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FireEye, Inc. (NASDAQ:FEYE)
Q4 2018 Earnings Conference Call
Feb. 06, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the FireEye Fourth Quarter 2018 Earnings Result Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. If anyone should require operator assistance during today's call, please press * then 0 on your telephone keypad. Also this call is being recorded. At this time I would like to turn the call over to Kate Patterson. Please, go ahead.

Kate Patterson -- Vice President, Investor Relations

Thank you, Chelsea. Good afternoon, and thanks to everyone on the call for joining us today to discuss FireEye's financial results for the fourth quarter of 2018 and the full year 2018. This call is being broadcast live over the internet and can be accessed on the investor relations section of FireEye's website at investors.fireeye.com. With me on the call today are Kevin Mandia, FireEye's Chief Executive Officer, and Frank Verdecanna, Executive Vice President, Chief Financial Officer, and Chief Accounting Officer of FireEye.

After the market closed today, FireEye issued a press release announcing the results for the fourth quarter of 2018 and the full year 2018. Before we begin, let me remind you that FireEye's management will make forward-looking statements during the course of this call, including statements relating to FireEye's guidance and expectations for certain financial results and metrics, FireEye's priorities, initiatives, plans, and investments, drivers in expectations for growth, the expansion of FireEye's platform, and the benefits, capabilities, and availability of new and enhanced offerings, competitive positions, market opportunities, and go-to market strategies.

These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after the call. For a detailed description of the risks and uncertainties, please refer to our SCC filings, as well as our earnings release posted an hour ago. Copies of these documents may be obtained from the SCC or by visiting the investor relations section of the website.

Additionally, certain non-gap financial measures will be discussed on this call. We have provided reconciliations on these non-gap financial measures for the most directly comparable gap financial measures in the investor relations section of the website as well as the earnings release. We'd also like to remind you that the results included in this call and the earnings release are using the ASC-606 revenue standard. Finally I'd like to point out that we've posted the supplemental slides on the investor relations section of the website. With that, I'll turn the call over to Kevin.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you, Kate, and thank you to all of you, the investors, employees, customers, and partners who are joining us on this call. We appreciate your continued interest in supporting FireEye. Today I'd like to discuss three things: some Q4 highlights, some of our accomplishments in 2018, and provide insights into our plan for 2019.

The fourth quarter was our eighth consecutive quarter of doing what we said we would do: meeting or exceeding our guidance ranges for all key financial metrics. That completes two consecutive years where we executed to or exceeded the plan we shared with everyone. I would like to take this moment to recognize and thank all the dedicated FireEye employees for their effort. Such performance is the result of our teamwork and the pride we feel protecting the most security conscious organizations in the world.

Now let me share some fourth quarter highlights. We posted record billings of $265 million, which was above our guidance range of $245 to $255 million. We posted record revenues of $218 million, which was at the high end of our guidance range. We had a record number of total transactions, a record number of transactions greater than $1 million, and a record number of new logos sourced by our partners. We had a record service this quarter in sales and revenue, showing our services are in high demand as we expand globally. We experienced sales growth in every geography. We achieved non-gap profitability for the third quarter in a row, and I'm also pleased with the results of our expertise on demand sales. Even with limited availability in Q4, expertise on demand generated several million dollars in new and add-on sales.

In addition to these Q4 highlights, we achieved essential milestones in 2018. We achieved non-gap profitability for the full year for the first time in our history. We generated positive operating and free cash flow for the full year. We added over 1,100 new customers. We performed over 700 investigations into security incidents, resulting in hundreds of thousands of hours learning from the frontlines when other security safeguards failed, and this is a double-digit increase year-over-year.

We performed approximately 400 red team engagements, also up double digits year-over-year, and red teaming is when we test the security of our customers and look for ways to circumvent their security safeguards. And we do not just break into a customer's network, but we try to break into their network and perform actions that would have grave impact if they were successful by an attacker such as accessing an OT environment or stealing customer data. During our red teams work side-by-side with our customers, advising our customers on how they can improve their defenses, and I believe such red team assessments are the most effective way for organizations to understand the unvarnished true state of their security.

We saw our professional education and security training services continue to accelerate, and we delivered 20% more classes year-over-year. As a reminder, these are not product training classes but rather security courses to ensure that our customers, government agencies, and law enforcement better understand and practice cybersecurity and perform cybersecurity investigations.

These results demonstrate how our services business remains highly strategic to FireEye. It fuels our innovation cycle, and it allows us to rapidly adapt our solutions to emerging threats. And it also allows us to forge trusted advisor relationships with our customers, and I believe that if you really wanna make a difference in the cybersecurity industry, attribution, or identifying who may have conducted an attack, is critical. Without attribution, nations and societies cannot hold people accountable for abiding by any established rules of engagement or for committing criminal acts. Therefore FireEye's doing our part by using our threat intelligence to perform attribution whenever possible.

Our differentiation and intelligence stems from the belief that attribution matters, and our unique capabilities in obtaining and curating threat intelligence resulted in FireEye being named the sole leader in the Forrester New Wave External Threat Intelligence Services Report. And more importantly it resulted in our customers' being better protected.

In addition to our services and intelligence, we also made tremendous strides in our product innovation in 2018. With regard to Helix, we significantly increased our cloud analytics capabilities. We now have specific analytics for O365, Azure, AWS, and Google Cloud based on threats we learned or discovered on the frontlines. With thousands of analytics, over 550 third-party integrations, and more than 30 compliance dashboards and reports, Helix is able to meet today's sim and orchestration requirements and serve as the security operations platform for the future.

We expanded the functionality in our email and endpoint products so that they can fully replace legacy solutions. As a result, sales of both products grew double digits year-over-year as we successfully displaced incumbent vendors in both email and endpoint, and our pipeline of opportunities continues to build.

In network security we continued to develop new features and use-cases for our technology. These new features and use-cases led to the growth in our network security sales in both Q4 and 2018, and I continue to be proud of the work we do for government agencies around the world. And as an example of some of the important work we do here at FireEye, FireEye personnel worked side-by-side with US federal and state agencies to safeguard the 2018 midterm election process, and I'm honored that we're able to play a role in defending this most critical component of the democratic process.

