3)(10)

44,394

40,930

88,855

82,835

Sales and marketing (1)(2)

71,153

63,018

140,562

124,231

General and administrative (1)(4)(10)

34,428

29,020

66,841

54,371

Restructuring charges (5)

1,927

1,040

1,927

Total operating expenses

149,975

134,895

297,298

263,364

Operating loss

(87,565

)

(84,510

)

(176,946

)

(157,376

)

Other expense, net (6)

(2,351

)

(13,868

)

(4,195

)

(26,277

)

Loss before income taxes from continuing operations before income taxes

(89,916

)

(98,378

)

(181,141

)

(183,653

)

Provision for income taxes (7)

575

763

1,364

1,943

Loss from continuing operations

(90,491

)

(99,141

)

(182,505

)

(185,596

)

Net income from discontinued operations, net of income taxes (11)

34,445

70,254

Net loss

$

(90,491

)

$

(64,696

)

$

(182,505

)

$

(115,342

)

Dividend on series A convertible preferred stock (8)

(4,772

)

(4,563

)

(9,490

)

(9,075

)

Accretion of series A convertible preferred stock (9)

(82

)

Net income (loss) attributable to common stockholders

$

(95,263

)

$

(69,259

)

$

(191,995

)

$

(124,499

)

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

Continuing operations

$

(0.41

)

$

(0.44

)

$

(0.83

)

$

(0.83

)

Discontinued operations

0.15

0.30

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

$

(0.41

)

$

(0.29

)

$

(0.83

)

$

(0.53

)

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

233,218

237,279

231,909

236,016

Mandiant, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Six Months Ended June 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss from continuing operations

$

(182,505

)

$

(185,596

)

Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:

Depreciation and amortization

33,859

46,648

Stock-based compensation

80,012

72,143

Non-cash interest expense related to convertible senior notes

2,007

22,907

Deferred income taxes

61

(114

)

Loss (gain) on disposal of property and equipment

(44

)

113

Other

239

(63

)

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

Accounts receivable

32,806

17,445

Prepaid expenses and other assets

16,150

6,374

Accounts payable

9,546

4,211

Accrued liabilities

(24,498

)

(1,540

)

Accrued compensation

(21,964

)

(14,231

)

Deferred revenue

(2,415

)

13,072

Other long-term liabilities

(5,128

)

(4,915

)

Net cash used in operating activities - continuing operations

(61,874

)

(23,546

)

Net cash provided by operating activities - discontinued operations

67,851

Net cash provided by (used in) operating activities

(61,874

)

44,305

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment and demonstration units

(16,196

)

(13,378

)

Purchases of short-term investments

(569,715

)

(512,642

)

Proceeds from maturities of short-term investments

514,681

264,160

Business acquisitions, net of cash acquired

50

FireEye Products business sale transaction costs

(1,057

)

Lease deposits

785

674

Net cash used in investing activities - continuing operations

(71,502

)

(261,136

)

Net cash used in investing activities - discontinued operations

(10,107

)

Net cash used in investing activities

(71,502

)

(271,243

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of convertible senior notes

(451,691

)

Settlement of share repurchases

(11,483

)

(68,334

)

Series A convertible preferred stock issuance costs

(82

)

Payment related to shares withheld for taxes

(7,336

)

(9,725

)

Proceeds from employee stock purchase plan

9,981

12,335

Proceeds from exercise of equity awards

1,659

3,600

Net cash used in financing activities

(458,870

)

(62,206

)

Net change in cash and cash equivalents

(592,246

)

(289,144

)

Cash and cash equivalents, beginning of period

1,154,458

673,234

Cash and cash equivalents, end of period

$

562,212

$

384,090

Mandiant, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

GAAP operating loss

$

(87,565

)

$

(84,510

)

$

(176,946

)

$

(157,376

)

Stock-based compensation expense (1)

41,702

38,742

80,012

72,143

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

725

459

1,393

993

Amortization of intangible assets (2)

8,594

10,998

17,287

22,108

Transformation and transition expense (10)

8,594

3,190

14,702

3,190

Acquisition related expenses (4)

500

1,000

Restructuring charges (5)

1,927

1,040

1,927

Non-GAAP operating income (loss)

$

(27,450

)

$

(29,194

)

$

(61,512

)

$

(57,015

)

GAAP gross margin

45

%

44

%

45

%

46

%

Stock-based compensation expense (1)

9

%

9

%

8

%

8

%

Amortization of intangible assets (2)

5

%

6

%

5

%

6

%

Non-GAAP gross margin

59

%

59

%

58

%

60

%

GAAP operating margin

(63

)%

(74

)%

(66

)%

(69

)%

Stock-based compensation expense (1)

30

%

33

%

30

%

32

%

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

1

%

%

1

%

%

Amortization of intangible assets (2)

6

%

10

%

6

%

10

%

Transformation and transition expense (10)

6

%

3

%

5

%

1

%

Acquisition related expenses (4)

%

%

%

%

Restructuring charges (5)

%

2

%

%

1

%

Non-GAAP operating margin

(20

)%

(26

)%

(24

)%

(25

)%

GAAP net loss attributable to common stockholders

$

(95,263

)

$

(69,259

)

$

(191,995

)

$

(124,499

)

Continuing operations:

Stock-based compensation expense (1)

41,702

38,742

80,012

72,143

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

725

459

1,393

993

Amortization of intangible assets (2)

8,594

10,998

17,287

22,108

Acquisition related expenses (4)

500

1,000

Restructuring charges (5)

1,927

1,040