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Fortinet Reports First Quarter 2013 Financial Results


Fortinet Reports First Quarter 2013 Financial Results

SUNNYVALE, CA -- (Marketwired) -- 04/30/13 -- Fortinet(R) (NASDAQ: FTNT)


 
--  Revenues of $135.8 million, up 16% year over year
--  Billings of $148.5 million, up 8% year over year(1)
--  GAAP diluted net income per share of $0.07
--  Non-GAAP diluted net income per share of $0.10(1)
--  Cash flow from operations of $37.7 million
--  Free cash flow of $36.1 million(1)
--  Cash, cash equivalents and investments of $782.5 million, with no debt

Fortinet(R) (NASDAQ: FTNT) -- a leader in high-performance network security -- today announced financial results for the first quarter ended March 31, 2013.

Financial Highlights for the First Quarter of 2013


 
--  Revenue: Total revenue was $135.8 million for the first quarter of
    2013, an increase of 16% compared to $117.2 million in the same
    quarter of 2012. Within total revenue, product revenue was $58.0
    million, an increase of 9% compared to the same quarter of 2012.
    Services revenue was $75.9 million, an increase of 22% compared to the
    same quarter of 2012.
    
    
--  Billings(1): Total billings were $148.5 million for the first quarter
    of 2013, an increase of 8% compared to $137.0 million in the same
    quarter of 2012.
    
    
--  Deferred Revenue: Deferred revenue was $376.4 million as of March 31,
    2013, an increase of 20% compared to deferred revenue of $314.6
    million as of March 31, 2012, and up $13.2 million from $363.2 million
    as of December 31, 2012.
    
    
--  Cash and Cash Flow(1): As of March 31, 2013, cash, cash equivalents
    and investments were $782.5 million, compared to $739.6 million as of
    December 31, 2012. In the first quarter of 2013, cash flow from
    operations was $37.7 million and free cash flow was $36.1 million.
    
    
--  GAAP Operating Income(1): GAAP operating income was $15.4 million for
    the first quarter of 2013, representing a GAAP operating margin of
    11%. GAAP operating income was $18.7 million for the same quarter of
    2012, representing a GAAP operating margin of 16%.
    
    
--  GAAP Net Income and Diluted Net Income Per Share(1): GAAP net income
    was $12.2 million for the first quarter of 2013, based on a 28% tax
    rate for the quarter. This compares to GAAP net income of $14.2
    million for the same quarter of 2012, based on a 28% tax rate for the
    quarter. GAAP diluted net income per share was $0.07 for the first
    quarter of 2013, based on 167.8 million weighted-average diluted
    shares outstanding, compared to $0.09 for the same quarter of 2012,
    based on 165.8 million weighted-average diluted shares outstanding.
    
    
--  Non-GAAPOperating Income(1): Non-GAAP operating income was $24.2
    million for the first quarter of 2013, representing a non-GAAP
    operating margin of 18%. Non-GAAP operating income was $25.5 million
    for the same quarter of 2012, representing a non-GAAP operating margin
    of 22%.
    
    
--  Non-GAAPNet Income and Diluted Net Income Per Share(1): Non-GAAP net
    income was $17.3 million for the first quarter of 2013, based on a 33%
    effective tax rate for the quarter. Non-GAAP net income for the same
    quarter of 2012 was $17.5 million, based on a 34% effective tax rate.
    Non-GAAP diluted net income per share was $0.10 for the first quarter
    of 2013 based on 167.8 million weighted-average diluted shares
    outstanding, compared to $0.11 for the same quarter of 2012, based on
    165.8 million weighted-average diluted shares outstanding.

(1) A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

"While we performed well in Asia Pacific and the U.S. enterprise sector, our first quarter results were affected primarily by macroeconomic and geopolitical challenges in Latin America and EMEA, a shortfall in U.S service provider business, and to a lesser extent some inventory shortages and product transition issues," said Ken Xie, founder, president and chief executive officer. "Given the macro uncertainty, we are moving forward cautiously yet confidently, as the network security market remains healthy and Fortinet's competitive position and product advantage remains strong."

