View printer-friendly version
Fortinet Reports Fourth Quarter and Full Year 2017 Financial Results
Fourth Quarter 2017 Highlights
- Revenue of
$416.7 million , up 15% year over year - Billings of
$534.0 million , up 15% year over year1 - Deferred revenue of
$1.34 billion , up 29% year over year - GAAP diluted net loss per share of
$0.17 , including the impact of a one-time tax expense of$63.0 million , or$0.36 per share, related to new tax legislation - Non-GAAP diluted net income per share of
$0.32 1 - Cash flow from operations of
$157.5 million - Free cash flow of
$143.9 million 1 - Cash, cash equivalents and investments of
$1.35 billion $322.4 million in share repurchases
Full Year 2017 Highlights
- Revenue of
$1.49 billion , up 17% year over prior year - Billings of
$1.80 billion , up 19% year over prior year1 - GAAP diluted net income per share of
$0.18 , including the impact of a one-time tax expense of$63.0 million , or$0.35 per share, related to new tax legislation - Non-GAAP diluted net income per share grew 42% year over year to
$1.04 1 - Cash flow from operations of
$594.4 million - Free cash flow grew 65% year over year to
$459.1 million 1 $446.3 million in share repurchases
"We are pleased with our strong fourth quarter and full year results, which demonstrate our clear technology advantage and market leadership," said
Financial Highlights for the Fourth Quarter of 2017
- Revenue: Total revenue was
$416.7 million for the fourth quarter of 2017, an increase of 15% compared to$362.8 million in the same quarter of 2016.
- Product revenue was
$162.1 million for the fourth quarter of 2017, an increase of 2% compared to$158.9 million in the same quarter of 2016. Service revenue was$254.6 million for the fourth quarter of 2017, an increase of 25% compared to$203.9 million in the same quarter of 2016.
- Billings1: Total billings were
$534.0 million for the fourth quarter of 2017, an increase of 15% compared to$463.4 million in the same quarter of 2016.
- Deferred Revenue: Total deferred revenue was
$1.34 billion as ofDecember 31, 2017 , an increase of 29% compared to$1.04 billion as ofDecember 31, 2016 .
- GAAP Operating Income and Margin: GAAP operating income was
$42.2 million for the fourth quarter of 2017, representing a GAAP operating margin of 10%. GAAP operating income was$45.2 million for the same quarter of 2016, representing a GAAP operating margin of 12%.
- Non-GAAP Operating Income1 and Margin1: Non-GAAP operating income was
$78.7 million for the fourth quarter of 2017, representing a non-GAAP operating margin of 19%. Non-GAAP operating income was$81.1 million for the fourth quarter of 2016, representing a non-GAAP operating margin of 22%.
- GAAP Net Income or Loss and Diluted Net Income or Loss Per Share: GAAP net loss was
$29.0 million for the fourth quarter of 2017, compared to GAAP net income of$25.2 million for the same quarter of 2016. GAAP diluted net loss per share was$0.17 for the fourth quarter of 2017, based on 171.5 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of$0.14 for the same quarter of 2016, based on 176.7 million diluted weighted-average shares outstanding.
- Impact of New Tax Legislation: Net loss in the fourth quarter of 2017 was impacted by a one-time tax expense of
$63.0 million , or$0.36 per share, resulting from the Tax Cuts and Jobs Act (the "Act") signed into law inDecember 2017 .
- Non-GAAP Net Income1 and Diluted Net Income Per Share1: Non-GAAP net income was
$55.5 million for the fourth quarter of 2017, compared to non-GAAP net income of$53.2 million for the same quarter of 2016. Non-GAAP diluted net income per share was$0.32 for the fourth quarter of 2017, based on 175.4 million diluted weighted-average shares outstanding, compared to$0.30 for the same quarter of 2016, based on 176.7 million diluted weighted-average shares outstanding. Non-GAAP effective tax rate remained at 32% in 2017 and was not impacted by the Act.
