Slide 1: Q4 2020 Financial Results
Q4 2020 Financial Results February 4, 2021 © Copyright Fortinet Inc. All rights reserved.
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 Q1 and 2021 guidance, and future prospects and expectations are forward-looking statements that involve risks and uncertainties
Slide 3: Q4 2020 Non-GAAP Results
(1) Q4 2020 Non-GAAP Results Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Billings(2) $649.2M $551.6M $622.4M $626.6M $802.3M $667.8M $711.5M $749.8M $960.9M Y/Y % Change 21.6% 19.1% 21.2% 18.8% 23.6% 21.1% 14.3% 19.7% 19.8% Revenue $509.5M $473.0M $523.8M $548.1M $618.1M $577.7M $617.6M $6
Slide 4: Q4 2020 Non-GAAP Results (Continued)
Q4 2020 Non-GAAP Results(1) (Continued) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Gross Margin(2) 75.8% 77.2% 76.5% 78.2% 78.1% 78.8% 79.1% 79.5% 78.5% Operating Income(2)(3) $133.1M $97.0M $125.2M $145.2M $168.6M $129.2M $170.3M $178.6M $219.9M Operating Margin(2)(3) 26.1% 20.5% 23.9% 2
Slide 5: 2020 Non-GAAP Results
(1) 2020 Non-GAAP Results 2018 2019 2020 Billings(2) $2.153B $2.603B $3.090B Y/Y % Change 19.9% 20.9% 18.7% Revenue $1.805B $2.163B $2.594B Y/Y % Change 20.5% 19.9% 19.9% Product Revenue $674.4M $788.5M $916.4M Y/Y % Change 16.8% 16.9% 16.2% Service Revenue $1.130B $1.375B $1.678B Y/Y % Change 22.8%
Slide 6: 2020 Non-GAAP Results (Continued)
2020 Non-GAAP Results (Continued)(1) 2018 2019 2020 Gross Margin (%)(2) 76.1% 77.6% 78.9% Operating Income(2)(3) $406.3M $536.0M $698.0M Operating Margin (%)(2)(3) 22.5% 24.8% 26.9% Net Income(2)(3)(4)(5) $322.2M $436.7M $562.6M Diluted Earnings Per Share(2)(3)(4)(5) $1.84 $2.50 $3.35 Weighted Dilut
Slide 7: Revenue by Geography
(1) Revenue by Geography Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % ($ in millions) $ Change $ Change $ Change $ Change $ Change $ Change $ Change $ Change $ Change Americas $205.0 17.1% $200.6 14.0% $226.4 19.3% $241.0 24.3% $252.2 23
Slide 8: Revenue by Geography (Continued)
(1) Revenue by Geography (Continued) 2018 2019 2020 Y/Y % Y/Y % Y/Y % ($ in millions) $ Change $ Change $ Change Americas $764.4 18.8% $920.2 20.4% $1,077.2 17.1% EMEA $679.3 22.3% $816.5 20.2% $991.9 21.5% APAC $360.9 20.9% $426.3 18.1% $525.3 23.2% Total $1,804.6 20.5% $2,163.0 19.9% $2,594.4 19.9
Slide 9: Number of Deals & FortiGate Sales
Number of Deals & FortiGate Sales Number of Deals(1) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 No. of Deals >$50K 2,154 1,683 1,906 1,908 2,565 2,121 2,111 2,267 2,991 No. of Deals >$250K 363 266 346 333 469 323 369 398 491 No. of Deals >$500K 129 108 147 130 197 120 146 168 205 No. of D
Slide 10: Statement of Cash Flows (Non-GAAP)
Statement of Cash Flows(1) (Non-GAAP) ($ in millions) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 GAAP Net Income $184.6 $59.1 $74.2 $80.2 $118.2 $104.6 $113.8 $123.4 $146.7 Depreciation and Stock-Based Compensation 57.3 58.7 60.2 57.4 59.4 62.4 66.7 66.0 65.4 Accounts Receivable—Net (120.
