Second Quarter 2023 Highlights
- Product revenue of $472.6 million, up 18% year over year
- Service revenue of $820.2 million, up 30% year over year
- Total revenue of $1.29 billion, up 26% year over year
- Billings of $1.54 billion, up 18% year over year1
- Deferred revenue of $5.13 billion, up 30% year over year
- GAAP operating income of $279.0 million, up 43% year over year
- Non-GAAP operating income of $348.1 million, up 36% year over year1
- GAAP operating margin of 21.6%
- Non-GAAP operating margin of 26.9%1
- GAAP diluted net income per share attributable to Fortinet, Inc. of $0.33, up 57% year over year
- Non-GAAP diluted net income per share attributable to Fortinet, Inc. of $0.38, up 58% year over year1
- Cash flow from operations of $515.1 million
- Free cash flow of $438.3 million1
- SUNNYVALE - Aug. 03, 2023 (GLOBE NEWSWIRE) -- Fortinet® (Nasdaq: FTNT), a global cybersecurity leader driving the convergence of networking and security, today announced financial results for the second quarter ended June 30, 2023.
“As a leading cybersecurity platform and secure networking vendor, we remain well-positioned for strong long-term growth as companies increasingly look to consolidate vendors and point products,” said Ken Xie, Founder, Chairman and Chief Executive Officer at Fortinet. “We are one of the top market share leaders in both SD-WAN and OT, and we will continue to focus on our key long-term growth markets of Secure Networking, Consolidated Cybersecurity Fabric, Hybrid Cloud Security, and Operational Technology, which have a combined 2023 TAM of $122 billion.”
Financial Highlights for the Second Quarter of 2023
Product Revenue: Product revenue was $472.6 million for the second quarter of 2023, an increase of 17.9% compared to $400.7 million for the same quarter of 2022.
- Service Revenue: Service revenue was $820.2 million for the second quarter of 2023, an increase of 30.3% compared to $629.4 million for the same quarter of 2022.
- Revenue: Total revenue was $1.29 billion for the second quarter of 2023, an increase of 25.5% compared to $1.03 billion for the same quarter of 2022.
- Billings1: Total billings were $1.54 billion for the second quarter of 2023, an increase of 18.1% compared to $1.30 billion for the same quarter of 2022.
- Deferred Revenue: Total deferred revenue was $5.13 billion as of June 30, 2023, an increase of 30.4% compared to $3.93 billion as of June 30, 2022.
- GAAP Operating Income and Margin: GAAP operating income was $279.0 million for the second quarter of 2023, representing a GAAP operating margin of 21.6%. GAAP operating income was $195.3 million for the same quarter of 2022, representing a GAAP operating margin of 19.0%.
- Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $348.1 million for the second quarter of 2023, representing a non-GAAP operating margin of 26.9%. Non-GAAP operating income was $255.4 million for the same quarter of 2022, representing a non-GAAP operating margin of 24.8%.
- GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.: GAAP net income was $266.3 million for the second quarter of 2023, compared to GAAP net income of $173.5 million for the same quarter of 2022. GAAP diluted net income per share was $0.33 for the second quarter of 2023, based on 795.9 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.21 for the same quarter of 2022, based on 810.1 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 $300.4 million for the second quarter of 2023, compared to non-GAAP net income of $194.1 million for the same quarter of 2022. Non-GAAP diluted net income per share was $0.38 for the second quarter of 2023, based on 795.9 million diluted weighted-average shares outstanding, compared to $0.24 for the same quarter of 2022, based on 810.1 million diluted weighted-average shares outstanding.
- Cash Flow: Cash flow from operations was $515.1 million for the second quarter of 2023, compared to $323.4 million for the same quarter of 2022.
- Free Cash Flow1: Free cash flow was $438.3 million for the second quarter of 2023, compared to $283.5 million for the same quarter of 2022.
- Share Repurchase Program: There were no shares repurchased under the Repurchase Program during the three and six months ended June 30, 2023. During the three and six months ended June 30, 2022, Fortinet repurchased 14.4 million and 25.8 million shares of its common stock at an average price of $55.45 and $57.82 per share and for an aggregate purchase price of $800.0 million and $1.49 billion, respectively. In April 2023 and July 2023, Fortinet’s board of directors authorized a $1.0 billion increase and $500.0 million increase in the authorized stock repurchase amount under the Repurchase Program, respectively, bringing the aggregate amount authorized to be repurchased to $6.75 billion of our outstanding common stock through February 29, 2024. As of August 3, 2023, approximately $2.03 billion remained available for future share repurchases.
Guidance
For the third quarter of 2023, Fortinet currently expects:
- Revenue in the range of $1.315 billion to $1.375 billion
- Billings in the range of $1.560 billion to $1.620 billion
- Non-GAAP gross margin in the range of 75.5% to 76.5%
- Non-GAAP operating margin in the range of 24.5% to 25.5%
- Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $0.35 to $0.37, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 million.
For the fiscal year 2023, Fortinet currently expects:
- Revenue in the range of $5.350 billion to $5.450 billion
- Service revenue in the range of $3.350 billion to $3.410 billion
- Billings in the range of $6.490 billion to $6.590 billion
- Non-GAAP gross margin in the range of 75.25% to 76.25%
- Non-GAAP operating margin in the range of 25.25% to 26.25%
- Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $1.49 to $1.53, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 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.
Third Quarter 2023 Conference Participation Schedule:
- Oppenheimer Virtual Tech Conference
August 9, 2023 - Rosenblatt Virtual Tech Summit
August 23, 2023 - Stifel Tech Executive Summit
August 28 – 29, 2023 - Deutsche Bank Technology Conference
August 30 – 31, 2023 - Goldman Sachs Communacopia + Technology Conference
September 5, 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. Learn more at https://www.fortinet.com, the Fortinet Blog or FortiGuard Labs.