- Cash, Cash Flow and Free Cash Flow1
: As of
December 31, 2017 , cash, cash equivalents and investments were$1.35 billion , compared to$1.52 billion as ofSeptember 30, 2017 . In the fourth quarter of 2017, cash flow from operations was$157.5 million compared to$101.0 million in the same quarter of 2016. Free cash flow1 was$143.9 million during the fourth quarter of 2017 compared to$84.2 million in the same quarter of 2016.
- Share Repurchase: During the fourth quarter of 2017,
Fortinet repurchased 7.9 million shares of its common stock for a total purchase price of $322.4 million. During the fourth quarter of 2016,Fortinet repurchased 1.2 million shares of its common stock for a total purchase price of $35.8 million.
Financial Highlights for the Full Year 2017
- Revenue: Total revenue was
$1.49 billion for 2017, an increase of 17% compared to$1.28 billion in 2016.
- Product revenue was
$577.2 million for 2017, an increase of 5% compared to$548.1 million in 2016. Service revenue was$917.8 million for 2017, an increase of 26% compared to$727.3 million in 2016.
- Billings1: Total billings were
$1.80 billion for 2017, an increase of 19% compared to$1.52 billion in 2016.
- GAAP Operating Income and Margin: GAAP
operating income was
$109.8 million for 2017, representing a GAAP operating margin of 7%. GAAP operating income was$42.9 million for 2016, representing a GAAP operating margin of 3%.
- Non-GAAP Operating Income1 and Margin1: Non-GAAP operating income was
$257.4 million for 2017, representing a non-GAAP operating margin of 17%. Non-GAAP operating income was$193.1 million for 2016, representing a non-GAAP operating margin of 15%.
- GAAP Net Income and Diluted Net Income Per Share: GAAP net income was
$31.4 million for 2017, compared to GAAP net income of$32.2 million for 2016. GAAP diluted net income per share was$0.18 for 2017, based on 178.1 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of$0.18 for 2016, based on 176.3 million diluted weighted-average shares outstanding.
- Impact of New Tax Legislation: Net income for 2017 was impacted by a one-time tax expense of
$63.0 million , or$0.35 per share, resulting from the Act. The effective GAAP tax rate was 75% in 2017, up from the 25% rate in 2016, reflecting the impact of the Act. Excluding the impact of the Act, the effective income tax rate for 2017 was 24%.
- Non-GAAP Net Income1 and Diluted Net Income Per Share1: Non-GAAP net income was
$184.7 million for 2017, compared to non-GAAP net income of$129.5 million for 2016. Non-GAAP diluted net income per share was$1.04 for 2017, based on 178.1 million diluted weighted-average shares outstanding, compared to$0.73 , based on 176.3 million diluted weighted-average shares outstanding, for 2016. Non-GAAP effective tax rate remained at 32% in 2017 and was not impacted by the Act.
- Cash Flow and Free Cash Flow1: In 2017, cash flow from operations was
$594.4 million compared to$345.7 million in 2016. Free cash flow1 was$459.1 million in 2017 compared to$278.5 million in 2016. In 2017,Fortinet used$107.2 million for real estate purchases for itsCanada andSunnyvale offices.
- Share Repurchase:
During 2017,
Fortinet repurchased 11.2 million shares of its common stock for a total purchase price of $446.3 million. During 2016,Fortinet repurchased 3.9 million shares of its common stock for a total purchase price of $110.8 million.
Guidance
For the first quarter of 2018,
- Revenue in the range of
$387.0 million to$393.0 million - Billings in the range of
$449.0 million to$457.0 million - Non-GAAP gross margin in the range of 75% to 76%
- Non-GAAP operating margin in the range of 12% to 13%
- Diluted non-GAAP earnings per share in the range of
$0.21 to$0.22 , assuming a non-GAAP tax rate of 24%
For the fiscal year of 2018,
- Revenue in the range of
$1.695 billion to$1.715 billion - Billings in the range of
$2.030 billion to$2.050 billion - Non-GAAP gross margin in the range of 75% to 76%
- Non-GAAP operating margin in the range of 17.7% to 18%
- Diluted non-GAAP earnings per share in the range of
$1.30 to$1.32 , assuming a non-GAAP tax rate of 24%
The above guidance for the first quarter and full year of 2018 excludes the transition impact of ASC 606 adoption, which is effective
