10-QPeriod: Q1 FY2012

Fortinet, Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 7, 2012For Securities:FTNT

Summary

Fortinet, Inc. reported solid revenue growth of 26% year-over-year for the first quarter of 2012, reaching $117.2 million. This growth was driven by increases in both product and services revenue, with services showing a particularly strong 28% increase. The company also demonstrated healthy operational cash flow, increasing by 21% to $48.5 million. This financial performance reflects successful execution of their global sales strategy and ongoing product innovation. Fortinet ended the quarter with a strong cash position of $600.3 million, including cash, cash equivalents, and investments, up from the previous quarter. Deferred revenue also saw a significant increase of $19.7 million, indicating strong future revenue potential from subscription and support services. The company continues to invest in research and development and sales and marketing, with operating expenses growing by 29%, primarily due to increased headcount to support growth initiatives.

Financial Highlights

48 data points
Beta

Revenue

$117.25M

73.5% Gross Margin

Net Income

$14.17M

12.1% Net Margin

EPS (Diluted)

$0.02

Total Assets

$788.44M

Cash & Equivalents

$74.78M

Free Cash Flow

$48.52M

Financial Statements
Beta
Revenue$117.25M
Cost of Revenue$31.04M
Gross Profit$86.20M
R&D Expenses$19.67M
Operating Expenses$67.49M
Operating Income$18.71M
Net Income$14.17M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)780.05M
Shares Outstanding (Diluted)828.75M

Key Highlights

  • 1Total revenue increased by 26% to $117.2 million in Q1 2012 compared to Q1 2011.
  • 2Product revenue grew by 32% and Services revenue by 28% year-over-year.
  • 3Operating cash flow increased by 21% to $48.5 million in Q1 2012.
  • 4Total cash, cash equivalents, and investments reached $600.3 million as of March 31, 2012.
  • 5Deferred revenue increased by $19.7 million to $314.6 million, indicating strong future revenue visibility.
  • 6The number of deals exceeding $100,000 increased significantly to 153 in Q1 2012 from 111 in Q1 2011.
  • 7Research and development expenses increased by 36% to support product innovation and enhancements.

Frequently Asked Questions

Fortinet reported total revenue of $117.2 million for the first quarter of 2012, representing a 26% increase compared to $93.3 million in the same period of 2011. This growth was driven by both product and services revenue.

As of March 31, 2012, Fortinet had $600.3 million in cash, cash equivalents, and investments, an increase from $538.7 million at December 31, 2011. The company also generated $48.5 million in cash flow from operating activities during the quarter.

The increase in deferred revenue to $314.6 million from $294.8 million at the end of 2011 is a positive indicator. Deferred revenue primarily represents unearned revenue from subscription and support service contracts, which provides Fortinet with good visibility into future revenue recognition.

Fortinet is investing in its future by increasing spending in research and development (up 36% year-over-year) to drive product innovation and enhancements, and in sales and marketing (up 28% year-over-year) to expand its sales infrastructure and market reach. This investment is reflected in an overall 29% increase in operating expenses, largely due to increased headcount.