10-QPeriod: Q3 FY2012

Fortinet, Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 30, 2012For Securities:FTNT

Summary

Fortinet, Inc. reported strong year-over-year revenue growth for both the three and nine months ended September 30, 2012. Total revenue increased by 17% to $136.3 million for the quarter and by 22% to $382.5 million for the nine months. This growth was driven by increases in both product revenue (up 19% and 27% respectively) and services revenue (up 21% and 24% respectively). The company also demonstrated healthy operational cash flow, generating $133.6 million for the nine months ended September 30, 2012, a 21% increase year-over-year. The balance sheet reflects a significant increase in cash, cash equivalents, and investments, reaching $690.3 million, up $151.6 million from the end of the prior year. Deferred revenue also saw a substantial increase of $45.2 million, indicating strong future revenue potential from services contracts.

Financial Highlights

49 data points
Beta

Revenue

$136.27M

72.3% Gross Margin

Net Income

$17.21M

12.6% Net Margin

EPS (Diluted)

$0.02

Total Assets

$913.27M

Cash & Equivalents

$75.47M

Free Cash Flow

$40.77M

Financial Statements
Beta
Revenue$136.27M
Cost of Revenue$37.81M
Gross Profit$98.46M
R&D Expenses$20.50M
Operating Expenses$72.69M
Operating Income$25.77M
Net Income$17.21M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)793.75M
Shares Outstanding (Diluted)833.96M

Key Highlights

  • 1Total revenue for Q3 2012 was $136.3 million, a 17% increase year-over-year.
  • 2Nine-month revenue reached $382.5 million, a 22% increase year-over-year.
  • 3Product revenue grew 19% and services revenue grew 21% in Q3 2012 compared to the prior year.
  • 4Operating cash flow for the nine months was $133.6 million, up 21% year-over-year.
  • 5Cash, cash equivalents, and investments increased to $690.3 million as of September 30, 2012.
  • 6Deferred revenue rose to $340.1 million, up $45.2 million from the end of 2011.
  • 7The number of large deals (>$100k) increased significantly, indicating strong enterprise traction.

Frequently Asked Questions

Fortinet reported total revenue of $136.3 million for the three months ended September 30, 2012, representing a 17% increase compared to $116.4 million in the same period of 2011. Both product and services revenue segments contributed to this growth.

As of September 30, 2012, Fortinet held $690.3 million in cash, cash equivalents, and investments, an increase of $151.6 million from December 31, 2011. The company has maintained positive cash flow from operations and believes its current liquidity is sufficient for at least the next 12 months.

The increase in deferred revenue to $340.1 million (up $45.2 million from year-end 2011) is significant because it represents revenue that has been invoiced but not yet recognized. The majority of this balance relates to unearned revenue from subscription and support service contracts, indicating strong future revenue visibility and the health of the company's recurring revenue streams.

Fortinet continues to invest in research and development for new products and enhancements, as well as in sales and marketing to expand its global reach and brand awareness. Operating expenses, particularly in R&D and Sales & Marketing, have increased primarily due to headcount growth to support business expansion. The company also incurred litigation settlement expenses during the period.