10-QPeriod: Q2 FY2013

Fortinet, Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 6, 2013For Securities:FTNT

Summary

Fortinet, Inc. (FTNT) reported its financial results for the second quarter and first half of 2013. For the quarter ended June 30, 2013, the company generated $147.4 million in total revenue, a 14% increase year-over-year. Services revenue showed strong growth at 22%, while product revenue grew by 8%. Net income for the quarter was $9.0 million, or $0.05 per diluted share, a decrease from the prior year's $14.0 million, or $0.08 per diluted share. For the six months ended June 30, 2013, total revenue reached $283.2 million, a 15% increase year-over-year. Services revenue again demonstrated robust growth of 22%, while product revenue increased by 8%. Net income for the first half of the year was $21.2 million, or $0.13 per diluted share, down from $28.1 million, or $0.17 per diluted share in the same period of 2012. The company's cash, cash equivalents, and investments increased to $814.4 million. Deferred revenue also grew to $389.7 million, indicating future revenue potential.

Financial Highlights

52 data points
Beta

Revenue

$147.43M

70.4% Gross Margin

Net Income

$8.98M

6.1% Net Margin

EPS (Diluted)

$0.01

Total Assets

$1.09B

Cash & Equivalents

$123.47M

Free Cash Flow

$37.22M

Financial Statements
Beta
Revenue$147.43M
Cost of Revenue$43.71M
Gross Profit$103.72M
R&D Expenses$25.16M
Operating Expenses$89.94M
Operating Income$13.78M
Net Income$8.98M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)811.24M
Shares Outstanding (Diluted)840.21M

Key Highlights

  • 1Total revenue for Q2 2013 increased by 14% to $147.4 million compared to Q2 2012.
  • 2Services revenue demonstrated strong growth, increasing by 22% year-over-year for both the quarter and the first half of 2013.
  • 3Net income for Q2 2013 decreased to $9.0 million ($0.05/share) from $14.0 million ($0.08/share) in Q2 2012.
  • 4Total cash, cash equivalents, and investments grew to $814.4 million as of June 30, 2013.
  • 5Deferred revenue increased to $389.7 million as of June 30, 2013, up from $363.2 million at the end of 2012.
  • 6Operating expenses increased significantly, particularly in sales and marketing (27% for the quarter) and R&D (23% for the quarter), reflecting continued investment in growth.

Frequently Asked Questions

Fortinet reported total revenue of $147.4 million for the three months ended June 30, 2013, an increase of 14% compared to the same period in 2012. Product revenue grew by 8% to $66.5 million, while Services revenue increased by 22% to $79.7 million.

Net income for the second quarter of 2013 was $9.0 million, or $0.05 per diluted share, a decrease from $14.0 million, or $0.08 per diluted share, in the same quarter of 2012. This decrease was influenced by higher operating expenses, particularly in sales and marketing and R&D.

As of June 30, 2013, Fortinet held $814.4 million in cash, cash equivalents, and investments, an increase from the previous year. Deferred revenue also grew to $389.7 million, up from $363.2 million at the end of 2012. This growth in deferred revenue is primarily driven by subscription and support services, indicating strong future revenue potential.

The filing mentions ongoing patent infringement lawsuits, including one with Network Protection Sciences, LLC, which is scheduled for a jury trial in September 2013. While the company does not currently believe these proceedings will have a material adverse effect, litigation remains a risk factor. The company also highlights risks related to unpredictable quarterly operating results, reliance on channel partners, inventory management, and intense market competition.