MANDIANT, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K for the year ended
December 31, 2021. The following discussion and analysis contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements include, but are not limited to, statements
regarding:

•the changing landscape of threats faced by our customers and prospects;

• our ability, and the effects of our efforts, to raise market awareness of the benefits of our security solutions;

• our ability to continue to grow our revenues, including annual recurring cloud and subscription revenues;

•our future financial and operating results;

•our business plan and our ability to effectively manage our growth and related investments;

•our beliefs and objectives for future operations;

•our ability to attract and retain customers and expand the footprint of our solutions with each of these customers;

• our expectations regarding customer retention rates as well as our expectations regarding the value of subscriptions and service renewals;

•our ability to maintain our competitive technological advantages in the face of new entrants to our industry;

• our ability to scale and adapt our existing technology in a timely and efficient manner;

•our ability to innovate new offerings and bring them to market in a timely manner;

• our ability to maintain, protect and improve our brand and our intellectual property;

•our ability to expand internationally;

•the effects of increased competition in our market and our ability to compete effectively;

• cost of revenues, including changes in costs associated with customer support;

•changes in operating expenses, including changes in research and development, sales and marketing, general and administrative expenses;

•the expected tax rates;

•potential attrition and other impacts associated with the restructuring;

• sufficient liquidity to meet liquidity needs for at least the next 12 months;

•our ability to generate cash flow from operations and free cash flow;

• our ability to enter into new contracts and renew existing contracts with United States and international governments;

•our expectations regarding relationships with third parties, including distribution partners and logistics providers;

•economic and industry trends or trend analysis;

•the impact of the COVID-19 pandemic and related public health measures on our business and the global economy;

•Attracting, training, integrating and retaining qualified employees and key personnel;

•future acquisitions or investments in complementary companies, products, subscriptions or technologies;

• our expectations, beliefs, plans, intentions and strategies related to our acquisition of Intrigues Corp. (“Plot”);


•our expectations, beliefs, plans, intentions and strategies related to our
divestiture of the FireEye Products business to a consortium led by Symphony
Technology Group ("STG") including our expectations related to the transition
services agreement and the impact of the divestiture on our remaining business;

• our expectations, beliefs, plans, intentions and strategies related to
Beggar acquired by Googleincluding our expectations related to the expected closing;

•the costs and any benefits of our divestiture of the FireEye Products business; and

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•the effects of seasonal trends on our results of operations.


As well as other statements regarding our future operations, financial condition
and prospects, and business strategies. Forward-looking statements generally can
be identified by words such as "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "predicts," "projects," "will be," "will
continue," "will likely result," and similar expressions. These forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties, which could cause our actual results to differ
materially from those reflected in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in this Quarterly Report on Form 10-Q, and in particular, the
risks discussed under the caption "Risk Factors" in Item 1A of Part II of this
Quarterly Report on Form 10-Q and those discussed in other documents we file
with the SEC. We undertake no obligation to revise or publicly release the
results of any revision to these forward-looking statements, except as required
by law. Given these risks and uncertainties, readers are cautioned not to place
undue reliance on such forward-looking statements.

Investors and others should note that we announce material financial information
to our investors using our investor relations Web site
(http://investors.mandiant.com/), SEC filings, press releases, public conference
calls and webcasts. We use these channels, as well as social media, to
communicate with the public about our company, our services and other issues. It
is possible that the information we post on social media could be deemed to be
material information.


Overview

Mandiant, Inc. and its wholly owned subsidiaries (collectively, the "Company",
"Mandiant", "we", "us", or "our") provide a broad portfolio of cybersecurity
solutions and services that allow organizations to prepare for, prevent, respond
to, investigate and remediate cyber-attacks. Our portfolio includes threat
intelligence, security validation, attack surface management and automated alert
investigation integrated in the Mandiant Advantage platform, managed services
and consulting services.

On March 7, 2022, we entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Google LLC ("Google") and Dupin Inc., a wholly owned subsidiary
of Google ("Merger Sub"), pursuant to which and subject to the terms and
conditions of which, Google has agreed to acquire us in an all-cash transaction
by way of a merger of Merger Sub with and into Mandiant, Inc. (the "Merger"),
with Mandiant, Inc. surviving the merger as a wholly owned subsidiary of Google.

Under the Merger Agreement, subject to the terms and conditions thereof, at the
effective time of the Merger, each issued and outstanding share of Mandiant's
common stock (except as otherwise set forth in the Merger Agreement) will be
canceled and automatically converted into the right to receive $23.00 in cash,
without interest and less any applicable withholding taxes.

Completion of the Merger is subject to the satisfaction (or waiver where
permissible pursuant to applicable law) of certain terms and conditions set
forth in the Merger Agreement, including (i) adoption of the Merger Agreement by
the holders of our common stock and convertible preferred stock (on an
as-converted to common stock basis), voting together as a single class; (ii) the
absence of an injunction, judgment, order or other legal restraint, law or any
action of any governmental authority preventing, materially restraining or
materially impairing the consummation of the Merger or the conversion of our
convertible preferred stock into common stock in connection with the Merger; and
(iii) the expiration or termination of the waiting period under the United
States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
clearance under the regulatory laws of certain non-United States jurisdictions.
The Merger is expected to close in calendar year 2022, subject to the
satisfaction (or waiver where permissible pursuant to applicable law) of certain
conditions. Upon consummation of the Merger, Mandiant's common stock will no
longer be listed on any public market.

The foregoing summary of the Merger Agreement and the transactions contemplated
thereby does not purport to be complete and is subject to, and qualified in its
entirety by, the full text of the Merger Agreement, which is filed as Exhibit
2.1 of our Current Report on Form 8-K filed on March 9, 2022 and incorporated by
reference herein.

On October 8, 2021, we completed the previously announced sale of the FireEye
Products business to Magenta Buyer LLC ("Trellix"), which is backed by a
consortium led by Symphony Technology Group, in exchange for total cash
consideration of $1.2 billion, subject to certain purchase price adjustments,
and assumption of certain liabilities of the FireEye Products business as
specified in the Asset Purchase Agreement, as amended by an Amendment to the
Asset Purchase Agreement entered into on October 8, 2021. As a result, all
historical periods presented in our condensed consolidated financial statements
and other portions of this Quarterly Report on Form 10-Q have been conformed to
present the FireEye Products business as discontinued operations.

