Third Quarter 2023 Highlights
- Total revenue of $1.33 billion, up 16% year over year
- Service revenue of $868.7 million, up 28% year over year
- Billings of $1.49 billion, up 6% year over year1
- Deferred revenue of $5.29 billion, up 26% year over year
- GAAP operating income of $303.2 million, up 14% year over year
- Non-GAAP operating income of $371.4 million, up 14% year over year1
- GAAP operating margin of 22.7%
- Non-GAAP operating margin of 27.8%1
- GAAP diluted net income per share attributable to Fortinet, Inc. of $0.41, up 41% year over year
- Non-GAAP diluted net income per share attributable to Fortinet, Inc. of $0.41, up 24% year over year1
- Cash flow from operations of $551.2 million
- Free cash flow of $481.1 million1
SUNNYVALE - Nov. 02, 2023 (GLOBE NEWSWIRE) -- Fortinet® (Nasdaq: FTNT), a global cybersecurity leader driving the convergence of networking and security, today announced financial results for the third quarter ended September 30, 2023.
“While the Secure Networking market is experiencing slower growth as product demand returns to normal levels following two years of elevated growth, we are leveraging our scale, go-to-market capabilities and engineering expertise to focus our attention on the faster growing SASE and Security Operations markets, in addition to continuing our focus on Secure Networking,” said Ken Xie, Founder, Chairman and Chief Executive Officer of Fortinet. “We are well-positioned to capitalize on these emerging growth opportunities by leveraging our integrated FortiOS operating system, industry leadership in firewall and SD-WAN, and exceptional solutions in each of the SASE and Security Operations markets.”
Financial Highlights for the Third Quarter of 2023
- Revenue: Total revenue was $1.33 billion for the third quarter of 2023, an increase of 16.1% compared to $1.15 billion for the same quarter of 2022.
- Product Revenue: Product revenue was $465.9 million for the third quarter of 2023, a decrease of 0.6% compared to $468.7 million for the same quarter of 2022.
- Service Revenue: Service revenue was $868.7 million for the third quarter of 2023, an increase of 27.6% compared to $680.8 million for the same quarter of 2022.
- Billings1: Total billings were $1.49 billion for the third quarter of 2023, an increase of 5.7% compared to $1.41 billion for the same quarter of 2022.
- Deferred Revenue: Total deferred revenue was $5.29 billion as of September 30, 2023, an increase of 26.0% compared to $4.19 billion as of September 30, 2022.
- GAAP Operating Income and Margin: GAAP operating income was $303.2 million for the third quarter of 2023, representing a GAAP operating margin of 22.7%. GAAP operating income was $265.5 million for the same quarter of 2022, representing a GAAP operating margin of 23.1%.
- Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $371.4 million for the third quarter of 2023, representing a non-GAAP operating margin of 27.8%. Non-GAAP operating income was $324.9 million for the same quarter of 2022, representing a non-GAAP operating margin of 28.3%.
- GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.: GAAP net income was $322.9 million for the third quarter of 2023, compared to GAAP net income of $231.6 million for the same quarter of 2022. GAAP diluted net income per share was $0.41 for the third quarter of 2023, based on 791.2 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.29 for the same quarter of 2022, based on 798.6 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 $323.5 million for the third quarter of 2023, compared to non-GAAP net income of $262.7 million for the same quarter of 2022. Non-GAAP diluted net income per share was $0.41 for the third quarter of 2023, based on 791.2 million diluted weighted-average shares outstanding, compared to $0.33 for the same quarter of 2022, based on 798.6 million diluted weighted-average shares outstanding.
- Cash Flow: Cash flow from operations was $551.2 million for the third quarter of 2023, compared to $483.0 million for the same quarter of 2022.
- Free Cash Flow1: Free cash flow was $481.1 million for the third quarter of 2023, compared to $395.2 million for the same quarter of 2022.
- Share Repurchase Program: During the three and nine months ended September 30, 2023, Fortinet repurchased 10.4 million shares of its common stock at an average price of $58.43 per share and for an aggregate purchase price of $605.2 million. During the three and nine months ended September 30, 2022, Fortinet repurchased 10.2 million and 36.0 million shares of its common stock, respectively, at an average price of $49.15 and $55.37 per share, respectively, and for an aggregate purchase price of $500.0 million and $1.99 billion, respectively. Subsequent to September 30, 2023 through October 31, 2023, Fortinet repurchased 7.7 million shares of its common stock at an average price of $57.43 per share for an aggregate purchase price of $444.4 million.
Guidance
For the fourth quarter of 2023, Fortinet currently expects:
- Revenue in the range of $1.380 billion to $1.440 billion
- Billings in the range of $1.560 billion to $1.700 billion
- Non-GAAP gross margin in the range of 75.5% to 76.5%
- Non-GAAP operating margin in the range of 27.5% to 28.5%
- Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $0.42 to $0.44, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 780 million to 790 million.
For the fiscal year 2023, Fortinet currently expects:
- Revenue in the range of $5.270 billion to $5.330 billion
- Service revenue in the range of $3.355 billion to $3.375 billion
- Billings in the range of $6.095 billion to $6.235 billion
- Non-GAAP gross margin in the range of 76.0% to 77.0%
- Non-GAAP operating margin in the range of 26.5% to 27.5%
- Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $1.54 to $1.56, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 790 million to 800 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 matters. 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”.
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. 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.
Fourth Quarter 2023 Conference Participation Schedule:
- Stifel Midwest One-on-One Growth Conference
November 9, 2023 - Wells Fargo TMT Summit
November 28, 2023 - Barclays Global Technology, Media & Telecommunications Conference
December 6, 2023
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, pre-register and listen to the webcast of each event, please visit the Investor Presentation & Events page of Fortinet’s website at https://investor.fortinet.com/events-and-presentations. The schedule is subject to change.
About Fortinet (www.fortinet.com)
Fortinet (Nasdaq: FTNT) is a driving force in the evolution of cybersecurity and the convergence of networking and security. Our mission is to secure people, devices and data everywhere, and today we deliver cybersecurity everywhere our customers need it with the largest integrated portfolio of over 50 enterprise-grade products. Over half a million customers trust Fortinet's solutions, which are among the most deployed, most patented and most validated in the industry. The Fortinet Training Institute, one of the largest and broadest training programs in the industry, is dedicated to making cybersecurity training and new career opportunities available to everyone. FortiGuard Labs, Fortinet’s elite threat intelligence and research organization, develops and utilizes leading-edge machine learning and AI technologies to provide customers with timely and consistently top-rated protection and actionable threat intelligence.