Fortinet Announces Preliminary First Quarter 2013 Results

Fortinet Announces Preliminary First Quarter 2013 Results 
SUNNYVALE, CA -- (Marketwired) -- 04/10/13 --  Fortinet(R) (NASDAQ:
FTNT) -- a leader in high-performance network security -- today
announced certain preliminary financial information for the first
quarter ended March 31, 2013.  
Total billings(1) are expected to be in the $147 million to $149
million range compared to the company's previously-announced guidance
of $158 million to $162 million. Total revenue is expected to be in
the $134 million to $136 million range compared to the company's
guidance of $138 million to $141 million. Non-GAAP net income per
diluted share(1) is expected to be approximately $0.10 compared to
the company's guidance of $0.11 to $0.12.  
"Our financial results were negatively impacted by a few deals in the
U.S. service provider segment which did not close as expected, macro
factors in Latin America and EMEA, and, to a lesser extent, the
timing of new appliance product releases and inventory shortages,"
stated Ken Xie, founder, president and chief executive officer of
Fortinet. "We were pleased with the strong performance of the Asia
Pacific region as well as traction in the U.S. Enterprise sector
during the first quarter. We remain optimistic about Fortinet's
long-term opportunities as our products and innovation are strong and
security demand drivers remain high."  
(1) A reconciliation of expected GAAP to non-GAAP financial measures
has been provided in the tables included below. An explanation of
these measures is also included below under the heading "Non-GAAP
Financial Measures." 
Conference Call Today 
Fortinet will host a conference call today at 2:00 p.m. Pacific Time
(5:00 p.m. Eastern Time) to discuss its preliminary first quarter
results. The call can be accessed by dialing (877) 303-6913
(domestic) or (224) 357-2188 (international) with conference ID #
34797801. 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 April 17, 2013, by dialing (855)
859-2056 (domestic) or (404) 537-3406 (international) with conference
ID# 34797801.  
Fortinet plans on releasing its full first quarter fiscal year 2013
results after the market closes on April 30, 2013 and will issue a
separate press release with the conference call details. 
About Fortinet (www.fortinet.com)    
Fortinet (NASDAQ: FTNT) is a worldwide provider of network security
appliances and a market leader in unified threat management (UTM).
Our products and subscription services provide broad, integrated and
high-performance protection against dynamic security threats while
simplifying the IT security infrastructure. Our customers include
enterprises, service providers and government entities worldwide,
including the majority of the 2012 Fortune Global 100. Fortinet's
flagship FortiGate product delivers ASIC-accelerated performance and
integrates multiple layers of security designed to help protect
against application and network threats. Fortinet's broad product
line goes beyond UTM to help secure the extended enterprise -- from
endpoints, to the perimeter and the core, including databases and
applications. Fortinet is headquartered in Sunnyvale, Calif., with
offices around the world. 
Copyright Copyright 2013 Fortinet, Inc. All rights reserved. The
symbols (R) and (TM) denote respectively federally registered
trademarks and unregistered trademarks of Fortinet, Inc., its
subsidiaries and affiliates. Fortinet's trademarks include, but are
not limited to, the following: Fortinet, FortiGate, FortiGuard,
FortiManager, FortiMail, FortiClient, FortiCare, FortiAnalyzer,
FortiReporter, FortiOS, FortiASIC, FortiWiFi, FortiSwitch, FortiVoIP,
FortiBIOS, FortiLog, FortiResponse, FortiCarrier, FortiScan, FortiAP,
FortiDB, FortiVoice and FortiWeb. Other trademarks belong to their
respective owners. Fortinet has not independently verified statements
or certifications herein attributed to third parties, and Fortinet
does not independently endorse such statements. Notwithstanding
anything to the contrary herein, nothing herein constitutes a
warranty, guarantee, binding specification or other binding
commitment by Fortinet, and performance and other specification
information herein may be unique to certain environments.  
FTNT-F 
Forward-looking Statements 
 This press release contains
forward-looking statements that involve risks and uncertainties.
These forward-looking statements include statements regarding the
momentum in our business, demand drivers, and our view regarding
future prospects and opportunities. Although we attempt to be
accurate in making forward-looking statements, it is possible that
future circumstances might differ from the assumptions on which such
statements are based. Important factors that could cause results to
differ materially from the statements herein include the following:
general economic risks; specific economic risks in different
geographies and among different customer segments; timing of orders;
uncertainty regarding increased business and renewals from existing
customers; uncertainties around continued success in sales growth and
market share gains; failure to convert sales pipeline into final
sales and purchase delays; risks associated with successful
implementation of multiple integrated software products and other
product functionality risks; execution risks, including those around
marketing, new product development and introductions and innovation;
competitive dynamics; litigation and disputes and the potential cost,
distraction and damage to sales and reputation caused thereby; market
acceptance of new products and services; the ability to attract and
retain personnel; changes in strategy; risks associated with
management of growth; lengthy sales and implementation cycles,
particularly in larger organizations; technological changes that make
our products and services less competitive; risks associated with the
adoption of, and demand for, the UTM model in general and by specific
customer segments; competition and pricing pressure; and the other
risk factors set forth from time to time in our most recent Annual
Report on Form 10-K, our most recent Quarterly Report on Form 10-Q
and our other filings with the SEC, copies of which are available
free of charge at the SEC's website at www.sec.gov or upon request
from our investor relations department. All forward-looking
statements herein reflect our opinions only as of the date of this
release, and we undertake no obligation, and expressly disclaim any
obligation, to update forward-looking statements herein in light of
new information or future event. 
Non-GAAP Financial Measures 
 We have provided in this release
financial information that has not been prepared in accordance with
Generally Accepted Accounting Principles (GAAP). We use these
non-GAAP financial measures internally in analyzing our financial
results and believe they are useful to investors, as a supplement to
GAAP measures, in evaluating our ongoing operational performance. We
believe that the use of these non-GAAP financial measures provides an
additional tool for investors to use in evaluating ongoing operating
results and trends and in comparing our financial results with other
companies in our industry, many of which present similar non-GAAP
financial measures to investors
.  
Non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, financial information prepared in
accordance with GAAP. Investors are encouraged to review the
reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measures below. As previously
mentioned, a reconciliation of our non-GAAP financial measures to
their most directly comparable GAAP measures has been provided in the
financial statement tables included below in this press release. 
Billings. We define billings as revenue recognized plus the change in
deferred revenue from the beginning to the end of the period less any
deferred revenue balances acquired from business combination(s)
during the period. We consider billings to be a useful metric for
management and investors because billings drive deferred revenue,
which is an important indicator of the health and visibility of our
business, and has historically represented a majority of the
quarterly revenue that we recognize. There are a number of
limitations related to the use of billings versus revenue calculated
in accordance with GAAP. First, billings include amounts that have
not yet been recognized as revenue. Second, we may calculate billings
in a manner that is different from other companies that report
similar financial measures. Management compensates for these
limitations by providing specific information regarding GAAP revenue
and evaluating billings together with revenues calculated in
accordance with GAAP. 
Non-GAAP net income and diluted net income per share. We define
non-GAAP net income as net income plus stock-based compensation
expense reduced by the income from payments we received from a patent
settlement, and includes the impact of the tax adjustment, if any,
required to achieve the effective tax rate on a pro forma basis,
which could differ from the GAAP tax rate. We define non-GAAP diluted
net income per share as non-GAAP net income divided by the
weighted-average diluted shares outstanding. We consider these
non-GAAP financial measures to be useful metrics for management and
investors for the same reasons that we use non-GAAP operating income
and non-GAAP operating margin. However, in order to provide a
complete picture of our recurring core business operating results, we
include in non-GAAP net income and non-GAAP diluted net income per
share, the tax adjustment required to achieve the effective tax rate
on a pro forma basis, which could differ from the GAAP tax rate. We
believe the effective tax rates we used are reasonable estimates of
long-term normalized tax rates under our global operating structure.
The same limitations described above regarding our use of non-GAAP
operating income and non-GAAP operating margin apply to our use of
non-GAAP net income and non-GAAP diluted net income per share. We
compensate for these limitations by providing specific information
regarding the GAAP amounts excluded from non-GAAP net income and
non-GAAP diluted net income per share and evaluating non-GAAP net
income and non-GAAP diluted net income per share together with net
income and diluted net income per share calculated in accordance with
GAAP. 
Reconciliations of expected non-GAAP results of operations to the
nearest comparable GAAP measures 