In March 2020, the World Health Organization declared the novel coronavirus
disease (COVID-19) a global pandemic. The pandemic has impacted, and could
further impact, our operations and the operations of our customers as a result
of quarantines, various local, state and federal government public health
orders, facility and business closures, supply chain shortages, vaccination
mandates, and travel and logistics restrictions. With our COVID-19 safety plans,
work-from-home and return-to-office policies and restricted employee travel to
essential, business-critical trips, we have been able to maintain strong
customer relationships and deliver

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our technology-based managed and professional services to clients without interruption. As a result, we have not experienced any significant disruptions to our operations in the three months ended March 31, 2022 due to the pandemic.


In January 2022, the U.S. Supreme Court struck down the U.S. Department of
Labor's Occupational Safety and Health Administration ("OSHA") Emergency
Temporary Standard (the "ETS") requiring that all employers with at least 100
employees ensure that their U.S. employees are fully vaccinated for COVID-19.
Following that ruling, OSHA chose to withdraw the vaccine ETS altogether. In
addition, the federal district court in Georgia stayed the enforcement of the
mandatory employee COVID-19 vaccination requirement found in President Biden's
Executive Order for U.S. government contractors and their subcontractors (the
"Executive Order"). As a result, we revised our COVID-19 policy to only require
COVID-19 vaccination for employees or visitors that will be entering any of
Mandiant's U.S. office locations. We are also complying with the other aspects
of the Executive Order for federal government contractors at our covered
contractor workplaces that have not been stayed by the federal courts. Our
implementation and enforcement of vaccination requirements could be difficult,
costly, and potentially result in employee attrition, including attrition of key
employees, disruptions in workforce performance, and difficulty securing future
labor needs, any of which could have a material adverse effect on our business,
financial condition, and results of operations.

We anticipate governments and businesses may take additional actions or extend
existing actions to respond to the risks of the COVID-19 pandemic. We continue
to actively monitor the impacts and potential impacts of the COVID-19 pandemic
in all aspects of our business. Although we are unable to predict the impact of
the COVID-19 pandemic, including any recurrence of the virus or its variants, on
our business, results of operations, liquidity or capital resources at this
time, we expect we may be negatively affected if the pandemic and related public
health measures further result in substantial manufacturing or supply chain
problems, disruptions in local and global economies, volatility in the global
financial markets, overall reductions in demand, delays in payment, or other
ramifications from the COVID-19 pandemic. For a further discussion of the
uncertainties and business risks associated with the COVID-19 pandemic, see the
section entitled "Risk Factors" in Part I, Item 1A of this Quarterly Report on
Form 10-Q.

Our Business Model

We generate revenue from Mandiant Solutions. Pursuant to the sale of the FireEye
Products business to a consortium led by STG, the revenue from the FireEye
Products business has been included within discontinued operations in our
condensed consolidated financial statements for all historical periods
presented. We disaggregate our revenue from Mandiant Solutions into two main
categories: (i) platform, cloud subscription and managed services and (ii)
professional services. For the three months ended March 31, 2022 and 2021,
platform, cloud subscription and managed services revenue as a percentage of
total revenue was 44% and 49%, respectively. Revenue from professional services
was 56% and 51% for the three months ended March 31, 2022 and 2021,
respectively.

Platform, cloud subscription and managed services


The majority of our platform, cloud subscription and managed services revenue is
generated from sales of subscriptions to our Mandiant Advantage platform and
modules (including Security Validation, Threat Intelligence and Automated
Defense and Attack Surface Management) and managed services that are delivered
through the cloud. A majority of the revenue in this category is recognized
ratably over the contractual term, generally one to three years.

While our threat intelligence and automated defense modules are only available
through the cloud, a portion of our revenue in the platform, cloud subscription
and managed services category is derived from term licenses of our Security
Validation module deployed on premise, and revenue from these sales is
recognized when the license key is issued to the customer. Revenue from the sale
of our on-premise Security Validation term licenses continues to decline as we
encourage our new and existing customers to migrate their solution to the
cloud-based Mandiant Advantage platform for greater flexibility and integration
with our Threat Intelligence Attack Surface Management and Automated Defense
modules. An increasing number of new Security Validation customers are
purchasing subscriptions for the cloud-based Mandiant Advantage Security
Validation module, and we expect an increasing number of Security Validation
customers to renew on the cloud-based Mandiant Advantage module. Deferred
revenue from platform, cloud and managed services as of March 31, 2022 and
December 31, 2021 was $263.6 million and $271.0 million, respectively.

Professional services


In addition to our platform, cloud subscription and managed services, we offer
professional services, including incident response and other strategic security
consulting services, to our customers who have experienced a cybersecurity
breach or desire assistance assessing and increasing the resilience of their IT
environments to cyber-attack. The majority our professional services are offered
on a time and materials basis, through a fixed fee arrangement, or on a retainer
basis. Revenue from professional services is recognized as services are
delivered. Revenue from our expertise-on-demand subscription and some pre-paid
professional services is deferred, and revenue is recognized when services are
delivered. Deferred revenue from professional services as of March 31, 2022 and
December 31, 2021 was $136.4 million and $139.3 million, respectively.

Discontinued operations

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Revenue from discontinued operations was generated primarily from sales of
network, email, endpoint security, Helix SIEM and Cloudvisory solutions deployed
on a customer's premises, either as an integrated security appliance or a
distributed hybrid on-premise/private cloud configurations. As a single
performance obligation, revenue from sales of appliance hardware and related
subscriptions was recognized ratably over the contractual term, typically one to
three years. Such contracts typically contained a material right of renewal
option that allows the customer to renew their Dynamic Threat Intelligence
("DTI") cloud and support subscriptions for an additional term at a discount to
the original purchase price of the single performance obligation. For contracts
that contained a material right of renewal option, the value of the performance
obligation allocated to the renewal was recognized ratably over the period
between the end of the initial contractual term and end of the estimated useful
life of the related appliance and license. A small portion of our revenue in the
product and related subscription and support revenue related to discontinued
operations was derived from the sale of our network forensics appliances and our
central management system appliances. These appliances were not dependent on
regular security intelligence updates, and revenue from these appliances was
therefore recognized when ownership was transferred to our customer, typically
at shipment.

