SOURCE: Fortinet

Fortinet

January 27, 2010 16:15 ET

Fortinet Announces Fourth Quarter and Full Year 2009 Financial Results

SUNNYVALE, CA--(Marketwire - January 27, 2010) - Fortinet® (NASDAQ: FTNT) -- a leading network security provider and worldwide leader of unified threat management (UTM) solutions -- today announced financial results for the fourth quarter and full year 2009, ended December 31, 2009.

Financial Highlights for the Fourth Quarter of 2009

--  Billings: Total billings were $82.3 million for the fourth quarter of
    2009, an increase of 13% compared to the fourth quarter of 2008.   We
    define billings as revenue recognized plus the change in deferred revenue
    from the beginning to the end of the period.
    
--  Revenue: Total revenue was $70.7 million for the fourth quarter of 2009, 
    an increase of 20% compared to the fourth quarter of 2008. Within total
    revenue, product revenue was $29.4 million, an increase of 12% compared to
    the fourth quarter of 2008. Services revenue was $37.4 million, an increase
    of 25% compared to the fourth quarter of 2008.  Ratable product and
    services revenue was $3.9 million, an increase of 32% compared to the
    fourth quarter of 2008.
    
--  Deferred Revenue: Deferred revenue was $201.9 million as of December 31,
    2009, an increase of 18% compared to deferred revenue as of December 31,
    2008.
    
--  Cash and Cash flow: As of December 31, 2009, cash and cash equivalents
    and short-term investments were $260.3 million, an increase from $152.4
    million as of September 30, 2009. Cash flow from operations was $16.6
    million. Net proceeds of $87.4 million from the Company's initial public
    offering contributed to the strong increase in cash and cash equivalents
    and short-term investments during the fourth quarter.
    
--  GAAP Operating Income: GAAP operating income was $7.5 million for the
    fourth quarter of 2009, representing a GAAP operating margin of 11% and an
    increase of 19% compared to the fourth quarter of 2008.
    
--  Non-GAAP(1) Operating Income: Non-GAAP operating income was $11.3 million
    for the fourth quarter of 2009, representing a non-GAAP operating margin of
    16% and an increase of 46% compared to the fourth quarter of 2008. Non-GAAP
    operating income and operating margin exclude non-cash stock-based
    compensation and non-cash acquisition related charges. Non-cash acquisition
    related charges consist of intangible asset write-offs but exclude ongoing
    amortization of intangible assets.
    
--  GAAP Net Income and EPS: GAAP net income was $43.9 million for the fourth
    quarter of 2009 (which includes a $37.8 million tax benefit from the
    reversal of our valuation allowance), compared to $7.9 million for the
    fourth quarter of 2008. GAAP EPS was $0.62 on 70.8 million weighted-average
    diluted shares outstanding, compared to $0.12 on 66.9 million weighted-
    average diluted shares outstanding for the fourth quarter of 2008.
    
--  Non-GAAP(1) Net Income and EPS: Non-GAAP net income was $9.2 million for
    the fourth quarter of 2009, based on a 21% tax rate. This compares to $9.1
    million for the fourth quarter of 2008, based on a 9% tax rate, and
    included a $1.2 million foreign currency gain. Non-GAAP EPS was $0.13 for
    the fourth quarter of 2009 on 70.8 million weighted-average diluted shares
    outstanding, compared to $0.14 in the fourth quarter of 2008 on 66.9
    million weighted-average diluted shares outstanding. Non-GAAP net income
    and EPS exclude non-cash stock-based compensation and non-cash acquisition
    related charges, and the related tax effects and, for the fourth quarter
    and full year 2009, the reversal of the tax-related valuation allowance.
    

(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."

Full Year 2009 Results

--  Billings: Total billings were $282.4 million for fiscal 2009, an increase
    of 12% compared to fiscal 2008.
    
