Fortinet Reports Fourth Quarter and Full Year 2021 Financial
Results
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, 2021.
“Revenue growth accelerated to 29% in 2021, after three
consecutive years with revenue growth of 20% or more. Cash flow
from operations was $1.5 billion and free cash flow was a record
$1.2 billion for the year,” said Ken Xie, Founder, Chairman and
Chief Executive Officer. “Our 2021 performance was driven by
increased demand for our cybersecurity solutions and exceptional
execution from our global operations and sales teams and excellent
support from our channel partners and distributors. Fortinet’s
integrated and single platform approach to security is resonating
with customers that want to effectively protect their corporate
networks from a wide range of attack vectors. Given our robust
pipeline and strong business momentum, we expect several more years
of solid growth as Fortinet is well positioned to address our $174
billion market opportunity.”
Financial Highlights for the Fourth Quarter of
2021
- Revenue: Total revenue was $963.6 million for
the fourth quarter of 2021, an increase of 28.8% compared to $748.0
million for the same quarter of 2020.
- Product Revenue: Product revenue was $378.9
million for the fourth quarter of 2021, an increase of 31.4%
compared to $288.4 million for the same quarter of 2020.
- Service Revenue: Service revenue was $584.7
million for the fourth quarter of 2021, an increase of 27.2%
compared to $459.6 million for the same quarter of 2020.
- Billings1:
Total billings were $1.31 billion for the fourth quarter of 2021,
an increase of 35.9% compared to $960.9 million for the same
quarter of 2020.
- Bookings2: Total bookings
were $1.43 billion for the fourth quarter of 2021, an increase of
48.7% compared to $960.3 million for the same quarter of 2020.
Backlog2 was $161.9 million as of December 31, 2021 an
increase of $149.7 million compared to $12.2 million as of
December 31, 2020.
- GAAP Operating Income and Margin: GAAP
operating income was $214.9 million for the fourth quarter of 2021,
representing a GAAP operating margin of 22.3%. GAAP operating
income was $169.4 million for the same quarter of 2020,
representing a GAAP operating margin of 22.6%.
- Non-GAAP Operating Income
and Margin1:
Non-GAAP operating income was $274.7 million for the fourth quarter
of 2021, representing a non-GAAP operating margin of 28.5%.
Non-GAAP operating income was $219.9 million for the same quarter
of 2020, representing a non-GAAP operating margin of 29.4%.
- GAAP Net Income and Diluted Net Income Per Share
Attributable to Fortinet, Inc.: GAAP net income was $199.0
million for the fourth quarter of 2021, compared to GAAP net income
of $146.7 million for the same quarter of 2020. GAAP diluted net
income per share was $1.19 for the fourth quarter of 2021, based on
167.0 million diluted weighted-average shares outstanding,
compared to GAAP diluted net income per share of $0.89 for the same
quarter of 2020, based on 165.5 million diluted
weighted-average shares outstanding.
- Non-GAAP Net Income and Diluted Net
Income Per Share Attributable to Fortinet,
Inc.1: Non-GAAP net
income was $205.8 million for the fourth quarter of 2021, compared
to non-GAAP net income of $175.5 million for the same quarter of
2020. Non-GAAP diluted net income per share was $1.23 for the
fourth quarter of 2021, based on 167.0 million diluted
weighted-average shares outstanding, compared to $1.06 for the same
quarter of 2020, based on 165.5 million diluted
weighted-average shares outstanding.
- Cash Flow: Cash flow from operations was
$366.8 million for the fourth quarter of 2021, compared to $296.5
million for the same quarter of 2020.
- Free Cash
Flow1: Free cash flow
was $215.5 million for the fourth quarter of 2021, compared to
$264.2 million for the same quarter of 2020.
Financial Highlights for the Full Year 2021
- Revenue: Total revenue was $3.34 billion for
2021, an increase of 28.8% compared to $2.59 billion in 2020.
- Product Revenue: Product revenue was $1.26
billion for 2021, an increase of 36.9% compared to $916.4 million
in 2020.
- Service Revenue: Service revenue was $2.09
billion for 2021, an increase of 24.4% compared to $1.68 billion in
2020.
- Billings1:
Total billings were $4.18 billion for 2021, an increase of 35.3%
compared to $3.09 billion in 2020.
- Bookings2: Total bookings
were $4.33 billion for 2021, an increase of 40.2% compared to $3.09
billion in 2020.
- Deferred Revenue: Total deferred revenue was
$3.45 billion as of December 31, 2021, an increase of 32.5%
compared to $2.61 billion as of December 31, 2020.
- GAAP Operating Income and Margin: GAAP
operating income was $650.4 million for 2021, representing a GAAP
operating margin of 19.5%. GAAP operating income was $531.8 million
for 2020, representing a GAAP operating margin of 20.5%.