Slide 11: Statement of Cash Flows (Non-GAAP) (Continued)
Statement of Cash Flows(1) (Non-GAAP) (Continued) ($ in millions) 2018 2019 2020 GAAP Net Income $334.9 $331.7 $488.5 Depreciation and Stock-Based Compensation 218.6 235.7 260.5 Accounts Receivable—Net (82.0) (96.7) (176.4) Inventory (33.4) (48.5) (42.2) Deferred Revenue 348.7 439.9 495.6 Other (147
Slide 12: Free Cash Flow and Adjusted Free Cash Flow Growth
Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP) ($ in millions) $286 $262 $237 $215 $212 $195 $187 $174 $178 Reported Free Cash Flow Real Estate Related Add Backs $242 $264 $204 $216 $169 $191 $178 $186 $143 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 ◦ Free Cash Flow is a non
Slide 13: Q1 and 2021 Guidance (Non-GAAP)
(1) Q1 and 2021 Guidance (Non-GAAP) Actual Actual Q1'20(2) Q1'21 2020 2021 Billings(3) $667.8M $765 - 780M $3.090B $3.560 - 3.640B Y/Y Mid-Pt Growth 16% 17% Revenue (GAAP) $577.7M $670 - 685M $2.594B $3.025 - 3.075B Y/Y Mid-Pt Growth 17% 18% Service Revenue (GAAP) $331.8M $1.678B $2.015- 2.045B Y/Y
Slide 14: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations(1) ($ in millions) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 GAAP product gross profit $113.9 $92.5 $107.2 $118.1 $146.1 $116.0 $127.5 $139.5 $181.0 Stock‑based compensation 0.4 0.4 0.4 0.4 0.3 0.4 0.4 0.4 0.4 Amortization of acquired intangible assets 2.
Slide 15: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 GAAP general and administrative expense $22.0 $24.5 $24.3 $26.1 $27.2 $28.8 $28.9 $29.4 $32.4 Stock‑based compensation (4.8) (5.0) (5.4) (5.1) (5.4) (5.3) (6.1) (5.9) (6.0) Litigatio
Slide 16: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 GAAP other income (expense), net $(2.3) $(0.5) $(0.4) $(6.0) $(0.6) $(8.0) $0.9 $(1.0) $0.3 Loss on investments in privately-held companies — — — 3.8 — 4.3 — — — Non-GAAP other incom
Slide 17: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 GAAP net income $184.6 $59.1 $74.2 $80.2 $118.2 $104.6 $113.8 $123.4 $146.7 Stock‑based compensation 42.6 43.0 45.0 42.4 43.7 45.3 49.6 50.0 48.9 Amortization of acquired intangible
Slide 18: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) 2018 2019 2020 GAAP product gross profit $383.4 $463.9 $564.0 Stock‑based compensation 1.5 1.5 1.6 Amortization of acquired intangible assets 6.0 6.5 4.7 Non‑GAAP product gross profit $390.9 $471.9 $570.3 Non‑GAAP product gross margin 5
Slide 19: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) 2018 2019 2020 GAAP general and administrative expense $93.0 $102.1 $119.5 Stock‑based compensation (18.6) (20.9) (23.3) Litigation-related matter — — 0.7 Non‑GAAP general and administrative expense $74.4 $81.2 $96.9 Non‑GAAP general an
Slide 20: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) 2018 2019 2020 GAAP other expense, net $(6.6) $(7.5) $(7.8) (Gain) loss on investments in privately-held companies (2.2) 3.8 4.3 Non-GAAP other expense, net $(8.8) $(3.7) $(3.5) Non‑GAAP other expense, net as a percentage of revenue (0.
Slide 21: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations(1) (Continued) ($ in millions) 2018 2019 2020 GAAP net income $334.9 $331.7 $488.5 Stock‑based compensation 162.9 174.1 193.8 Amortization of acquired intangible assets 9.0 10.9 13.3 Gain on IP matter — — (40.2) Litigation-related matter — — (0.7) (Gain) loss on inve
Slide 22: Revenue to Billings Reconciliation
(1) Revenue to Billings Reconciliation As Adjusted ($ in millions) Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Revenue $399.1 $442.5 $453.5 $509.5 $473.0 $523.8 $548.1 $618.1 $577.7 $617.6 Add: Ending Deferred Revenue 1,379.7 1,452.9 1,526.9 1,666.8 1,745.4 1,844.0 1,922.5 2,109.1 2,
Slide 23: Fortinet
F° ATINET.