Now I'd like to provide a few highlights for our plans for 2019. As an overview, we will continue to innovate and leverage the breadth of our product portfolio, our data scientists, or X15 big data platform, our experience managing security operations, and our expertise responding to and containing incidents to bring together the components necessary to build the most effective security operations platform available. Now turning to specific products and services, we expect to exit 2019 with an endpoint solution that runs on all major operating systems and supports higher deployments on private, public clouds or SAZ offering. We are also working on tightly integrating our endpoint solution into Helix, with endpoint metadata streaming to power advanced analytics and native orchestration.

Turning to email security, we are positioning our email security to continue displacing legacy security email gateway products while leveraging the migration to cloud email by building more API-driven integrations into the major cloud email solution providers, and we will also be rolling out capabilities to stream email metadata into Helix to drive more effective an advanced detection.

For network security, we plan to extend the reach of our market-leading advanced threat protection capabilities further into the cloud, with protection for Azure, AWS, Google, and Oracle clouds. We are working with major cloud providers on solutions that integrate with their technologies so FireEye solutions will easily snap into a customer's cloud deployments. We are also applying what we know about detecting suspicious network activity to a market segment some refer to as network traffic analysis. By feeding metadata from FireEye and third-party network sensors into Helix, we will be able to provide unique insights associated with anomalous network activity.

With Helix we have built the fundamental elements need to automate tier 1 and tier 2 security operations. Going forward we'll continue to innovate machine learning, analytics, and artificial intelligence to enable Helix to solve customers' security challenges faster, better, and more efficiently than other products. We also plan to introduce on-premise and public or private cloud deployment options in addition to our current SAZ offering.

Helix is at the center of our innovation story, but it is much more than just a platform to integrate and enhance the value of security products. To become an extension of our customers' security operations, Helix must also seamlessly integrate expertise, intelligence, and services. On the last earnings call I mentioned that technology alone cannot solve all the cybersecurity challenges. Given the talent shortage in security, I believe having a cadre of experts only a click away will become indispensable, and that is why we continue to refine our expertise-on-demand offering to make it more accessible to our customers in more ways.

In the first quarter of 2019, expertise on demand will be available to all our customers as well as our partners directly through our Helix dashboard. Customers will be able to tap our expertise and intelligence as needed at the click of a button. For example, customers will be able to request from our analysts intelligence briefings, forensic investigations, red team exercises, internal training classes, and much more through the platform using prepaid units. As our customers use expertise on demand, they will be able to more easily budget for and manage their security investments as they gain leverage from our extensive menu of products and services.

We are really excited about the potential impact of expertise on demand and what that impact will be on our business. Not only does it create a direct link between our products and our experts, it expands the market for our services and threat intelligence subscriptions to midsized and smaller customers. Expertise on demand also makes it easy for partners to sell our services or to purchase our services for their own use in supporting their customers.

I believe we are a very unique company. When we combine our technology, our security expertise, and intelligence into a continuous cycle of innovation, we create the best means of protection for our customers. Our unique innovation cycle also provides the foundation for our growth, both in 2019 and for the long-term.

Before I turn the call over to Frank, I would like to thank our customers who put their trust in us and rely on our products and our experts to safeguard their organizations. I would also like to thank our partners who work with us every day to serve our growing base of customers. And lastly I'd like to take a moment to welcome Adrian McDermott, president of products at Zendesk, to FireEye's board of directors. Adrian is a proven leader in software development, and we are excited to have him join our board.

Now I'd like to turn the call over to Frank.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Thanks, Kevin, and hello to everyone on the call. Over the last year and on every call I said that I believe that our best-in-class products, services, and intelligence, simplified pricing and packaging, and energized sales team set us up for renewed growth and improving financial metrics. This has certainly proved to be true, and we ended 2018 with very strong Q4 results. Our performance in Q4 and 2018 underscored the ongoing transformation of our business and our business model. Not only did our billings growth accelerate in Q4, the growth was driven primarily by increased sales of our new products and our Mandiant services. I view both as positive leading indicators for our future.

Before I review the detailed metrics, let me remind you that I will be referring to non-gap metrics except for revenue. Our non-gap measures exclude stock-based compensation, amortization of intangibles, non-cash interest expense on our convertible debt, and other non-recurring items. Also note that prior period results have been adjusted to reflect the adoption ASC-606 as of January 1, 2018.

Turning to our results, total billings were $265 million, $10 million above the high end of our guidance range of $245 to $255 million. Billings for professional services were at a record $53 million, reflecting continued strong demand for our services and the launch of expertise on demand in Q4. We continue to operate at or near capacity in this area of the business, and most of the hiring this quarter was for consultants in both the US and international. By the way, Q4 sales of expertise on demand are included in the current deferred revenue for services.

Product and related subscriptions and support billings were up 3% year-over-year, as the increase in subscriptions more than offset the continued decline in appliance hardware sales. To provide some visibility to the trends within this category without breaking the single performance obligation under ASC-606, there is a slide showing the mix of appliances, support, and subscription for the years 2016 through 2018. It is clear that the trend toward subscription billings accelerated in 2018 with the introduction of our subscription pricing model for network, email, and endpoint security. This helped drive double-digit growth in network, email, and endpoint security, even though sales of appliance hardware declined by 11% in Q4 and 10% in 2018.

The final breakout category, cloud subscriptions and management services, increased 31% sequentially and 12% year-over-year. The growth reflected strength in managed systems, stand-alone threat intelligence, Helix subscriptions, and our cloud email solution. We achieved this growth even though Q4 '17 billings included a $10 million plus transaction. If we exclude the large deal from Q4 '17, cloud subscriptions and managed services would have grown more than 30% year-over-year in Q4.