1 A reconciliation of GAAP to non-GAAP 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."
Keith Jensen Named Interim Chief Financial Officer - Effective
Conference Call Details
Following Fortinet's financial results conference call,
First Quarter 2018 Analyst Day and Investor Conference Participation Schedule:
Goldman Sachs Technology & Internet Conference 2018February 13, 2018 -San Francisco, CA Fortinet Analyst DayFebruary 27, 2018 -Las Vegas, NV - Morgan Stanley
Technology, Media & Telecom Conference March 1, 2018 -San Francisco, CA
Members of Fortinet's management team are expected to present at these events and discuss the latest company strategies and initiatives. To access the most updated information and listen to the webcast of each event, please visit the Investor Relations page of Fortinet's website at http://investor.fortinet.com. The schedule is subject to change.
About
Copyright © 2018 Fortinet, Inc. All rights reserved. The symbols ® and ™ denote respectively federally registered trademarks and unregistered trademarks of
FTNT-F
Forward-looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding our market position, strong market momentum, position for future growth, ability to continue to grow our market position and address our market opportunity, and guidance and future financial results. 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; global economic conditions, country-specific economic conditions, and foreign currency risks; competitiveness in the security market; the
dynamic nature of the security market; specific economic risks worldwide and 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; longer sales cycles, particularly for larger enterprise customers; failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; sales and marketing execution 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; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand for, our products and services in general and by specific customer segments; competition and pricing pressure; risks related to integrating acquisitions; 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
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). These non-GAAP financial and liquidity measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. 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 peer companies, 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 provided in the financial statement tables below.
Billings (Non-GAAP). We define billings as revenue recognized in accordance with GAAP 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 future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.
Free cash flow (Non-GAAP). We define free cash flow as net cash provided by operating activities minus capital expenditures such as purchases of real estate and other property and equipment. We believe 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 capital expenditures, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, repurchasing outstanding common stock, and strengthening the balance sheet. However, free cash flow is not intended to represent our residual cash flow available for discretionary expenditures, since we may have other non-discretionary expenditures that are not deducted from the measure. A limitation of using free cash flow rather than the GAAP measure of net cash provided by operating activities is that free cash flow does not represent the total increase or decrease in the cash, cash equivalents and investments balance for the period because it excludes cash provided by or used for other investing and financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities 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 and by presenting cash flows from investing and financing activities in our reconciliation of free cash flows. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flows as a comparative measure.
Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income or loss plus stock-based compensation, business acquisition-related charges, purchase accounting adjustments, impairment and amortization of acquired intangible assets, restructuring charges, expenses associated with the implementation of a new Enterprise Resource Planning (ERP) system, litigation settlement expenses and, when applicable, other significant non-recurring items in a given quarter. Non-GAAP operating margin is defined as non-GAAP operating income divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the items noted above so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income instead of operating income or loss calculated in accordance with GAAP. First, non-GAAP operating income excludes the items noted above. Second, the components of the costs that we exclude from our calculation of non-GAAP operating income may differ from the components that peer companies exclude when they report their non-GAAP results of operations. Management accounts 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 or loss plus the items noted above under non-GAAP operating income and operating margin, including a tax adjustment to achieve our effective tax rate on a non-GAAP basis, which often differs from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the non-GAAP diluted weighted-average 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 more 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 resulting in an effective tax rate on a non-GAAP basis, which often differs from the GAAP tax rate. We believe the non-GAAP effective tax rates we use are reasonable estimates of normalized tax rates for our current and prior fiscal years 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 account 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 or loss and diluted net income per share calculated in accordance with GAAP.