- Non-GAAP Operating Income
and Margin1:
Non-GAAP operating income was $875.5 million for 2021, representing
a non-GAAP operating margin of 26.2%. Non-GAAP operating income was
$698.0 million for 2020, representing a non-GAAP operating margin
of 26.9%.
- GAAP Net Income and Diluted Net Income Per Share
Attributable to Fortinet, Inc.: GAAP net income was $606.8
million for 2021, compared to GAAP net income of $488.5 million for
2020. GAAP diluted net income per share was $3.63 for 2021, based
on 167.1 million diluted weighted-average shares outstanding,
compared to GAAP diluted net income per share of $2.91 for 2020,
based on 167.7 million diluted weighted-average shares
outstanding.
- Non-GAAP Net Income and Diluted Net
Income Per Share Attributable to Fortinet,
Inc.1: Non-GAAP net
income was $666.0 million for 2021, compared to non-GAAP net income
of $562.6 million for 2020. Non-GAAP diluted net income per share
was $3.99 for 2021, based on 167.1 million diluted
weighted-average shares outstanding, compared to $3.35 for 2020,
based on 167.7 million diluted weighted-average shares
outstanding.
- Cash Flow: In 2021, cash flow from operations
was $1.50 billion compared to $1.08 billion in 2020.
- Free Cash
Flow1: Free cash flow
was $1.20 billion during 2021, compared to $907.8 million in
2020.
Guidance
For the first quarter of 2022, Fortinet currently expects:
- Revenue in the range of $865 million to $895 million
- Billings in the range of $1.050 billion to $1.090 billion
- Non-GAAP gross margin in the range of 75.5% to 76.5%
- Non-GAAP operating margin in the range of 19.5% to 20.5%
- Diluted non-GAAP net income per share attributable to Fortinet,
Inc. in the range of $0.75 to $0.80, assuming a non-GAAP effective
tax rate of 18%. This assumes a diluted share count of 166 million
to 168 million.
For the fiscal year 2022, Fortinet currently expects:
- Revenue in the range of $4.275 billion to $4.325 billion
- Service revenue in the range of $2.685 billion to $2.715
billion
- Billings in the range of $5.400 billion to $5.480 billion
- Non-GAAP gross margin in the range of 74.0% to 76.0%
- Non-GAAP operating margin in the range of 24.0% to 26.0%
- Diluted non-GAAP net income per share attributable to Fortinet,
Inc. in the range of $4.85 to $5.00, assuming a non-GAAP effective
tax rate of 18%. This assumes a diluted share count of 169 million
to 171 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 Bookings represents the total value of
all orders received during the fiscal period. Backlog represents
orders received but not fulfilled and excludes Alaxala. When an
order is fulfilled, billings and revenue are recognized.
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 #1957267. 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 10,
2022, by dialing (855) 859-2056 (domestic) or (404) 537-3406
(international) with conference ID #1957267.
First Quarter 2022 Virtual Conference Participation
Schedule:
- Morgan Stanley Technology, Media & Telecom
ConferenceMarch 9, 2022 – San Francisco, CA
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 (www.fortinet.com)
Fortinet (Nasdaq: FTNT) secures the largest enterprise, service
provider, and government organizations around the world. Fortinet
empowers its 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.
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. Both a technology company and a learning
organization, the Fortinet Network Security 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 © 2022 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, the Fortinet logo,
FortiGate, FortiOS, FortiGuard, FortiCare, FortiAnalyzer,
FortiManager, FortiASIC, FortiClient, FortiCloud, FortiMail,
FortiSandbox, FortiADC, FortiAI, FortiAIOps, FortiAntenna, FortiAP,
FortiAPCam, FortiAuthenticator, FortiCache, FortiCall, FortiCam,
FortiCamera, FortiCarrier, FortiCASB, FortiCentral, FortiConnect,
FortiController, FortiConverter, FortiCWP, FortiDB, FortiDDoS,
FortiDeceptor, FortiDeploy, FortiDevSec, FortiEdge, FortiEDR,
FortiExplorer, FortiExtender, FortiFirewall, FortiFone, FortiGSLB,
FortiHypervisor, FortiInsight, FortiIsolator, FortiLAN, FortiLink,
FortiMoM, FortiMonitor, FortiNAC, FortiNDR, FortiPenTest,
FortiPhish, FortiPlanner, FortiPolicy, FortiPortal, FortiPresence,
FortiProxy, FortiRecorder, FortiSASE, FortiSDNConnector, FortiSIEM,
FortiSMS, FortiSOAR, FortiSwitch, FortiTester, FortiToken,
FortiVoice, FortiWAN, FortiWeb, FortiWiFi, FortiWLC, FortiWLM and
FortiXDR. 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.
FTNT-F
Forward-Looking Statements
This press release contains forward-looking statements that
involve risks and uncertainties. These forward-looking statements
include statements regarding demand for our products and services,
guidance and expectations around future financial results,
including guidance and expectations for the first quarter and full
year 2022, statements regarding the momentum in our business and
future growth expectations, and statements regarding our robust
pipeline, market opportunity and market size, strong business
momentum, and expectations of several more years of solid growth.