Conference Call Details Fortinet will host a conference call today, April 30, 2013, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its financial results. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 34804106. 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 May 7, 2013, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 34804106.

Following Fortinet's earnings conference call, the Company will host an additional question-and-answer session at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to provide an opportunity for financial analysts and investors to ask more detailed product and financial questions. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 34804106. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and a replay will be archived and available after the call at http://investor.fortinet.com/events.cfm. A replay of this conference call will also be available through May 7, 2013 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 34804106.

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, FortiDB and FortiWeb. Other trademarks belong to their respective owners.

FTNT-F

Forward-looking Statements This press release contains forward-looking statements that inv olve risks and uncertainties. These forward-looking statements include statements regarding the potential growth of our business. 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; 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; risks associated with successful implementation of multiple integrated software products and other product functionality risks; execution risks around new product development and introductions and innovation; 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 and service providers; 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 events.

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.

Bill ings. 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.

Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, making str ategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparisons of our operating results to competitors' operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating the Company is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures. Management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation reduced by the income from payments we received from a patent settlement. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense and patent settlement related income so that our management and investors can compare our rec urring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes stock-based compensation expense. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in our business. Second, stock-based compensation is an important part of our employees' compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their non-GAAP results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income 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.


 
                                                                            
                                                                            
                                                                            
                               FORTINET, INC.                               
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                         (Unaudited, in thousands)                          
                                                                            
                                                   March 31,   December 31, 
                                                     2013          2012     
                                                 ------------  ------------ 
                     ASSETS                                                 
CURRENT ASSETS:                                                             
  Cash and cash equivalents                      $     97,384  $    122,975 
  Short-term investments                              362,996       290,719 
  Accounts receivable-Net                             102,359       107,642 
  Inventory                                            23,933        21,060 
  Prepaid expenses and other current assets            26,988        26,878 
                                                 ------------  ------------ 
    Total current assets                              613,660       569,274 
PROPERTY AND EQUIPMENT-Net                             25,803        25,638 
LONG-TERM INVESTMENTS                                 322,158       325,892 
GOODWILL AND OTHER INTANGIBLE ASSETS-Net                9,964         2,117 
OTHER ASSETS                                           61,144        52,576 
                                                 ------------  ------------ 
TOTAL ASSETS                                     $  1,032,729  $    975,497 
                                                 ============  ============ 
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
CURRENT LIABILITIES:                                                        
  Accounts payable                               $     26,369  $     20,816 
  Accrued liabilities                                  21,677        22,263 
  Accrued payroll and compensation                     26,350        28,957 
  Deferred revenue                                    257,332       247,268 
                                                 ------------  ------------ 
    Total current liabilities                         331,728       319,304 
DEFERRED REVENUE-Non-current                          119,082       115,917 
OTHER LIABILITIES                                      34,210        29,342 
                                                 ------------  ------------ 
    Total liabilities                                 485,020       464,563 
                                                 ------------  ------------ 
STOCKHOLDERS' EQUITY:                                                       
  Common stock                                            164           162 
  Additional paid-in capital                          425,524       400,075 
  Treasury stock                                       (2,995)       (2,995)
  Accumulated other comprehensive income                2,166         3,091 
  Retained earnings                                   122,850       110,601 
                                                 ------------  ------------ 
    Total stockholders' equity                        547,709       510,934 
                                                 ------------  ------------ 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  1,032,729  $    975,497 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                               FORTINET, INC.                               
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
            (Unaudited, in thousands, except per share amounts)             
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                
                                   March 31,     March 31,  
                                                      2013         2012     
                                                 ------------- ------------ 
REVENUE:                                                                    
  Product                                        $      57,950 $     53,204 
  Services                                              75,896       62,138 
  Ratable and other revenue                              1,974        1,905 
                                                 ------------- ------------ 
    Total revenue                                      135,820      117,247 
                                                 ------------- ------------ 
COST OF REVENUE:                                                            
  Product (1)                                           22,958       19,067 
  Services (1)                                          15,574       11,213 
  Ratable and other revenue                                596          763 
                                                 ------------- ------------ 
    Total cost of revenue                               39,128       31,043 
                                                 ------------- ------------ 
GROSS PROFIT:                                                               
  Product                                               34,992       34,137 
  Services                                              60,322       50,925 
  Ratable and other revenue                              1,378        1,142 
                                                 ------------- ------------ 
    Total gross profit                                  96,692       86,204 
                                                 ------------- ------------ 
OPERATING EXPENSES:                                                         
  Research and development (1)                          23,334       19,667 
  Sales and marketing (1)                               49,976       42,036 
  General and administrative (1)                         7,991        5,786 
                                                 ------------- ------------ 
    Total operating expenses                            81,301       67,489 
                                                 ------------- ------------ 
OPERATING INCOME                                        15,391       18,715 
INTEREST INCOME                                          1,369        1,085 
OTHER INCOME (EXPENSE)-Net                                 215          (71)
                                                 ------------- ------------ 
INCOME BEFORE INCOME TAXES                              16,975       19,729 
PROVISION FOR INCOME TAXES                               4,726        5,556 
                                                 ------------- ------------ 
NET INCOME                                       $      12,249 $     14,173 
                                                 ============= ============ 
Net income per share:                                                       
  Basic                                          $        0.08 $       0.09 
                                                 ============= ============ 
  Diluted                                        $        0.07 $       0.09 
                                                 ============= ============ 
Weighted-average shares outstanding:                                        
  Basic                                                161,282      156,010 
                                                 ============= ============ 
  Diluted                                              167,823      165,751 
                                                 ============= ============ 
                                                                            