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Unaudited, in thousands) | |||||||
2017 | 2016 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS: | |||||||
| Cash and cash equivalents | $ | 811,004 | $ | 709,003 | |||
| Short-term investments | 440,273 | 376,522 | |||||
| Accounts receivable—net | 348,185 | 312,998 | |||||
| Inventory | 77,291 | 106,887 | |||||
| Prepaid expenses and other current assets | 40,067 | 33,306 | |||||
| Total current assets | 1,716,820 | 1,538,716 | |||||
| LONG-TERM INVESTMENTS | 98,022 | 224,983 | |||||
| PROPERTY AND EQUIPMENT—NET | 245,395 | 137,249 | |||||
| DEFERRED TAX ASSETS | 146,932 | 182,745 | |||||
| OTHER INTANGIBLE ASSETS—NET | 16,255 | 24,828 | |||||
| 14,553 | 14,553 | ||||||
| OTHER ASSETS | 19,939 | 16,867 | |||||
| TOTAL ASSETS | $ | 2,257,916 | $ | 2,139,941 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Accounts payable | $ | 70,009 | $ | 56,732 | |||
| Accrued liabilities | 50,015 | 35,640 | |||||
| Accrued payroll and compensation | 91,944 | 78,138 | |||||
| Income taxes payable | 21,435 | 13,588 | |||||
| Deferred revenue | 793,820 | 645,342 | |||||
| Total current liabilities | 1,027,223 | 829,440 | |||||
| DEFERRED REVENUE | 542,494 | 390,007 | |||||
| INCOME TAX LIABILITIES | 90,213 | 68,551 | |||||
| OTHER LIABILITIES | 8,609 | 14,262 | |||||
| Total liabilities | 1,668,539 | 1,302,260 | |||||
| COMMITMENTS AND CONTINGENCIES | |||||||
| STOCKHOLDERS' EQUITY: | |||||||
| Common stock | 168 | 173 | |||||
| Additional paid-in capital | 909,636 | 800,653 | |||||
| Accumulated other comprehensive loss | (847 | ) | (765 | ) | |||
| Retained earnings (deficit) | (319,580 | ) | 37,620 | ||||
| Total stockholders' equity | 589,377 | 837,681 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,257,916 | $ | 2,139,941 | |||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (Unaudited, in thousands, except per share amounts) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
| REVENUE: | |||||||||||||||
| Product | $ | 162,118 | $ | 158,925 | $ | 577,171 | $ | 548,110 | |||||||
| Service | 254,550 | 203,905 | 917,759 | 727,333 | |||||||||||
| Total revenue | 416,668 | 362,830 | 1,494,930 | 1,275,443 | |||||||||||
| COST OF REVENUE: | |||||||||||||||
| Product 1 | 69,634 | 56,616 | 243,824 | 208,984 | |||||||||||
| Service 1 | 35,785 | 34,275 | 141,460 | 128,853 | |||||||||||
| Total cost of revenue | 105,419 | 90,891 | 385,284 | 337,837 | |||||||||||
| GROSS PROFIT: | |||||||||||||||
| Product | 92,484 | 102,309 | 333,347 | 339,126 | |||||||||||
| Service | 218,765 | 169,630 | 776,299 | 598,480 | |||||||||||
| Total gross profit | 311,249 | 271,939 | 1,109,646 | 937,606 | |||||||||||
| OPERATING EXPENSES: | |||||||||||||||
| Research and development 1 | 54,774 | 45,589 | 210,614 | 183,084 | |||||||||||
| Sales and marketing 1 | 191,928 | 162,873 | 701,026 | 626,501 | |||||||||||
| General and administrative 1 | 22,349 | 17,451 | 87,862 | 81,080 | |||||||||||
| Restructuring charges | — | 833 | 340 | 3,997 | |||||||||||
| Total operating expenses | 269,051 | 226,746 | 999,842 | 894,662 | |||||||||||
| OPERATING INCOME | 42,198 | 45,193 | 109,804 | 42,944 | |||||||||||
| INTEREST INCOME | 4,061 | 1,964 | 13,482 | 7,303 | |||||||||||
| OTHER INCOME (EXPENSE)—NET | (1,181 | ) | (3,650 | ) | 708 | (7,099 | ) | ||||||||
| INCOME BEFORE INCOME TAXES | 45,078 | 43,507 | 123,994 | 43,148 | |||||||||||
| PROVISION FOR INCOME TAXES | 74,039 | 18,341 | 92,595 | 10,961 | |||||||||||