With strong performance in both product and related and cloud subscriptions, recurring billings grew 12% year-over-year, an acceleration from 11% in Q3. Taking out the big deal in Q4 '17, recurring billings grew more than 20% year-over-year in Q4. The weighted average contract length for recurring billings was just under 26 months in Q4 '18, compared to about 24 months in Q4 '17. The $10 million plus deal in Q4 '17 was a 12-month transaction and reduced the average contract length by about one month in Q4 '17. On a rolling four quarter basis, which excludes any seasonality, the average contract length for recurring billing was about 24.5 months, within the same range it has been the past couple of years. The continued stability in the recurring billings average contract length suggests that contract length is not a meaningful headwind or tailwind to our overall billings growth. For the same reason, ACL trends tend not to indicate any meaningful change in customers' preferences or commitment to FireEye's technology.

Our customer retention rate remained approximately 90%. We added 354 new logo customers in Q4, which was up 19% year-over-year. Transaction volume was at record levels for both greater than $1 million transactions and transactions less than $1 million. This reflected both a growth in new logo customers and strong follow-on purchases by existing customers. Our enterprise customers are spending more with us, and we are extending our reach into the mid-market through the channel, both positive trends for the business overall.

Our performance on retention, cross-cell, and new business are all reflected in our annual recurring revenue, or ARR, metric. We ended the quarter and the year with $553 million in annual recurring revenue, an increase of $44 million, or 9%, year-over-year, and $15 million, or 3%, sequentially. ARR for subscriptions for both breakout categories increased. ARR for cloud subscriptions and managed services increased more than 19% year-over-year for both the quarter and the year, reflecting the momentum we are seeing in this segment of the business. Recall the ARR growth for cloud subs had a tough grow over this quarter due to the $10 million increase on a large deal in Q4 of '17.

Turning to revenue and the income statement, revenue in the quarter was $218 million, at the high end of our guidance range $214 to $219 million, and up 6% year-over-year. Approximately 90% of our non-services revenue, or $159 million, was recognized from current deferred revenue associated with prior quarter billings.

Our strong revenue performance was accompanied by continued discipline on cost and expense lines. Total costs increased modestly, reflecting higher cloud coast costs. Sales and marketing expense increased in absolute dollars due to the higher sales activity, and R&D expense increased slightly based on some incremental hiring in engineering to support the new product roadmap and innovations Kevin discussed earlier. This was partially offset by a decrease in GNA associated with lower payroll taxes as we ended the year.

Turn to the balance sheet and cash flow. We continue to maintain a very healthy balance sheet, with cash and short-term investments of $1.1 billion, an increase of $28 million from the prior quarter. We ended the quarter with receivables of $158 million and DSOs calculated on billings of 55 days, at the low end of our target range of 55 to 65 days. Ending deferred revenue was approximately $935 million, up $48 million sequentially and $25 million from the end of Q4 '17. The increase in both current and total deferred revenue was due to increases in deferred revenue for cloud subscriptions and managed services category and, to a lesser extent, an increase in deferred revenue associated with professional services, including expertise on demand.

Deferred product and related subscription revenue decreased by $47 million from a year ago as we recognize more product and related subscriptions and support revenue than we build. This decrease reflects the decline in new appliance sales that began in mid-2016. Since about 90% of our non-services revenues recognize from deferred revenue, the decline in our product and related subscriptions current deferred revenue creates a headwind for revenue in this category in 2019. This is reflected in a lower overall growth rate for total revenue than for billings in 2019.

With this is a background, let's turn now to our 2019 guidance ranges. Our 2019 guidance range for billings is $910 to $930 million, representing growth of approximately 8% at the midpoint. We do not currently anticipate any greater than $10 million deals in 2019. If we exclude the two greater than $10 million deals from the first half of 2018, the underlying growth rate for 2019 at the midpoint would be approximately 10.5%. For revenue we are guiding between $880 and $890 million, implying a growth rate of 6.5% at the midpoint. This growth rate reflects the headwind of $28 million less in beginning product and related current deferred revenues. We expect operating margin between 4 and 6% and earnings per share in the range of $0.17 to $0.21 based on average diluted shares outstanding of 210 million. We expect operating cash flow in the range of $90 to $110 million for a cash flow margin of 11% on our expected 2019 billings. Capex is expected to be in the range of $40 to $50 million.

For Q1 guidance, we expect billing in the range of $170 to $180 million. The midpoint of our Q1 range represents approximately 19% of the 2019 billings guidance range and is consistent with historical annual linearity. The year-over-year growth rate at the midpoint is flat with Q1 '18. You'll recall that Q1 '18 billings included the one greater than $10 million plus transaction, but it also included two transactions greater than $5 million. These three transactions alone accounted for approximately $25 million. We are currently not anticipating any deals greater than $5 million in Q1 of '19. Excluding the three large deals from Q1 '18, the growth rate at the midpoint shows an acceleration in growth rate from Q4.

We expect revenue in the range of $208 to $212 million, implying 6% year-over-year growth at the midpoint. The sequential decline from Q4 reflects two fewer days of revenue recognition and typical Q1 seasonality in the portion of our billings that are recognized upfront. Since we are expecting revenue to exceed billings, this will have the effect of a sequential decrease in both current and total deferred revenue. Given the revenue range, we expect operating margin between -3% and -1%. This implies sequential growth in op ex of about 5 to 6%, about the same as the sequential growth in operating expenses in Q1 '18. The increase reflects employee-related costs that kick back in at the beginning of the year and an increase in our ending Q4 headcount.

We also expect interest income to offset cash interest expense, and we expect cash taxes of between $1.5 and $2 million, consistent with prior quarters. This yields a loss per share between $0.02 and $0.04 based on a share count of 198 million shares. Operating cash flow is expected in the range of $10 to $50 million and Capex of about $10 million.

Before I turn the call back over to the operator, I wanna make a final comment on the variability large transactions cause in our year-over-year growth rates. These transactions are a huge positive for our business and demonstrate the trusted partner relationship we've established with our customers. They typically include multiple products and services and may extend for multiple years, giving us increased visibility into our revenue streams, but they are difficult to forecast with precision and they don't come along every single quarter. Since they are somewhat extraordinary, we have tried to give you a sense of the underlying growth rates and the sustained progress we've made. Near term headwinds from 606 aside, I remain confident in our ability to achieve our long-term operating targets.

