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Fortinet reports third quarter 2020 financial results

Third quarter 2020 highlights 

  • Total revenue of $651.1 million, up 19 per cent year over year 
  • Product revenue of $223.8 million, up 14 per cent year over year 
  • Service revenue of $427.3 million, up 22 per cent year over year 
  • Billings of $749.8 million, up 20 per cent year over year (1) 
  • Deferred revenue of $2.39 billion, up 24 per cent year over year 
  • GAAP operating margin of 19.5 per cent, up 110 basis points year over year 
  • Non-GAAP operating margin of 27.4 per cent, up 90 basis points year over year (1) 
  • GAAP diluted net income per share of $0.75 
  • Non-GAAP diluted net income per share of $0.88 (1) 
  • Cash flow from operations of $220.8 million 
  • Free cash flow of $185.7 millio(1)  

Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, has announced financial results for the third quarter ended September 30, 2020. 

“Strong performances by our Secure SD-WAN, cloud, and Security Fabric offerings resulted in solid third-quarter year-over-year total revenue growth. In the quarter, Secure SD-WAN revenue more than doubled from the same period a year ago. At the end of the third quarter, Gartner recognised our differentiated SD-WAN offering as a Leader in the 2020 WAN Edge Infrastructure Magic Quadrant,” said Ken Xie, Founder, Chairman, and Chief Executive Officer. “The pandemic has accelerated digital transformation and cloud migration efforts creating multiple edges that require protection. Fortinet’s security-driven networking approach protects these edges, whether they are at the branch, cloud, data center, home, network or WAN edge.” 

Financial highlights for the third quarter of 2020 (2) 

  • Revenue: Total revenue was $651.1 million for the third quarter of 2020, an increase of 18.8 per cent compared to $548.1 million for the same quarter of 2019. 
  • Product revenue: Product revenue was $223.8 million for the third quarter of 2020, an increase of 13.5 per cent compared to $197.1 million for the same quarter of 2019. 
  • Service revenue: Service revenue was $427.3 million for the third quarter of 2020, an increase of 21.7 per cent compared to $351.0 million for the same quarter of 2019. 
  • Billings (1): Total billings were $749.8 million for the third quarter of 2020, an increase of 19.7 per cent compared to $626.6 million for the same quarter of 2019. 
  • Deferred revenue: Total deferred revenue was $2.39 billion as of September 30, 2020, an increase of 24.4 per cent compared to $1.92 billion as of September 30, 2019. 
  • GAAP operating income and margin: GAAP operating income was $126.9 million for the third quarter of 2020, representing a GAAP operating margin of 19.5 per cent. GAAP operating income was $100.6 million for the same quarter of 2019, representing a GAAP operating margin of 18.4 per cent. 
  • Non-GAAP operating income and margin (1): Non-GAAP operating income was $178.6 million for the third quarter of 2020, representing a non-GAAP operating margin of 27.4 per cent. Non-GAAP operating income was $145.2 million for the third quarter of 2019, representing a non-GAAP operating margin of 26.5 per cent. 
  • GAAP net income and diluted net income per share: GAAP net income was $123.4 million for the third quarter of 2020, compared to GAAP net income of $80.2 million for the same quarter of 2019. GAAP diluted net income per share was $0.75 for the third quarter of 2020, based on 165.6 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.46 for the same quarter of 2019, based on 174.8 million diluted weighted-average shares outstanding. 
  • Non-GAAP net income and diluted net income per share (1): Non-GAAP net income was $145.4 million for the third quarter of 2020, compared to non-GAAP net income of $117.3 million for the same quarter of 2019. Non-GAAP diluted net income per share was $0.88 for the third quarter of 2020, based on 165.6 million diluted weighted-average shares outstanding, compared to $0.67 for the same quarter of 2019, based on 174.8 million diluted weighted-average shares outstanding. 
  • Cash flow and free cash flow (1): In the third quarter of 2020, cash flow from operations was $220.8 million compared to $221.2 million in the same quarter of 2019. Free cash flow was $185.7 million during the third quarter of 2020, compared to $203.7 million for the same quarter of 2019. 

Guidance 

For the fourth quarter of 2020, Fortinet currently expects: 

  • Revenue in the range of $710 million to $730 million 
  • Billings in the range of $890 million to $920 million 
  • Non-GAAP gross margin in the range of 78.0 per cent to 80.0 per cent 
  • Non-GAAP operating margin in the range of 27.0 per cent to 29.0 per cent 
  • Diluted non-GAAP net income per share in the range of $0.95 to $0.97, assuming a non-GAAP effective tax rate of 21 per cent. This assumes a diluted share count of 167 million to 169 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, amortisation of acquired intangible assets and gain on intellectual property matter. 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.” 

(2) During the third quarter, Fortinet identified and made an immaterial correction to the recognition of revenue related to certain service contracts, increasing previously reported amounts. The financial results presented for 2019 and 2020 reflect the effects of the correction. 

Read the full press release (includes financial tables) 

About Fortinet
Fortinet (NASDAQ: FTNT) secures the largest enterprise, service provider, and government organisations around the world. Fortinet empowers our customers with complete visibility and control across the expanding attack surface and the power to take on ever-increasing performance requirements today and into the future. Only the Fortinet Security Fabric platform can address the most critical security challenges and protect data across the entire digital infrastructure, whether in networked, application, multi-cloud or edge environments. Fortinet ranks #1 in the most security appliances shipped worldwide and more than 465,000 customers trust Fortinet to protect their businesses. Both a technology company and a learning organisation, the Fortinet Network Security Expert (NSE) Training Institute has one of the largest and broadest cybersecurity training programs in the industry. Learn more at https://www.fortinet.com, the Fortinet Blog, or FortiGuard Labs. 

Copyright © 2020 Fortinet, Inc. All rights reserved. The symbols ® and  denote respectively federally registered trademarks and common law trademarks of Fortinet, Inc., its subsidiaries and affiliates. Fortinet’s trademarks include, but are not limited to, the following: Fortinet, FortiGate, FortiGuard, FortiCareFortiManagerFortiAnalyzerFortiOSFortiADCFortiAPFortiAppMonitorFortiASICFortiAuthenticatorFortiBridgeFortiCacheFortiCameraFortiCASB, FortiClient, FortiCloudFortiConnectFortiControllerFortiConverterFortiDBFortiDDoSFortiExplorerFortiExtenderFortiFoneFortiCarrierFortiHypervisorFortiIsolatorFortiMailFortiMonitorFortiNACFortiPlannerFortiPortalFortiPresence , FortiProxyFortiRecorderFortiSandboxFortiSIEMFortiSwitchFortiTesterFortiTokenFortiVoiceFortiWANFortiWebFortiWiFiFortiWLCFortiWLCOS and FortiWLM. 

Other trademarks belong to their respective owners. Fortinet has not independently verified statements or certifications herein attributed to third parties and Fortinet does not independently endorse such statements. Notwithstanding anything to the contrary herein, nothing herein constitutes a warranty, guarantee, contract, binding specification or other binding commitment by Fortinet or any indication of intent related to a binding commitment, and performance and other specification information herein may be unique to certain environments. This news release may contain forward-looking statements that involve uncertainties and assumptions, such as statements regarding technology releases among others. Changes of circumstances, product release delays, or other risks as stated in our filings with the Securities and Exchange Commission, located at www.sec.gov, may cause results to differ materially from those expressed or implied in this press release. If the uncertainties materialise or the assumptions prove incorrect, results may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Fortinet assumes no obligation to update any forward-looking statements, and expressly disclaims any obligation to update these forward-looking statements.  

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