| NET INCOME (LOSS) | $ | (28,961 | ) | $ | 25,166 | $ | 31,399 | $ | 32,187 | ||||||
| Net income (loss) per share: | |||||||||||||||
| Basic | $ | (0.17 | ) | $ | 0.15 | $ | 0.18 | $ | 0.19 | ||||||
| Diluted | $ | (0.17 | ) | $ | 0.14 | $ | 0.18 | $ | 0.18 | ||||||
| Weighted-average shares outstanding: | |||||||||||||||
| Basic | 171,530 | 173,315 | 174,315 | 172,621 | |||||||||||
| Diluted | 171,530 | 176,679 | 178,079 | 176,338 | |||||||||||
| 1 Includes stock-based compensation as follows: | |||||||||||||||
| Cost of product revenue | $ | 341 | $ | 313 | $ | 1,380 | $ | 1,200 | |||||||
| Cost of service revenue | 2,349 | 2,276 | 9,503 | 8,771 | |||||||||||
| Research and development | 8,067 | 7,871 | 32,194 | 30,120 | |||||||||||
| Sales and marketing | 19,614 | 17,930 | 77,994 | 68,113 | |||||||||||
| General and administrative | 4,083 | 3,691 | 16,112 | 14,219 | |||||||||||
| $ | 34,454 | $ | 32,081 | $ | 137,183 | $ | 122,423 | ||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
| (Unaudited, in thousands) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income (loss) | $ | (28,961 | ) | $ | 25,166 | $ | 31,399 | $ | 32,187 | ||||||
| Other comprehensive income (loss): | |||||||||||||||
| Change in unrealized gains (losses) on investments | (599 | ) | (1,411 | ) | (93 | ) | 258 | ||||||||
| Tax provision (benefit) related to change in unrealized gains (losses) on investments | (168 | ) | (493 | ) | (11 | ) | 90 | ||||||||
| Other comprehensive income (loss) | (431 | ) | (918 | ) | (82 | ) | 168 | ||||||||
| Comprehensive income (loss) | $ | (29,392 | ) | $ | 24,248 | $ | 31,317 | $ | 32,355 | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| (Unaudited, in thousands) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||
| Net income (loss) | $ | (28,961 | ) | $ | 25,166 | $ | 31,399 | $ | 32,187 | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
| Depreciation and amortization | 14,268 | 13,624 | 55,476 | 48,520 | |||||||||||
| Amortization of investment premiums | 417 | 952 | 2,542 | 4,780 | |||||||||||
| Stock-based compensation | 34,454 | 32,081 | 137,183 | 122,423 | |||||||||||
| Other non-cash items—net | 601 | (2,202 | ) | 3,780 | 2,644 | ||||||||||
| Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | |||||||||||||||
| Accounts receivable—net | (89,902 | ) | (70,663 | ) | (38,455 | ) | (57,875 | ) | |||||||
| Inventory | (8,264 | ) | (18,468 | ) | 9,423 | (43,023 | ) | ||||||||
| Prepaid expenses and other current assets | 2,873 | (1,685 | ) | (6,726 | ) | 2,616 | |||||||||
| Deferred tax assets | 57,957 | 7,183 | 35,824 | (27,822 | ) | ||||||||||
| Other assets | (641 | ) | 243 | (1,001 | ) | (2,352 | ) | ||||||||
| Accounts payable | 29,627 | 1,623 | 13,090 | 39 | |||||||||||
| Accrued liabilities | 6,393 | (3,808 | ) | 14,445 | (3,210 | ) | |||||||||
| Accrued payroll and compensation | 16,098 | 12,443 | 12,567 | 15,696 | |||||||||||
| Other liabilities | (1,659 | ) | (1,894 | ) | (5,489 | ) | (5,013 | ) | |||||||
| Deferred revenue | 116,489 | 100,094 | 300,839 | 242,961 | |||||||||||
| Income taxes payable | 7,792 | 6,348 | 29,508 | 13,137 | |||||||||||
| Net cash provided by operating activities | 157,542 | 101,037 | 594,405 | 345,708 | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||
| Purchases of investments | (309,602 | ) | (103,035 | ) | (669,171 | ) | (473,608 | ) | |||||||
| Sales of investments | 290,322 | 6,506 | 300,317 | 28,311 | |||||||||||