That concludes my prepared remarks. I will now take your questions. Operator?

Questions and Answers:

Operator

Thank you. Ladies and gentleman, if you have a question at this time, please press the * then the 1 key on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the # key. To prevent any background noise, we do ask that you please place your line on mute once your question has been stated. Thank you.

And our first question will come from the line of Andrew Nowinski with Piper Jaffray. Your line is open.

Andrew Nowinski -- Piper Jaffray -- Senior Analyst

Great, thank you, and congrats on another good quarter, a good close to the end of year. Maybe just to start with, a clarification. I know you had some large deals in Q1 of '18, so is that why the billings growth decelerates in Q1 of '19 given the strong results you saw in Q4?

Kevin Mandia -- Chief Executive Officer and Board Director

Yes, Andrew, exactly. If you look at, if you take out the $10 million deal that we closed in Q1 of '18, the midpoint of our guidance range would be 7% year-over-year growth, and then if you were to take out the three greater than $5 million deals in Q1 of '18 your growth rate would be 17% at the midpoint.

Andrew Nowinski -- Piper Jaffray -- Senior Analyst

Okay, great. Got it. And then as I, you know, look at your 2019 revenue outlook, growth basically remains somewhat unchanged from what you just delivered in 2018. So I was wondering if you could maybe paint a picture of what it would take to get your revenue growth to double digits in 2019 in a very optimistic scenario.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, since revenue's kind of the trailing indicator, obviously if we exceed our billings guidance plan, that will help increase the overall growth rate, but, you know, revenue's going to lag a little bit on billings because of the headwind we see from kind of the declining appliance sales. The amortization that we'll recognize in '19 is going to be less than the amortization we recognized in '18.

Andrew Nowinski -- Piper Jaffray -- Senior Analyst

Well, I guess I was just looking more for like which products would stand out that you think could potentially offer a form to move the needle.

Kevin Mandia -- Chief Executive Officer and Board Director

So from a billings, you know, if we were going to over-achieve the billings guidance, you know, I'd say the three areas that we'll likely be driven by will be the Helix platform sales, our subscription based network email and endpoint, and then services including expertise on demand.

Andrew Nowinski -- Piper Jaffray -- Senior Analyst

That's perfect. Thank you very much.

Kevin Mandia -- Chief Executive Officer and Board Director

Thanks, Andrew.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Thank you.

Operator

And our next question comes from the line of Rob Owens with KeyBanc Capital Markets. Your line is open.

Rob Owens -- KeyBanc Capital Markets -- Managing Director

Great, and thank you guys for taking my question. I guess to start off on the revenue side, and I understand there's lots of puts and takes with the shifted subscription, but maybe on the product side, and I do see product billings being a little weaker this quarter, but maybe you can address just the sequential growth in product being one of the slowest that you've seen for a Q4. And is it really come down to the predictability of what comes in a product versus what comes in a subscription? Because I know that back in Q3, that was tough to predict. Or maybe just a little help in terms of maybe why that number wasn't a little more robust this quarter.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

I think, Rob, it really, you know, talks about how the customers are purchasing and their preference. We've had a lot of success on that movement to subscription and movement to cloud, and so, you know, in any one quarter, again, there's going to be variability depending on the personal preference of the customers. I think, you know, we did see sequential growth in product billings, but for, you know, it wasn't as significant as Q4 '17. But again, I think if you look at the growth and the tapped subscriptions, we went from $59 million to $78 million.

Rob Owens -- KeyBanc Capital Markets -- Managing Director

Is there anything to be read into that number from certain verticals with Q3 being kind of a heavier fed quarter versus Q4? And then, I guess, as an adjacent question, no thoughts on any impact from federal shutdown in the fourth quarter or anything that might carry over into Q1's results?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Sure. So, you know, Q3 obviously did have, you know, a much bigger fed impact than Q4, and so product tends to be a little bit stronger during a fed quarter. Q4, we did have a very successful fed quarter, and I think our expectation is that will continue into 2019. The good thing is if you look at the breakup of our federal sales, most of them is coming from agencies that were fully funded, even during the shutdown.

Rob Owens -- KeyBanc Capital Markets -- Managing Director

Great. Thanks.

Operator

Thank you, and our next question comes from the line Gur Talpaz with Stifel. Your line is open.

Gur Talpaz -- Stifel -- Analyst

Okay. Thanks for taking my question. So Mandiant had a really, really strong quarter here. I was hoping you'd kinda talk about the puts and takes there, what ultimately drove that strength, and how much upside you saw from expertise on demand, whether that kind of contributed or whether it was really just sort of organic growth in the Mandiant services business.

Kevin Mandia -- Chief Executive Officer and Board Director

Yeah, this is Kevin speaking. It's just, quite frankly, we just hired faster in Q4. We brought in more folks, and when you have more folks one of the levers moves up on how you can grow your business. Second thing, is it's growing internationally, as well. You know, Mandiant was primarily a US brand three years ago, four years ago, and so we're seeing increased sales in other geographies. And we're just getting into -- You know, we still have that core competency of responding to the breaches that matter so we can learn on the frontlines, but we're doing more red teaming and some more strategic consulting. So it just had a good quarter.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

And I'll add on the billing side of it, we did launch in limited availability expertise on demand, and so we did have some very nice traction in expertise on demand. And we're really encouraged by the fact that the button will actually be on Helix in Q1, and so we think that will continue to drive momentum in that category.

Gur Talpaz -- Stifel -- Analyst

Okay, that's helpful, and maybe a product-centric question. Kevin, you and I talked about this last quarter. The potential for Helix to serve as a sim-replacement, and you saw some traction with that last quarter. I was hoping you could give some commentary as to whether that persisted again this quarter, and then maybe some color around endpoint. You talked about being able to service most OS's, anything you're seeing around there from a traction standpoint, too, would be helpful.

Kevin Mandia -- Chief Executive Officer and Board Director

So the first thing, when we talk about sim takeout, that's just kind of along the course of our Helix vision that we've always had. You know, our true IP is determining unauthorized, unlawful, or unacceptable behavior in a big pile of data, so we're building Helix to be able to ingest that data and figure out, hey, what's bad in there? And building Helix so that it automates that tier 1 and tier 2 decision making process. In the natural course of building Helix, you gotta mow down sim.