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 such that
actual results are materially different from our forward-looking
statements in this release. Important factors that could cause
results to differ materially from the statements herein include the
following: general economic risks, including those caused by the
COVID-19 pandemic; significantly heightened supply chain challenges
due to the current global environment; negative impacts from the
COVID-19 pandemic on sales, billings, revenue, demand and buying
patterns, component supply and ability to manufacture products to
meet demand in a timely fashion, and costs such as possible
increased costs for shipping and components; global economic
conditions, country-specific economic conditions, and foreign
currency risks; competitiveness in the security market; the dynamic
nature of the security market and its products and services;
specific economic risks worldwide and in different geographies, and
among different customer segments; uncertainty regarding demand and
increased business and renewals from existing customers;
uncertainties around continued success in sales growth and market
share gains; uncertainties in market opportunities and the market
size; actual or perceived vulnerabilities in our supply chain,
products or services, and any actual or perceived breach of our
network or our customers’ networks; longer sales cycles,
particularly for larger enterprise, service providers, government
and other large organization customers; the effectiveness of our
salesforce and failure to convert sales pipeline into final sales;
risks associated with successful implementation of multiple
integrated software products and other product functionality risks;
risks associated with integrating acquisitions and changes in
circumstances and plans associated therewith, including, among
other risks, changes in plans related to product and services
integrations, product and services plans and sales strategies;
sales and marketing execution risks; execution risks around new
product development and introductions and innovation; litigation
and disputes and the potential cost, distraction and damage to
sales and reputation caused thereby or by other factors;
cybersecurity threats, breaches and other disruptions; market
acceptance of new products and services; 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, our products and services in
general and by specific customer segments, including those caused
by the COVID-19 pandemic; competition and pricing pressure; product
inventory shortages for any reason, including those caused by the
COVID-19 pandemic; risks associated with business disruption caused
by natural disasters and health emergencies such as earthquakes,
fires, power outages, typhoons, floods, health epidemics and
viruses such as the COVID-19 pandemic, and by manmade events such
as civil unrest, labor disruption, international trade disputes,
international conflicts, terrorism, wars, and critical
infrastructure attacks; tariffs, trade disputes and other trade
barriers, and negative impact on sales based on geo-political
dynamics and disputes and protectionist policies; any political and
government disruption around the world, including the impact of any
future shutdowns of the U.S. government; and the other risk factors
set forth from time to time in our most recent Annual Report on
Form 10-K, our most recent Quarterly Report on Form 10-Q and our
other filings with the Securities and Exchange Commission (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.
COVID-19 Impact
While the broader implications of the COVID-19 pandemic on our
employees and overall financial performance remain uncertain, we
have seen certain impacts on our business and operations, results
of operations, financial condition, cash flows, liquidity and
capital and financial resources. Going forward, the situation is
uncertain, rapidly changing and hard to predict, and the COVID-19
pandemic may have a material negative impact on our future periods,
including our results for the three months ending March 31, 2022,
our annual results for 2022, and beyond. To highlight the
uncertainty remaining for the three-month period ending March 31,
2022, it should be noted that, due to customer buying patterns and
the efforts of our sales force and channel partners to meet or
exceed quarterly quotas, we have historically received a
substantial portion of each quarter’s sales orders and generated a
substantial portion of each quarter’s billings and revenue during
the last two weeks of the quarter. Additionally, significantly
heightened supply chain challenges are impacting businesses around
the globe. If we experience significant changes in our billings
growth rates or if we are unable to supply product to meet demand,
it will impact product revenue in the current quarter and
FortiGuard and FortiCare service revenues in subsequent quarters,
as we sell annual and multi-year service contracts that are
recognized ratably over the contractual service term. In addition,
the broader implications of the pandemic on our business and
operations and our financial results, including the extent to which
the effects of the pandemic will impact future results and growth
in the cybersecurity industry, remain uncertain. The duration and
severity of the economic downturn from the pandemic may negatively
impact our business and operations, results of operations,
financial condition, cash flows, liquidity and capital and
financial resources in a material way. As a result, the effects of
the pandemic may not be fully reflected in our results of
operations until future periods.
Non-GAAP Financial Measures
We have provided in this release financial information that has
not been prepared in accordance with U.S. Generally Accepted
Accounting Principles (GAAP). These non-GAAP financial and
liquidity measures are not based on any standardized methodology
prescribed by GAAP and are not necessarily comparable to similar
measures presented by other companies. 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 peer companies, 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 provided in
the financial statement tables below.
