(pressebox) Sunnyvale, 26.01.2011 – Fortinet (NASDAQ: FTNT) – a leading network security provider and worldwide leader of unified threat management (UTM) solutions – today announced financial results for the fourth quarter and full year ended December 31, 2010.
Financial Highlights for the Fourth Quarter of 2010
– Billings(1): Total billings were $111.0 million for the fourth quarter of 2010, an increase of 35% compared to the fourth quarter of 2009. We define billings, a non-GAAP financial measure, as revenue recognized during the period plus the change in deferred revenue from the beginning to the end of the period.
– Revenue: Total revenue was $93.6 million for the fourth quarter of 2010, an increase of 32% compared to the fourth quarter of 2009. Within total revenue, product revenue was $41.1 million, an increase of 40% compared to the fourth quarter of 2009. Services revenue was $47.9 million, an increase of 28% compared to the fourth quarter of 2009. Ratable product and services revenue was $4.6 million, an increase of 17% compared to the fourth quarter of 2009.
– Deferred Revenue: Deferred revenue was $252.6 million as of December 31, 2010, an increase of 25% compared to deferred revenue as of December 31, 2009, and up $17.4 million from September 30, 2010.
– Cash and Cash Flow: As of December 31, 2010, cash, cash equivalents and investments were $387.5 million, compared to $352.3 million as of September 30, 2010. Cash flow from operations was $31.4 million for the fourth quarter of 2010, compared to $16.2 million for the fourth quarter of 2009. In the fourth quarter of 2010, free cash flow was $30.5 million, compared to $15.9 million for the fourth quarter of 2009. We define free cash flow, a non-GAAP financial measure of liquidity, as net cash provided by operating activities less capital expenditures.(1)
– GAAP Operating Income: GAAP operating income was $20.7 million for the fourth quarter of 2010, representing a GAAP operating margin of 22% and an increase of 178% compared to the fourth quarter of 2009.
– Non-GAAP(1) Operating Income: Non-GAAP operating income was $23.2 million for the fourth quarter of 2010, representing a non-GAAP operating margin of 25% and an increase of 105% compared to the fourth quarter of 2009. Non-GAAP operating income and operating margin exclude stock-based compensation expense and, for the fourth quarter of 2009, non-cash asset acquisition related write-offs. Non-cash asset acquisition related write-offs consist of intangible assets that have no future value but exclude ongoing amortization of intangible assets that provide an ongoing benefit to our recurring operations.
– GAAP Net Income and EPS: GAAP net income was $16.1 million for the fourth quarter of 2010, based on a 23% tax rate for the quarter. The fourth quarter rate brings us to a 27% tax rate for the year. This compares to GAAP net income of $43.9 million for the fourth quarter of 2009 (which includes a $37.8 million tax benefit from the reversal of our valuation allowance). GAAP EPS was $0.20 for the fourth quarter of 2010, based on 80.3 million weighted-average diluted shares outstanding, compared to $0.62 for the fourth quarter of 2009, based on 70.8 million weighted-average diluted shares outstanding.
– Non-GAAP(1) Net Income and EPS: Non-GAAP net income was $17.3 million for the fourth quarter of 2010, based on a 27% tax rate for the quarter. The fourth quarter rate brings us to a 32% tax rate for the year. Non-GAAP net income for the fourth quarter of 2009 was $9.2 million, based on a 21% tax rate. Non-GAAP EPS was $0.22 for the fourth quarter of 2010 based on 80.3 million weighted-average diluted shares outstanding, compared to $0.13 for the fourth quarter of 2009 based on 70.8 million weighted-average diluted shares outstanding. Non-GAAP EPS for the fourth quarter of 2010 included a benefit of $0.03 associated with a reduction in our annual non-GAAP tax rate as discussed in our full year results section below. Non-GAAP net income excludes stock-based compensation expense, non-cash asset acquisition related write-offs (for the fourth quarter of 2009) and the related tax effects. Non-GAAP EPS for the fourth quarter of 2009 was based on non-GAAP net income of $9.2 million, based on a 21% tax rate.