Key Business Metrics

We monitor our key business metrics set forth below to help us evaluate growth
trends, establish budgets, measure the effectiveness of our sales and marketing
efforts, and assess operational efficiencies. We discuss revenue and gross
margin below under "Components of Operating Results." Deferred revenue,
annualized recurring revenue, billings (a non-GAAP metric), net cash flow
provided by (used in) operating activities, and free cash flow (a non-GAAP
metric) are discussed immediately below the following table (in thousands,
except percentages).

                                                                     Three Months Ended or as of
                                                                              March 31,
                                                                      2022                   2021
Platform, cloud subscription and managed services revenue       $      57,629           $    55,999
Professional services revenue                                          72,515                58,689
Total revenue                                                   $     130,144           $   114,688
Year-over-year percentage increase                                         13   %                24  %
Gross margin percentage                                                    45   %                48  %
Deferred revenue (current and non-current)                      $     399,989           $   280,291
Annualized recurring revenue                                    $     287,041           $   236,062
Billings (non-GAAP)                                             $     119,805           $   110,726

Net cash used in operating activities – continuing operations ($23,335) ($15,572)
Net cash flow generated by operating activities – discontinued operations

                                                                  -                36,433
Net cash provided by (used in) operating activities             $     (23,335)          $    20,861
Free cash flow (non-GAAP) - continuing operations               $     

(32,337) ($21,199)



Deferred revenue. Our deferred revenue consists of amounts that we have the
right to invoice but have not yet been recognized into revenue as of the end of
the respective period. We monitor our deferred revenue balance because it
represents a significant portion of revenue to be recognized in future periods.
Our deferred revenue consists of the unamortized balance of deferred revenue
from previously invoiced sales of our security validation platforms, threat
intelligence, consulting services and managed detection and response services
and excludes deferred revenue from discontinued operations. Invoiced amounts for
such contracts can be for multiple years, and we classify our deferred revenue
as current or non-current depending on when we expect to recognize the related
revenue. If the deferred revenue is expected to be recognized within 12 months
it is classified as current, otherwise, the deferred revenue is classified as
non-current. A table for our deferred revenue is provided below (in thousands):

                                     As of March 31,
                                   2022           2021

Deferred income, current $302,857 $221,478
Deferred income, non-current 97,132 58,813 Total deferred income $399,989 $280,291



Annualized recurring revenue. Annualized recurring revenue ("ARR") is an
operating metric and represents the annualized revenue run-rate of active term
licenses, subscriptions and managed services contracts at the end of a reporting
period. ARR should be viewed independently of revenue and deferred revenue as
ARR is an operating metric and is not intended to be combined with or replace
revenue or deferred revenue. ARR is not a forecast of future revenue, which can
be impacted by contract start and end dates and renewal rates, and does not
include revenue from consumption-based contracts or professional services except
for service level

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agreement payments. We consider ARR a useful measure of the value of the
recurring components of our business because it reflects both our ability to
attract new customers for our solutions and our success at retaining and
expanding our relationships with existing customers. Further, ARR is not
impacted by variations in contract length, enabling more meaningful comparison
to prior periods as we align our invoicing practices to growing customer
preference for annual billing on multi-year contracts. A table for our ARR is
provided below (in thousands):

                                                           As of March 31,
                                                         2022           

2021

Platform, cloud subscription and managed services $275,162 $228,856
Professional services

                                    11,879          

7,206

Total annualized recurring revenue                    $ 287,041      $ 

236,062



Billings. Billings are a non-GAAP financial metric that we define as revenue
recognized in accordance with generally accepted accounting principles ("GAAP")
plus the change in deferred revenue from the beginning to the end of the period,
excluding deferred revenue assumed through acquisitions. We monitor billings as
a supplement to revenue (the corresponding GAAP measure), because billings
impact our deferred revenue, which is an important indicator of the health and
visibility of trends in our business and represents a significant percentage of
future revenue. However, it is important to note that other companies, including
companies in our industry, may not use billings, may define billings
differently, may have different billing frequencies, or may use other financial
measures to evaluate their performance, all of which could reduce the usefulness
of billings as a comparative measure. Additionally, the calculated billings
metric represents the total contract value we have the right to invoice, which
includes multi-year subscriptions to our solutions as well as commitments for
future services engagements. Calculated billings are impacted by changes in
average contract length, thereby reducing the usefulness of comparisons to prior
periods. Unlike subscription revenue, which is recognized ratably over a
contract term, services revenue is recognized when services are delivered,
making calculated services billings less useful as a measure of current business
activity. A reconciliation of billings to revenue, the most directly comparable
financial measure calculated and presented in accordance with GAAP, is provided
below (in thousands):

                                                       Three Months Ended March 31,
                                                           2022                   2021
Revenue                                         $       130,144                $ 114,688
Add: deferred revenue, end of period                    399,989             

280 291

Less: deferred revenue, beginning of period            (410,328)                (284,253)

Billings (non-GAAP)                             $       119,805                $ 110,726

We have provided the billing breakdown below (in thousands):

Three months completed March, 31st,

                                                                            2022                  2021
Platform, cloud subscription and managed services                    $        50,213          $  52,335
Professional services                                                         69,592             58,391
Billings (non-GAAP)                                                  $       119,805          $ 110,726


Net cash used in operating activities. We monitor net cash used in operating
activities as a measure of our overall business performance. Our net cash used
in operating activities performance is driven in large part by sales of our
offerings in the platform, cloud subscription, managed services category and
professional services and from up-front payments for both subscriptions and
services. Monitoring net cash used in operating activities enables us to analyze
our financial performance without the non-cash effects of certain items, such as
depreciation, amortization and stock-based compensation costs, thereby allowing
us to better understand and manage the cash needs of our business.

