UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 24, 2011
FORTINET, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-34511 | 77-0560389 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
1090 Kifer Road
Sunnyvale, CA 94086
(Address of principal executive offices, including zip code)
(408) 235-7700
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On October 24, 2011, Fortinet, Inc. issued a press release reporting its financial results for the third quarter ended September 30, 2011. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | Description | |
99.1 | Press release dated October 24, 2011 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Fortinet, Inc. | ||
Date: October 24, 2011 | By: | /s/ JOHN WHITTLE |
John Whittle | ||
Vice President and General Counsel | ||
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release dated October 24, 2011 | |
Press Release
Investor & Media Contact:
Michelle Spolver
Fortinet, Inc.
408-486-7837
mspolver@fortinet.com
Fortinet Reports Record Financial Results
•Revenues of $116.4 million, up 37% year over year
•Billings of $118.4 million, up 25% year over year
•GAAP EPS of $0.11 and Non-GAAP EPS of $0.13
•Cash and investments of $503.0 million, with no debt
•Free cash flow of $34.7 million, up 10% year over year
•GAAP net income of $17.9 million, up 28% year over year
•Non-GAAP net income of $21.7 million, up 61% year over year
SUNNYVALE, Calif. - October 24, 2011 - Fortinet® (NASDAQ: FTNT) - a leading network security provider and the worldwide leader in unified threat management (UTM) solutions - today announced financial results for the third quarter ended September 30, 2011.
Financial Highlights for the Third Quarter of 2011
• | Revenue1, 2: Total revenue was $116.4 million for the third quarter of 2011, an increase of 37% compared to the third quarter of 2010. Within total revenue, product revenue was $53.1 million, an increase of 48% compared to the third quarter of 2010. Services revenue was $57.8 million, an increase of 30% compared to the third quarter of 2010. Ratable and other revenue was $5.5 million, an increase of 21% compared to the third quarter of 2010. |
• | Billings2, 3: Total billings were $118.4 million for the third quarter of 2011, an increase of 25% compared to the third quarter of 2010. We define billings, a non-GAAP financial measure, as revenue recognized during the period plus the change in deferred revenue from the beginning to the end of the period. |
• | Deferred Revenue: Deferred revenue was $275.1 million as of September 30, 2011, an increase of 17% compared to deferred revenue as of September 30, 2010, and up $1.9 million from June 30, 2011. |
• | Cash and Cash Flow2: As of September 30, 2011, cash, cash equivalents and investments were $503.0 million, compared to $468.5 million as of June 30, 2011. Cash flow from operations was $36.0 million for the third quarter of 2011, compared to $32.2 million for the third quarter of 2010. In the third quarter of 2011, free cash flow was $34.7 million, compared to $31.5 million for the third quarter of 2010. We define free cash flow, a non-GAAP financial measure of liquidity, as net cash provided by operating activities less capital expenditures. |
• | GAAP Operating Income2: GAAP operating income was $26.2 million for the third quarter of 2011, representing a GAAP operating margin of 22%, and an increase of 44% compared to the third quarter of 2010. |
• | Non-GAAP3 Operating Income2: Non-GAAP operating income was $31.4 million for the third quarter of 2011, representing a non-GAAP operating margin of 27% and an increase of 52% compared to the third quarter of 2010. Non-GAAP operating income and operating margin exclude stock-based compensation expense and income from payments we received related to a patent settlement. |
• | GAAP Net Income and EPS2: GAAP net income was $17.9 million for the third quarter of 2011, based on a 34% tax rate for the quarter. This compares to GAAP net income of $14.0 million for the third quarter of 2010, based on a 23% tax rate for the quarter. GAAP diluted EPS was $0.11 for the third quarter of 2011, based on 163.9 million weighted-average diluted shares outstanding, compared to $0.09 for the third quarter of 2010, based on 155.8 million weighted-average diluted shares outstanding4. GAAP EPS includes $0.01 attributable to a sale of previously-acquired patents and its related tax effects. |
• | Non-GAAP3 Net Income and EPS2: Non-GAAP net income was $21.7 million for the third quarter of 2011, based on a 33% effective tax rate for the quarter. Non-GAAP net income for the third quarter of 2010 was $13.5 million, based on a 35% effective tax rate. Non-GAAP diluted EPS was $0.13 for the third quarter of 2011 based on 163.9 million weighted-average diluted shares outstanding, compared to $0.09 for the third quarter of 2010 based on 155.8 million weighted-average diluted shares outstanding4. Non-GAAP net income and non-GAAP EPS exclude stock-based compensation expense, income from payments we received related to a patent settlement and the related tax effects. Non-GAAP EPS includes $0.01 attributable to a sale of previously-acquired patents and its related tax effects. |
1 Effective January 1, 2011, we prospectively adopted the Financial Accounting Standards Board's new accounting standards related to software revenue recognition for applicable transactions originating or materially modified after December 31, 2010.
