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Press Release

Fortinet Reports Fourth Quarter and Full Year 2020 Financial Results

SUNNYVALE, Calif. - Feb 4, 2021


Fourth Quarter 2020 Highlights

  • Total revenue of $748.0 million, up 21% year over year
  • Product revenue of $288.4 million, up 21% year over year
  • Service revenue of $459.6 million, up 21% year over year
  • Billings of $960.9 million, up 20% year over year1
  • GAAP operating margin of 22.6%, up 280 basis points year over year
  • Non-GAAP operating margin of 29.4%, up 210 basis points year over year1
  • GAAP diluted net income per share of $0.89
  • Non-GAAP diluted net income per share of $1.061
  • Cash flow from operations of $296.5 million
  • Free cash flow of $264.2 million1

Full Year 2020 Highlights

  • Total revenue of $2.59 billion, up 20% year over year
  • Product revenue of $916.4 million, up 16% year over year
  • Service revenue of $1.68 billion, up 22% year over year
  • Billings of $3.09 billion, up 19% year over year1
  • Deferred revenue of $2.61 billion, up 24% year over year
  • GAAP operating margin of 20.5%, up 430 basis points year over year
  • Non-GAAP operating margin of 26.9%, up 210 basis points year over year1
  • GAAP diluted net income per share of $2.91
  • Non-GAAP diluted net income per share of $3.351
  • Cash flow from operations of $1.08 billion
  • Free cash flow of $907.8 million1

SUNNYVALE, Calif. - February 4, 2021 - Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, today announced financial results for the fourth quarter and full year ended December 31, 2020.

"We reported our third consecutive year of product revenue growth of approximately 16%, services revenue growth of approximately 22% and total organic revenue growth of approximately 20%. These results were driven by a strong worldwide sales operation, an innovative culture that results in a diversified product set and the market’s growing demand for cybersecurity products both on-premise and in the cloud. Our solid 2020 revenue performance led to an all-time company high non-GAAP operating margin of 26.9%,” said Ken Xie, Founder, Chairman, and Chief Executive Officer. “Given the many growth opportunities that lie ahead for us, we plan to shift our focus more to growth for at least the next several quarters.”

Financial Highlights for the Fourth Quarter of 20202

  • Revenue: Total revenue was $748.0 million for the fourth quarter of 2020, an increase of 21.0% compared to $618.1 million for the same quarter of 2019.

  • Product Revenue: Product revenue was $288.4 million for the fourth quarter of 2020, an increase of 20.8% compared to $238.8 million for the same quarter of 2019.

  • Service Revenue: Service revenue was $459.6 million for the fourth quarter of 2020, an increase of 21.2% compared to $379.3 million for the same quarter of 2019.

  • Billings1: Total billings were $960.9 million for the fourth quarter of 2020, an increase of 19.8% compared to $802.3 million for the same quarter of 2019.

  • GAAP Operating Income and Margin: GAAP operating income was $169.4 million for the fourth quarter of 2020, representing a GAAP operating margin of 22.6%. GAAP operating income was $122.1 million for the same quarter of 2019, representing a GAAP operating margin of 19.8%.

  • Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $219.9 million for the fourth quarter of 2020, representing a non-GAAP operating margin of 29.4%. Non-GAAP operating income was $168.6 million for the fourth quarter of 2019, representing a non-GAAP operating margin of 27.3%.

  • GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $146.7 million for the fourth quarter of 2020, compared to GAAP net income of $118.2 million for the same quarter of 2019. GAAP diluted net income per share was $0.89 for the fourth quarter of 2020, based on 165.5 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.67 for the same quarter of 2019, based on 175.2 million diluted weighted-average shares outstanding.

  • Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $175.5 million for the fourth quarter of 2020, compared to non-GAAP net income of $135.1 million for the same quarter of 2019. Non-GAAP diluted net income per share was $1.06 for the fourth quarter of 2020, based on 165.5 million diluted weighted-average shares outstanding, compared to $0.77 for the same quarter of 2019, based on 175.2 million diluted weighted-average shares outstanding.