Billings (non-GAAP). We define billings as revenue recognized in
accordance with GAAP plus the change in deferred revenue from the
beginning to the end of the period, less any deferred revenue
balances acquired from business combination(s) and adjustment due
to adoption of new accounting standard during the period. We
consider billings to be a useful metric for management and
investors because billings drive current and future revenue, which
is an important indicator of the health and viability of our
business. There are a number of limitations related to the use of
billings instead of GAAP revenue. First, billings include amounts
that have not yet been recognized as revenue and are impacted by
the term of security and support agreements. Second, we may
calculate billings in a manner that is different from peer
companies that report similar financial measures. Management
accounts for these limitations by providing specific information
regarding GAAP revenue and evaluating billings together with GAAP
revenue.
Free cash flow (non-GAAP). We define free cash flow as net cash
provided by operating activities minus purchases of property and
equipment and excluding any significant non-recurring items, such
as proceeds from intellectual property matter. We believe 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 capital expenditures and net of proceeds from
intellectual property matter, can be used for strategic
opportunities, including repurchasing outstanding common stock,
investing in our business, making strategic acquisitions and
strengthening the balance sheet. A limitation of using free cash
flow rather than the GAAP measures of cash provided by or used in
operating activities, investing activities, and financing
activities is that free cash flow does not represent the total
increase or decrease in the cash and cash equivalents balance for
the period because it excludes cash flows from significant
non-recurring items, such as proceeds from intellectual property
matter, investing activities other than capital expenditures and
cash flows from financing activities. Management accounts for this
limitation by providing information about our capital expenditures
and other investing and financing activities 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 most recent
Quarterly Report on Form 10-Q and Annual Report on Form 10-K and by
presenting cash flows from investing and financing activities in
our reconciliation of free cash flow. In addition, it is important
to note that other companies, including companies in our industry,
may not use free cash flow, may calculate free cash flow in a
different manner than we do or may use other financial measures to
evaluate their performance, all of which could reduce the
usefulness of free cash flow as a comparative measure.
Non-GAAP operating income and operating margin. We define
non-GAAP operating income as operating income plus stock-based
compensation, impairment and amortization of acquired intangible
assets, less gain on intellectual property matter and, when
applicable, other significant non-recurring items in a given
quarter, such as non-recurring gains or losses on
litigation-related matters. Non-GAAP operating margin is defined as
non-GAAP operating income divided by GAAP revenue. We consider
these non-GAAP financial measures to be useful metrics for
management and investors because they exclude the items noted above
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 instead of operating income calculated in accordance with
GAAP. First, non-GAAP operating income excludes the items noted
above. Second, the components of the costs that we exclude from our
calculation of non-GAAP operating income may differ from the
components that peer companies exclude when they report their
non-GAAP results of operations. Management accounts 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 diluted net income per share
attributable to Fortinet, Inc. We define non-GAAP net income as net
income or loss plus the items noted above under non-GAAP operating
income and operating margin. In addition, we adjust non-GAAP net
income and diluted net income per share for gains or losses on
investments in privately held companies, a tax adjustment required
for an effective tax rate on a non-GAAP basis and adjustments
attributable to non-controlling interests, which differs from the
GAAP effective tax rate. We define non-GAAP diluted net income per
share as non-GAAP net income divided by the non-GAAP diluted
weighted-average shares outstanding. We consider these non-GAAP
financial measures to be useful metrics 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 more complete picture of our recurring core business operating
results, we include in non-GAAP net income and non-GAAP diluted net
income per share, the tax adjustment required resulting in an
effective tax rate on a non-GAAP basis, which often differs from
the GAAP tax rate. We believe the non-GAAP effective tax rates we
use are reasonable estimates of normalized tax rates for our
current and prior fiscal years 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 diluted net income per
share. We account for these limitations by providing specific
information regarding the GAAP amounts excluded from non-GAAP net
income and non-GAAP diluted net income per share and evaluating
non-GAAP net income and non-GAAP diluted net income per share
together with net income or loss and diluted net income per share
calculated in accordance with GAAP.