| Maturities of investments | 98,231 | 115,484 | 427,363 | 460,443 | |||||||||||
| Purchases of property and equipment | (13,671 | ) | (16,863 | ) | (135,312 | ) | (67,182 | ) | |||||||
| Payments made in connection with business acquisitions, net of cash acquired | — | — | — | (22,087 | ) | ||||||||||
| Net cash provided by (used in) investing activities | 65,280 | 2,092 | (76,803 | ) | (74,123 | ) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||
| Repurchase and retirement of common stock | (322,377 | ) | (35,828 | ) | (446,333 | ) | (110,828 | ) | |||||||
| Proceeds from issuance of common stock | 14,033 | 2,569 | 75,869 | 44,861 | |||||||||||
| Taxes paid related to net share settlement of equity awards | (9,268 | ) | (8,380 | ) | (45,137 | ) | (38,266 | ) | |||||||
| Payments of debt assumed in business acquisition | — | — | — | (1,626 | ) | ||||||||||
| Net cash used in financing activities | (317,612 | ) | (41,639 | ) | (415,601 | ) | (105,859 | ) | |||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | (94,790 | ) | 61,490 | 102,001 | 165,726 | ||||||||||
| CASH AND CASH EQUIVALENTS—Beginning of period | 905,794 | 647,513 | 709,003 | 543,277 | |||||||||||
| CASH AND CASH EQUIVALENTS—End of period | $ | 811,004 | $ | 709,003 | $ | 811,004 | $ | 709,003 | |||||||
| Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures | |||||||||||||||
| (Unaudited, in thousands, except per share amounts) | |||||||||||||||
| Reconciliation of net cash provided by operating activities to free cash flow | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net cash provided by operating activities | $ | 157,542 | $ | 101,037 | $ | 594,405 | $ | 345,708 | |||||||
| Less purchases of property and equipment | (13,671 | ) | (16,863 | ) | (135,312 | ) | (67,182 | ) | |||||||
| Free cash flow | $ | 143,871 | $ | 84,174 | $ | 459,093 | $ | 278,526 | |||||||
| Net cash provided by (used) in investing activities | $ | 65,280 | $ | 2,092 | $ | (76,803 | ) | $ | (74,123 | ) | |||||
| Net cash used in financing activities | $ | (317,612 | ) | $ | (41,639 | ) | $ | (415,601 | ) | $ | (105,859 | ) | |||
| Reconciliation of GAAP operating income to non-GAAP operating income, operating margin, net income and diluted net income per share | |||||||||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||||||||
| GAAP Results | Adjustments | Non-GAAP Results | GAAP Results | Adjustments | Non-GAAP Results | ||||||||||||||||||
| Operating income | $ | 42,198 | $ | 36,490 | (a) | $ | 78,688 | $ | 45,193 | $ | 35,936 | (b) | $ | 81,129 | |||||||||
| Operating margin | 10 | % | 19 | % | 12 | % | 22 | % | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Stock-based compensation | 34,454 | 32,081 | |||||||||||||||||||||
| Amortization of acquired intangible assets | 2,036 | 3,022 | |||||||||||||||||||||
| Restructuring charges | — | 833 | |||||||||||||||||||||
| Tax adjustment | 47,937 | (c) | (7,875 | ) | (c) | ||||||||||||||||||
| Net income (loss) | $ | (28,961 | ) | $ | 84,427 | $ | 55,466 | $ | 25,166 | $ | 28,061 | $ | 53,227 | ||||||||||
| Diluted net income (loss) per share | $ | (0.17 | ) | $ | 0.32 | $ | 0.14 | $ | 0.30 | ||||||||||||||
| Shares used in diluted net income (loss) per share calculations | 171,530 | 175,384 | 176,679 | 176,679 | |||||||||||||||||||
(a) To exclude
(b) To exclude
(c) Non-GAAP financial information is adjusted to achieve an overall 32% and 33% effective tax rate in 2017 and 2016, respectively, on a non-GAAP basis, which differs from the GAAP effective tax rate.
