Slide 1: Q4 2022 Financial Results
Q4 2022 Financial Results February 7, 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 first quarter and full year 2023 guidance, and future prospects and expectations are forward-looking statements that involve ri
Slide 3: Q4 2022 Non-GAAP Results
Q4 2022 Non-GAAP Results Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Billings (1) $960.9M $850.6M $960.9M $1.064B $1.306B $1.160B $1.304B $1.411B $1.719B Y/Y % Change 19.8% 27.4% 35.1% 41.9% 35.9% 36.4% 35.7% 32.6% 31.6% Revenue $748.0M $710.3M $801.1M $867.2M $963.6M $954.8M $1.030B $1.15
Slide 4: Q4 2022 Non-GAAP Results
Q4 2022 Non-GAAP Results Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Gross Profit (1) $587.0M $560.1M $621.2M $663.8M $744.4M $710.2M $788.5M $875.5M $996.0M Gross Margin (1) 78.5% 78.9% 77.5% 76.5% 77.3% 74.4% 76.5% 76.2% 77.6% Operating Income (1)(2) $219.9M $173.9M $203.3M $223.6M $274.
Slide 5: 2022 Non-GAAP Results
2022 Non-GAAP Results 2020 2021 2022 Billings (1) $3.090B $4.181B $5.594B Y/Y % Change 18.7% 35.3% 33.8% Revenue $2.594B $3.342B $4.417B Y/Y % Change 19.9% 28.8% 32.2% Product Revenue $916.4M $1.255B $1.781B Y/Y % Change 16.2% 36.9% 41.9% Service Revenue $1.678B $2.087B $2.637B Y/Y % Change 22.1% 24
Slide 6: 2022 Non-GAAP Results
2022 Non-GAAP Results 2020 2021 2022 Gross Profit (1) $2.05B $2.59B $3.37B Gross Margin (%) (1) 78.9% 77.5% 76.3% Operating Income (1)(2) $698.0M $875.5M $1.21B Operating Margin (%) (1)(2) 26.9% 26.2% 27.3% Net Income Attributable to Fortinet, Inc. (1)(2)(3)(4)(5)(6) $562.6M $666.0M $961.6M Diluted
Slide 7: Revenue by Geography
Revenue by Geography Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % Y/Y % ($ in millions) $ $ $ $ $ $ $ $ $ Change Change Change Change Change Change Change Change Change Americas $301.3 19.5% $290.9 19.9% $337.0 29.1% $350.1 28.5% $380.8 26.4%
Slide 8: Revenue by Geography (Continued)
Revenue by Geography (Continued) 2020 2021 2022 Y/Y % Y/Y % Y/Y % ($ in millions) $ Change $ Change $ Change Americas $1,077.2 17.1% $1,358.8 26.1% $1,785.0 31.4% EMEA $991.9 21.5% $1,275.9 28.6% $1,691.8 32.6% APAC $525.3 23.2% $707.5 34.7% $940.6 32.9% Total $2,594.4 19.9% $3,342.2 28.8% $4,417.4
Slide 9: Number of Deals & FortiGate Sales
Number of Deals & FortiGate Sales Number of Deals (1) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 No. of Deals >$50K 2,991 2,489 2,856 3,021 3,807 3,241 3,583 4,269 4,904 No. of Deals >$250K 491 387 499 548 758 598 699 830 1,008 No. of Deals >$500K 205 167 203 232 320 243 312 355 450 No. o
Slide 10: FortiGate Sales (Continued)
FortiGate Sales (Continued) % of FortiGate (1) 2020 2021 2022 Entry Level (FG30-90) 22.6% 24.4% 29.2% Mid - Range (FG100-900) 43.0% 39.2% 39.2% High - End (FG1000-7000) 34.5% 36.4% 31.6% Note (1) Represents the percentage of invoiced amounts from FortiGate sales during the period by range of product
Slide 11: Statement of Cash Flows (Non-GAAP)
Statement of Cash Flows (Non-GAAP) ($ in millions) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 GAAP Net Income Including Non-controlling Interests $146.7 $107.2 $137.5 $163.2 $198.8 $138.3 $173.4 $231.1 $313.8 Depreciation, Amortization and Stock-Based Compensation 65.4 66.8 71.5 75.6 78.4
Slide 12: Statement of Cash Flows (Non-GAAP) (Continued)
Statement of Cash Flows (Non-GAAP) (Continued) ($ in millions) 2020 2021 2022 GAAP Net Income Including Non-controlling Interests $488.5 $606.7 $856.6 Depreciation, Amortization and Stock-Based Compensation 260.5 292.3 321.6 Accounts Receivable (176.4) (72.5) (456.7) Inventory (42.2) (19.4) (109.1)