--  Revenue:  Total revenue was $252.1 million for fiscal 2009, an increase
    of 19% compared to fiscal 2008. Within total revenue, product revenue was
    $98.7 million for fiscal 2009, an increase of 4% compared to fiscal 2008,
    and services revenue was $139.2 million for fiscal 2009, an increase of 32%
    compared to fiscal 2008.  Ratable product and services revenue was $14.3
    million, an increase of 20% compared to fiscal 2008.
    
--  GAAP Operating Income: GAAP operating income was $25.3 million for fiscal
    2009, representing a GAAP operating margin of 10% and an increase of 414%
    compared to fiscal 2008.
    
--  Non-GAAP(1) Operating Income: Non-GAAP operating income was $35.2 million
    for fiscal 2009, representing a non-GAAP operating margin of 14% and an
    increase of 244% compared to fiscal 2008.
    
--  GAAP Net Income and EPS: GAAP net income was $60.2 million for fiscal
    2009 (which includes a $37.8 million tax benefit from the reversal of our
    valuation allowance), compared to $7.4 million for 2008. GAAP EPS, based on
    net income attributable to common shareholders of $50.9 million, was $0.78
    on 65.2 million weighted-average diluted shares outstanding for fiscal
    2009, compared with $0.11 on 67.1 million weighted-average diluted shares
    outstanding for fiscal 2008.
    
--  Non-GAAP(1) Net Income and EPS: Non-GAAP net income was $30.5 million for
    fiscal 2009 compared to $11.6 million for fiscal 2008. Non-GAAP EPS was
    $0.47 on 65.2 million weighted-average diluted shares outstanding for
    fiscal 2009, compared to $0.17 on 67.1 million weighted-average diluted
    shares outstanding for fiscal 2008.
    

(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."

Management Commentary:

Ken Xie, founder, president and chief executive officer of Fortinet, stated: "The fourth quarter of 2009 was a milestone for Fortinet as we successfully completed our IPO and had a strong finish to the year. Our focus on innovation and providing an end-to-end IT security portfolio utilizing our custom ASICs continues to drive Fortinet's market share gains and new customer acquisitions."

Ken Goldman, chief financial officer of Fortinet, stated: "We are very pleased with the company's performance during our first quarter as a public company. In addition to reporting record total revenue, strong billings growth and cash collections led to fourth quarter and full year cash flow that was ahead of our expectations. While cognizant of the volatile economic environment, we remain focused on growing our global market share, delivering strong profits and cash flow, and continuing to introduce innovative, high-performance products."

Conference Call Details

Fortinet will host a conference call today, January 27, 2010, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the Company's financial results. To access this call, dial 888-601-3860 (domestic) or 913-312-1437 (international) with conference ID #2125684. 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 until February 5, 2010, by dialing 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 2125684.

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 to ask more detailed product and financial questions. To access this call, dial 800-215-2540 (domestic) or 913-312-0943 (international) with conference ID #8493298. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and 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 February 5, 2010 at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 8493298.

About Fortinet (www.fortinet.com)

Fortinet (NASDAQ: FTNT) is a worldwide provider of network security and unified threat management (UTM) solutions. 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 is headquartered in Sunnyvale, Calif., with offices around the world.

Copyright © 2010 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, FortiDB and FortiWeb. Other trademarks belong to their respective owners.

FTNT-F

Forward-looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our continued focus on innovation and providing an end-to-end IT security portfolio to drive market share gains and new customer acquisitions and statements regarding our focus on growing our global market share, delivering strong profits and cash flows, and continuing to introduce innovative, high-performance products. Although Fortinet attempts 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; uncertainty regarding increased business and renewals from existing customers; uncertainties around continued success in sales growth; risks associated with successful implementation of multiple integrated software products; execution risks around new product introductions and innovation; the ability to attract and retain key personnel; 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; 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 Fortinet's investor relations department.

