Fortinet Reports Second Quarter 2016 Financial Results

Revenue and billings outperformance highlights Fortinet’s best-in-class Security Fabric

• Revenue of $311.4 million, up 30% year over year
• Billings of $373.8 million, up 26% year over year1
• GAAP diluted net loss per share $0.01
• Non-GAAP diluted net income per share of $0.141
• Cash flow from operations of $67.9 million
• Free cash flow of $53.5 million1
• Cash, cash equivalents and investments of $1.22 billion
• Deferred revenue of $904.0 million, up 37% year over year

Dubai, UAE.July 31, 2016- Fortinet® (NASDAQ: FTNT), a global leader in high performance cyber security solutions, today announced financial results for the second quarter ended June 30, 2016.

“We are pleased with our billings and revenue over performance and ability to meet our expense and profitability targets while still investing for growth,” said Ken Xie, founder, chairman and chief executive officer. “The threat landscape and network architectures are evolving and shifting to integrated end-to-end platforms, which is the vision Fortinet was founded upon.  Our strong innovation and ability to provide a seamless, tightly-integrated and intelligent Security Fabric that protects all points in the network - from IoT to cloud - positions us well for continued growth and share gains in 2016 and beyond.”

Financial Highlights for the Second Quarter of 2016

• Revenue: Total revenue was $311.4 million for the second quarter of 2016, an increase of 30% compared to $239.8 million in the same quarter of 2015. Within total revenue, product revenue was $136.6 million, an increase of 19% compared to $114.8 million in the same quarter of 2015. Service revenue was $174.8 million, an increase of 40% compared to $125.0 million in the same quarter of 2015.
• Billings1: Total billings were $373.8 million for the second quarter of 2016, an increase of 26% compared to $297.2 million in the same quarter of 2015.
• Deferred Revenue: Total deferred revenue was $904.0 million as of June 30, 2016, an increase of $66.8 million compared to $837.2 million as of March 31, 2016.
• Cash and Cash Flow: As of June 30, 2016, cash, cash equivalents and investments were $1.22 billion, compared to $1.19 billion as of March 31, 2016. In the second quarter of 2016, cash flow from operations was $67.9 million compared to $84.3 million in the same quarter of 2015. Free cash flow1 was $53.5 million during the second quarter of 2016 compared to $73.5 million in the same quarter of 2015.
• GAAP Operating Income or Loss: GAAP operating loss was $4.0 million for the second quarter of 2016, representing a GAAP operating margin of -1%. GAAP operating income was $3.0 million for the same quarter of 2015, representing a GAAP operating margin of 1%. 
• Non-GAAP Operating Income1: Non-GAAP operating income was $36.0 million for the second quarter of 2016, representing a non-GAAP operating margin of 12%. Non-GAAP operating income was $29.3 million for the same quarter of 2015, representing a non-GAAP operating margin of 12%. 
• GAAP Net Income or Loss and Diluted Net Income or Loss Per Share: GAAP net loss was $1.4 million for the second quarter of 2016, compared to GAAP net income of $0.8 million for the same quarter of 2015. GAAP diluted net loss per share was $0.01 for the second quarter of 2016. GAAP diluted net income per share was break-even for the second quarter of 2015.
• Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $24.0 million for the second quarter of 2016, compared to non-GAAP net income of $19.4 million for the same quarter of 2015.  Non-GAAP diluted net income per share was $0.14 for the second quarter of 2016, compared to $0.11 for the same quarter of 2015.

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.”