(1) Includes stock-based compensation expense as                            
 follows:                                                                   
  Cost of product revenue                        $          90 $         64 
  Cost of services revenue                               1,020          745 
  Research and development                               2,766        1,957 
  Sales and marketing                                    4,118        3,443 
  General and administrative                             1,305        1,037 
                                                 ------------- ------------ 
                                                 $       9,299 $      7,246 
                                                 ============= ============ 
                                                                            
                                                                            
                                                                            
         CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME          
                         (Unaudited, in thousands)                
          
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                                                   March 31,     March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
Net income                                       $     12,249  $     14,173 
Other comprehensive (loss) income, net of                                   
 reclassification adjustments:                                              
  Foreign currency translation (losses) gains            (952)          558 
  Unrealized gains on investments                          42         1,799 
  Tax provision related to items of other                                   
   comprehensive income or loss                           (15)         (629)
                                                 ------------  ------------ 
Other comprehensive (loss) income, net of tax            (925)        1,728 
                                                 ------------  ------------ 
Comprehensive income                             $     11,324  $     15,901 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                         (Unaudited, in thousands)                          
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                                                   March 31,     March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
  Net income                                     $     12,249  $     14,173 
  Adjustments to reconcile net income to net                                
   cash provided by operating activities:                                   
    Depreciation and amortization                       3,098         2,082 
    Amortization of investment premiums                 3,051         3,255 
    Stock-based compensation                            9,299         7,246 
    Excess tax benefit from employee stock                                  
     option plans                                      (1,453)       (2,320)
    Other non-cash items, net                            (540)           19 
    Changes in operating assets and liabilities:                            
      Accounts receivable-Net                           5,747        10,763 
      Inventory                                        (4,520)       (3,409)
      Prepaid expenses and other current assets          (202)         (345)
      Other assets                                     (8,568)          569 
      Accounts payable                                  4,957        (6,319)
      Accrued liabilities                                 (11)         (231)
      Accrued payroll and compensation                 (2,416)         (547)
      Deferred revenue                                 12,677        19,696 
      Income taxes payable                              4,305         3,886 
                                                 ------------  ------------ 
    Net cash provided by operating activities          37,673        48,518 
                                                 ------------  ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
  Purchases of investments                           (171,506)     (192,567)
  Sales of investments                                 13,823        17,416 
  Maturities of investments                            86,018       115,026 
  Purchases of property and equipment                  (1,534)       (1,624)
  Payments made in connection with business                                 
   acquisitions                                        (5,979)         (550)
                                                 ------------  ------------ 
    Net cash used in investing activities             (79,178)      (62,299)
                                                 ------------  ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
  Proceeds from issuance of common stock               14,464        13,551 
  Excess tax benefit from employee stock option                             
   plans                                                1,453         2,320 
                                                 ------------  ------------ 
    Net cash provided by financing activities          15,917        15,871 
                                                 ------------  ------------ 
EFFECT OF EXCHANGE RATES ON CASH AND CASH                                   
 EQUIVALENTS                                               (3)          703 
                                                 ------------  ------------ 
NET (DECREASE) INCREASE IN CASH AND CASH                                    
 EQUIVALENTS                                          (25,591)        2,793 
CASH AND CASH EQUIVALENTS-Beginning of period         122,975        71,990 
                                                 ------------  ------------ 
CASH AND CASH EQUIVALENTS-End of period          $     97,384  $     74,783 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
Reconciliations of non-GAAP results of operations measures to the nearest   
comparable GAAP measures                                                    
(Unaudited, in thousands)                                                   
                                                                            
