Fortinet reports first quarter 2023 financial results

Fortinet, a provider of comprehensive, integrated and automated cybersecurity solutions, has announced financial results for the first quarter ended March 31, 2023. 

The product revenue for the company was US$500.7 million for the first quarter of 2023, an increase of 35% compared to US$371.0 million for the same quarter of 2022. Service revenue was US$761.6 million for the first quarter of 2023, an increase of 30.5% compared to US$583.8 million for the same quarter of 2022. Hence, the total revenue was US$1.26 billion for the first quarter of 2023, an increase of 32.2% compared to US$954.8 million for the same quarter of 2022. 

Meanwhile, the total billings were US$1.50 billion for the first quarter of 2023, an increase of 29.6% compared to US$1.16 billion for the same quarter of 2022. 

The total deferred revenue was US$4.88 billion as of March 31, 2023, an increase of 33.4% compared to US$3.66 billion as of March 31, 2022. 

The GAAP operating income was US$273.5 million for the first quarter of 2023, representing a GAAP operating margin of 21.7%. GAAP operating income was US$151.0 million for the same quarter of 2022, representing a GAAP operating margin of 15.8%.
 
The non-GAAP operating income was US$334 million for the first quarter of 2023, representing a non-GAAP operating margin of 26.5%. Non-GAAP operating income was US$210.2 million for the same quarter of 2022, representing a non-GAAP operating margin of 22%. 

The GAAP net income was US$247.7 million for the first quarter of 2023, compared to GAAP net income of US$138.4 million for the same quarter of 2022. GAAP diluted net income per share was US$0.31 for the first quarter of 2023, based on 793.4 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of US$0.17 for the same quarter of 2022, based on 820.8 million diluted weighted-average shares outstanding. 

The non-GAAP net income was US$269.7 million for the first quarter of 2023, compared to non-GAAP net income of US$155.1 million for the same quarter of 2022. Non-GAAP diluted net income per share was US$0.34 for the first quarter of 2023, based on 793.4 million diluted weighted-average shares outstanding, compared to US$0.19 for the same quarter of 2022, based on 820.8 million diluted weighted-average shares outstanding. 

Fortinet's cash flow from operations was US$677.5 million for the first quarter of 2023, compared to US$396.1 million for the same quarter of 2022. Meanwhile, free cash flow was US$647.2 million for the first quarter of 2023, compared to US$273.5 million for the same quarter of 2022.

In April 2023, Fortinet's board of directors authorised a US$1.0 billion increase in the authorised stock repurchase under our share repurchase program. As of May 4, 2023, approximately US$1.53 billion remained available for future share repurchases.

For the second quarter of 2023, Fortinet expects revenue from US$1.280 billion to US$1.320 billion. 

"We expect billings in the range of US$1.560 billion to US$1.600 billion. Non-GAAP gross margin in the range of 75.5 to 76.5%. Non-GAAP operating margin in the range of 24.5 to 25.5%. Diluted non-GAAP net income per share attributable to Fortinet, in the range of US$0.33 to US$0.35, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 790 million to 800 million," says the company. 

For the fiscal year 2023, Fortinet expects revenue from US$5.425 billion to US$5.485 billion. "We expect service revenue from US$3.370 billion to US$3.400 billion. Billings in the range of US$6.750 billion to US$6.810 billion. Non-GAAP gross margin in the range of 75 to 76%. Non-GAAP operating margin in the range of 25 to 26%. Diluted non-GAAP net income per share attributable to Fortinet, in the range of US$1.44 to US$1.48, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 795 million to 805 million," adds the company in its report.

"The above statements are forward-looking and actual results may differ materially. Our guidance with respect to non-GAAP financial measures excludes stock-based compensation, amortisation of acquired intangible assets and gain on intellectual property matters. 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," adds Fortinet.

"Revenue growth in the first quarter was 32 % due to strong growth in both product and service revenue. With 35 % product revenue growth, we continue to gain market share while being a leading product revenue company in the cybersecurity industry. Service revenue grew over 30 % for the first time in a quarter in six years. We believe we have a significant opportunity to continue to grow service revenue by upselling value-added security services to our large installed base of customers," says Ken Xie, founder, chairman, and chief executive officer of Fortinet.

"Companies of all sizes are increasingly recognising that Fortinet's integrated FortiOS and custom ASIC technology can deliver a lower total cost of ownership while improving the efficiency and efficacy of their security."