2 Includes the impact of a $2.6 million sale of previously-acquired patents during the quarter.
3 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.”
4 Effective June 1, 2011, we completed a two-for-one stock split of our outstanding shares of common stock effected in the form of a stock dividend. All prior share and per share amounts in this release have been retroactively adjusted
so the stock split is reflected for all periods presented.
Management Commentary:
Ken Xie, founder, president and chief executive officer of Fortinet, stated: “We are very pleased with our performance during the third quarter, as demand in the UTM market combined with the successful implementation of our global go-to-market sales strategy continued to drive growth and market share gains. A strong network security product portfolio and the execution of our growth plan enabled us to continue to win business with service providers, and gain further traction with large enterprise deployments across all of our geographies. In addition, we demonstrated the value of our products by winning a landmark enterprise deal in the United States, which represents the largest contract in the company's history. Our high performance UTM solutions continue to differentiate us in the marketplace and fuel our growth.”
Ken Goldman, chief financial officer of Fortinet, stated: "We had record financial performance during the third quarter -- exceeding expectations from a revenue, billings, profitability and cash flow perspective. Product revenue growth was strong, which we view as a leading indicator for our business. In addition, we continued to achieve improvements in productivity levels as we remain focused on leveraging our investments in R&D and implementing our global sales strategy throughout the organization. The strength of our balance sheet and liquidity is demonstrated by our exceeding $500 million in cash and investments with no debt.”
Conference Call Details
Fortinet will host a conference call today, October 24, 2011, 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 # 17263883. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of our 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 November 7, 2011, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 17263883.
Following our earnings conference call, we 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 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 # 17263883. This follow-up call will be webcast live and accessible 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 November 7, 2011, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 17263883.
About Fortinet (www.fortinet.com)
Fortinet (NASDAQ: FTNT) is a worldwide provider of network security appliances and the 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 2009 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 © 2011 Fortinet, Inc. All rights reserved. The symbols ® and ™ 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 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.
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, continued differentiation and growth based on our high performance UTM solutions, our pipeline of business, improving trends in EMEA, and our fourth-quarter product launches. 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 introductions and innovation; 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; and the other risk factors set forth from time to time in our 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 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. 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 peer 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 strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also 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 Fortinet 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 during the period. 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 Quarterly Report on Form 10-Q and Annual Report on Form 10-K. We have computed free cash flow using the same consistent method from quarter to quarter and year to year.
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 recurring 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 EPS. 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, less the related tax effects for both periods presented. We define non-GAAP EPS as non-GAAP net income divided by the weighted-average shares outstanding, on a fully-diluted basis. We consider these non-GAAP financial measures to be a useful metric 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 exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with stock-based compensation and the patent settlement. We used a 33 percent effective tax rate to calculate non-GAAP net income for the third quarter of 2011. We used a 35 percent effective tax rate to calculate non-GAAP net income for the third quarter of 2010. We believe these effective tax rates 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 EPS. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.
