Slide 1: Q3 2023 Financial Results
Q3 2023 Financial Results November 2, 2023
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 fourth quarter and full year 2023 guidance, and future prospects and expectations are forward-looking statements that involve r
Slide 3: Fortinet Recognized in 9 Gartner Magic Quadrants
Fortinet Recognized in 9 Gartner Magic Quadrants © Fortinet Inc. All Rights Reserved. 3
Slide 4: © Fortinet Inc. All Rights Reserved.
© Fortinet Inc. All Rights Reserved. 4
Slide 5: A Large and Growing Total Addressable Market (TAM)
A Large and Growing Total Addressable Market (TAM) 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 A
Slide 6: © Fortinet Inc. All Rights Reserved.
© Fortinet Inc. All Rights Reserved. 6
Slide 7: © Fortinet Inc. All Rights Reserved.
© Fortinet Inc. All Rights Reserved. 7
Slide 8: © Fortinet Inc. All Rights Reserved.
© Fortinet Inc. All Rights Reserved. 8
Slide 9: Q3 2023 Non-GAAP Results
Q3 2023 Non-GAAP Results Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Billings (1) $1.064B $1.306B $1.160B $1.304B $1.411B $1.719B $1.503B $1.541B $1.491B Y/Y % Change 41.9% 35.9% 36.4% 35.7% 32.6% 31.6% 29.6% 18.1% 5.7% Revenue $867.2M $963.6M $954.8M $1.030B $1.150B $1.283B $1.262B $1.293
Slide 10: Q3 2023 Non-GAAP Results
Q3 2023 Non-GAAP Results Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Gross Profit (1) $663.8M $744.4M $710.2M $788.5M $875.5M $996.0M $963.6M $1.01B $1.03B Gross Margin (1) 76.5% 77.3% 74.4% 76.5% 76.2% 77.6% 76.3% 77.9% 76.9% Operating Income (1)(2) $223.6M $274.7M $210.2M $255.4M $324.9M
Slide 11: Revenue by Geography
Revenue by Geography Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % ($ in millions) $ $ $ $ $ $ $ $ $ Change Change Change Change Change Change Change Change Change Americas $350.1 28.5% $380.8 26.4% $382.6 31.5% $413.6 22.7% $467.6 33.6%
Slide 12: Number of Deals & FortiGate Sales
Number of Deals & FortiGate Sales Number of Deals (1) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 No. of Deals >$50K 3,021 3,807 3,241 3,583 4,269 4,904 4,583 4,790 4,732 No. of Deals >$250K 548 758 598 699 830 1,008 838 836 835 No. of Deals >$500K 232 320 243 312 355 450 323 353 367 No. o
Slide 13: Statement of Cash Flows (Non-GAAP)
Statement of Cash Flows (Non-GAAP) ($ in millions) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 GAAP Net Income Including Non-controlling Interests $163.2 $198.8 $138.3 $173.4 $231.1 $313.8 $247.7 $266.3 $322.9 Depreciation, Amortization and Stock-Based Compensation 75.6 78.4 78.7 79.8 81.1
Slide 14: Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP)
Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP) $662.1 ($ in millions) $530.8 $509.8 $497.7 $463.8 $386.9 $366.2 $344.5 (1) $304.7 $647.2 Reported Free Cash Flow Real Estate Related Add Backs (2) $497.2 $481.1 $438.3 $395.2 $329.8 $273.5 $283.5 $215.5 (3) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q
Slide 15: LTM Adjusted Free Cash Flow
LTM Adjusted Free Cash Flow $2,200 $2,133 ($ in millions) $1,940 $1,645 $1,479 (1), (2) LTM Adj FCF Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Notes (1) Free Cash Flow is a non-GAAP measure that we define as net cash provided by operating activities minus purchases of property and equipment. (2) Adjusted Free Ca
Slide 16: Billings & Revenue Y/Y Growth Rates and Operating Margin: 2009 - 2023E
Billings & Revenue Y/Y Growth Rates and Operating Margin: 2009 - 2023E 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 4 4 4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E GAAP Operating Margin Non-GAAP Operating Margin Billings Growth Revenue Growth 2009 – 2023E Billings & Re
Slide 17: Product and Services Revenue and Y/Y Growth: 2009 - 2023E
Product and Services Revenue and Y/Y Growth: 2009 - 2023E $6,000 $5,000 40% $4,000 $3,365 $3,000 $2,637 $2,087 20% $2,000 $1,678 $1,375 $1,130 $1,000 $410 $532 $730 $921 $1,255 $1,781 $1,935 $236 $285 $337 $577 $674 $789 $916 $190 $477 $548 $0 $153 $99 $135 $197 $249 $278 $361 0% 2009 2010 2011 2012
Slide 18: Q4 and 2023 Guidance (Non-GAAP)
Q4 and 2023 Guidance (Non-GAAP)(1) Actual Q4'23E Actual 2022 2023E Q4'22 Billings (2) $1.719B $1.560 - 1.700B $5.594B $6.095 - 6.235B Y/Y Mid-Pt Growth (5.2)% 10.2% Revenue (GAAP) $1.283B $1.380 - 1.440B $4.417B $5.270 - 5.330B Y/Y Mid-Pt Growth 9.9% 20.0% Service Revenue (GAAP) $742.9M $2.637B $3.3
Slide 19: Additional Modeling Points
Additional Modeling Points Actual Actual Actual Q4’23E 2023E Q1'23 Q2'23 Q3’23 Cash Paid for Taxes $21M $38M(1) $26M(1) $345M(1) $430M Capital Expenditures $30M $77M $70M $40 - $60M $220 - $240M Non-GAAP Tax Rate 17% 17% 17% 17% 17% Notes (1) Payment of 2023 estimated Federal tax and other tax payme
Slide 20: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Total revenue $867.2 $963.6 $954.8 $1,030.1 $1,149.5 $1,283.0 $1,262.3 $1,292.8 $1,334.6 Add: Change in deferred revenue 201.0 346.5 205.0 274.1 261.5 446.8 240.6 247.7 156.7 Less: Deferred revenue
Slide 21: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 GAAP product gross profit $202.8 $232.4 $210.0 $245.5 $283.5 $350.2 $307.1 $298.1 $267.6 Stock-based compensation 0.4 0.4 0.4 0.4 0.5 0.4 0.4 0.5 0.4 Amortization of acquired intangible
Slide 22: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 GAAP general and administrative expense $35.8 $41.3 $38.6 $45.4 $40.7 $44.3 $52.8 $49.9 $53.5 Stock-based compensation (6.9) (6.9) (7.2) (7.7) (7.4) (7.8) (8.2) (9.9) (9.9) Non-GAAP gen
Slide 23: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 GAAP provision for (benefit from) income taxes $(9.3) $3.7 $(8.1) $2.4 $27.3 $9.2 $21.3 $27.6 $(0.3) Tax adjustments related to the above 54.2 52.4 41.7 39.1 27.8 63.6 38.5 35.0 67.6 No
Slide 24: Fortinet
F=SRTINET.