FORTINET, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, in millions)
|
December 31,2021 |
|
December 31,2020 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
1,319.1 |
|
|
$ |
1,061.8 |
|
Short-term investments |
|
1,194.0 |
|
|
|
775.5 |
|
Marketable equity securities |
|
38.6 |
|
|
|
— |
|
Accounts receivable—net |
|
807.7 |
|
|
|
720.0 |
|
Inventory |
|
175.8 |
|
|
|
139.8 |
|
Prepaid expenses and other current assets |
|
65.4 |
|
|
|
43.3 |
|
Total current assets |
|
3,600.6 |
|
|
|
2,740.4 |
|
LONG-TERM INVESTMENTS |
|
440.8 |
|
|
|
118.3 |
|
PROPERTY AND
EQUIPMENT—NET |
|
687.6 |
|
|
|
448.0 |
|
DEFERRED CONTRACT COSTS |
|
423.3 |
|
|
|
304.8 |
|
DEFERRED TAX ASSETS |
|
342.3 |
|
|
|
245.2 |
|
GOODWILL AND OTHER INTANGIBLE
ASSETS—NET |
|
188.7 |
|
|
|
124.6 |
|
OTHER ASSETS |
|
235.8 |
|
|
|
63.2 |
|
TOTAL ASSETS |
$ |
5,919.1 |
|
|
$ |
4,044.5 |
|
LIABILITIES AND
EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
$ |
148.4 |
|
|
$ |
141.6 |
|
Accrued liabilities |
|
197.3 |
|
|
|
149.2 |
|
Accrued payroll and compensation |
|
195.0 |
|
|
|
145.9 |
|
Deferred revenue |
|
1,777.4 |
|
|
|
1,392.8 |
|
Total current liabilities |
|
2,318.1 |
|
|
|
1,829.5 |
|
DEFERRED REVENUE |
|
1,675.5 |
|
|
|
1,212.5 |
|
INCOME TAX LIABILITIES |
|
79.5 |
|
|
|
90.3 |
|
LONG-TERM DEBT |
|
988.4 |
|
|
|
— |
|
OTHER LIABILITIES |
|
59.2 |
|
|
|
56.2 |
|
Total liabilities |
|
5,120.7 |
|
|
|
3,188.5 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
EQUITY: |
|
|
|
Common stock |
|
0.2 |
|
|
|
0.2 |
|
Additional paid-in capital |
|
1,254.2 |
|
|
|
1,207.2 |
|
Accumulated other comprehensive income (loss) |
|
(4.8) |
|
|
|
0.7 |
|
Accumulated deficit |
|
(467.9) |
|
|
|
(352.1) |
|
Total Fortinet, Inc. stockholders’ equity |
|
781.7 |
|
|
|
856.0 |
|
Non-controlling interests |
|
16.7 |
|
|
|
— |
|
Total
equity |
|
798.4 |
|
|
|
856.0 |
|
TOTAL LIABILITIES AND
EQUITY |
$ |
5,919.1 |
|
|
$ |
4,044.5 |
|
FORTINET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Unaudited, in millions, except per share
amounts)
|
Three Months Ended |
|
Year Ended |
|
December 31,2021 |
|
December 31,2020 |
|
December 31,2021 |
|
December 31,2020 |
REVENUE: |
|
|
|
|
|
|
|
Product |
$ |
378.9 |
|
|
$ |
288.4 |
|
|
$ |
1,255.0 |
|
|
$ |
916.4 |
|
Service |
|
584.7 |
|
|
|
459.6 |
|
|
|
2,087.2 |
|
|
|
1,678.0 |
|
Total revenue |
|
963.6 |
|
|
|
748.0 |
|
|
|
3,342.2 |
|
|
|
2,594.4 |
|
COST OF REVENUE: |
|
|
|
|
|
|
|
Product |
|
146.5 |
|
|
|
107.4 |
|
|
|
487.7 |
|
|
|
352.4 |
|
Service |
|
81.8 |
|
|
|
59.6 |
|
|
|
295.3 |
|
|
|
217.6 |
|
Total cost of revenue |
|
228.3 |
|
|
|
167.0 |
|
|
|
783.0 |
|
|
|
570.0 |
|
GROSS PROFIT: |
|
|
|
|
|
|
|
Product |
|
232.4 |
|
|
|
181.0 |
|
|
|
767.3 |
|
|
|
564.0 |
|
Service |
|
502.9 |
|
|
|
400.0 |
|
|
|
1,791.9 |
|
|
|
1,460.4 |
|
Total gross profit |
|
735.3 |
|
|
|
581.0 |
|
|
|
2,559.2 |
|
|
|
2,024.4 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Research and development |
|
112.6 |
|
|
|
89.0 |
|
|
|
424.2 |
|
|
|
341.4 |
|
Sales and marketing |
|
367.7 |
|
|
|
291.4 |
|
|
|
1,345.7 |
|
|
|
1,071.9 |
|
General and administrative |
|
41.3 |
|
|
|
32.4 |
|
|
|
143.5 |
|
|
|
119.5 |
|
Gain on intellectual property matter |
|
(1.2) |
|
|
|
(1.2) |
|
|
|
(4.6) |
|
|
|
(40.2) |
|
Total operating expenses |
|
520.4 |
|
|
|
411.6 |
|
|
|
1,908.8 |
|
|
|
1,492.6 |
|
OPERATING INCOME |
|
214.9 |
|
|
|
169.4 |
|
|
|
650.4 |
|
|
|
531.8 |
|
INTEREST INCOME |
|
1.0 |
|
|
|
2.0 |
|
|
|
4.5 |
|
|
|
17.7 |
|
INTEREST EXPENSE |
|
(4.5) |
|
|
|
— |
|
|
|
(14.9) |
|
|
|
— |
|
OTHER INCOME
(EXPENSE)—NET |
|
(4.1) |
|
|
|
0.3 |
|
|
|
(11.6) |
|
|
|
(7.8) |
|
