10-QPeriod: Q1 FY2011

Fortinet, Inc. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:FTNT

Summary

Fortinet, Inc. reported strong financial performance for the first quarter of 2011, with total revenue increasing by 33.6% year-over-year to $93.3 million. This growth was driven by a significant surge in product revenue (up 48.2%) and solid growth in services revenue (up 26.0%). The company also demonstrated improved operational efficiency, with operating expenses growing at a slower pace than revenue, leading to a substantial increase in operating income and operating margin. The company highlighted increased sales to enterprise and service provider customers, particularly in the high-end product segment, and expressed confidence in its continued growth trajectory. Key financial highlights include a robust increase in gross margin to 74.9% and a healthy operating cash flow of $40.2 million. The company's cash, cash equivalents, and investments position strengthened significantly, reaching $432.7 million. Deferred revenue also saw a healthy increase, indicating strong future revenue visibility. Despite ongoing litigation and market risks, Fortinet's Q1 2011 results showcase robust top-line growth and improving profitability.

Financial Highlights

27 data points
Beta

Revenue

$93.27M

74.9% Gross Margin

Net Income

$13.59M

14.6% Net Margin

EPS (Diluted)

$0.02

Cash & Equivalents

$68.98M

Free Cash Flow

$40.18M

Financial Statements
Beta
Revenue$93.27M
Cost of Revenue$23.42M
Gross Profit$69.85M
R&D Expenses$14.42M
Operating Expenses$52.41M
Operating Income$17.45M
Net Income$13.59M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)751.54M
Shares Outstanding (Diluted)814.32M

Key Highlights

  • 1Total revenue for Q1 2011 grew 33.6% year-over-year to $93.3 million.
  • 2Product revenue saw a significant increase of 48.2% year-over-year, reaching $40.2 million.
  • 3Services revenue increased by 26.0% year-over-year to $48.7 million.
  • 4Gross margin improved to 74.9% from 72.2% in the prior year period.
  • 5Operating income more than doubled, increasing to $17.4 million from $6.7 million in Q1 2010.
  • 6Cash, cash equivalents, and investments grew to $432.7 million.
  • 7Operating cash flow was strong at $40.2 million.

Frequently Asked Questions

Fortinet reported a substantial increase in total revenue, which grew by 33.6% year-over-year to $93.3 million in the first quarter of 2011. This growth was primarily driven by a 48.2% increase in product revenue and a 26.0% increase in services revenue.

The company demonstrated strong profitability improvements. Gross margin increased to 74.9% from 72.2% in Q1 2010. Operating income more than doubled, reaching $17.4 million, and operating margin improved significantly to 18.7%.

Fortinet's financial health is robust. The company's total cash, cash equivalents, and investments increased to $432.7 million as of March 31, 2011. Furthermore, cash flow from operating activities was strong, providing $40.2 million during the first quarter of 2011.

Fortinet adopted new revenue recognition rules effective January 1, 2011. The company stated that the adoption of these new rules contributed approximately $3.3 million to revenue growth in Q1 2011 and is expected to result in a decline in 'ratable product and services revenue' over time.