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Fortinet Reports Third Quarter 2019 Financial Results

Thursday, November 14, 2019/ Editor -  

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Third Quarter 2019 Highlights

• Total revenue of $547.5 million, up 21% year over year

• Product revenue of $197.1 million, up 20% year over year

• Billings of $626.6 million, up 19% year over year1

• Deferred revenue of $1.95 billion, up 26% year over year

• GAAP operating margin of 18%, up 450 basis points year over year

• Non-GAAP operating margin of 26%, up 250 basis points year over year1

• GAAP diluted net income per share of $0.46

• Non-GAAP diluted net income per share of $0.671

• Cash flow from operations of $221.2 million

• Free cash flow of $203.7 million, up $45.2 million year over year1


Dubai, UAE. - November 14, 2019 - Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, today announced financial results for the third quarter ended September 30, 2019.

“Strong revenue growth for Fortinet Security Fabric, cloud and SD-WAN offerings contributed to our 21% year-over-year total revenue growth in the third quarter, which we believe is stronger than the average revenue growth rate in our industry. The Americas and EMEA regions led the way with revenue growth of 24% and 21%, respectively,” said Ken Xie, Founder, Chairman and Chief Executive Officer. “As we approach the tenth anniversary of Fortinet’s initial public offering on November 18, we are focused on driving better than industry average growth for at least the next decade.”

Financial Highlights for the Third Quarter of 2019

• Revenue: Total revenue was $547.5 million for the third quarter of 2019, an increase of 21% compared to $453.9 million for the same quarter of 2018.

• Product revenue was $197.1 million for the third quarter of 2019, an increase of 20% compared to $164.5 million for the same quarter of 2018.

• Service revenue was $350.4 million for the third quarter of 2019, an increase of 21% compared to $289.4 million for the same quarter of 2018.

• Billings1: Total billings were $626.6 million for the third quarter of 2019, an increase of 19% compared to $527.5 million for the same quarter of 2018.

• Deferred Revenue: Total deferred revenue was $1.95 billion as of September 30, 2019, an increase of 26% compared to $1.54 billion as of September 30, 2018.

• GAAP Operating Income and Margin: GAAP operating income was $100.0 million for the third quarter of 2019, representing a GAAP operating margin of 18%. GAAP operating income was $62.8 million for the same quarter of 2018, representing a GAAP operating margin of 14%.

• Non-GAAP Operating Income and Margin1: Non-GAAP operating income was $144.6 million for the third quarter of 2019, representing a non-GAAP operating margin of 26%. Non-GAAP operating income was $108.5 million for the third quarter of 2018, representing a non-GAAP operating margin of 24%.

• GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $79.8 million for the third quarter of 2019, compared to GAAP net income of $58.7 million for the same quarter of 2018. GAAP diluted net income per share was $0.46 for the third quarter of 2019, based on 174.8 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.33 for the same quarter of 2018, based on 175.7 million diluted weighted-average shares outstanding.

• Non-GAAP Net Income and Diluted Net Income Per Share1: Non-GAAP net income was $116.9 million for the third quarter of 2019, compared to non-GAAP net income of $86.7 million for the same quarter of 2018. Non-GAAP diluted net income per share was $0.67 for the third quarter of 2019, based on 174.8 million diluted weighted-average shares outstanding, compared to $0.49 for the same quarter of 2018, based on 175.7 million diluted weighted-average shares outstanding.

• Cash Flow and Free Cash Flow1: In the third quarter of 2019, cash flow from operations was $221.2 million compared to $176.7 million in the same quarter of 2018. Free cash flow was $203.7 million during the third quarter of 2019, compared to $158.5 million for the same quarter of 2018.

Guidance

For the fourth quarter of 2019, Fortinet currently expects:

• Revenue in the range of $595 million to $610 million

• Billings in the range of $750 million to $765 million

• Non-GAAP gross margin in the range of 75.5% to 76.5%

• Non-GAAP operating margin in the range of 25.5% to 26.0%

• Diluted non-GAAP net income per share in the range of $0.69 to $0.71, assuming a non-GAAP effective tax rate of 24%. This assumes a diluted share count of 176 million to 178 million.

For the fiscal year 2019, Fortinet currently expects:

• Revenue in the range of $2.135 billion to $2.150 billion

• Service revenue in the range of $1.355 billion to $1.365 billion

• Billings in the range of $2.550 billion to $2.565 billion

• Non-GAAP gross margin in the range of 76.5% to 77.0%

• Non-GAAP operating margin in the range of 24.0% to 24.5%

• Diluted non-GAAP net income per share in the range of $2.39 to $2.41, assuming a non-GAAP effective tax rate of 24%. This assumes a diluted share count of 175 million to 177 million.

Our guidance with respect to non-GAAP financial measures excludes stock-based compensation and amortization of acquired intangible assets. 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.


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