You just say hey, listen, we need the dashboards. We're getting the data, and people need the compliance for that. So we gotta do the log aggregation, as well, and we gotta create the compliance dashboard. So it wasn't like we sat down three years ago and said, "How're we going to take on the sim market?" We really just sat down and said, "How're we going to build the best security product?" And it just happens to be when you're aggregating the data we're aggregating, you end up building some of the sim components. So we still have orchestration in there as well, threat intelligence management in there, the ability to click a button and get the human expertise, and we're going to constantly keep laying models on top of it.

As this company grows and as Helix gets more adopted, you'll see us talk more about the data that we're collecting and our ability to make use of more data to answer and solve people's problems. So the bottom line, sim takeout was just -- We looked at it and said, "You know what? A lot of folks built their operations around sim. We want them to build it around sim plus." That's Helix.

And in regards to endpoint, we had some ground to cover. We started our endpoint as a forensics tool. Nothing could do what our endpoint did, and it enabled our services to do the incident response work that they did. So we're still the agent that we deploy when we do all our investigations to figure out is there any compromise anywhere, and I consider our endpoint the best forensic ultrasound you can give a computer to figure out if it's got a problem or not. We didn't build it originally for endpoint protection, and we started getting into the endpoint protection market late in 2017.

And every company starts niche and goes into adjacencies. We started as forensics, endpoint, getting into endpoint protection. We did Windows first, and we gotta get Mac and Linux done. We have the Linux EDR capabilities coming out now, and we'll have the OS's covered by the end of the year in regards to endpoint protection.

On the forensics front, we usually get that to market sooner with our technology-enabled services folks. They usually have an agent out that we GA, oftentimes six months to a year later, because it has less guardrails for our folks. But the bottom line is that's what I meant by those comments, Gur, is we gotta get to the other platforms on endpoint protection. We have a great forensics endpoint and EDR endpoint already.

Gur Talpaz -- Stifel -- Analyst

That's super helpful. Thanks for the color.

Operator

Thank you. Our next question comes from the line of Melissa Franchi with Morgan Stanley. Your line is open.

Melissa Franchi -- Morgan Stanley -- Equity Analyst

Great, thanks for taking my question. Kevin, you continue to have very good new customer adds, and we saw that in Q4. I'm wondering if you can just comment on what's working well for you in terms of adding new customers. Do these customers look different in terms of their size, vertical exposure, and are they engaging with different areas of the product portfolio that you've seen in the past?

Kevin Mandia -- Chief Executive Officer and Board Director

So we've seen, quite frankly, it's a similar pattern. It's -- Services is often the most net new logos, and behind that it's network. Or some quarters it's email, you know, email on-prem and off-prem combined, on how we get the new logos. What I noticed, and I'm speaking anecdotally right now because I kind of eyeballed the statistics, the Hermes pricing that we did, kind of the bundled pricing, has helped us get down market, and I would make the assumption now we get a lot with the endpoint through the -- into the S and B market once we got into the endpoint protection.

But we look at -- most net new customer adds realize when you show up to a new logo, when it's a product sale a lot of times it's a longer sales cycle. You have a bakeoff between multiple products. But services, if they want a red team, we can do it in a few days. So you will see a lot of the times, most of our quarters, it's services-led, but that establishes a strong relationship with that customer and makes them a good prospect for a product sale. So I'd say most of the time net new logos is services.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

And what I'll add to that that this quarter, the one thing we did see was a record quarter of customers coming from the channel, sourced from the channel. So that's something that really encouraged by and that was across really all the different products, but it was definitely a pretty big uptick in the quarter.

Melissa Franchi -- Morgan Stanley -- Equity Analyst

Got it. That makes sense. And just a question for you, Frank, on operating margins. So over the past few years, you guys have done a good job in terms of optimizing costs, and we've seen margin improvement. As we're looking forward to FY '19, it seems like you're guiding to an acceleration in operating leverage relative to what we saw in FY '18. So I'm wondering if you can just talk about what's driving that and then what gives you confidence that you can sustain growth while also being disciplined on cost.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Sure, Melissa. Yeah, the big driver there is the fact that, you know, we did have a pretty big ramp up getting ahead of the expertise on demand in Q4 and in 2018. As you look at 2019, we'll have some growth in services and we'll have some growth in engineering, but for the most part the rest of the company is relatively flat from a headcount perspective. We believe that we'll be able to meet 2019 guidance without adding significant amount of heads across the business, so we're very confident that we'll see revenues grow significantly faster than our off-X.

Melissa Franchi -- Morgan Stanley -- Equity Analyst

Got it. Thank you very much.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you, Melissa.

Operator

Thank you, and our next question comes from the line of Steve Koenig with Wedbush Securities. Your line is open.

Steve Koenig -- Wedbush Securities -- Managing Director

Hey, guys, this is Ahmad, Ahmad Khalil, on for Steve. First I wanted to ask, where are we in terms of market adoption for security orchestration? And how would you say Helix is playing competitively in that?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, I couldn't speak to the whole market adoption of it, you know, as you would view it. I think it's still early stages for orchestration. We bought the Invotas asset in, I believe, 2016, so it's been about a two and a half year run. I see orchestration as really a plugin to whatever you're operating your security on, most likely a sim product at this point, and we see a convergence that is in its early stages of sim threat intelligence management and orchestration and investigative platform all kind of mushing into one. And that's what we're trying to build with Helix is that center nerve cell or brain for security operations. I would say market adoption's in the first inning. I mean, everybody needs to go into this direction, and very few people have adopted it at this stage.

Steve Koenig -- Wedbush Securities -- Managing Director

Great. Thanks for the color. And then my follow-up. With your hub-and-spoke model, I guess, for next year, what components would you expect to be the most important drivers for growth? Would you say it's attracting new customers or would it be mostly expansion?

