Fortinet Reports First Quarter 2021 Financial Results
First Quarter 2021 Highlights
- Total revenue of $710.3 million, up 23% year over year
- Product revenue of $240.7 million, up 25% year over year
- Service revenue of $469.6 million, up 22% year over year
- Billings of $850.6 million, up 27% year over year1
- Deferred revenue of $2.75 billion, up 25% year over year
- GAAP operating margin of 17.1%, down 310 basis points year over year
- Non-GAAP operating margin of 24.5%, up 210 basis points year over year1
- GAAP diluted net income per share of $0.64
- Non-GAAP diluted net income per share of $0.811
- Cash flow from operations of $315.9 million
- Free cash flow of $263.8 million1
Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, today announced financial results for the first quarter ended March 31, 2021.
“We delivered strong revenue and billings growth in the first quarter while investing to increase market share across our existing businesses and drive growth in newer product areas such as 5G, SASE, and SD-WAN,” said Ken Xie, Founder, Chairman, and Chief Executive Officer. “Fortinet’s platform of on-premise and cloud security products is resonating with new and existing customers, confirmed by our highest quarterly product revenue growth in five years. With good visibility and strong business momentum, we are pleased to raise our full year guidance.”
Financial Highlights for the First Quarter of 2021
- Revenue: Total revenue was $710.3 million for the first quarter of 2021, an increase of 23.0% compared to $577.7 million for the same quarter of 2020.
- Product Revenue: Product revenue was $240.7 million for the first quarter of 2021, an increase of 25.2% compared to $192.3 million for the same quarter of 2020.
- Service Revenue: Service revenue was $469.6 million for the first quarter of 2021, an increase of 21.8% compared to $385.4 million for the same quarter of 2020.
- Billings1: Total billings were $850.6 million for the first quarter of 2021, an increase of 27.4% compared to $667.8 million for the same quarter of 2020.
- Deferred Revenue: Total deferred revenue was $2.75 billion as of March 31, 2021, an increase of 24.8% compared to $2.20 billion as of March 31, 2020.
- GAAP Operating Income and Margin: GAAP operating income was $121.6 million for the first quarter of 2021, representing a GAAP operating margin of 17.1%. GAAP operating income was $116.7 million for the same quarter of 2020, representing a GAAP operating margin of 20.2%.
- Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $173.9 million for the first quarter of 2021, representing a non-GAAP operating margin of 24.5%. Non-GAAP operating income was $129.2 million for the same quarter of 2020, representing a non-GAAP operating margin of 22.4%.
- GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $107.2 million for the first quarter of 2021, compared to GAAP net income of $104.6 million for the same quarter of 2020. GAAP diluted net income per share was $0.64 for the first quarter of 2021, based on 166.4 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.60 for the same quarter of 2020, based on 174.2 million diluted weighted-average shares outstanding.
- Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $135.6 million for the first quarter of 2021, compared to non-GAAP net income of $105.1 million for the same quarter of 2020. Non-GAAP diluted net income per share was $0.81 for the first quarter of 2021, based on 166.4 million diluted weighted-average shares outstanding, compared to $0.60 for the same quarter of 2020, based on 174.2 million diluted weighted-average shares outstanding.
- Cash Flow: In the first quarter of 2021, cash flow from operations was $315.9 million compared to $319.4 million in the same quarter of 2020.
- Free Cash Flow1: Free cash flow was $263.8 million during the first quarter of 2021, compared to $241.8 million for the same quarter of 2020.
For the second quarter of 2021, Fortinet currently expects:
- Revenue in the range of $733 million to $747 million
- Billings in the range of $860 million to $880 million
- Non-GAAP gross margin in the range of 78.5% to 79.5%
- Non-GAAP operating margin in the range of 24.5% to 25.5%
- Diluted non-GAAP net income per share in the range of $0.83 to $0.88, assuming a non-GAAP effective tax rate of 21%. This assumes a diluted share count of 168 million to 170 million.
For the fiscal year 2021, Fortinet currently expects:
- Revenue in the range of $3.080 billion to $3.130 billion
- Service revenue in the range of $2.020 billion to $2.050 billion
- Billings in the range of $3.685 billion to $3.745 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 $3.65 to $3.80, 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.
1A 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”.
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 # 1998423. 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 May 6 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID #1998423.
Second Quarter 2021 Virtual Conference Participation Schedule:
- J.P. Morgan Virtual 49th Annual Global Technology, Media and Communications Conference
May 25, 2021
- Bernstein’s Virtual 37th Annual Strategic Decisions Conference
June 2, 2021
- Bank of America’s Virtual 2021 Global Technology Conference
June 8, 2021
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.
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 500,000 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.
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