INCOME BEFORE INCOME TAXES AND
LOSS FROM EQUITY METHOD INVESTMENT |
|
207.3 |
|
|
|
171.7 |
|
|
|
628.4 |
|
|
|
541.7 |
|
PROVISION FOR INCOME
TAXES |
|
3.7 |
|
|
|
25.0 |
|
|
|
14.1 |
|
|
|
53.2 |
|
LOSS FROM EQUITY METHOD
INVESTMENT |
|
(4.8) |
|
|
|
— |
|
|
|
(7.6) |
|
|
|
— |
|
NET INCOME INCLUDING
NON-CONTROLLING INTERESTS |
|
198.8 |
|
|
|
146.7 |
|
|
|
606.7 |
|
|
|
488.5 |
|
Less: NET LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS, NET OF TAX |
|
(0.2) |
|
|
|
— |
|
|
|
(0.1) |
|
|
|
— |
|
NET INCOME ATTRIBUTABLE TO
FORTINET, INC. |
$ |
199.0 |
|
|
$ |
146.7 |
|
|
$ |
606.8 |
|
|
$ |
488.5 |
|
Net income per share
attributable to Fortinet, Inc.: |
|
|
|
|
|
|
|
Basic |
$ |
1.22 |
|
|
$ |
0.90 |
|
|
$ |
3.72 |
|
|
$ |
2.98 |
|
Diluted |
$ |
1.19 |
|
|
$ |
0.89 |
|
|
$ |
3.63 |
|
|
$ |
2.91 |
|
Weighted-average shares used
to compute net income per share attributable to Fortinet,
Inc.: |
|
|
|
|
|
|
|
Basic |
|
163.0 |
|
|
|
162.5 |
|
|
|
163.2 |
|
|
|
164.2 |
|
Diluted |
|
167.0 |
|
|
|
165.5 |
|
|
|
167.1 |
|
|
|
167.7 |
|
FORTINET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited, in millions)
|
Year Ended |
|
December 31,2021 |
|
December 31,2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income including non-controlling interests |
$ |
606.7 |
|
|
$ |
488.5 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Stock-based compensation |
|
207.9 |
|
|
|
191.7 |
|
Amortization of deferred contract costs |
|
175.9 |
|
|
|
137.4 |
|
Depreciation and amortization |
|
84.4 |
|
|
|
68.8 |
|
Amortization of investment premiums |
|
6.9 |
|
|
|
1.3 |
|
Loss from equity method investment |
|
7.6 |
|
|
|
— |
|
Other |
|
7.9 |
|
|
|
6.0 |
|
Changes in operating assets and liabilities, net of impact
of business combinations: |
|
|
|
Accounts receivable—net |
|
(72.5) |
|
|
|
(176.4) |
|
Inventory |
|
(19.4) |
|
|
|
(42.2) |
|
Prepaid expenses and other current assets |
|
(17.7) |
|
|
|
(2.8) |
|
Deferred contract costs |
|
(294.5) |
|
|
|
(205.1) |
|
Deferred tax assets |
|
(94.0) |
|
|
|
(10.5) |
|
Other assets |
|
(19.0) |
|
|
|
(4.6) |
|
Accounts payable |
|
(13.1) |
|
|
|
37.4 |
|
Accrued liabilities |
|
49.9 |
|
|
|
45.8 |
|
Accrued payroll and compensation |
|
44.0 |
|
|
|
43.1 |
|
Other liabilities |
|
(0.7) |
|
|
|
9.7 |
|
Deferred revenue |
|
839.4 |
|
|
|
495.6 |
|
Net cash provided by operating
activities |
|
1,499.7 |
|
|
|
1,083.7 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of investments |
|
(2,308.0) |
|
|
|
(1,079.0) |
|
Sales of investments |
|
85.5 |
|
|
|
152.2 |
|
Maturities of investments |
|
1,470.3 |
|
|
|
1,018.8 |
|
Purchases of property and equipment |
|
(295.9) |
|
|
|
(125.9) |
|
Purchases of investment in privately held company |
|
(160.0) |
|
|
|
— |
|
Payments made in connection with business combinations, net of cash
acquired |
|
(74.9) |
|
|
|
(40.2) |
|
Purchases of marketable equity securities |
|
(42.5) |
|
|
|
— |
|
Other |
|
0.4 |
|
|
|
1.3 |
|
Net cash used in investing
activities |
|
(1,325.1) |
|
|
|
(72.8) |
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Proceeds from long-term borrowings, net of discount and
underwriting fees |
|
989.4 |
|
|
|
— |
|
Payments for debt issuance costs |
|
(2.4) |
|
|
|
— |
|
Repurchase and retirement of common stock |
|
(741.8) |
|
|
|
(1,080.1) |
|
Proceeds from issuance of common stock |
|
26.0 |
|
|
|
22.1 |
|
Taxes paid related to net share settlement of equity awards |
|
(167.9) |
|
|
|
(108.2) |
|
Payments of debt assumed in connection with business
combinations |
|
(19.5) |
|
|
|
(4.1) |
|
Other |
|
(1.0) |
|
|
|
(1.3) |
|
Net cash provided by (used in) financing
activities |
|