Non-GAAP Financial Measures

Fortinet has provided in this release financial information that has not been prepared in accordance with GAAP. Fortinet uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Fortinet's ongoing operational performance. Fortinet believes 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 its financial results with other companies in Fortinet's 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 measure 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. Fortinet considers billings to be a useful metric for management and investors because billings drive deferred revenue, which are an important indicator of the health and visibility of Fortinet's business, and have historically represented a majority of the quarterly revenue that Fortinet recognizes. 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, Fortinet 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 revenues and evaluating billings together with revenues calculated in accordance with GAAP.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus non-cash stock-based compensation and non-cash acquisition related charges. Non-cash acquisition related charges include intangible asset write-offs but exclude ongoing amortization of intangible assets. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenue. Fortinet considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of non-cash stock-based compensation, non-cash acquisition related charges and one-time events so that Fortinet's management and investors can compare Fortinet's 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 some costs, namely, non-cash stock-based compensation, that are recurring. Non-cash stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in Fortinet's business. Second, non-cash 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 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 non-cash stock-based compensation and non-cash acquisition related charges, less the related tax effects and, for the fourth quarter and full year 2009, adjusted for the tax-related valuation allowance reversal and, for fiscal 2009, the premium paid on repurchase of convertible preferred stock. We define non-GAAP EPS as non-GAAP net income divided by the weighted-average outstanding shares, 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 Fortinet uses 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 non-cash acquisition related charges. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Fortinet's use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates 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.

                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)
                                (unaudited)

                                                 December 28,  December 31,
                       ASSETS                        2008          2009
                                                  -----------  -----------
CURRENT ASSETS:
  Cash and cash equivalents                       $    56,571  $   212,458
  Short-term investments                               67,619       47,856
  Accounts receivable, net of allowance for
   doubtful accounts of $318 and $367, respectively    46,043       54,551
  Inventory                                            11,419       10,649
  Deferred tax asset                                       69        9,652
  Prepaid expenses and other current assets             3,270        3,100
  Deferred cost of revenues                             3,470        3,951
                                                  -----------  -----------
           Total current assets                       188,461      342,217
PROPERTY AND EQUIPMENT -- Net                           3,425        6,387
DEFERRED COST OF REVENUES -- Noncurrent                 5,161        5,743
DEFERRED TAX ASSET -- Noncurrent                            -       31,671
OTHER ASSETS                                            2,058        1,195
                                                  -----------  -----------
TOTAL ASSETS                                      $   199,105  $   387,213
                                                  ===========  ===========
  LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
  Accounts payable                                $     7,004  $    10,987
  Accrued liabilities                                  12,128       14,911
  Accrued payroll and compensation                     12,839       13,991
  Deferred revenue -- Current                         118,297      140,537
  Income tax payable                                        -          139
                                                  -----------  -----------
           Total current liabilities                  150,268      180,565
DEFERRED REVENUE -- Noncurrent                         53,320       61,393
OTHER NON-CURRENT LIABILITIES                             746        2,525
DEFERRED RENT -- Noncurrent                                            278
                                                  -----------  -----------
           Total liabilities                          204,334      244,761
                                                  -----------  -----------
STOCKHOLDERS' (DEFICIT) EQUITY:
  Convertible preferred stock                          94,368            -
  Common stock                                             21           70
  Additional paid-in-capital                           20,833      204,265
  Treasury stock -- common                                  -       (2,995)
  Accumulated other comprehensive income (loss)          (300)       1,084
  Accumulated deficit                                (120,151)     (59,972)
                                                  -----------  ----------- 
           Total stockholders' (deficit) equity        (5,229)     142,452
                                                  -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
 EQUITY                                           $   199,105  $   387,213




                              FORTINET, INC.