Kevin Mandia -- Chief Executive Officer and Board Director

I think, where the tip of the spear, I think, is going to continue being, you know, the different spokes. You know, if you looked at 2018, network, email, and endpoint all grew double digits. I think the expectation for 2019 is going to be the same. We're going to see growth across all three of those email security vectors. And then obviously we continue to expect growth in Helix and expertise on demand as well.

Steve Koenig -- Wedbush Securities -- Managing Director

Great. Thank you very much.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you.

Operator

And our next question comes from the line of Sterling Auty with JP Morgan. Your line is open.

Sterling Auty -- JP Morgan -- Analyst

Yeah, thanks. Hi, guys. Frank, I wanted to circle back just on the margin and the margin outlook. You mentioned, I think, to Melissa, some of the hiring that's done. Is the hiring really front-end loaded and is there any other investment that's non-headcount related that's driving kind of the margin profile as we think about how the first quarter relates to the full year guide on margins?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, the first quarter has a couple of things going. It has the kickback and payroll taxes, which is a significant sequential increase, but also happens to have our annual sales conference and RSA in Q1, as well. And then we did have growth in Q4 in headcount really to help frontload the support on the expertise on demand. And so I think those are the big kind of Q1 sequential increases. As we go out through the year, there's some nominal increases across R&D and services, but nothing significant.

Sterling Auty -- JP Morgan -- Analyst

Okay, and then one other in terms of follow-up. You talked about fed, but any other commentary in terms of the vertical, you know, experience in the quarter and what's in the pipeline? So any particular industries that are jumping out to you being particularly strong or weak in the fourth quarter?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

No. You know, if you look at the business across GOs, across industry, and across profit, we're pretty well-diversified, I think. One of the areas a little bit more of an uptick than normal is the mid-market, and I think you see that coming from the new logos source from the channel.

Sterling Auty -- JP Morgan -- Analyst

That makes sense. Thank you, guys.

Kevin Mandia -- Chief Executive Officer and Board Director

Thanks, Sterling.

Operator

And our next question comes from the line of Shaul Eyal with Oppenheimer. Your line is open.

Shaul Eyal -- Oppenheimer -- Analyst

Thank you. Good afternoon, guys. Frank, I think you mentioned in your prepared remarks a growing focus or so on the middle market. Does that generate a need or even a different channel strategy, new partnerships, new compensation plans? Just curious how you guys think about it.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah. Shaul, I don't think it really has a change in our strategy. We've actually invested and signed up a fair amount of customers that service the mid-market over the last few years. I think one of the major changes in 2018, which is now really playing in our favor, is the simplified pricing and packaging process we went through. That really has resonated with the channel, and if you look at the new customer logos sourced from the channel, they're almost all buying under the new pricing model. And so I think, you know, we really put a lot into 2018 from a sales enablement and changing of the pricing to really enable both our internal sales team and the channel to just be able to reduce the friction in the selling process, and I think that we're just starting to see that really pay off.

Shaul Eyal -- Oppenheimer -- Analyst

Got it. Got it. That makes sense. And also, if I may ask, how would you characterize the current pricing environment versus maybe last quarter versus fourth quarter of '17? Any change?

Kevin Mandia -- Chief Executive Officer and Board Director

Yeah, I haven't felt any change at all. This is Kevin speaking. Yeah, I think it's the same. Haven't felt a contraction on it.

Shaul Eyal -- Oppenheimer -- Analyst

Got it. Understood. Thank you so much.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Thanks, Shaul.

Operator

Thank you. Our next question comes from the line of Tal Liani with Bank of America Merrill Lynch. Your line is open.

Tal Liani -- Bank of America Merrill Lynch -- Technology Analyst

Great. Hey, guys. This is Dan Martus on for Tal. Thanks for taking my question. So a strategic one to start for Kevin. It seems like the managed defense part of the business, one of the brightest areas, or it's at least driving a lot of the differentiation potentially in the Helix, too, so when you look out a few years, how much of FireEye's success is dependent on becoming more of a managed security company? And then how do you guys balance those efforts in growth with the channel partners that are also using this kind of strategy?

Kevin Mandia -- Chief Executive Officer and Board Director

A couple things. One, we're not really a replacement for an MSSP with our managed detection and response, so the genesis of managed defense was we'd respond to breaches and people did not have the security expertise we had. But we never intended nor are we in the business of we're going to tweak your firewalls, we're going to be your Windows security folks, or we're going to update patches. We always felt that's not the task that we're in the business of doing.

When you look at MSSPs, they do staff augmentation. They manage other people's software. We do not do that. When we do managed detection and response, it's the ability to collect logs. It's the ability to manage our software and detect when other safeguards have failed. I mean, that's really it. And when I look at a couple years out, I've always said this should have happened a decade ago, but it still hasn't happened yet. There's gotta be a seamless integration between the products people buy to secure their networks and the experts, and that's why we have expertise on demand. And over time you're not going to see a difference between our expertise on demand and our managed defense package, because I think it passes the "Hey, I'd buy that" test.

When I talk to SISOs, they don't wanna have 10 Mauer analysts that they only need three days a month. They don't wanna have a whole threat intelligence unit that they maintain, but they do want those expertise when they need them. And I see over time as we build more expertise on demand into our products, you can imagine a future where our customers are inside of Helix saying, "Oh, I needed an endpoint to be forensically examined," and just click a button and we've got a cadre of experts -- or our partners have experts that can go do it. So that's why Helix will be built for the MSSPs. It'll be federated. It'll have expertise on demand that others can use Helix to provide the expertise. It's just we happen to have it here.

Our customers have learned to trust it, and they may prefer to use our expertise on demand. But we're not going to tweak people's firewalls. We're not going to manage their sims. That's what MSSPs do. What we do is we find if something bad's happening, and we ask if people want us to fix it.

Tal Liani -- Bank of America Merrill Lynch -- Technology Analyst

Great. That's really helpful, and then a quick follow-up on the Helix customer additions. Can you talk about the mix between existing customers and new customers? And what I'm getting at there is, you know, is Helix actually becoming a real driver for new customers coming onto the FireEye platform?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, it generally is primarily new customers adopting Helix as part of the platform with other spoke products, or it's existing customer that has one or two spokes that's adding the overall platform. And so we see a pretty good mix of both new and follow-on purchases in Helix. And in the quarter we had 143 new Helix adds. Again, that's driven from both new, brand new customers and existing follow-on customers.