Free cash flow. Free cash flow is a non-GAAP financial measure we define as net
cash used in operating activities, the most directly comparable GAAP financial
measure, less purchases of property and equipment. We consider free cash flow to
be a liquidity measure that provides useful information to management and
investors about the amount of cash generated by our business that, after the
purchases of property and equipment, can be used by us for strategic
opportunities, including investing in our business, making strategic
acquisitions, debt repayment, strengthening our balance sheet and share
repurchases. However, it is important to note that other companies, including
companies in our industry, may not use free cash flow, may calculate free cash
flow differently, or may use other financial measures to evaluate their
performance, all of which could reduce the usefulness of free cash flow as a
comparative measure. A reconciliation of free cash flow to cash flow provided by
(used in) operating activities is provided below (in thousands):

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Three months completed March, 31st,

                                                                            2022                  2021

Net cash used in operating activities – continuing operations $

(23,335) ($15,572)


Less: purchase of property and equipment                                      (9,002)             (5,627)
Free cash flow (non-GAAP) - continuing operations                    $       (32,337)         $  (21,199)
Net cash used in investing activities - continuing operations        $      (343,357)         $ (168,167)
Net cash used in financing activities - continuing operations        $      

(15,799) ($7,783)

Factors affecting our performance


Market Adoption. We rely on market education to raise awareness of today's
cyber-attacks and articulate the need for our solutions and services. Although
our security validation and automated defense solutions address significant
challenges experienced by customers when implementing effective cybersecurity
safeguards - challenges that include an expanding attack surface from remote
workers and digital transformation, proliferation of nation state-sponsored
attackers, and an acute shortage of cybersecurity talent - the markets for these
solutions are in the early stages of development. As a result, our prospective
customers may not have a specific portion of their IT budgets allocated for our
advanced security solutions.

We invest heavily in sales and marketing efforts to increase market awareness,
educate prospective customers and drive adoption of our solutions and services.
Additionally, our consultants use our technology in their engagements, allowing
customers to witness the features and capabilities of our solutions in their IT
environments. This market education is critical to creating new IT budget
dollars or allocating more of existing IT budget dollars to cybersecurity in
general and specifically our security validation and security automation
solutions. The degree to which prospective customers recognize the mission
critical need for our solutions will drive our ability to acquire new customers
and increase renewals and follow-on sales opportunities, which, in turn, will
affect our future financial performance.

Sales Productivity. Our sales organization consists of in-house sales teams who
work in collaboration with external channel partners to identify new sales
prospects, sell additional solutions, subscriptions and services, and provide
post-sale support. Our direct sales teams are organized by territory to target
large enterprise and government customers who typically have sales cycles that
can last several months or more. We have also expanded our inside sales teams to
work with channel partners to expand our customer base of small and medium
enterprises, or SMEs, as well as manage renewals of subscription and support
contracts.

Newly hired sales and marketing employees typically require several months to
establish prospect relationships and achieve full sales productivity. In
addition, although we believe our investments in market education have increased
awareness of us and our solutions globally, sales teams in certain international
markets may face local markets with limited awareness of us and our solutions,
or have customer-specific requirements that are not available with our
solutions. These factors will influence the timing and overall levels of sales
productivity, impacting the rate at which we will be able to convert prospects
to sales and drive revenue growth.

Customer Acquisition and Retention. Since we expect that our existing customers
are likely to expand their deployments and purchase additional solutions from us
over time, we believe new customer acquisition and retention thereafter of
existing customers is essential to expanding the value of our installed base,
which we monitor through our key business metrics, including annualized
recurring revenue. We believe our ability to maintain strong customer retention
and drive new customer acquisition will have a material impact on future sales
of our security solutions and services and therefore our future financial
performance.

Follow-On Sales. To grow our revenue, it is important that our customers make
additional purchases of our solutions and services. After the initial sale to a
new customer, we focus on expanding our relationship with the customer to sell
additional modules available on the Mandiant Advantage platform as well as add
additional services. Sales to our existing customer base can take the form of
incremental sales of our solutions, managed services, and consulting services
either to expand their deployment of our technologies, to extend their internal
security resources with our managed and professional security services, or to
continuously measure the effectiveness of their security controls. Our
opportunity to expand our customer relationships through follow-on sales will
increase as we demonstrate the utility of our solutions, broaden our security
solutions portfolio with additional subscriptions and services and enhance the
functionality of our existing solutions. Follow-on sales lead to increased
revenue over the lifecycle of a customer relationship and can significantly
increase the return on our sales and marketing investments. With many of our
large enterprise and government customers, we have realized follow-on sales that
were multiples of the value of their initial purchases.

Components of operating results


As a result of the sale of the FireEye Products business, all historical periods
presented in this Form 10-Q have been conformed to present the FireEye Products
business as discontinued operations. We report the financial results of
discontinued operations separately from continuing operations to distinguish the
financial impact of disposal transactions from ongoing operations. The results
of

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operations and cash flows from a discontinued operation are restated for all comparative periods presented. Refer to Note 2, “Discontinued Operations”, to our condensed consolidated financial statements for more information.

Revenue


We generate revenue from the sales of our Mandiant solutions and services.
Revenue is recognized when a contract has been entered into with a customer, the
performance obligation(s) is (are) identified, the transaction price is
determined and has been allocated to the performance obligation(s) and only then
for each performance obligation after we have satisfied that performance
obligation.

•Platform, cloud subscription and managed services revenue. The majority of our
platform, cloud subscription and managed services revenue is generated from
sales of subscriptions to our Mandiant Advantage platform and modules (security
validation, threat intelligence, and automated defense) and to our managed
services that are delivered through the cloud and are recognized over the term
of the contract. A small portion of our security validation platform licenses
deployed on premise, historically, were recognized when the license key was
issued to the customer. Beginning January 1, 2022, due to a change in product
licensing that requires all licenses (deployed on premise or in the cloud) to
connect to the cloud-based Mandiant Advantage platform in order to be
functional, revenue related to all security validation platform licenses is
recognized over the contract term.

•Professional services revenue. Professional services, which includes incident
response, security assessments, and other strategic security consulting
services, are offered on a time-and-material basis, through a fixed fee
arrangement, or on a retainer basis. We recognize the associated revenue as the
services are delivered. Some professional services and our expertise-on-demand
subscription are prepaid, and revenue is deferred until services are delivered.

Revenue cost

Our total revenue cost includes cloud and managed services revenue cost and professional services revenue cost.


•Cost of platform, cloud subscription and managed services revenue. Cost of
platform, cloud subscription and managed services revenue primarily consists of
personnel costs associated with maintaining our threat intelligence and
delivering our managed services, hosting costs paid to third party cloud
platform providers, and allocated overhead costs. Personnel costs associated
with maintaining our threat intelligence and delivering our managed services
consist of salaries, benefits, bonuses and stock-based compensation. Overhead
costs consist of certain facilities, depreciation and information technology
costs. If revenue from sales of our cloud and managed services declines, the
cost of platform, cloud subscription and managed services revenue may increase
as a percentage of cloud and managed services revenue due to the fixed nature of
a portion of these costs.