                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)
                                (unaudited)

                           Three Months Ended           Years Ended
                        ------------------------  ------------------------
                        December 28, December 31, December 28, December 31,
                            2008         2009         2008         2009
                        ------------ -----------  ------------ -----------

REVENUE:
  Product               $     26,192 $    29,359  $     94,587 $    98,686
  Services                    29,898      37,413       105,292     139,172
  Ratable product and
   services                    2,976       3,939        11,912      14,257
                        ------------ -----------  ------------ -----------
       Total revenue          59,066      70,711       211,791     252,115
                        ------------ -----------  ------------ -----------
COST OF REVENUE:
  Product*                    11,977      13,117        41,397      42,166
  Services*                    4,690       6,310        19,441      22,265
  Ratable product and
   services                    1,187       1,482         4,634       5,544
                        ------------ -----------  ------------ -----------
       Total cost of
        revenue               17,854      20,909        65,472      69,975
                        ------------ -----------  ------------ -----------
GROSS PROFIT:
  Product                     14,215      16,242        53,190      56,520
  Services                    25,208      31,103        85,851     116,907
  Ratable product and
   services                    1,789       2,457         7,278       8,713
                        ------------ -----------  ------------ -----------
       Total gross
        profit                41,212      49,802       146,319     182,140
                        ------------ -----------  ------------ -----------
OPERATING EXPENSES:
  Research and
   development*                8,849      10,988        37,035      42,195
  Sales and marketing*        21,817      26,719        87,717      96,291
  General and
   administrative*             4,273       4,642        16,640      18,320
                        ------------ -----------  ------------ -----------
        Total operating
         expenses             34,939      42,349       141,392     156,806
OPERATING INCOME               6,273       7,453         4,927      25,334
INTEREST INCOME                  742         304         2,614       1,981
OTHER INCOME                   1,539          50         1,710         198
                        ------------ -----------  ------------ -----------
INCOME BEFORE INCOME
 TAXES                         8,554       7,807         9,251      27,513
PROVISION / (BENEFIT)
 FOR INCOME TAXES                611     (36,132)        1,888     (32,666)
                        ------------ -----------  ------------ -----------
NET INCOME              $      7,943 $    43,939  $      7,363 $    60,179
Premium paid on
 repurchase of convertible
 preferred shares                  -           -             -      (9,266)
Net income attributable
 to common shareholders $      7,943 $    43,939  $      7,363 $    50,913
                        ============ ===========  ============ ===========
Net income per share:
   Basic                $       0.38 $      1.02  $       0.37 $      1.93
                        ============ ===========  ============ ===========
   Diluted              $       0.12 $      0.62  $       0.11 $      0.78
                        ============ ===========  ============ ===========
Weighted-average shares
 outstanding:
   Basic                      20,663      42,991        20,017      26,334
                        ============ ===========  ============ ===========
   Diluted                    66,935      70,760        67,122      65,219
                        ============ ===========  ============ ===========
_____________________
*Includes stock-based
  compensation expense
  as follows:
  Cost of product
   revenue              $         21 $        26  $         67 $       102
  Cost of services
   revenue                       117         193           400         658
  Research and
   development                   322         571         1,049       1,963
  Sales and marketing            645         918         2,512       3,020
  General and
   administrative                339         474         1,271       1,718
                        ------------ -----------  ------------ -----------
                        $      1,444 $     2,182  $      5,299 $     7,461
                        ============ ===========  ============ ===========





                              FORTINET, INC.

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)
                                (unaudited)

