Fortinet reports strong fourth-quarter and full-year 2014 financial results

Fourth-quarter 2014 highlights

* Billings of $282.7 million, up 35% year over year 1
* Revenues of $224.0 million, up 26% year over year
* Non-GAAP diluted net income per share of $0.141
* Cash flow from operations of $35.4 million
* Free cash flow of $30.0 million1
* Cash, cash equivalents and investments of $991.7 million
* Deferred revenue of $558.8 million, up 29% year over year

Full-year 2014 highlights

* Billings of $896.5 million, up 31% year over year1
* Revenues of $770.4 million, up 25% year over year
* Non-GAAP diluted net income per share of $0.481
* Cash flow from operations of $196.6 million
* Free cash flow of $164.4 million1

Fortinet, a global leader in high performance cyber security solutions, today announced financial results for the fourth quarter and full year ended 31 December 2014.

"Fortinet had an excellent fourth quarter, exceeding or meeting our expectations across all key metrics," said Ken Xie, founder, chairman and chief executive officer of Fortinet. "We are a growth-oriented company, we've been investing for growth, and that strategy is paying off. Our Q4 billings growth was the highest in 16 quarters and we saw a continued increase in new enterprise customer wins and the number of large deals closed. Cyber security remains at the forefront of enterprise IT priorities and Fortinet has a proven platform of competitively-differentiated products and threat research to address these complex threats. Entering 2015, we are confident in our direction and opportunity and thus are continuing to invest for future growth and market share gains."

Financial highlights for the fourth quarter of 2014

* Billings1: Total billings were $282.7 million for the fourth quarter of 2014, an increase of 35% compared to $209.8 million in the same quarter of 2013.

* Revenue4: Total revenue was $224.0 million for the fourth quarter of 2014, an increase of 26% compared to $177.4 million in the same quarter of 2013. Within total revenue, product revenue was $110.7 million, an increase of 32% compared to the same quarter of 2013. Services and other revenue was $113.3 million, an increase of 21% compared to the same quarter of 2013.

* Deferred revenue: Total deferred revenue was $558.8 million as of 31 December 2014, an increase of $58.7 million from $500.0 million as of 30 September 2014.

* Cash and Cash Flow2: As of 31 December 2014, cash, cash equivalents and investments were $991.7 million, compared to $963.8 million as of 30 September 2014. In the fourth quarter of 2014, cash flow from operations was $35 4 million and free cash flow1 was $30.0 million.

* GAAP Operating Income: GAAP operating income was $19.9 million for the fourth quarter of 2014, representing a GAAP operating margin of 9%. GAAP operating income was $24.6 million for the same quarter of 2013, representing a GAAP operating margin of 14%.

* GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $6.8 million for the fourth quarter of 2014, compared to GAAP net income of $12.0 million for the same quarter of 2013. GAAP diluted net income per share was $0.04 for the fourth quarter of 2014, compared to $0.07 for the same quarter of 2013.

* Non-GAAP Operating Income1: Non-GAAP operating income was $36.8 million for the fourth quarter of 2014, representing a non-GAAP operating margin of 16%. Non-GAAP operating income was $38.3 million for the same quarter of 2013, representing a non-GAAP operating margin of 22%.

* Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $24.1 million for the fourth quarter of 2014, compared to non-GAAP net income of $26.3 million for the same quarter of 2013. Non-GAAP diluted net income per share was $0.14 for the fourth quarter of 2014, compared to $0.16 for the same quarter of 2013.

Financial highlights for the full year 2014

* Billings1: Total billings were $896.5 million for fiscal 2014, an increase of 31% compared to $684.2 million in fiscal 2013.

* Revenue4 Total revenue was $770.4 million for fiscal 2014, an increase of 25% compared to $615.3 million in fiscal 2013. Within total revenue, product revenue was $360.6 million, an increase of 30% compared to fiscal 2013. Services and other revenue was $409.8 million, an increase of 22% compared to fiscal 2013.

* Deferred Revenue: Total deferred revenue was $558.8 million as of 31 December 2014, an increase of 29% compared to deferred revenue of $432.6 million as of 31 December 2013.

* Cash and Cash Flow3: As of 31 December 2014, cash, cash equivalents and investments were $991.7 million, compared to $843.0 million as of 31 December 2013. In fiscal 2014, cash flow from operations was $196.6 million and free cash flow1 was $164.4 million.

* GAAP Operating Income: GAAP operating income was $59.3 million for fiscal 2014, representing a GAAP operating margin of 8%. GAAP operating income was $72.1 million for fiscal 2013, representing a GAAP operating margin of 12%.

* GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $25.3 million for fiscal 2014, compared to GAAP net income of $44.3 million for fiscal 2013. GAAP diluted net income per share was $0.15 for fiscal 2014, compared to $0.26 for fiscal 2013.

* Non-GAAP Operating Income1: Non-GAAP operating income was $122.1 million for fiscal 2014, representing a non-GAAP operating margin of 16%. Non-GAAP operating income was $118.6 million for fiscal 2013, representing a non-GAAP operating margin of 19%.

* Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $80.8 million for fiscal 2014, compared to non-GAAP net income of $82.0 million for fiscal 2013. Non-GAAP diluted net income per share was $0.48 for fiscal 2014, compared to $0.49 for fiscal 2013.

(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."
(2) During the fourth quarter of fiscal 2014, we repurchased $5.4 million of our common stock under our share repurchase programme.
(3) During fiscal 2014, we repurchased $38.6 million of our common stock under our share repurchase programme.
(4) Beginning in the first quarter of 2014, we combined rateable and other revenue with services revenue to present the combined amounts as services and other revenue in the consolidated statements of operations. The related cost of revenue and gross profit, including prior period amounts, have also been combined to conform to the current period presentation. We believe the rateable and other revenue amounts, including the related cost of revenue and gross profit amounts, are not material.

Fortinet (NASDAQ: FTNT) protects the most valuable assets of some of the largest enterprise, service provider and government organisations across the globe. The company's fast, secure and global cyber security solutions provide broad, high-performance protection against dynamic security threats while simplifying the IT infrastructure. They are strengthened by the industry's highest level of threat research, intelligence and analytics. Unlike pure-play network security providers, Fortinet can solve organisations' most important security challenges, whether in networked, application or mobile environments ? be it virtualised/cloud or physical. More than 200 000 customers worldwide, including some of the largest and most complex organisations, trust Fortinet to protect their brands. Learn more at http://www.fortinet.com, the Fortinet Blog or FortiGuard Labs.

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