•Cost of professional services revenue. Cost of professional services revenue
primarily consists of personnel costs for our services organization and
allocated overhead costs. If sales of our professional services decline or we
are unable to maintain our chargeability or billing rates, our cost of
professional services revenue may increase as a percentage of professional
services revenue.

Gross margin


Gross margin, or gross profit as a percentage of revenue, has been and will
continue to be affected by a variety of factors, including the mix between
platform, cloud subscription and managed services and professional services
revenue, the mix of incident response and other strategic security consulting,
and the amount of reimbursable travel expenses. We expect our gross margins to
fluctuate slightly depending on these factors, but increase over time with
expected growth and higher mix of platform, cloud subscription and managed
services revenue compared to professional services revenue.

Although the FireEye Products business revenue is included in discontinued
operations for the three months ended March 31, 2021, indirect overhead costs
are not allocated to the discontinued operations as they are not direct costs of
the FireEye Product business, resulting in a decrease in gross margins.

Functionnary costs


Our operating expenses consist of research and development, sales and marketing
and general and administrative expenses. Personnel costs are the most
significant component of operating expenses and consist of salaries, benefits,
bonuses, stock-based compensation and, with regard to sales and marketing
expense, sales commissions. Operating expenses also include allocated overhead
costs consisting of certain facilities, depreciation and information technology
costs.

Operating expenses from continuing operations include the total cost of resources shared by Beggar solutions and the FireEye Products business. We are reimbursed for the cost of shared resources associated with supporting the FireEye Products business under

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Transition Services Agreement (“TSA”). These costs are not included in operating expenses and are instead included in other income and expenses.


•Research and development. Research and development expense consists primarily
of personnel costs and allocated overhead. Research and development expense also
includes certain costs associated with delivering our threat intelligence
through our Mandiant Advantage platform that were included in cost of goods sold
before the Mandiant Advantage platform became generally available. We expect
research and development expense to increase in terms of absolute dollars and
slightly decrease as a percentage of total revenue.

•Sales and marketing. Sales and marketing expense consists primarily of
personnel costs, incentive commission costs and allocated overhead. Commission
costs are capitalized and amortized over the expected period of benefit, taking
into consideration the pattern of transfer to which the asset relates and the
expected renewal period. When commissions paid for initial contracts are higher
than those paid for renewal contracts, the initial commissions are not
commensurate and as such, are recognized over the expected period of benefit,
which we generally estimate to be four years. Renewal commissions are generally
amortized over the renewal period.

Sales and marketing expense also includes costs for market development programs,
promotional and other marketing activities, travel, and outside consulting
costs. These costs are recognized as incurred. We expect sales and marketing
expense to increase in absolute dollars and decrease slightly as a percentage of
total revenue.

•General and administrative. General and administrative expense consists of
personnel costs, professional service costs and allocated overhead. General and
administrative personnel include our executive, finance, human resources,
facilities and legal organizations. Professional service costs consist primarily
of legal, auditing, accounting and other consulting costs. We expect general and
administrative expense to remain relatively flat in terms of absolute dollars
and decrease as a percentage of total revenue.

•Restructuring Charges. In the fiscal years 2021 and 2020, we implemented
restructuring plans designed to align our resources with the strategic
initiatives of the business. These restructuring plans resulted in a reduction
of our total workforce as well as the exiting and downsizing of certain real
estate facilities, including the decommissioning of our Milpitas, California
office space and relocation of our corporate headquarters to Reston, Virginia,
and the impairment of certain assets. The expenses incurred primarily consisted
of employee severance charges and other termination benefits, as well as real
estate and related fixed asset charges for the consolidation or exiting of
certain leased facilities.

interest income


Interest income consists of interest earned on our cash and cash equivalent and
investment balances. We have historically invested our cash in money-market
funds and other short-term, high quality securities. We expect interest income
to vary each reporting period depending on our average cash and cash equivalent
and investment balances during the respective reporting periods, types and mix
of investments and market interest rates.

Interest charges


Interest expense consists primarily of interest at the stated rate (coupon) and
amortization of discounts and issuance costs relating to our convertible notes.
We expect interest expense to decrease as a result of the expected repurchase of
our Series B Notes in June of 2022 as well as due to the adoption of ASU No.
2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own
Equity as of January 1, 2022 as described in Note 1 to the accompanying
condensed consolidated financial statements.

Other income, net


Other income, net, includes gains or losses on the disposal of fixed assets,
gains or losses from our equity-method investment, gains or losses on the
extinguishment of convertible notes, foreign currency re-measurement gains and
losses and foreign currency transaction gains and losses. We expect other
income, net, to fluctuate primarily as a result of foreign exchange rate
movements.

Provision for (benefit from) income taxes


Provision for (benefit from) income taxes relates primarily to income taxes
payable in foreign jurisdictions where we conduct business, withholding taxes,
and state income taxes in the United States. The provision is offset by tax
benefits primarily related to the reversal of valuation allowances previously
established against our deferred tax assets. Should the tax benefits exceed the
provision, then a net tax benefit from income taxes is reflected for the period.
Income in certain countries may be taxed at statutory tax rates that are lower
than the U.S. statutory tax rate. As a result, our overall effective tax rate
over the long-term may be lower than the U.S. federal statutory tax rate due to
net income being subject to foreign income tax rates that are lower than the
U.S. federal statutory rate.

Net profit (loss) from discontinued operations


As more fully described in Note 2 to the accompanying condensed consolidated
financial statements, on October 8, 2021, we completed the sale of the FireEye
Products business and received approximately $1.2 billion in cash. As a result,
the historical results

                                       37
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operations of the FireEye Products business have been included in discontinued operations in our condensed consolidated financial statements.

Operating results

The following table summarizes our results of operations for the periods presented and as a percentage of our total revenues for those periods. Comparison of results from period to period is not necessarily indicative of results in future periods.

