Fortinet announces total revenue growth of 32% for 2022

Fortinet, a global specialist in broad, integrated and automated cybersecurity solutions, has announced financial results for the fourth quarter and full year ended December 31, 2022.

Ken Xie, Founder, Chairman and Chief Executive Officer, says, "Total revenue grew 32% in 2022 and year-over-year to $4.42 billion, and we generated GAAP net income of $857.3 million. This marks the 14th consecutive year that we have been GAAP profitable, including every year since our 2009 IPO. Cash flow from operations was $1.73 billion and free cash flow was a Fortinet record of $1.45 billion for the year.

"Our market share gains are being driven by Fortinet's integrated and single platform approach to cybersecurity combined with FortiASIC technology, which lowers the management costs and the total cost of ownership for organisations. Given our cost-for-performance advantage, the convergence of security and networking, and the consolidation of products and vendors, we expect to continue our solid growth trajectory."

Financial highlights for the fourth quarter of 2022

Product revenue: Product revenue was $540.1 million for the fourth quarter of 2022, an increase of 42.5% compared to $378.9 million for the same quarter of 2021.

Service revenue: Service revenue was $742.9 million for the fourth quarter of 2022, an increase of 27.1% compared to $584.7 million for the same quarter of 2021.

Revenue: Total revenue was $1.28 billion for the fourth quarter of 2022, an increase of 33.1% compared to $963.6 million for the same quarter of 2021.

Billings: Total billings were $1.72 billion for the fourth quarter of 2022, an increase of 31.6% compared to $1.31 billion for the same quarter of 2021.

GAAP operating income and margin: GAAP operating income was $357.8 million for the fourth quarter of 2022, representing a GAAP operating margin of 27.9%. GAAP operating income was $214.9 million for the same quarter of 2021, representing a GAAP operating margin of 22.3%.

Non-GAAP operating income and margin: Non-GAAP operating income was $417.6 million for the fourth quarter of 2022, representing a non-GAAP operating margin of 32.5%. Non-GAAP operating income was $274.7 million for the same quarter of 2021, representing a non-GAAP operating margin of 28.5%.

GAAP net income and diluted net income per share attributable to Fortinet: GAAP net income was $313.8 million for the fourth quarter of 2022, compared to GAAP net income of $199.0 million for the same quarter of 2021. GAAP diluted net income per share was $0.40 for the fourth quarter of 2022, based on 791.8 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.24 for the same quarter of 2021, based on 835.0 million diluted weighted-average shares outstanding.

Non-GAAP net income and diluted net income per share attributable to Fortinet: Non-GAAP net income was $349.7 million for the fourth quarter of 2022, compared to non-GAAP net income of $205.8 million for the same quarter of 2021. Non-GAAP diluted net income per share was $0.44 for the fourth quarter of 2022, based on 791.8 million diluted weighted-average shares outstanding, compared to $0.25 for the same quarter of 2021, based on 835.0 million diluted weighted-average shares outstanding.

Cash flow: Cash flow from operations was $528.1 million for the fourth quarter of 2022, compared to $366.8 million for the same quarter of 2021.

Free cash flow1: Free cash flow was $497.2 million for the fourth quarter of 2022, compared to $215.5 million for the same quarter of 2021.

Financial highlights for the full year 2022

Product revenue: Product revenue was $1.78 billion for 2022, an increase of 41.9% compared to $1.26 billion in 2021.

Service revenue: Service revenue was $2.64 billion for 2022, an increase of 26.3% compared to $2.09 billion in 2021.

Revenue: Total revenue was $4.42 billion for 2022, an increase of 32.2% compared to $3.34 billion in 2021.

Billings: Total billings were $5.59 billion for 2022, an increase of 33.8% compared to $4.18 billion in 2021.

Deferred revenue: Total deferred revenue was $4.64 billion as of December 31, 2022, an increase of 34.4% compared to $3.45 billion as of December 31, 2021.

GAAP operating income and margin: GAAP operating income was $969.6 million for 2022, representing a GAAP operating margin of 21.9%. GAAP operating income was $650.4 million for 2021, representing a GAAP operating margin of 19.5%.

Non-GAAP operating income and margin: Non-GAAP operating income was $1.21 billion for 2022, representing a non-GAAP operating margin of 27.3%. Non-GAAP operating income was $875.5 million for 2021, representing a non-GAAP operating margin of 26.2%.

GAAP net income and diluted net income per share attributable to Fortinet: GAAP net income was $857.3 million for 2022, compared to GAAP net income of $606.8 million for 2021. GAAP diluted net income per share was $1.06 for 2022, based on 805.3 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.73 for 2021, based on 835.3 million diluted weighted-average shares outstanding.

Non-GAAP net income and diluted net income per share attributable to Fortinet: Non-GAAP net income was $961.6 million for 2022, compared to non-GAAP net income of $666.0 million for 2021. Non-GAAP diluted net income per share was $1.19 for 2022, based on 805.3 million diluted weighted-average shares outstanding, compared to $0.80 for 2021, based on 835.3 million diluted weighted-average shares outstanding.

Cash flow: Cash flow from operations was $1.73 billion in 2022 compared to $1.50 billion in 2021.

Free cash flow: Free cash flow was $1.45 billion in 2022, compared to $1.20 billion in 2021.

Share repurchase program: During the year ended December 31, 2022 and 2021, Fortinet repurchased 36.0 million and 12.9 million shares of its common stock at an average price of $55.37 and $57.45 per share, respectively, and for an aggregate purchase price of $1.99 billion and $741.8 million, respectively.

Guidance for the first quarter of 2023

Fortinet currently expects:

• Revenue in the range of $1.180 billion to $1.220 billion
• Billings in the range of $1.415 billion to $1.465 billion
• Non-GAAP gross margin in the range of 75.0% to 76.0%
• Non-GAAP operating margin in the range of 23.0% to 24.0%
• Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $0.27 to $0.29, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 million.

For the fiscal year 2023, Fortinet currently expects:

• Revenue in the range of $5.370 billion to $5.430 billion
• Service revenue in the range of $3.335 billion to $3.365 billion
• Billings in the range of $6.710 billion to $6.790 billion
• Non-GAAP gross margin in the range of 75.0% to 76.0%
• Non-GAAP operating margin in the range of 25.0% to 26.0%
• Diluted non-GAAP net income per share attributable to Fortinet, in the range of $1.39 to $1.41, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 805 million to 815 million.