Slide 1: Q4 2023 Financial Results
Q4 2023 Financial Results February 6, 2024
Slide 2: Safe Harbor Statement
Safe Harbor Statement Information, statements and projections contained in these presentation slides and related conference call concerning Fortinet’s business outlook, the first quarter of 2024 and full year 2024 guidance, and future prospects and expectations are forward-looking statements that in
Slide 3: 2023 Financial Highlights
2023 Financial Highlights Note (1) Recurring revenue represents total revenue less hardware and professional services revenue. © Fortinet Inc. All Rights Reserved. 3
Slide 4: The Fortinet Security Fabric Vision
The Fortinet Security Fabric Vision © Fortinet Inc. All Rights Reserved. 4
Slide 5: Segment Breakdown Q4'23 Billings
Segment Breakdown Q4’23 Billings 1 1, 2 1 FortiGate Firewall FortiSwitch FortiAP FortiExtender FortiManager FortiNAC FortiDDoS +MORE Note 1 All Solutions include FortiGuard service sales Note 2 SD-WAN in Unified SASE is calculated from a % of FortiGate Entry Level and Mid-Range sales © Fortinet Inc.
Slide 6: Total TAM of $150B in 2024 Growing to $208B by 2027
Total TAM of $150B in 2024 Growing to $208B by 2027 Gartner, September 2023 - Forecast: Enterprise Network Equipment by Market Segment, Worldwide, 2021-2027, 3Q23 Update Gartner, September 2023 - Forecast: Information Security and Risk Management, Worldwide, 2021-2027, 3Q23 Update Gartner, Forecast
Slide 7: Fortinet Secures Over Half a Million Organizations Worldwide
Fortinet Secures Over Half a Million Organizations Worldwide Over 700,000 enterprises, service providers, and government organizations around the world trust Fortinet to secure their operations © Fortinet Inc. All Rights Reserved. 7
Slide 8: © Fortinet Inc. All Rights Reserved.
© Fortinet Inc. All Rights Reserved. 8
Slide 9: Organic Development Creates a Truly Integrated Platform
Organic Development Creates a Truly Integrated Platform © Fortinet Inc. All Rights Reserved. 9
Slide 10: Q4 2023 Non-GAAP Results
Q4 2023 Non-GAAP Results Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Billings (1) $1.306B $1.160B $1.304B $1.411B $1.719B $1.503B $1.541B $1.491B $1.865B Y/Y % Change 35.9% 36.4% 35.7% 32.6% 31.6% 29.6% 18.1% 5.7% 8.5% Revenue $963.6M $954.8M $1.030B $1.150B $1.283B $1.262B $1.293B $1.335B
Slide 11: Q4 2023 Non-GAAP Results
Q4 2023 Non-GAAP Results Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Gross Profit (1) $744.4M $710.2M $788.5M $875.5M $996.0M $963.6M $1.01B $1.03B $1.11B Gross Margin (1) 77.3% 74.4% 76.5% 76.2% 77.6% 76.3% 77.9% 76.9% 78.5% Operating Income (1)(2) $274.7M $210.2M $255.4M $324.9M $417.6M
Slide 12: 2023 Non-GAAP Results
2023 Non-GAAP Results 2021 2022 2023 Billings (1) $4.181B $5.594B $6.400B Y/Y % Change 35.3% 33.8% 14.4% Revenue $3.342B $4.417B $5.305B Y/Y % Change 28.8% 32.2% 20.1% Product Revenue $1.255B $1.781B $1.927B Y/Y % Change 36.9% 41.9% 8.2% Service Revenue $2.087B $2.637B $3.378B Y/Y % Change 24.4% 26.
Slide 13: Revenue by Geography
Revenue by Geography Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % ($ in millions) $ $ $ $ $ $ $ $ $ Change Change Change Change Change Change Change Change Change Americas $380.8 26.4% $382.6 31.5% $413.6 22.7% $467.6 33.6% $521.2 36.9%
Slide 14: Revenue by Geography (Continued)
Revenue by Geography (Continued) 2021 2022 2023 Y/Y % Y/Y % Y/Y % ($ in millions) $ Change $ Change $ Change Americas $1,358.8 26.1% $1,785.0 31.4% $2,175.2 21.9% EMEA $1,275.9 28.6% $1,691.8 32.6% $2,072.9 22.5% APAC $707.5 34.7% $940.6 32.9% $1,056.7 12.3% Total $3,342.2 28.8% $4,417.4 32.2% $5,30
Slide 15: Number of Deals & FortiGate Sales
Number of Deals & FortiGate Sales Number of Deals (1) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 No. of Deals >$50K 3,807 3,241 3,583 4,269 4,904 4,583 4,790 4,732 5,625 No. of Deals >$250K 758 598 699 830 1,008 838 836 835 1,112 No. of Deals >$500K 320 243 312 355 450 323 353 367 474 No.
Slide 16: FortiGate Sales (Continued)
FortiGate Sales (Continued) % of FortiGate (1) 2021 2022 2023 Entry Level (FG30-90) 24.4% 29.2% 28.1% Mid - Range (FG100-900) 39.2% 39.2% 45.9% High - End (FG1000-7000) 36.4% 31.6% 26.0% Note (1) Represents the percentage of invoiced amounts from FortiGate sales during the period by range of product
Slide 17: Statement of Cash Flows (Non-GAAP)
Statement of Cash Flows (Non-GAAP) ($ in millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 GAAP Net Income Including Non-controlling Interests $198.8 $138.3 $173.4 $231.1 $313.8 $247.7 $266.3 $322.9 $310.9 Depreciation, Amortization and Stock-Based Compensation 78.4 78.7 79.8 81.1 82.0
Slide 18: Statement of Cash Flows (Non-GAAP) (Continued)
Statement of Cash Flows (Non-GAAP) (Continued) ($ in millions) 2021 2022 2023 GAAP Net Income Including Non-controlling Interests $606.7 $856.6 $1,147.8 Depreciation, Amortization and Stock-Based Compensation 292.3 321.6 362.4 Accounts Receivable (72.5) (456.7) (146.4) Inventory (19.4) (109.1) (253.