| Year Ended | Year Ended | ||||||||||||||||||||||
| GAAP Results | Adjustments | Non-GAAP Results | GAAP Results | Adjustments | Non-GAAP Results | ||||||||||||||||||
| Operating income | $ | 109,804 | $ | 147,595 | (a) | $ | 257,399 | $ | 42,944 | $ | 150,186 | (b) | $ | 193,130 | |||||||||
| Operating margin | 7 | % | 17 | % | 3 | % | 15 | % | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Stock-based compensation | 137,183 | 122,423 | |||||||||||||||||||||
| Amortization of acquired intangible assets | 8,572 | 9,308 | |||||||||||||||||||||
| Litigation settlement expenses | 1,500 | — | |||||||||||||||||||||
| Restructuring charges | 340 | 3,997 | |||||||||||||||||||||
| ERP-related expenses | — | 13,362 | |||||||||||||||||||||
| Inventory fair value adjustment amortization | — | 842 | |||||||||||||||||||||
| Acquisition-related charges | — | 254 | |||||||||||||||||||||
| Tax adjustment | 5,687 | (c) | (52,839 | ) | (c) | ||||||||||||||||||
| Net income | $ | 31,399 | $ | 153,282 | $ | 184,681 | $ | 32,187 | $ | 97,347 | $ | 129,534 | |||||||||||
| Diluted net income per share | $ | 0.18 | $ | 1.04 | $ | 0.18 | $ | 0.73 | |||||||||||||||
| Shares used in diluted net income per share calculations | 178,079 | 178,079 | 176,338 | 176,338 | |||||||||||||||||||
(a) To exclude
(b) To exclude
(c) Non-GAAP financial information is adjusted to achieve an overall 32% and 33% effective tax rate in 2017 and 2016, respectively, on a non-GAAP basis, which differs from the GAAP effective tax rate.
| Reconciliation of diluted weighted-average shares outstanding used in the calculation of GAAP and non-GAAP earnings per share | ||||||||||||
| Three Months Ended | Year Ended | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
| Shares used in diluted net income (loss) per share calculations - GAAP | 171,530 | 176,679 | 178,079 | 176,338 | ||||||||
| Adjustment for diluted weighted-average shares outstanding | (a) | 3,854 | — | — | — | |||||||
| Shares used in diluted net income per share calculations - Non-GAAP | 175,384 | 176,679 | 178,079 | 176,338 | ||||||||
(a) GAAP diluted weighted-average shares outstanding differs from non-GAAP diluted weighted-average shares outstanding in periods when we have a GAAP net loss and a non-GAAP net income. The adjustment for diluted weighted-average shares outstanding represents the dilutive effect of employee equity incentive plan awards and is calculated by applying the treasury stock method.
| Billings Reconciliation | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
2017 | 2016 | 2017 |
2016 | ||||||||||||
| Total revenue | $ | 416,668 | $ | 362,830 | $ | 1,494,930 | $ | 1,275,443 | |||||||
| Add change in deferred revenue | 117,357 | 100,557 | 300,965 | 244,046 | |||||||||||
| Less deferred revenue balance acquired in business acquisition | — | — | — | (4,400 | ) | ||||||||||
| Total billings | $ | 534,025 | $ | 463,387 | $ | 1,795,895 | $ | 1,515,089 | |||||||
Investor Contact:
408-331-4595
psalkowski@fortinet.com
Media Contact:
408-391-9408
swheatley@fortinet.com
News Provided by Acquire Media