Tal Liani -- Bank of America Merrill Lynch -- Technology Analyst

Great. Thank you very much.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you.

Operator

And our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open.

Gabriela Borges -- Goldman Sachs -- Equity Analyst

Great. Good afternoon. Thank you for taking my question. This one is for Kevin. I'm hoping you can describe for us how your opportunity to expand on the network security side has changed with the addition of things like cloud and VX, network forensics, some of the internal segmentation of visibility, things you might be doing. As customers go from classic FireEye appliance on the network side to adopting some of these broader technology suites, what happens to all the value and how the conversation's changing? Thanks.

Kevin Mandia -- Chief Executive Officer and Board Director

Well, so complex question in some ways. When I look at our network product, we have to do more with it. It's a second line of defense. We're not building it in at a first line. So one difference between that and our other spokes is endpoint we're building into the first line of defense with endpoint protection. With email, we built a secure email gateway. We're in the first line. But on network, we're the second line of defense behind a firewall. And the good news, firewalls miss enough that you need a second line of defense, but it also means that there's a whole buyer's market out there that will buy the firewall and buy the plugins and buy the subscription to it and that'll be good enough for them.

What we really wanna do -- and that's why for every product that I mention that's a spoke -- is share how it's feeding Helix. Helix is -- we wanna put our IP -- when you talk about countermeasures, we'll put the IP into the spokes, but we wanna put a lot of the detect bad stuff and do something about it and manage it with workflow and process into Helix. The future that I see in what we're doing in 2019 is building our network into the adjacencies of let's just detect bad east-west traffic. So we launched what we call smart vision. But let's start collecting metadata so that we can find things, and we already do this, as well. Let's find data exfiltration or data theft. Let's find other things that you can't always use a border router or your firewalls to constantly look for. And so we're going to build into those niches and have it feed Helix over time.

But we still want -- Another way to answer that question is we always want to go from spoke to a product, a platform sale. I know that's overused. Platform, platform, platform, but we've got endpoint, email, and network, and we're making it all work together better and better every single quarter. And over time that's going to matter to people, that synchronicity between, hey, I detected something on the endpoint, and the network already did a countermeasure. That's pretty cool, and we can deliver that because we make all those products. So rather than duct taping it with personnel and scripts and your own expertise, we're just going to be building that here at FireEye.

And that benefits all our products when they all work in union together. So I'm going to give you five different tracks here, but we do know this. Our network is a layer two defense. We're not going to be building a firewall. So we just gotta get better at detecting a lot more things that the firewall can't detect and is not positioned to detect.

Gabriela Borges -- Goldman Sachs -- Equity Analyst

I appreciate the callout. The follow-up is for Frank. When you look at your customers that are on the Helix interface versus those who are not, can you just compare and contrast the willingness of the folks on Helix to adopt the platform versus the folks who have yet to migrate? Thanks.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, Gabriela, the continued thing we see with our Helix customers is that they tend to add more spokes and more additional subscriptions than non-Helix customers, and so, you know, the strength in eyesight, intelligence, and in managed defense is often bolstered because of Helix customers. And I think that's just the value of the synergies of having multiple products all working together.

Gabriela Borges -- Goldman Sachs -- Equity Analyst

Thank you.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Thanks, Gabriela.

Operator

Thank you, and our next question comes from the line of Ken Talanian with Evercore ISI. Your line is open.

Ken Talanian -- Evercore ISI -- Analyst

Hi, thanks for taking the question. First one for Frank. What assumptions around your NX refresh are factored into your fiscal '19 billings guidance? And how does that renewal base in 2019 compare to 2018?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Sure. So the renewal book is actually a little bit bigger in 2019 than 2018, and so if you look at the refresh opportunity it obviously is a larger opportunity in '19 than '18. Our expectation is that we'll continue to execute really well on that, and so in addition the refresh that happens on the network side alone I think we'll continue to add additional spokes as part of those refreshes.

Ken Talanian -- Evercore ISI -- Analyst

Okay. And as we think about 2019 and the trend for billings, I know you mentioned there were some tougher comps versus 1Q '18, but are there any other big deals that we saw through '18 that we should be thinking about relative to the year-over-year compare for '19?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Sure. And we did call -- If you look at 2018, we had two quarters where we did have a greater than $10 million transaction, which was Q1 '18 and Q2 '18. In Q3 and Q4 we did not have any transactions greater than $10 million, so the grow over is obviously much bigger and much tougher in the first half.

Ken Talanian -- Evercore ISI -- Analyst

Great. Thanks very much.

Operator

Thank you. Our next question comes from the line of Jonathan Ho with William Blair and Company. Your line is open.

Jonathan Ho -- William Blair and Company -- Technology Analyst

Hi, this is John Wattermore for Jonathan. Thanks for taking our call and squeezing us in. My question is, internationally, I'd like to get a sense of the adoption maturity of international relative to US for, well, two dimensions. Product subscription, but also your managed services. Is international any more likely, less likely, or about as likely on those two dimensions relative to the US market?

Kevin Mandia -- Chief Executive Officer and Board Director

Do you wanna answer that, Frank, on the product side? On managed defense we're much more adopted Continental US than international, and it's kinda going -- it's emerging in the international market.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, I think we've seen that really across our entire business and products and subscription and services. The US tends to be the early adopters, and then we see kinda the follow-on growth internationally. And so I'd say we're still early days with some of the newer products internationally, but those will ultimately be the growth engines in the out years. In the US we've seen obviously Helix and some of the newer products be adopted much faster, but yeah, I think if you look at the business overall we're growing very nicely internationally. And a lot of that is because those customers are now just starting to buy some additional products in addition to still buying network, email, and endpoint.

Jonathan Ho -- William Blair and Company -- Technology Analyst

Okay, great. Yeah, thank you very much for confirming that. And my last question is on sale cycles. With your growing product suite and your recent transition, it seems like you're pretty much through -- I call it a reproduct-ization. Your price and strategy and naming and such. Do you see sale cycles? Are they maintaining? Are they getting any longer given you've got more stuff going on, more things to sell?