Three months completed March, 31st,

                                                                    2022                                        2021
                                                                             % of total                               % of total
                                                        Amount                 Revenue              Amount              Revenue
                                                                                (Dollars in thousands)
Revenue:
Platform, cloud subscription and managed services  $       57,629                    44  %       $  55,999                    49  %
Professional services                                      72,515                    56             58,689                    51
Total revenue                                             130,144                   100            114,688                   100
Cost of revenue:
Platform, cloud subscription and managed services          30,121                    23             26,613                    23
Professional services                                      42,081                    32             32,472                    28
Total cost of revenue                                      72,202                    55             59,085                    52
Total gross profit                                         57,942                    45             55,603                    48
Operating expenses:
Research and development                                   44,461                    34             41,905                    37
Sales and marketing                                        69,409                    53             61,213                    53
General and administrative                                 32,413                    25             25,351                    22
Restructuring charges                                       1,040                     1                  -                     -
Total operating expenses                                  147,323                   113            128,469                   112
Operating loss                                            (89,381)                  (69)           (72,866)                  (64)
Interest income                                             1,751                     1              1,644                     1
Interest expense                                           (4,314)                   (3)           (14,624)                  (13)
Other income, net                                             719                     1                571                     -
Loss before income taxes from continuing
operations                                         $      (91,225)                  (70)         $ (85,275)                  (74)
Provision for income taxes                                    789                     1              1,180                     1
Loss from continuing operations                    $      (92,014)                  (71)         $ (86,455)                  (75)
Net income from discontinued operations, net of
income taxes                                                    -                     -             35,809                    31
Net loss                                           $      (92,014)                  (71) %       $ (50,646)                  (44) %



                                       38
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Comparison of the three months ended March 31, 2022 and 2021

Continuing operations

Revenue

                                                              Three Months Ended March 31,
                                                      2022                                      2021                                Change
                                                               % of Total                              % of Total
                                          Amount                Revenue              Amount             Revenue             Amount              %
                                                                                  (Dollars in thousands)
Revenue:
Platform, cloud subscription and
managed services                     $       57,629                   44  %       $  55,999                   49  %       $  1,630                3  %
Professional services                        72,515                   56             58,689                   51            13,826               24
Total revenue                        $      130,144                  100  %       $ 114,688                  100  %       $ 15,456               13  %

Revenue by geographic region:
U.S.                                 $       85,350                   66  %       $  77,796                   68  %       $  7,554               10  %
EMEA                                         21,122                   16             17,017                   15             4,105               24
APAC                                         14,128                   11             11,704                   10             2,424               21
Other                                         9,544                    7              8,171                    7             1,373               17
Total revenue                        $      130,144                  100  %       $ 114,688                  100  %       $ 15,456               13  %


Platform, cloud subscription and managed services revenue increased by $1.6
million, or 3%, during the three months ended March 31, 2022 compared to the
three months ended March 31, 2021. The increase in platform, cloud subscription
and managed services revenue reflected increased recognition of deferred revenue
associated with sales of the threat intelligence and security validation modules
of the Mandiant Advantage platform and our Managed Defense managed security
service, partially offset by a decrease in up-front revenue recognized on our
on-premise security validation solution, which was recognized ratably during the
three months ended March 31, 2022.

Professional services revenue increased by $13.8 million, or 24%, during the
three months ended March 31, 2022 compared to the three months ended March 31,
2021. The increase was primarily driven by an increase in number of engagements
enabled by an increase in professional services personnel and an increase in
chargeability and billable hours as compared to the same period in 2021.

Our international revenue increased $7.9 million, or 21%, during the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
The increase primarily reflects an increase in the number of professional
services engagements in all international regions compared to prior periods as
well as slight growth in sales of our platform, cloud subscription and managed
services.

Revenue Cost and Gross Margin

                                                            Three Months Ended March 31,
                                                     2022                                    2021                                Change
                                                               Gross                                 Gross
                                          Amount               Margin             Amount             Margin            Amount               %
                                                                                (Dollars in thousands)
Cost of revenue:
Platform, cloud subscription and
managed services                     $      30,121                              $ 26,613                              $  3,508               13  %
Professional services                       42,081                                32,472                                 9,609               30
Total cost of revenue                $      72,202                              $ 59,085                              $ 13,117               22  %
Gross margin:
Platform, cloud subscription and
managed services                                                    48  %                                 52  %
Professional services                                               42  %                                 45  %
Total gross margin                                                  45  %                                 48  %


The cost of platform, cloud subscription and managed services revenue increased
by $3.5 million, or 13%, during the three months ended March 31, 2022 compared
to the three months ended March 31, 2021. The increase in cost of platform,
cloud
                                       39
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subscription and managed services revenue was primarily due to an increase of
$3.0 million in payroll costs due to an increase in headcount as well as annual
salary increases, an increase of $0.9 million pertaining to hosting services, an
increase of $0.8 million in stock-based compensation, an increase of
$0.4 million in consulting costs and an increase of$0.3 million in software
costs, partially offset by a $0.8 million decrease in shared services, such as
facility and IT support costs from our restructuring and cost optimization
plans.

The cost of professional services revenue increased by $9.6 million, or 30%,
during the three months ended March 31, 2022 compared to the three months ended
March 31, 2021. The increase in cost of professional services revenue was
primarily due to an increase of $7.4 million in payroll due to an increase in
headcount as well as annual salary increases, an increase of $2.2 million in
stock-based compensation expense, an increase of $1.5 million related to
technology fees and fleet support pertaining to our reseller agreement with
Trellix, which was not in place during the three months ended March 31, 2021, an
increase of $0.6 million in travel expense to support the increase in customer
engagements and an increase of $0.4 million in consulting costs, partially
offset by a $2.4 million decrease in shared services, such as facility and IT
support costs from our restructuring and cost optimization plans.

Gross margin percentage decreased by 3 percentage points in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Operating Expenses

                                                               Three Months Ended March 31,
                                                       2022                                      2021                                 Change
                                                                % of Total                              % of Total
                                           Amount                Revenue              Amount             Revenue             Amount               %
                                                                                    (Dollars in thousands)
Operating expenses:
Research and development              $       44,461                   34  %       $  41,905                   37  %       $  2,556                 6  %
Sales and marketing                           69,409                   53             61,213                   53             8,196                13
General and administrative                    32,413                   25             25,351                   22             7,062                28
Restructuring charges                          1,040                    1                  -                    -             1,040               100
Total operating expenses              $      147,323                  113  %       $ 128,469                  112  %       $ 18,854                15  %
Includes stock-based compensation
expense of:
Research and development              $        9,194                               $   8,423
Sales and marketing                           10,631                                   9,890
General and administrative                     7,530                                   7,088

Total                                 $       27,355                               $  25,401


Research and Development

Research and development expense increased by $2.6 million, or 6%, during the
three months ended March 31, 2022 compared to the three months ended March 31,
2021. The increase was primarily due to an increase of $2.4 million in employee
costs due to an increase in headcount as well as annual salary increases, an
increase of $2.9 million in consulting expenses and an increase of $0.8 million
in stock-based compensation expense, partially offset by a $3.9 million decrease
in shared services, such as facility and IT support costs from our restructuring
and cost optimization plans.