82.8 |
|
|
|
(1,171.6) |
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
(0.1) |
|
|
|
— |
|
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS |
|
257.3 |
|
|
|
(160.7) |
|
CASH AND CASH
EQUIVALENTS—Beginning of year |
|
1,061.8 |
|
|
|
1,222.5 |
|
CASH AND CASH EQUIVALENTS—End
of year |
$ |
1,319.1 |
|
|
$ |
1,061.8 |
|
Reconciliations of non-GAAP results of
operations measures to the nearest comparable GAAP
measures(Unaudited, in millions, except per share
amounts)
Reconciliation of net cash provided by operating
activities to free cash flow
|
Three Months Ended |
|
Year Ended |
|
December 31,2021 |
|
December 31,2020 |
|
December 31,2021 |
|
December 31,2020 |
Net cash provided by operating
activities |
$ |
366.8 |
|
|
$ |
296.5 |
|
|
$ |
1,499.7 |
|
|
$ |
1,083.7 |
|
Less: Purchases of property and equipment |
|
(151.3) |
|
|
|
(32.3) |
|
|
|
(295.9) |
|
|
|
(125.9) |
|
Less: Proceeds from intellectual property matter |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(50.0) |
|
Free cash flow |
$ |
215.5 |
|
|
$ |
264.2 |
|
|
$ |
1,203.8 |
|
|
$ |
907.8 |
|
Net cash used in investing
activities |
$ |
(265.9) |
|
|
$ |
(65.0) |
|
|
$ |
(1,325.1) |
|
|
$ |
(72.8) |
|
Net cash provided by (used in)
financing activities |
$ |
(633.6) |
|
|
$ |
(52.0) |
|
|
$ |
82.8 |
|
|
$ |
(1,171.6) |
|
Reconciliation of GAAP operating income to non-GAAP
operating income, operating margin, net income attributable to
Fortinet, Inc. and diluted net income per share attributable to
Fortinet, Inc.
|
Three Months Ended December 31, 2021 |
|
Three Months Ended December 31, 2020 |
|
GAAP Results |
|
Adjustments |
|
Non-GAAP Results |
|
GAAP Results |
|
Adjustments |
|
Non-GAAP Results |
Operating income |
$ |
214.9 |
|
|
$ |
59.8 |
|
(a) |
$ |
274.7 |
|
|
$ |
169.4 |
|
|
$ |
50.5 |
|
(b) |
$ |
219.9 |
|
Operating margin |
|
22.3 |
% |
|
|
|
|
28.5 |
% |
|
|
22.6 |
% |
|
|
|
|
29.4 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
54.2 |
|
|
|
|
|
|
|
48.9 |
|
|
|
Amortization of acquired intangible assets |
|
|
|
6.8 |
|
|
|
|
|
|
|
2.8 |
|
|
|
Gain on intellectual property matter |
|
|
|
(1.2) |
|
|
|
|
|
|
|
(1.2) |
|
|
|
Tax adjustment |
|
|
|
(52.4) |
|
(c) |
|
|
|
|
|
(21.7) |
|
(c) |
|
Adjustments attributable non-controlling interests |
|
|
|
(0.6) |
|
(d) |
|
|
|
|
|
— |
|
|
|
Net income attributable to
Fortinet, Inc. |
$ |
199.0 |
|
|
$ |
6.8 |
|
|
$ |
205.8 |
|
|
$ |
146.7 |
|
|
$ |
28.8 |
|
|
$ |
175.5 |
|
Diluted net income per share
attributable to Fortinet, Inc. |
$ |
1.19 |
|
|
|
|
$ |
1.23 |
|
|
$ |
0.89 |
|
|
|
|
$ |
1.06 |
|
Shares used in diluted net
income per share attributable to Fortinet, Inc. calculations |
|
167.0 |
|
|
|
|
|
167.0 |
|
|
|
165.5 |
|
|
|
|
|
165.5 |
|
(a) To exclude $54.2 million of stock-based compensation and
$6.8 million of amortization of acquired intangible assets, offset
by a $1.2 million gain on intellectual property matter in the three
months ended December 31, 2021.(b) To exclude $48.9 million of
stock-based compensation and $2.8 million of amortization of
acquired intangible assets, offset by a $1.2 million gain on
intellectual property matter in the three months ended
December 31, 2020.(c) Non-GAAP financial information is
adjusted to an overall effective tax rate of 21% in the three
months ended December 31, 2021 and 2020, on a non-GAAP basis,
which differs from the GAAP effective tax rate.(d) Adjustments
related to the non-GAAP results attributable to non-controlling
interests, which were adjusted to an effective tax rate of 31% for
the subsidiary of Alaxala Networks Corporation (“Alaxala”) in the
three months ended December 31, 2021.