                                                                            
Reconciliation of GAAP revenue to billings                                  
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                                                   March 31      March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
Total revenue                                    $    135,820  $    117,247 
  Add increase in deferred revenue                     13,229        19,739 
  Less deferred revenue balance acquired in                                 
   business combination                                  (550)            - 
                                                 ------------  ------------ 
Total billings (Non-GAAP)                        $    148,499  $    136,986 
                                                 ============  ============ 
                                                                            
                                                                            
Reconciliation of net cash provided by operating activities to free cash    
flow                                                                        
                                                                            
                                                     Three Months 
Ended     
                                                 -------------------------- 
                                                   March 31,     March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
Net cash provided by operating activities        $     37,673  $     48,518 
  Less purchases of property and equipment             (1,534)       (1,624)
                                                 ------------  ------------ 
Free cash flow (Non-GAAP)                        $     36,139  $     46,894 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
Reconciliation of non-GAAP results of operations to the nearest comparable  
 GAAP measures                                                              
(Unaudited, in thousands, except per share amounts)                         
                                                                            
Reconciliation of GAAP to Non-GAAP operating income, operating margin, net  
 income and diluted net income per share 
                                   
                                                                            
           Three Months Ended March 31,      Three Months Ended March 31,   
                       2013                              2012               
         --------------------------------  -------------------------------- 
           GAAP    Adjust-       Non-GAAP    GAAP    Adjust-       Non-GAAP 
          Results   ments         Results   Results   ments         Results 
         --------  --------      --------  --------  --------      -------- 
Operating                                                                       
   
 Income  $ 15,391  $  8,821  (a) $ 24,212  $ 18,715  $  6,768  (b) $ 25,483 
         ========  ========      ========  ========  ========      ======== 
Operating                                                                       
   
 Margin        11%                     18%       16%                     22%
         ========                ========  ========                ======== 
  Adjustments:                                                                  
      
  Stock-based                                                                   
 
   compensation                                                                 
      
   expense            9,299                             7,246               
  Patent                                                                    
   settlement                                                                   
 
   income             (478)                             (478)               
  Tax                                                                       
   adjustment       (3,787)  (c)                      (3,453)  (d)          
                   --------                          --------               
Net                                                                         
 Income  $ 12,249  $  5,034      $ 17,283  $ 14,173  $  3,315      $ 17,488 
         ========                ========  ========                ======== 
Diluted                                                                     
 net income                                                                     
 per 
 share   $   0.07                $   0.10  $   0.09                $   0.11 
         ========                ========  ========                ======== 
Shares                                                                      
 used in                                                                    
 per share                                                                      
 calculations -                                                                 
   
 diluted  167,823                 167,823   165,751                 165,751 
         ========                ========  ========                ========  
                                                                           
(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.                                                               
                                                                            
(b) To exclude $7.2 million of stock-based compensation expense offset by   
    $0.5 million of patent settlement income in the three months ended March
    31, 2012.                                                               
                                                                            
(c) 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.                
                                                                            
(d) Non-GAAP financial information is adjusted to achieve an overall 34     
    percent effective tax rate on a pro forma basis, which differs from the 
    GAAP tax rate, in the three months ended March 31, 2012.                

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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