Sales and Marketing

Sales and marketing expense increased by $8.2 million, or 13%, during the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
The increase was primarily due to an increase of $5.7 million in commission and
employee expenses due to an increase in headcount, and an increase of
$4.5 million in marketing program expense and company rebranding costs,
partially offset by a $2.1 million decrease in intangible amortization.

General and administrative


General and administrative expense increased by $7.1 million, or 28%, during the
three months ended March 31, 2022 compared to the three months ended March 31,
2021. The increase was primarily due to an increase of $4.6 million in
consulting and professional services expense and an increase of $2.3 million in
employee costs primarily due to retention bonuses and annual salary increases.

                                       40
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Restructuring charges


During the three months ended March 31, 2022, we incurred restructuring charges
of approximately $1.0 million, which primarily related to the provision for
restructuring charges as well as certain facilities exit costs and right-of-use
asset write-offs. We did not incur restructuring charges during the three months
ended March 31, 2021.

Interest Income

                                  Three Months Ended March 31,                  Change
                                        2022                   2021        Amount        %
                                                 (Dollars in thousands)
         Interest income   $        1,751                    $ 1,644      $    107       7  %


Interest income increased for the three months ended March 31, 2022 compared to
the three months ended March 31, 2021, due primarily to a higher rate of return
on balances in our cash and cash equivalents and investments.

Interest Expense

                                  Three Months Ended March 31,                   Change
                                       2022                    2021         Amount         %
                                                  (Dollars in thousands)
      Interest expense     $        4,314                   $ 14,624      $ (10,310)      (71) %


Interest expense decreased for the three months ended March 31, 2022 compared to
the three months ended March 31, 2021 primarily due to the adoption of ASU
2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own
Equity, which eliminates the debt discount amortization in 2022. Interest
expense pertains primarily to interest accrued as well as the amortization of
issuance costs related to our convertible notes.

Other Income, Net

                                    Three Months Ended March 31,                    Change
                                          2022                     2021       Amount         %
                                                   (Dollars in thousands)
      Other income, net    $           719                        $ 571      $    148       26  %


Other income, net, increased for the three months ended March 31, 2022 compared
to the three months ended March 31, 2021 primarily due to billing of services
under the TSA related to the sale of the FireEye Products business. We recognize
any difference between the cost to support the TSA and any billings for our
services rendered under the TSA in other income, net.

Provision for income taxes

                                              Three Months Ended March 31,
                                            2022                          2021
                                                 (Dollars in thousands)
         Provision for income taxes    $      789                      $ 1,180
         Effective tax rate                  (0.9)  %                     (1.4) %


The provision for income taxes decreased for the three months ended March 31,
2022 compared to the three months ended March 31, 2021. The decrease in the
provision for income taxes for the three months ended March 31, 2022 was
primarily due to lower foreign taxes and a decrease in unfavorable tax
adjustments from business combinations in the three months ended March 31, 2022
compared to the three months ended March 31, 2021.

Discontinued operations

                                       41
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                                                   Three Months Ended March 31,                     Change
                                                      2022              2021             Amount                 %
                                                                          (Dollars in thousands)
Net income from discontinued operations           $       -          $ 35,809          $ (35,809)                (100) %


On October 8, 2021, we completed the sale of the FireEye Products business and
received approximately $1.2 billion in cash. As a result, the historical results
of operations for the FireEye Products business have been included within
discontinued operations in our condensed consolidated financial statements. See
Note 2, contained in the "Notes to Condensed Consolidated Financial Statements"
in Part I, Item I of this Quarterly Report on Form 10-Q for additional
information.

There was no net income from discontinued operations during the three months
ended March 31, 2022 as the sale of the FireEye Products business was completed
in the fourth quarter of 2021.


Cash and capital resources

                                                          As of
                                         March 31, 2022       December 31, 2021
                                                     (In thousands)

Cash and cash equivalents $771,967 $1,154,458

          Short-term investments        $     1,359,105      $        1,039,339


                                                                      Three Months Ended March 31,
                                                                        2022                  2021
                                                                             (In thousands)
Net cash used in operating activities - continuing operations    $       (23,335)         $  (15,572)
Net cash provided by operating activities - discontinued
operations                                                                     -              36,433
Net cash provided by (used in) operating activities                      (23,335)             20,861

Net cash used in investing activities – continuing operations (343,357)

           (168,167)
Net cash used in investing activities - discontinued operations                -              (4,392)
Net cash used in investing activities                                   (343,357)           (172,559)
Net cash used in financing activities                                    (15,799)             (7,783)

    Net decrease in cash and cash equivalents                    $      

(382,491) ($159,481)



As of March 31, 2022, our cash and cash equivalents of $772.0 million were held
for working capital, capital expenditures, investment in technology, debt
servicing and business acquisition purposes, of which approximately $87.6
million was held outside of the United States. We consider the undistributed
earnings of our foreign subsidiaries as of March 31, 2022 to be indefinitely
reinvested outside the United States on the basis of estimates that future
domestic cash generation will be sufficient to meet future domestic cash needs
and our plan for reinvestment of our foreign subsidiaries' undistributed
earnings.

On August 4, 2021we announced the acquisition of Intrigue, a private company, for consideration of approximately $12.3 million in liquid.


On May 29, 2021, we entered into an Asset Purchase Agreement, pursuant to which
we agreed to sell the FireEye Products business to a consortium led by STG in
exchange for total cash consideration of $1.2 billion and assumption of certain
liabilities of the FireEye Products business as specified in the Asset Purchase
Agreement. The proceeds were received when the transaction closed on October 8,
2021.