Full Year 2010 Results
– Billings: Total billings were $375.4 million for fiscal 2010, an increase of 33% compared to fiscal 2009.
– Revenue: Total revenue was $324.7 million for fiscal 2010, an increase of 29% compared to fiscal 2009. Within total revenue, product revenue was $135.1 million for fiscal 2010, an increase of 37% compared to fiscal 2009, and services revenue was $172.0 million for fiscal 2010, an increase of 24% compared to fiscal 2009. Ratable product and services revenue was $17.5 million, an increase of 23% compared to fiscal 2009.
– Cash and Cash Flow: As of December 31, 2010, cash, cash equivalents and investments were $387.5 million, compared to $260.3 million as of December 31, 2009. Cash flow from operations was $103.4 million for fiscal 2010, compared to $62.0 million for fiscal 2009. Free cash flow was $99.6 million, compared to $57.4 million for fiscal 2009. We define free cash flow, a non-GAAP financial measure of liquidity, as net cash provided by operating activities less capital expenditures.1
– GAAP Operating Income: GAAP operating income was $55.3 million for fiscal 2010, representing a GAAP operating margin of 17% and an increase of 118% compared to fiscal 2009.
– Non-GAAP(1) Operating Income: Non-GAAP operating income was $64.7 million for fiscal 2010, representing a non-GAAP operating margin of 20% and an increase of 84% compared to fiscal 2009.
– GAAP Net Income and EPS: GAAP net income was $41.2 million for fiscal 2010, compared to $50.9 million for 2009 (which includes a $37.8 million tax benefit from the reversal of our valuation allowance). GAAP EPS was $0.53 on 78.2 million weighted-average diluted shares outstanding for fiscal 2010, compared with $0.78 on 65.2 million weighted-average diluted shares outstanding for fiscal 2009.
– Non-GAAP(1) Net Income and EPS: Non-GAAP net income was $44.6 million for fiscal 2010, based on a 32% tax rate. The non-GAAP tax rate for fiscal 2010 was lower than the 35% non-GAAP tax rate anticipated for fiscal 2010 due to the utilization of various R&D tax credits, including the reinstated Federal R&D Credit. Non-GAAP net income for fiscal 2009 was $30.5 million, based on an 18% tax rate. Non-GAAP EPS was $0.57 on 78.2 million weighted-average diluted shares outstanding for fiscal 2010, compared to $0.47 on 65.2 million weighted-average diluted shares outstanding for fiscal 2009.
Management Commentary
Ken Xie, founder, president and chief executive officer of Fortinet, stated: „2010 was an exceptional year for Fortinet, as we demonstrated our ability to successfully execute our global go to market strategy and increase market share. Our ongoing emphasis on product innovation, along with the build out of our sales coverage, continues to enable us to both attract new customers and maintain and grow business with our existing customers. We remain focused on strengthening and expanding our solution offering through new products and enhancements to help keep our competitive edge and meet the network security needs of large enterprises worldwide.“
Ken Goldman, chief financial officer of Fortinet, stated: „We are very pleased with our strong finish to our first year as a public company, with fourth quarter and full year results exceeding our expectations across all of our key operating metrics. With a globally diversified business model, cutting edge technology and a healthier economic environment, we believe we are well positioned to continue to deliver solid growth in billings, revenues, operating margins and cash flow. We remain committed to stepping up our investments in our sales and R&D teams in order to ensure we can capitalize on the growth opportunities in the UTM and other complimentary markets.“
Conference Call Details
Fortinet hosted a conference call on January 25, 2011, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the Company’s financial results. 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 February 8, 2011, by dialing (800) 642-1687 (domestic) or (706) 645-9291 (international). The replay passcode is 36006860.
Following Fortinet’s earnings conference call, the Company hosted 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 to ask more detailed product and financial questions. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and 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 February 8, 2011 at (800) 642-1687 (domestic) or (706) 645-9291 (international). The replay passcode is 36007444.
(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.“