Cybersecurity software and services company FireEye (NASDAQ:FEYE) has put a couple of solid quarters in the books this year, and the stock has responded well, up over 40% and soundly beating the market.

FEYE Chart

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As the company approaches its third-quarter earnings call on Nov. 1, investors are wondering if this trend will continue. I'll be watching for indicators of FireEye's continued progress on its turnaround. Deferred-revenue growth, product refresh success, and management's ability to keep its commitments will be key to understanding how things are going.

Deferred revenue growth

I've called deferred revenue the most important metric to watch for FireEye investors. While management has indicated that this metric is "an important indicator of the health and visibility of trends in our business," its growth has been weakening for the past two years. Management has noted that average contract length has been decreasing, but they think it has stabilized around 20-24 months. I'll be watching for the latest word on this important metric.

Line graph of FireEye's YOY deferred revenue growth declining from 78% in Q1-2015 to 5% in Q2-2017.

Data source: FireEye. Chart by author.

Progress on refreshes and new product sales

In recent discussions with analysts, management has highlighted a significant opportunity for increased revenue from current customers whose renewal comes due in 2017. For instance, the company says 6,000 of its NX appliances are coming up for renewal this year. The sales team has used these opportunities to upsell customers and talk with them about the company's new product, called Helix, the company's flagship software subscription product that's delivered to customers on the cloud. It has a number of key enhancements, including simplifying the interface for security analysts to make them more productive and integrating messages from non-FireEye products to allow one dashboard for companies to manage their end-to-end security solutions.

With 65% of the NX renewals set for Q3 and Q4, I'll be watching to see if the sales team can continue to execute on the success of the first half and for indicators of customer upgrades to the Helix platform.

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Image source: Getty Images.

Keeping commitments

With CEO Kevin Mandia having been at the helm since June 2016, FireEye is operating with a clear turnaround plan and delivering on it. I've come to trust what the CEO and management team have to say, and there's a number of commitments from management I'll be watching for updates on in the quarterly report, including:

  • Full-year revenue guidance of $734 million to $746 million.
  • Non-GAAP operating profitability in Q4.
  • A comprehensive pricing study set to be completed in mid-October.

The pricing study was mentioned in the most recent earnings call. The idea behind the study is that the company has been known as the premium-priced solution in the market, which restricts its addressable market. FireEye indicated that with its new Helix products, it can be more price competitive. On the last earnings call, Mandia stated that the consultant's study would be complete in 11 to 12 weeks, which should be in time to discuss results in the upcoming call.

The market is certainly giving FireEye credit for the moves it's made so far this year, but if any of these commitments slip, or investors see indicators that the turnaround plan is stalling, it could shed doubt on the positive progress so far.

Brian Withers owns shares of FireEye. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.