Our principal sources of liquidity are existing cash and cash equivalents and
short-term investments and any cash inflow from operations, which we believe
will be sufficient to meet our anticipated cash needs for at least the next 12
months. While we have experienced delays in collections which we attribute to
the COVID-19 pandemic, we believe we will be able to manage liquidity to meet
our anticipated cash needs for at least the next 12 months. Our future capital
requirements will depend on many factors, including our growth rate, the timing
and extent of spending to support development efforts, the efficiency of our
marketing and sales activities, the introduction of new and enhanced product and
service offerings, the cost of any future acquisitions of technology or
businesses, and the continuing market acceptance of our services. In the event
that additional financing is required from outside

                                       42
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sources, we may not be able to raise such financing on terms acceptable to us or
at all. If we are unable to raise additional capital when desired, our business,
operating results and financial condition would be adversely affected.

Under the terms of the Merger Agreement, we have agreed to various covenants and
agreements, including, among others, agreements to conduct our business in the
ordinary course during the period between the execution of the Merger Agreement
and the effective time of the Merger. Outside of certain limited exceptions, we
may not take, authorize, commit, resolve, or agree to do certain actions without
Google's consent, including: acquiring businesses and disposing of significant
assets, making capital expenditures in excess of those as set forth in a capital
expenditure budget provided to Google prior to execution of the Merger
Agreement, issuing additional capital stock or securities convertible into
capital stock, or incurring additional indebtedness. We do not believe these
restrictions will prevent us from meeting our ongoing operating expenses,
working capital needs, or capital expenditure requirements.

Operational activities


During the three months ended March 31, 2022, our operating activities used cash
of $23.3 million. We incurred a net loss of $92.0 million, which included net
non-cash expenses of $57.3 million, primarily consisting of stock-based
compensation charges, depreciation and amortization expense and non-cash
interest expense related to our convertible notes. Our net change in operating
assets and liabilities provided cash of $11.4 million, which primarily related
to cash sourced from a reduction in accounts receivable of $42.1 million due to
collections of billings made near the end of the prior year and an increase in
accounts payable and accrued liabilities of $2.5 million, partially offset by a
decrease in accrued compensation of $18.9 million primarily due to payments of
prior year commissions and a reduction of commission rates pertaining to
existing customer contract renewals, a decrease in deferred revenue of $10.3
million, a decrease in other long-term liabilities of $2.6 million and an
increase in prepaid expenses and other assets of $1.4 million.

During the three months ended March 31, 2021, our operating activities from
continuing operations used cash of $15.6 million. We incurred a loss from
continuing operations of $86.5 million, which included net non-cash expenses of
$68.4 million, primarily consisting of stock-based compensation charges,
depreciation and amortization expense and non-cash interest expense related to
our convertible notes. Our net change in operating assets and liabilities
provided cash of $2.5 million, primarily related to cash sourced from a
reduction in accounts receivable of $13.4 million due to increased collections,
an increase in accounts payable and accrued liabilities of $8.0 million and a
decrease in prepaid expenses and other assets of $4.5 million, partially offset
by a decrease in accrued compensation of $12.4 million, a decrease in other
long-term liabilities of $7.1 million and a decrease in deferred revenue of $4.0
million. Cash provided by operating activities from discontinued operations was
$36.4 million.

Investing Activities

Cash used in investing activities during the three months ended March 31, 2022
was $343.4 million. This was primarily due to $333.9 million net spending on
short-term investments as purchases exceeded maturities and sales and $9.0
million used for capital expenditures to purchase property and equipment.

Cash used in investing activities from continuing operations during the three
months ended March 31, 2021 was $168.2 million. This was primarily due to $163.0
million net spending on short-term investments as purchases exceeded maturities
and sales and $5.6 million used for capital expenditures to purchase property
and equipment. Cash used in investing activities from discontinued operations
was $4.4 million.

Financing Activities

During the three months ended March 31, 2022, financing activities used $15.8
million in cash, primarily for prior year share repurchases of $11.5 million
that settled in the current year and payment related to shares withheld for
taxes of $5.8 million, partially offset by $1.5 million received from exercises
of employee stock options.

During the three months ended March 31, 2021, financing activities used $7.8
million in cash, primarily for payment related to shares withheld for taxes of
$8.8 million, partially offset by $1.1 million received from exercises of
employee stock options.

Contractual obligations and commitments


There have been no significant changes to our contractual obligations and
commitments discussed in our Annual Report on Form 10-K for the year ended
December 31, 2021 except for those disclosed in Note 10 Convertible Senior Notes
and Note 11 Commitments and Contingencies contained in the "Notes to Condensed
Consolidated Financial Statements" in Part I, Item I of this Quarterly Report on
Form 10-Q.

Off-balance sheet arrangements

From March 31, 2022we had no relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, that were established to facilitate off-balance sheet arrangements or for other purposes.

                                       43
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Use of estimates


Our condensed consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles. The preparation of these
condensed consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
expenses, and related disclosures. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable under
the circumstances. We evaluate our estimates and assumptions on an ongoing
basis. Actual results may differ from these estimates. To the extent that there
are material differences between these estimates and our actual results, our
future financial statements will be affected.

Summary of Significant Accounting Policies

Discontinued operations


If the disposal of the component of an entity (or group of components)
represents a strategic shift that has (or will have) a major effect on an
entity's operations and financial results, it meets the criteria for
discontinued operations. The results of discontinued operations, as well as any
gain or loss on the disposal transaction, are presented separately, net of tax,
from the results of continuing operations for all periods presented. The
expenses included in the results of discontinued operations are the direct
operating expenses incurred by the discontinued segment that may be reasonably
segregated from the costs of the ongoing operations of the Company. The
operating results for historical periods have been included in discontinued
operations in our condensed consolidated statements of operations. The condensed
consolidated statement of cash flows presents combined cash flows from
continuing operations with cash flows from discontinued operations within each
cash flow statement category for all historical periods presented.

See Note 2, “Discontinued Operations,” contained in “Notes to Condensed Consolidated Financial Statements” in Part I, Item I of this Quarterly Report on Form 10-Q for additional information.

Recent accounting pronouncements


See Note 1, "Description of Business and Summary of Significant Accounting
Policies," contained in the "Notes to Condensed Consolidated Financial
Statements" in Part I, Item I of this Quarterly Report on Form 10-Q for a full
description of the recent accounting pronouncements and our expectation of their
impact, if any, on our results of operations and financial conditions.


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