Fortinet Reports Strong First Quarter 2014 Financial Results: Billings Grow 26% and Revenues Grow 24% year-over-year

  • Billings of $187.6 million, up 26% year over year1
  • Revenues of $168.9 million, up 24% year over year
  • GAAP diluted net income per share of $0.05
  • Non-GAAP diluted net income per share of $0.111
  • Cash flow from operations of $60.9 million
  • Free cash flow of $49.6 million1
  • Cash, cash equivalents and investments of $888.3 million2, with no debt

 

SUNNYVALE, Calif. - April 23, 2014 - Fortinet® (NASDAQ: FTNT), a global leader in high-performance network security, today announced financial results for the first quarter ended March 31, 2014.

The first quarter marked a strong start to the year, highlighted by billings, revenue, and operating profitability, each of which exceeded expectations, said Ken Xie, founder, chairman, and chief executive officer.  Fortinets business momentum is being driven by our focused execution and the strength, applicability, and breadth of our technology, as evidenced by the demand for recently-introduced products such as the FortiGate-3700D and 1500D high speed, low latency next-generation enterprise data center security appliances. Given the leverage we have seen from recent growth initiatives, we remain committed to investing for growth and delivering security innovation to further extend our market share and leadership position globally.

 

Financial Highlights for the First Quarter of 2014

 

     Billings1: Total billings were $187.6 million for the first quarter of 2014, an increase of 26% compared to $148.5 million in the same quarter of 2013.

 

     Revenue3: Total revenue was $168.9 million for the first quarter of 2014, an increase of 24% compared to $135.8 million in the same quarter of 2013.  Within total revenue, product revenue was $76.8 million, an increase of 32% compared to the same quarter of 2013.  Services and other revenue was $92.2 million, an increase of 18% compared to the same quarter of 2013.

 

     Deferred Revenue: Deferred revenue was $451.3 million as of March 31, 2014, an increase of 20% compared to deferred revenue of $376.4 million as of March 31, 2013, and an increase of $18.7 million from $432.6 million as of December 31, 2013.

 

     Cash and Cash Flow2: As of March 31, 2014, cash, cash equivalents and investments were $888.3 million, compared to $843.0 million as of December 31, 2013. In the first quarter of 2014, cash flow from operations was $60.9 million and free cash flow1 was $49.6 million. Cash flow from operations and free cash flow1 during the first quarter of 2014 included payment to Fortinet of $20.0 million pursuant to a six year mutual covenant-not-to-sue and release agreement.

 

     GAAP Operating Income: GAAP operating income was $12.8 million for the first quarter of 2014, representing a GAAP operating margin of 8%. GAAP operating income was $15.4 million for the same quarter of 2013, representing a GAAP operating margin of 11%.

 

     GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $8.4 million for the first quarter of 2014, based on a 39% effective tax rate for the quarter. This compares to GAAP net income of $12.2 million for the same quarter of 2013, based on a 28% effective tax rate for the quarter.  GAAP diluted net income per share was $0.05 for the first quarter of 2014, based on 168.1 million weighted-average diluted shares outstanding, compared to $0.07 for the same quarter of 2013, based on 167.8 million weighted-average diluted shares outstanding.

 

     Non-GAAP Operating Income1: Non-GAAP operating income was $26.3 million for the first quarter of 2014, representing a non-GAAP operating margin of 16%. Non-GAAP operating income was $25.0 million for the same quarter of 2013, representing a non-GAAP operating margin of 18%.

 

     Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $18.2 million for the first quarter of 2014, based on a 33% effective tax rate for the quarter.  Non-GAAP net income for the same quarter of 2013 was $17.8 million, based on a 33% effective tax rate.  Non-GAAP diluted net income per share was $0.11 for the first quarter of 2014 based on 168.1 million weighted-average diluted shares outstanding, compared to $0.11 for the same quarter of 2013, based on 167.8 million weighted-average diluted shares outstanding.

 

 

1 A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

 

2 During the first quarter of fiscal 2014, the Company repurchased $7.5 million of its common stock under its share repurchase program, all of which was paid in the first quarter of fiscal 2014 except for $0.7 million which was settled and paid in April 2014.

 

3 Beginning in the first quarter of 2014, the Company has combined Ratable and other revenue with Services revenue to present the combined amounts as Services and other revenue in the Condensed Consolidated Statements of Operations. The related Cost of revenue and Gross profit, including prior period amounts, have also been combined to conform to the current period presentation. The Company believes the Ratable and other revenue amounts, including the related Cost of revenue and Gross profit amounts, are not material.

 

Read the Full Press Release (includes financial tables)

 

 

 Conference Call Details

Fortinet will host a conference call today, April 23, 2014, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its financial results.  To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 27164378. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet's website at http://investor.fortinet.com and a replay will be archived and accessible at http://investor.fortinet.com/events.cfm.  A replay of this conference call can also be accessed through April 30, 2014, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 27164378.

Following Fortinet's financial results conference call, the Company will host an additional question-and-answer session at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to provide an opportunity for financial analysts and investors to ask more detailed questions. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 27166356. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and a replay will be archived and available after the call at http://investor.fortinet.com/events.cfm. A replay of this conference call will also be available through April 30, 2014 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 27166356.

 

About Fortinet

Fortinet (NASDAQ: FTNT) is a worldwide provider of network security appliances and a market leader in unified threat management (UTM). Our products and subscription services provide broad, integrated and high-performance protection against dynamic security threats while simplifying the IT security infrastructure. Our customers include enterprises, service providers and government entities worldwide, including the majority of the 2013 Fortune Global 100. Fortinet's flagship FortiGate product delivers ASIC-accelerated performance and integrates multiple layers of security designed to help protect against application and network threats. Fortinet's broad product line goes beyond UTM to help secure the extended enterprise -- from endpoints, to the perimeter and the core, including databases and applications. Fortinet is headquartered in Sunnyvale, Calif., with offices around the world.

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