                           Three Months Ended           Years Ended
                        ------------------------  ------------------------
                        December 28, December 31, December 28, December 31,
                            2008         2009         2008         2009
CASH FLOWS FROM
 OPERATING ACTIVITIES:
  Net income            $     7,943       43,939  $     7,363  $    60,179
  Adjustments to
   reconcile net income
   to net cash provided
   by operating activities;
    Depreciation and
     amortization               928        1,613        4,234        5,935
    Stock-based expense       1,444        2,183        5,299        7,462
    Writeoff of
     intangible assets            -        1,663            -        2,738
    Amortization of
     investment
     premiums                    11          (16)          41          836
    Excess tax benefit
     from employee
     stock option plans           -       (1,461)           -       (1,574)
    Income tax benefit
     from release of
     valuation
     allowance                    -      (30,211)           -      (30,211)
    Changes in operating
     assets and liabilities:
      Accounts
       receivable -- net     (7,473)     (10,441)     (18,350)      (8,509)
      Inventory                 555         (460)        (189)      (2,012)
      Deferred cost of
       revenues                  (2)        (137)      (1,231)      (1,063)
      Prepaid expenses
       and other
       current assets          (114)         167         (214)        (190)
      Deferred tax assets       529       (9,572)         205       (9,578)
      Other assets              999         (619)         (80)        (419)
      Accounts payable       (4,652)       1,964       (1,864)       3,046
      Accrued liabilities     1,555        1,996         (780)       2,157
      Accrued payroll
       and compensation       2,932        1,318        5,030          630
      Deferred revenue       13,510       11,555       40,363       30,313
      Income taxes
       payable                  415        3,084       (2,141)       2,582
                        -----------  -----------  -----------  -----------
        Net cash provided
         by operating
         activities          18,580       16,565       37,686       62,322
                        -----------  -----------  -----------  -----------
CASH FLOWS FROM
 INVESTING ACTIVITIES:
  Purchase of property
   and equipment             (1,850)        (336)      (2,798)      (4,589)
  Purchase of short-term
   investments              (36,948)     (18,569)     (80,588)    (137,231)
  Maturities and sales
   of short-term
   investments               12,986       48,843       31,742      156,126
  Payments made in
   connection with
   business
   acquisition, net               -            -       (2,000)        (900)
  Decrease in
   restricted cash                -            -          (62)           -
                        -----------  -----------  -----------  -----------
        Net cash provided
         by (used in)
         investing
         activities         (25,812)      29,938      (53,706)      13,406
                        -----------  -----------  -----------  -----------
CASH FLOWS FROM
 FINANCING ACTIVITIES:
  Proceeds from
   exercise of stock
   options                      168          509        2,117        2,416
  Proceeds from IPO,
   net of offering
   costs                          -       88,260            -       88,260
  Warrants exercised
   sold thru IPO                  -        1,121            -        1,121
  Options exercised
   sold thru IPO                  -          441            -          441
  Excess tax benefit
   from employee stock
   option plans                   -        1,461            -        1,574
  Repurchase of
   preferred stock                -            -            -      (12,768)
  Repurchase of common
   stock                          -            -            -       (2,995)
                        -----------  -----------  -----------  -----------
        Net cash provided
         by (used in)
         financing
         activities             168       91,792        2,117       78,049
                        -----------  -----------  -----------  -----------
EFFECT OF EXCHANGE
 RATES ON CASH AND
  CASH EQUIVALENTS           (1,561)         (70)        (937)       2,110
NET INCREASE (DECREASE)
 IN CASH AND CASH
 EQUIVALENTS                 (8,625)     138,225      (14,840)     155,887
CASH AND CASH
 EQUIVALENTS --
 Beginning of period         65,196       74,233       71,411       56,571
                        -----------  -----------  -----------  -----------
CASH AND CASH
 EQUIVALENTS -- End of
 period                 $    56,571  $   212,458  $    56,571  $   212,458
                        ===========  ===========  ===========  ===========
SUPPLEMENTAL
 DISCLOSURES OF CASH
 FLOW INFORMATION:
Accrued offering costs
 - not yet paid                   -          872            -          872




Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures
(in thousands, except per share amounts)
(unaudited)

           Three Months Ended     Fiscal Years Ended
            ----------------      ------------------
           December December      December  December
              28,      31,           28,       31,
             2008     2009          2008      2009
            -------  -------      --------  --------
Total
 revenue    $59,066  $70,711      $211,791  $252,115
Increase in
 deferred
 revenue     13,510   11,555        40,363    30,313
            -------  -------      --------  --------

Total
 billings
 (Non-GAAP) $72,576  $82,266      $252,154  $282,428
            =======  =======      ========  ========