Slide 13: Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP)
Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP) $509.8 $463.8 ($ in millions) $402.8 $386.9 $366.2 $344.5 $301.6 $304.7 $286.6 (1) $497.2 Reported Free Cash Flow $394.7 $395.2 Real Estate Related Add Backs (2) $329.8 $264.2 $263.8 $273.5 $283.5 $215.5 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22
Slide 14: Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP)
Free Cash Flow and Adjusted Free Cash Flow Growth (Non-GAAP) ($ in millions) 181% 161% 151% $1,644.5 $1,435.8 (1) Reported Free Cash Flow (2) Real Estate Related Add Backs (3) $997.4 Free Cash Flow Conversion $1,449.4 $1,203.8 $907.8 2020 2021 2022 Notes (1) Free Cash Flow is a non-GAAP measure that
Slide 15: Q1 and 2023 Guidance (Non-GAAP)
(1) Q1 and 2023 Guidance (Non-GAAP) Actual Q1'23E Actual 2022 2023E Q1'22 Billings (2) $1.160B $1.415 - 1.465B $5.594B $6.710 - 6.790B Y/Y Mid-Pt Growth 24.2% 20.7% Revenue (GAAP) $954.8M $1.180 - 1.220B $4.417B $5.370 - 5.430B Y/Y Mid-Pt Growth 25.7% 22.3% Service Revenue (GAAP) $583.8M $2.637B $3.
Slide 16: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Total revenue $748.0 $710.3 $801.1 $867.2 $963.6 $954.8 $1,030.1 $1,149.5 $1,283.0 Add: Change in deferred revenue 213.3 140.3 159.8 201.0 346.5 205.0 274.1 261.5 446.8 Less: Deferred revenue balan
Slide 17: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 GAAP product gross profit $181.0 $149.4 $182.7 $202.8 $232.4 $210.0 $245.5 $283.5 $350.2 Stock-based compensation 0.4 0.4 0.5 0.4 0.4 0.4 0.4 0.5 0.4 Amortization of acquired intangible assets 0.9
Slide 18: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 GAAP general and administrative expense $32.4 $32.0 $34.4 $35.8 $41.3 $38.6 $45.4 $40.7 $44.3 Stock-based compensation (6.0) (6.3) (7.0) (6.9) (6.9) (7.2) (7.7) (7.4) (7.8) Non-GAAP gen
Slide 19: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 GAAP provision for (benefit from) income taxes $25.0 $12.2 $7.5 $(9.3) $3.7 $(8.1) $2.4 $27.3 $9.2 Tax adjustments related to the above 21.7 23.9 34.6 54.2 52.4 41.7 39.1 27.8 63.6 Non-
Slide 20: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ($ in millions) 2020 2021 2022 Total revenue $2,594.4 $3,342.2 $4,417.4 Add: Change in deferred revenue 496.2 847.6 1,187.4 Less: Deferred revenue balance acquired in business combination (0.6) (4.1) (10.8) Less: Adjustment due to adoption of ASU 2021-08 (1) — (4.3)
Slide 21: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2020 2021 2022 GAAP product gross profit $564.0 $767.3 $1,089.2 Stock-based compensation 1.6 1.7 1.7 Amortization of acquired intangible assets 4.7 5.7 7.8 Non-GAAP product gross profit $570.3 $774.7 $1,098.7 Non-GAAP product gross margin
Slide 22: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2020 2021 2022 GAAP general and administrative expense $119.5 $143.5 $169.0 Stock-based compensation (23.3) (27.1) (30.1) Litigation-related matter 0.7 — — Non-GAAP general and administrative expense $96.9 $116.4 $138.9 Non-GAAP general an
Slide 23: GAAP to Non-GAAP Reconciliations (Continued)
GAAP to Non-GAAP Reconciliations (Continued) ($ in millions) 2020 2021 2022 GAAP other expense, net $(7.8) $(11.6) $(13.5) Impairment charge on investment in a privately-held company 4.3 — — Non-GAAP other expense, net $(3.5) $(11.6) $(13.5) Non-GAAP other expense, net as a percentage of revenue (0.
Slide 24: F=SRTINET.
F=SRTINET.