|
Year Ended December 31, 2021 |
|
Year Ended December 31, 2020 |
|
GAAP Results |
|
Adjustments |
|
Non-GAAP Results |
|
GAAP Results |
|
Adjustments |
|
Non-GAAP Results |
Operating income |
$ |
650.4 |
|
|
$ |
225.1 |
|
(a) |
$ |
875.5 |
|
|
$ |
531.8 |
|
|
$ |
166.2 |
|
(b) |
$ |
698.0 |
|
Operating margin |
|
19.5 |
% |
|
|
|
|
26.2 |
% |
|
|
20.5 |
% |
|
|
|
|
26.9 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
211.2 |
|
|
|
|
|
|
|
193.8 |
|
|
|
Amortization of acquired intangible assets |
|
|
|
18.5 |
|
|
|
|
|
|
|
13.3 |
|
|
|
Gain on intellectual property matter |
|
|
|
(4.6) |
|
|
|
|
|
|
|
(40.2) |
|
|
|
Litigation-related matter |
|
|
|
— |
|
|
|
|
|
|
|
(0.7) |
|
|
|
Loss on investments in privately-held companies |
|
|
|
— |
|
|
|
|
|
|
|
4.3 |
|
(c) |
|
Tax adjustment |
|
|
|
(165.1) |
|
(d) |
|
|
|
|
|
(96.4) |
|
(d) |
|
Adjustments attributable non-controlling interests |
|
|
|
(0.8) |
|
(e) |
|
|
|
|
|
— |
|
|
|
Net income attributable to
Fortinet, Inc. |
$ |
606.8 |
|
|
$ |
59.2 |
|
|
$ |
666.0 |
|
|
$ |
488.5 |
|
|
$ |
74.1 |
|
|
$ |
562.6 |
|
Diluted net income per share
attributable to Fortinet, Inc. |
$ |
3.63 |
|
|
|
|
$ |
3.99 |
|
|
$ |
2.91 |
|
|
|
|
$ |
3.35 |
|
Shares used in diluted net
income per share calculations |
|
167.1 |
|
|
|
|
|
167.1 |
|
|
|
167.7 |
|
|
|
|
|
167.7 |
|
(a) To exclude $211.2 million of stock-based compensation and
$18.5 million of amortization of acquired intangible assets, offset
by a $4.6 million gain on intellectual property matter in 2021.(b)
To exclude $193.8 million of stock-based compensation and $13.3
million of amortization of acquired intangible assets, offset by a
$40.2 million gain on intellectual property matter and a $0.7
million adjustment for a litigation-related matter in 2020.(c) To
exclude a $4.3 million impairment charge on an investment in a
privately held company in 2020.(d) Non-GAAP financial information
is adjusted to an overall effective tax rate of 21% in 2021 and
2020, on a non-GAAP basis, which differs from the GAAP effective
tax rate.(e) Adjustments related to the non-GAAP results
attributable to non-controlling interests, which were adjusted to
an effective tax rate of 31% for the subsidiary of Alaxala in
2021.
Reconciliation of total revenue to total
billings
|
Three Months Ended |
|
Year Ended |
|
December 31,2021 |
|
December 31,2020 |
|
December 31,2021 |
|
December 31,2020 |
Total revenue |
$ |
963.6 |
|
|
$ |
748.0 |
|
|
$ |
3,342.2 |
|
|
$ |
2,594.4 |
|
Add: Change in deferred revenue |
|
346.5 |
|
|
|
213.3 |
|
|
|
847.6 |
|
|
|
496.2 |
|
Less: Deferred revenue balance acquired in business
acquisitions |
|
— |
|
|
|
(0.4) |
|
|
|
(4.1) |
|
|
|
(0.6) |
|
Less: Adjustment due to adoption of ASU 2021-083 |
|
(4.3) |
|
|
|
— |
|
|
|
(4.3) |
|
|
|
— |
|
Total billings |
$ |
1,305.8 |
|
|
$ |
960.9 |
|
|
$ |
4,181.4 |
|
|
$ |
3,090.0 |
|
3 We early adopted ASU 2021-08 on a
retrospective basis and effective for us beginning on January 1,
2021. The adoption of ASU 2021-08 resulted in a $4.3 million
adjustment attributable to the acquisition of Alaxala in 2021, as a
result of the revised measurement of deferred revenue for
acquisition.
Investor
Contact: |
|
Media
Contact: |
|
|
|
Peter Salkowski |
|
Sandra Wheatley |
Fortinet, Inc. |
|
Fortinet, Inc. |
408-331-4595 |
|
408-391-9408 |
psalkowski@fortinet.com |
|
swheatley@fortinet.com |
Fortinet (LSE:0IR9)
Historical Stock Chart
From Sep 2024 to Oct 2024
Fortinet (LSE:0IR9)
Historical Stock Chart
From Oct 2023 to Oct 2024