  • Cash Flow: In the fourth quarter of 2020, cash flow from operations was $296.5 million compared to $190.4 million in the same quarter of 2019.

  • Free Cash Flow1: Free cash flow was $264.2 million during the fourth quarter of 2020, compared to $143.2 million for the same quarter of 2019.

Financial Highlights for the Full Year 20202

  • Revenue: Total revenue was $2.59 billion for 2020, an increase of 19.9% compared to $2.16 billion in 2019.

  • Product Revenue: Product revenue was $916.4 million for 2020, an increase of 16.2% compared to $788.5 million in 2019.

  • Service Revenue: Service revenue was $1.68 billion for 2020, an increase of 22.1% compared to $1.37 billion in 2019.

  • Billings1: Total billings were $3.09 billion for 2020, an increase of 18.7% compared to $2.60 billion in 2019.

  • Deferred Revenue: Total deferred revenue was $2.61 billion as of December 31, 2020, an increase of 23.5% compared to $2.11 billion as of December 31, 2019.

  • GAAP Operating Income and Margin: GAAP operating income was $531.8 million for  2020, representing a GAAP operating margin of 20.5%. GAAP operating income was $351.0 million for 2019, representing a GAAP operating margin of 16.2%.

  • Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $698.0 million for 2020, representing a non-GAAP operating margin of 26.9%. Non-GAAP operating income was $536.0 million for 2019, representing a non-GAAP operating margin of 24.8%.

  • GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $488.5 million for 2020, compared to GAAP net income of $331.7 million for 2019. GAAP diluted net income per share was $2.91 for 2020, based on 167.7 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $1.90 for 2019, based on 175.0 million diluted weighted-average shares outstanding.

  • Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $562.6 million for 2020, compared to non-GAAP net income of $436.7 million for 2019. Non-GAAP diluted net income per share was $3.35 for 2020, based on 167.7 million diluted weighted-average shares outstanding, compared to $2.50 for 2019, based on 175.0 million diluted weighted-average shares outstanding.

  • Cash Flow: In 2020, cash flow from operations was $1.08 billion compared to $808.0 million in 2019.

  • Free Cash Flow1: Free cash flow was $907.8 million during 2020, compared to $715.8 million in 2019.

Guidance

For the first quarter of 2021, Fortinet currently expects:

  • Revenue in the range of $670 million to $685 million
  • Billings in the range of $765 million to $780 million
  • Non-GAAP gross margin in the range of 78.5% to 79.5%
  • Non-GAAP operating margin in the range of 22.5% to 23.5%
  • Diluted non-GAAP net income per share in the range of $0.70 to $0.75, assuming a non-GAAP effective tax rate of 21%. This assumes a diluted share count of 167 million to 169 million.

For the fiscal year 2021, Fortinet currently expects:

  • Revenue in the range of $3.025 billion to $3.075 billion
  • Service revenue in the range of $2.015 billion to $2.045 billion
  • Billings in the range of $3.560 billion to $3.640 billion
  • Non-GAAP gross margin in the range of 78.0% to 80.0%
  • Non-GAAP operating margin in the range of 25.0% to 27.0%
  • Diluted non-GAAP net income per share in the range of $3.60 to $3.75, assuming a non-GAAP effective tax rate of 21%. This assumes a diluted share count of 170 million to 172 million.

These statements are forward looking and actual results may differ materially. Refer to the Forward-Looking Statements section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Our guidance with respect to non-GAAP financial measures excludes stock-based compensation, amortization of acquired intangible assets and gain on intellectual property matter. We have not reconciled our guidance with respect to non-GAAP financial measures to the corresponding GAAP measures because certain items that impact these measures are uncertain or out of our control, or cannot be reasonably predicted. Accordingly, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort.

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.”