FORTINET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
September 30, 2011 | December 31, 2010 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 66,630 | $ | 66,859 | |||
Short-term investments | 322,536 | 246,651 | |||||
Accounts receivable, net of allowance for doubtful accounts of $180 and $303, respectively | 75,835 | 72,336 | |||||
Inventory—Net | 12,968 | 13,517 | |||||
Deferred tax asset | 14,330 | 8,158 | |||||
Prepaid expenses and other current assets | 9,258 | 8,849 | |||||
Deferred cost of revenues | 2,369 | 3,788 | |||||
Total current assets | 503,926 | 420,158 | |||||
PROPERTY AND EQUIPMENT—Net | 7,485 | 7,056 | |||||
DEFERRED TAX ASSET—Non-current | 37,443 | 37,443 | |||||
DEFERRED COST OF REVENUES | 3,775 | 5,543 | |||||
LONG-TERM INVESTMENTS | 113,801 | 73,950 | |||||
OTHER ASSETS | 4,557 | 1,272 | |||||
TOTAL ASSETS | $ | 670,987 | $ | 545,422 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 15,342 | $ | 12,761 | |||
Accrued liabilities | 22,286 | 16,303 | |||||
Accrued payroll and compensation | 21,112 | 19,670 | |||||
Deferred revenue | 192,927 | 169,648 | |||||
Total current liabilities | 251,667 | 218,382 | |||||
DEFERRED REVENUE—Non-current | 82,199 | 82,983 | |||||
OTHER NON-CURRENT LIABILITIES | 20,254 | 11,603 | |||||
Total liabilities | 354,120 | 312,968 | |||||
STOCKHOLDERS' EQUITY: | |||||||
Common stock | 155 | 150 | |||||
Additional paid-in-capital | 292,440 | 251,845 | |||||
Treasury stock | (2,995 | ) | (2,995 | ) | |||
Accumulated other comprehensive income (loss) | (4 | ) | 2,181 | ||||
Retained earnings (accumulated deficit) | 27,271 | (18,727 | ) | ||||
Total stockholders' equity | 316,867 | 232,454 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 670,987 | $ | 545,422 | |||
FORTINET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||
REVENUE: | |||||||||||||||
Product | $ | 53,093 | $ | 35,913 | $ | 139,945 | $ | 94,060 | |||||||
Services | 57,835 | 44,527 | 159,192 | 124,116 | |||||||||||
Ratable and other revenue 1 | 5,498 | 4,531 | 13,578 | 12,921 | |||||||||||
Total revenue | 116,426 | 84,971 | 312,715 | 231,097 | |||||||||||
COST OF REVENUE: | |||||||||||||||
Product 2 | 20,606 | 13,263 | 51,272 | 36,399 | |||||||||||
Services 2 | 9,438 | 6,565 | 25,815 | 19,851 | |||||||||||
Ratable and other revenue | 1,095 | 1,615 | 4,026 | 4,733 | |||||||||||
Total cost of revenue | 31,139 | 21,443 | 81,113 | 60,983 | |||||||||||
GROSS PROFIT: | |||||||||||||||
Product | 32,487 | 22,650 | 88,673 | 57,661 | |||||||||||
Services | 48,397 | 37,962 | 133,377 | 104,265 | |||||||||||
Ratable and other revenue | 4,403 | 2,916 | 9,552 | 8,188 | |||||||||||
Total gross profit | 85,287 | 63,528 | 231,602 | 170,114 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Research and development 2 | 16,834 | 12,389 | 47,197 | 36,999 | |||||||||||
Sales and marketing 2 | 36,934 | 26,987 | 105,548 | 81,487 | |||||||||||
General and administrative 2 | 5,359 | 5,993 | 16,473 | 16,985 | |||||||||||
Total operating expenses | 59,127 | 45,369 | 169,218 | 135,471 | |||||||||||
OPERATING INCOME | 26,160 | 18,159 | 62,384 | 34,643 | |||||||||||
INTEREST INCOME | 904 | 514 | 2,560 | 1,181 | |||||||||||
OTHER INCOME (EXPENSE)—Net | 60 | (402 | ) | (242 | ) | (565 | ) | ||||||||
INCOME BEFORE INCOME TAXES | 27,124 | 18,271 | 64,702 | 35,259 | |||||||||||
PROVISION FOR INCOME TAXES | 9,207 | 4,254 | 18,704 | 10,155 | |||||||||||
NET INCOME | $ | 17,917 | $ | 14,017 | $ | 45,998 | $ | 25,104 | |||||||
Net income per share: 3 | |||||||||||||||
Basic | $ | 0.12 | $ | 0.10 | $ | 0.30 | $ | 0.18 | |||||||
Diluted | $ | 0.11 | $ | 0.09 | $ | 0.28 | $ | 0.16 | |||||||
Weighted-average shares outstanding: 3 | |||||||||||||||
Basic | 153,265 | 143,672 | 151,958 | 138,376 | |||||||||||
Diluted | 163,869 | 155,842 | 163,554 | 153,290 | |||||||||||
1 Ratable and other revenue was formerly referred to as Ratable product and services revenue. We have made this change to reflect the $2.6 million sale of patents during the current quarter. | |||||||||||||||
2 Includes stock-based compensation expense as follows: | |||||||||||||||
Cost of product revenue | $ | 64 | $ | 26 | $ | 129 | $ | 76 | |||||||
Cost of services revenue | 564 | 242 | 1,124 | 684 | |||||||||||
Research and development | 1,516 | 600 | 2,954 | 1,741 | |||||||||||
Sales and marketing | 2,708 | 1,017 | 6,289 | 2,780 | |||||||||||
General and administrative | 882 | 549 | 2,178 | 1,565 | |||||||||||
$ | 5,734 | $ | 2,434 | $ | 12,674 | $ | 6,846 | ||||||||