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Yeah, I think the sale cycles have actually remained pretty much the same. There's a couple things that we've added like expertise on demand that because of the breadth of different services and intel you can buy with expertise on demand we had seen some pretty short sale cycles in Q4 with the limited launch that we did. So I think that will likely be a shorter sale cycle because you can use stuff right out of the gate, but I think in general the sale cycles have remained relatively stable. Some of the things we've done on kind of the ability to proof of value some of the products like Fireproof that we did for email and now endpoint really gives a prospect an easy way to try and buy our products. And so we're hopeful that that'll lead to a shortening of the sale cycles with some of the spoke products.

Kevin Mandia -- Chief Executive Officer and Board Director

Yeah, and this is Kevin speaking. I mean, one of the things I've said numerous times, we have six different ways into a new customer. We've got network security, email security, endpoint security, services, threat intelligence, and Helix, which some people look at to just be how they operationalize their security and get our intel and some people may look at it as a sim replacement at this stage. And I probably got too specific and granular in your question, but the sales cycle can be dependent on which one of those products are the ones that are our foot in the door or our avenue to a new customer. But it's a great portfolio to carry with you if you're a salesperson.

Jonathan Ho -- William Blair and Company -- Technology Analyst

Great. Yeah. Thank you very much. Appreciate it.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you.

Kate Patterson -- Vice President, Investor Relations

We're at the top of the hour. We'll take one more question please.

Operator

Okay, our last question will come from the line of Saket Kalia with Barclays. Your line is open.

Saket Kalia -- Barclays -- Analyst

Hey, guys. Thanks for fitting me in here. Two-part question, and I'll leave it at that. It's on expertise on demand, because it sounds like there's a lot of excitement around it. So maybe the first part for you, Kevin, how long is it going to take your broader customer base to get access to that and do they have to have Helix to get it? Like that's the first question. And the second question for you, Frank, is can you talk about how it's priced? Is it a price per interaction? Is it a subscription price that you pay for? And how do [inaudible] work? Does that make sense?

Kevin Mandia -- Chief Executive Officer and Board Director

On your first -- Yeah, absolutely. Frank's got question No. 2 since you directed it to him and he doesn't want me to answer it. The reality on how do we get that out to all our customers, we gotta let them know it. So we're going to do a big launch at RSA. We're going to let the world know about it. You can get it through a myriad of ways right now. So you can call us. You can email us. It's in a button in Helix, and it's going to be through our customer support portal. And that's we have to do. We gotta give you many avenues in. Pick up the darn phone.

But ultimately when you go into the out years and Helix is the interface to all our products, that's how I'd prefer it to go, but you gotta have more than that as the avenue. And that would go in a framework for all FireEye products where customers over time will have kind of an experience where they know the products they have, the licensing to those products, and they'll have a single FireEye identity if you will to do it. And we'll be able to give them a bridge to our expertise in that portal as well over time.

So bottom line, we've gotta come up with it, and we will approach all our customers and make sure they're aware of expertise on demand. It, to me, is -- And I said it earlier. It passes the "I'd buy that" test. Just so many customers that I meet that they're supporting really good security experts. First, there's not enough of them. So then you're paying a lot of money for the ones you have, and you don't always need them all every day. And so we wanna be there when you need us or create the platform where our partners can be there when their customers need them. So that's why we're so excited about it. We'll make sure all our customers are aware of it as fast as possible.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

From a pricing perspective, Saket, it'll be prepaid units bought on a subscription basis. So basically, when a customer pre-purchases the units, it'll be sitting in deferred revenue until they actually utilize the catalogue of services. So there's going to be some level of automated intel reports that are delivered as part of the expertise on demand package, and so that will be amortized over the 12 month period. And then the rest of it's going to be drawn down based on usage of the actual units.

Saket Kalia -- Barclays -- Analyst

Got it. Makes sense. Thanks for squeezing me in again.

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Thanks, Saket.

Operator

Thank you. And this concludes today's question and answer session. I would now like to turn the call back to Kevin Mandia for closing remarks.

Kevin Mandia -- Chief Executive Officer and Board Director

Yeah. First I'd like to thank everybody for joining us today. I wanna put 2018 into some context. Coming into the midpoint of 2016, we had 10 straight quarters with over $40 million in losses. In under five quarters, we went to non-gap profitability. We had decelerating products. Now we have growing products. We have stabilized the business. We have become much more efficient. We have had two years of delivering on the plan that we're sharing with the street, and we believe strongly that we're building the right products to increase the growth rate in the future. So we're excited about our plan. We're very confident in our plan. And I look forward to speaking with you at our, I think we're having an event at RSA. So I hope to see all of you there.

Kate Patterson -- Vice President, Investor Relations

Tuesday morning, March 5, 8:30 to 10:00 at the Spur Building.

Kevin Mandia -- Chief Executive Officer and Board Director

Thank you very much.

Operator

Ladies and gentleman, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.

Duration: 62 minutes

Call participants:

Kate Patterson -- Vice President, Investor Relations

Kevin Mandia -- Chief Executive Officer and Board Director

Frank Verdecanna -- Executive Vice President, Chief Financial Officer, and Chief Accounting Officer

Andrew Nowinski -- Piper Jaffray -- Senior Analyst

Rob Owens -- KeyBanc Capital Markets -- Managing Director

Gur Talpaz -- Stifel -- Analyst

Melissa Franchi -- Morgan Stanley -- Equity Analyst

Steve Koenig -- Wedbush Securities -- Managing Director

Sterling Auty -- JP Morgan -- Analyst

Shaul Eyal -- Oppenheimer -- Analyst

Tal Liani -- Bank of America Merrill Lynch -- Technology Analyst

Gabriela Borges -- Goldman Sachs -- Equity Analyst

Ken Talanian -- Evercore ISI -- Analyst

Jonathan Ho -- William Blair and Company -- Technology Analyst

Saket Kalia -- Barclays -- Analyst

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