2 Fortinet identified an immaterial error related to the commencement of revenue recognition for certain FortiCare support service contracts, which resulted in an immaterial correction to revenue for prior year reported amounts for the six months ended June 30, 2020. All financial information contained herein has been revised to reflect the correction of this error.

Conference Call Details

Fortinet will host a conference call today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the earnings results. The call can be accessed by dialing (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 9656007. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet’s website at https://investor.fortinet.com and a replay will be archived and accessible at https://investor.fortinet.com/events-and-presentations. A replay of this conference call can also be accessed through February 11, 2021, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID #9656007.

First Quarter 2021 Virtual Conference Participation Schedule:

  • Goldman Sachs Technology and Internet Conference 2021
    February 10, 2021

  • Morgan Stanley TMT Conference
    March 2, 2021

  • Fortinet Virtual Accelerate 2021 & Analyst/Investor Day
    March 9, 2021
    Management Keynotes:                     8:00 AM PT – 9:30 AM PT
    CFO presentation & Q&A session:    10:00 AM PT – 11:30 AM PT
    Registration Link:
    https://www.fortinetaccelerate.com/2021americas/register?reg_type_id=140747

Members of Fortinet’s management team are expected to present at these conferences and discuss the latest company strategies and initiatives. Fortinet’s conference presentations are expected to be available via webcast on the company’s web site. 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 https://investor.fortinet.com. The schedule is subject to change.

About Fortinet

Fortinet (NASDAQ: FTNT) secures the largest enterprise, service provider, and government organizations around the world. Fortinet empowers our customers with complete visibility and control across the expanding attack surface and the power to take on ever-increasing performance requirements today and into the future. Only the Fortinet Security Fabric platform can address the most critical security challenges and protect data across the entire digital infrastructure, whether in networked, application, multi-cloud or edge environments. Fortinet ranks #1 in the most security appliances shipped worldwide and more than 480,000 customers trust Fortinet to protect their businesses. Both a technology company and a learning organization, the Fortinet Network Security Expert (NSE) Training Institute has one of the largest and broadest cybersecurity training programs in the industry. Learn more at https://www.fortinet.com, the Fortinet Blog, or FortiGuard Labs.

Copyright © 2021 Fortinet, Inc. All rights reserved. The symbols ® and ™ denote respectively federally registered trademarks and common law trademarks of Fortinet, Inc., its subsidiaries and affiliates. Fortinet's trademarks include, but are not limited to, the following: Fortinet, FortiGate, FortiGuard, FortiCare, FortiManager, FortiAnalyzer, FortiOS, FortiADC, FortiAP, FortiAppMonitor, FortiASIC, FortiAuthenticator, FortiBridge, FortiCache, FortiCamera, FortiCASB, FortiClient, FortiCloud, FortiConnect, FortiController, FortiConverter, FortiDB, FortiDDoS, FortiExplorer, FortiExtender, FortiFone, FortiCarrier, FortiHypervisor, FortiIsolator, FortiMail, FortiMonitor, FortiNAC, FortiPlanner, FortiPortal, FortiPresence , FortiProxy, FortiRecorder, FortiSandbox, FortiSIEM, FortiSwitch, FortiTester, FortiToken, FortiVoice, FortiWAN, FortiWeb, FortiWiFi, FortiWLC, FortiWLCOS and FortiWLM.

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. Notwithstanding anything to the contrary herein, nothing herein constitutes a warranty, guarantee, contract, binding specification or other binding commitment by Fortinet or any indication of intent related to a binding commitment, and performance and other specification information herein may be unique to certain environments. This news release may contain forward-looking statements that involve uncertainties and assumptions, such as statements regarding technology releases among others. Changes of circumstances, product release delays, or other risks as stated in our filings with the Securities and Exchange Commission, located at www.sec.gov, may cause results to differ materially from those expressed or implied in this press release. If the uncertainties materialize or the assumptions prove incorrect, results may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Fortinet assumes no obligation to update any forward-looking statements, and expressly disclaims any obligation to update these forward-looking statements.