3 Effective June 1, 2011, we completed a two-for-one stock split of our outstanding shares of common stock. In accordance with GAAP, we have retroactively displayed the effect of the change in our condensed consolidated financial statements. | |||||||||||||||
FORTINET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended | |||||||
September 30, 2011 | September 30, 2010 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 45,998 | $ | 25,104 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 5,114 | 4,233 | |||||
Loss on disposal of fixed assets | 22 | 14 | |||||
Amortization of investment premiums | 9,508 | 4,934 | |||||
Stock-based compensation | 12,674 | 6,846 | |||||
Excess tax benefit from employee stock option plans | (9,264 | ) | (4,191 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable—net | (3,559 | ) | (5,011 | ) | |||
Inventory | (1,478 | ) | (2,815 | ) | |||
Deferred tax assets | (5,546 | ) | (8 | ) | |||
Prepaid expenses and other current assets | (2,429 | ) | (2,905 | ) | |||
Deferred cost of revenues | 3,188 | (274 | ) | ||||
Other assets | (1,456 | ) | 50 | ||||
Accounts payable | 2,514 | (689 | ) | ||||
Accrued liabilities | 4,867 | 1,711 | |||||
Accrued payroll and compensation | 1,582 | 4,312 | |||||
Other liabilities (deferred litigation settlement) | 2,664 | — | |||||
Deferred revenue | 22,471 | 33,321 | |||||
Income taxes payable | 23,413 | 7,327 | |||||
Net cash provided by operating activities | 110,283 | 71,959 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of investments | (407,110 | ) | (311,995 | ) | |||
Maturities and sales of investments | 279,681 | 80,097 | |||||
Payment made in connection with business acquisition, net | (2,623 | ) | — | ||||
Purchases of property and equipment | (2,785 | ) | (2,900 | ) | |||
Deposits of restricted cash | — | (4 | ) | ||||
Net cash used in investing activities | (132,837 | ) | (234,802 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from exercise of stock options and warrants | 14,018 | 23,892 | |||||
Offering costs paid in connection with Initial Public Offering | — | (872 | ) | ||||
Excess tax benefit from employee stock option plans | 9,264 | 4,191 | |||||
Net cash provided by financing activities | 23,282 | 27,211 | |||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | (957 | ) | 313 | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (229 | ) | (135,319 | ) | |||
CASH AND CASH EQUIVALENTS—Beginning of period | 66,859 | 212,458 | |||||
CASH AND CASH EQUIVALENTS—End of period | $ | 66,630 | $ | 77,139 | |||
Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
(in thousands)
(unaudited)
Reconciliation of GAAP revenue to billing
Three Months Ended | |||||||
September 30, 2011 | September 30, 2010 | ||||||
Total revenue | $ | 116,426 | $ | 84,971 | |||
Increase in deferred revenue | 1,927 | 9,729 | |||||
Total billings (Non-GAAP) | $ | 118,353 | $ | 94,700 | |||
Reconciliation of cash provided by operating activities to free cash flow
Three Months Ended | |||||||
September 30, 2011 | September 30, 2010 | ||||||
Net cash provided by operating activities | $ | 36,039 | $ | 32,193 | |||
Less purchases of property and equipment | (1,335 | ) | (671 | ) | |||
Free cash flow (Non-GAAP) | $ | 34,704 | $ | 31,522 | |||
Net cash used in investing activities * | $ | (52,950 | ) | $ | (84,943 | ) | |
Net cash provided by financing activities | $ | 7,572 | $ | 11,890 | |||
* Includes purchases of property and equipment
Reconciliation of non-GAAP results of operations to the nearest comparable GAAP measures and other non-GAAP information
(in thousands, except per share amounts)
(unaudited)
Reconciliation of GAAP to Non-GAAP operating income, operating margin, net income and net income per share.
Three Months Ended September 30, 2011 | Three Months Ended September 30, 2010 | ||||||||||||||||||||||
GAAP Results | Adjustments | Non-GAAP Results | GAAP Results | Adjustments | Non-GAAP Results | ||||||||||||||||||
Operating Income | $ | 26,160 | $ | 5,191 | (a) | $ | 31,351 | $ | 18,159 | $ | 2,434 | (b) | $ | 20,593 | |||||||||
Operating Margin | 22 | % | 27 | % | 21 | % | 24 | % | |||||||||||||||
5,191 | (a) | 2,434 | (b) | ||||||||||||||||||||
(1,457 | ) | (c) | (2,993 | ) | (c) | ||||||||||||||||||
Net Income | $ | 17,917 | 3,734 | $ | 21,651 | $ | 14,017 | (559 | ) | $ | 13,458 | ||||||||||||
Net income per share - diluted | $ | 0.11 | $ | 0.13 | $ | 0.09 | $ | 0.09 | |||||||||||||||
Shares used in per share calculations - diluted | 163,869 | 163,869 | 155,842 | 155,842 | |||||||||||||||||||
(a) To eliminate $5.7 million of stock-based compensation expense offset by $0.5 million of patent settlement income in the three months ended September 30, 2011.
(b) To eliminate $2.4 million of stock-based compensation expense in the three months ended September 30, 2010.
(c) To eliminate the tax effects related to expenses noted in (a) and (b)