Slide 19: Free Cash Flow and Adjusted Free Cash Flow Growth
Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP) (Continued) ($ in millions) $1,858.3 $1,644.5 $1,435.8 (1) Reported Free Cash Flow (2) $1,731.4 Real Estate Related Add Backs $1,449.4 $1,203.8 2021 2022 2023 Notes (1) Free Cash Flow is a non-GAAP measure that we define as net cash provid
Slide 20: Returned $5.3 Billion to Shareholders via Share Repurchases Since 2020
Returned $5.3 Billion to Shareholders via Share Repurchases Since 2020 Share Repurchases $2.0B $1.5B $1.1B $742M 2020 2021 2022 2023 Note (1) As of February 6, 2024 © Fortinet Inc. All Rights Reserved. 20
Slide 21: Product and Services Revenue and Y/Y Growth: 2009 - 2023
Product and Services Revenue and Y/Y Growth: 2009 - 2023 ($ in millions) $6,000 50% $5,000 40% $4,000 30% $3,000 $3,378 20% $2,000 $2,637 $2,087 $1,000 $921 $1,678 10% $153 $337 $577 $916 $1,255 $1,781 $1,927 $278 $0 $99 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 P
Slide 22: Y/Y Billings & Revenue Growth Rates and Operating Margin: 2009 - 2023
Y/Y Billings & Revenue Growth Rates and Operating Margin: 2009 - 2023 40% 30% 20% 14-year CAGR ('09-'23) Billings: 25.0% 10% Revenue: 24.3% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 GAAP Operating Margin Non-GAAP Operating Margin Billings Growth Revenue Growth Not
Slide 23: Q1 and 2024 Guidance (Non-GAAP)
Q1 and 2024 Guidance (Non-GAAP)(1) Actual Q1'24E Actual 2023 2024E Q1'23 Billings (2) $1.503B $1.390 - 1.450B $6.400B $6.400 - 6.600B Y/Y Mid-Pt Growth (5.5)% 1.6% Revenue (GAAP) $1.262B $1.300 - 1.360B $5.305B $5.715 - 5.815B Y/Y Mid-Pt Growth 5.4% 8.7% Service Revenue (GAAP) $761.6M $3.378B $3.920
Slide 24: Additional Modeling Points
Additional Modeling Points Actual 2023 Q1’24E 2024E Cash Paid for Taxes $426M $30M $520M Capital Expenditures $204M $220 - $250M $370 - $420M Non-GAAP Tax Rate 17% 17% 17% © Fortinet Inc. All Rights Reserved. 24
Slide 25: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Total revenue $963.6 $954.8 $1,030.1 $1,149.5 $1,283.0 $1,262.3 $1,292.8 $1,334.6 $1,415.1 Add: Change in deferred revenue 346.5 205.0 274.1 261.5 446.8 240.6 247.7 156.7 449.7 Less: Deferred reven
Slide 26: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 GAAP product gross profit $232.4 $210.0 $245.5 $283.5 $350.2 $307.1 $298.1 $267.6 $290.9 Stock-based compensation 0.4 0.4 0.4 0.5 0.4 0.4 0.5 0.4 0.5 Amortization of acquired intangible
Slide 27: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 GAAP general and administrative expense $41.3 $38.6 $45.4 $40.7 $44.3 $52.8 $49.9 $53.5 $55.1 Stock-based compensation (6.9) (7.2) (7.7) (7.4) (7.8) (8.2) (9.9) (9.9) (9.9) Non-GAAP gen
Slide 28: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 GAAP provision for (benefit from) income taxes $3.7 $(8.1) $2.4 $27.3 $9.2 $21.3 $27.6 $(0.3) $95.2 Tax adjustments related to the above 52.4 41.7 39.1 27.8 63.6 38.5 35.0 67.6 (13.0) N
Slide 29: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) 2021 2022 2023 Total revenue $3,342.2 $4,417.4 $5,304.8 Add: Change in deferred revenue 847.6 1,187.4 1,094.7 Less: Deferred revenue balance acquired in business combination (4.1) (10.8) — Less: Adjustment due to adoption of ASU 2021-08 (1) (4.3) — —
Slide 30: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2021 2022 2023 GAAP product gross profit $767.3 $1,089.2 $1,163.7 Stock-based compensation 1.7 1.7 1.8 Amortization of acquired intangible assets 5.7 7.8 7.1 Non-GAAP product gross profit $774.7 $1,098.7 $1,172.6 Non-GAAP product gross mar
Slide 31: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2021 2022 2023 GAAP general and administrative expense $143.5 $169.0 $211.3 Stock-based compensation (27.1) (30.1) (37.9) Non-GAAP general and administrative expense $116.4 $138.9 $173.4 Non-GAAP general and administrative expense as a per
Slide 32: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2021 2022 2023 GAAP provision for income taxes $14.1 $30.8 $143.8 Tax adjustments related to the above 165.1 172.2 128.1 Non-GAAP provision for income taxes $179.2 $203.0 $271.9 Non-GAAP effective tax rate 21% 17% 17% GAAP net income attri
Slide 33: Fortinet
F=SRTINET.