 
                                                                            
                                                                            
Reconciliation of expected range of GAAP revenue to billings                
(Unaudited, in millions)                                                    
                                          Three Months Ended March 31, 2013 
                                        ------------------------------------
Total revenue                           $           134.0  $           136.0
                                                                            
  Increase in deferred revenue                       13.0               13.0
                                        -----------------  -----------------
                                                                            
Total billings (Non-GAAP)               $           147.0  $           149.0
                                        =================  =================
                                                                            
                                                                            
Reconciliation of expected GAAP to Non-GAAP net income and diluted net      
 income per share                                                           
(Unaudited, in millions, except per share amounts)                          
                                                                            
                                                                            
                                         Three Months Ended March 31, 2013  
                                      --------------------------------------
                                         GAAP                      Non-GAAP 
                                        Results  Adjustments        Results 
                                      ---------- -----------      ----------
Net Income                                  12.2         5.0  (a) $     17.2
                                      ========== ===========      ==========
Adjustments:                                                                
  Stock-based compensation expense                       9.3                
  Patent settlement income                              (0.5)               
  Tax adjustment                                        (3.8) (b)           
                                                 -----------                
                                                         5.0                
                                      ==========                  ==========
Diluted net income per share          $     0.07                  $     0.10
                                      ==========                  ==========
Shares used in per share calculations                                       
 - diluted                                 167.8                       167.8
                                      ==========                  ==========
                                                                            
(a) To exclude $9.3 million of stock-based compensation expense offset by   
    $0.5 million of patent settlement income in the three months ended March
    31, 2013, adjusted for the tax impact on a pro forma basis as referred  
    to in (b) below.                                                        
                                                                            
(b) Non-GAAP financial information is adjusted to achieve an overall 33     
    percent effective tax rate on a pro forma basis, which differs from the 
    GAAP tax rate, in the three months ended March 31, 2013.                

  
Investor Contact: 
Michelle Spolver
Fortinet, Inc.
408-486-7837
mspolver@fortinet.com  
Media Contact: 
Rick Popko
Fortinet, Inc.
408-486-7853
rpopko@fortinet.com 
 
 
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