                 Three Months Ended              Three Months Ended
                  December 28, 2008               December 31, 2009
            ------------------------------  ------------------------------
             GAAP    Adjust-      Non-GAAP   GAAP     Adjust-     Non-GAAP
             Actual   ments        Results   Actual    ments       Results
            -------  -------      --------  --------  -------      -------
                                                        1,663 (a)
                         138 (c)                          219 (b)
                     -------                          -------
Gross
 Profit      41,212      138        41,350    49,802    1,882       51,684
            =======  =======      ========  ========  =======      =======
Gross
 Margin        69.8%                  70.0%     70.4%                 73.1%
                       1,306 (c)                        1,963 (b)
                     -------                          -------
Operating
 Income       6,273    1,444         7,717     7,453    3,845       11,298
            =======  =======      ========  ========  =======      =======
Operating
 Margin        10.6%                  13.1%     10.5%                 16.0%
                                                        1,663 (a)
                       1,444 (c)                        2,182 (b)
                        (289)(d)                         (796)(d)
                                                      (37,771)(e)
                     -------                          -------
Net Income    7,943    1,155         9,098    43,939  (34,722)       9,217
            =======  =======      ========  ========  =======      =======
Net Income
 per share
 - diluted  $  0.12               $   0.14  $   0.62               $  0.13
            =======  =======      ========  ========  =======      =======
Shares used
 in per share
 calculation
 - diluted   66,935                 66,935    70,760                70,760
            =======  =======      ========  ========  =======      =======

(a) To eliminate $1.7 million of non-cash acquisition related charges.
(b) To eliminate $2.2 million of stock-based compensation expense in the
    fourth quarter of 2009.
(c) To eliminate $1.4 million of stock-based compensation expense in the
    fourth quarter of 2008.
(d) To eliminate the tax effects related to expenses noted in (a), (b)
    and (c).
(e) To eliminate the income statement impact from the reversal of the
    valuation allowance.



                   Fiscal Year 2008                Fiscal Year 2009
            ------------------------------  ------------------------------
             GAAP    Adjust-      Non-GAAP   GAAP     Adjust-     Non-GAAP
             Actual   ments        Results   Actual    ments       Results
            -------  -------      --------  --------  -------      -------
                                                        2,387 (a)
                         467 (c)                          760 (b)
                     -------                          -------
Gross
 Profit     146,319      467       146,786   182,140    3,147      185,287
            =======  =======      ========  ========  =======      =======
Gross
 Margin        69.1%                  69.3%     72.2%                 73.5%
                       4,832 (c)                        6,701 (b)
                     -------                          -------
Operating
 Income       4,927    5,299        10,226    25,334    9,848       35,182
            =======  =======      ========  ========  =======      =======
Operating
 Margin         2.3%                   4.8%     10.0%                 14.0%
                                                        2,387 (a)
                       5,299 (c)                        7,461 (b)
                      (1,060)(d)                       (1,772)(d)
                                                      (37,771)(e)
                     -------                          -------
Net Income    7,363    4,239        11,602    60,179  (29,695)      30,484
            =======  =======      ========  ========  =======      =======

Premium paid
 on repurchase
 of convertible
 preferred
 shares           -                      -    (9,266)   9,266(f)         -
            -------               --------  --------               -------
Net Income
 attributable
 to common
 shareholders 7,363                 11,602    50,913                30,484
            =======  =======      ========  ========  =======      =======

Net Income
 per share
 - diluted  $  0.11               $   0.17  $   0.78               $  0.47
            =======  =======      ========  ========  =======      =======

Shares used
 in per share
 calculation
 - diluted   67,122                 67,122    65,219                65,219
            =======  =======      ========  ========  =======      =======

(a) To eliminate $2.4 million of non-cash acquisition related charges.
(b) To eliminate $7.5 million of stock-based compensation expense
    in fiscal 2009.
(c) To eliminate $5.3 million of stock-based compensation expense
    in fiscal 2008.
(d) To eliminate the tax effects related to expenses noted in (a), (b)
    and (c).
(e) To eliminate the income statement impact from the reversal of the
    valuation allowance.
(f) To adjust net income attributable to common shareholders for the
    premium paid on repurchase of convertible preferred stock.

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