10-QPeriod: Q1 FY2022

Fortinet, Inc. Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 6, 2022For Securities:FTNT

Summary

Fortinet, Inc. reported strong financial results for the first quarter of 2022, with total revenue reaching $954.8 million, a 34% increase year-over-year. This growth was primarily driven by robust product revenue, which surged by 54% to $371.0 million, reflecting continued demand in the cybersecurity landscape. Service revenue also demonstrated healthy growth, increasing by 24% to $583.8 million. The company generated $396.1 million in cash flow from operating activities, showcasing strong operational efficiency. Despite facing ongoing supply chain challenges, including chip and component shortages, Fortinet managed to increase its deferred revenue by 6% to $3.66 billion, indicating strong future revenue potential. Fortinet also actively engaged in returning capital to shareholders, repurchasing $691.2 million of common stock during the quarter. The company's financial position remains solid, with total cash, cash equivalents, investments, and marketable equity securities amounting to $2.50 billion as of March 31, 2022.

Financial Highlights

55 data points
Beta

Revenue

$954.80M

73.4% Gross Margin

Net Income

$138.40M

14.5% Net Margin

EPS (Diluted)

$0.17

Total Assets

$5.65B

Cash & Equivalents

$923.50M

Free Cash Flow

$273.50M

Financial Statements
Beta
Revenue$954.80M
Cost of Revenue$253.80M
Gross Profit$701.00M
R&D Expenses$124.90M
Operating Expenses$550.00M
Operating Income$151.00M
Interest Expense$4.50M
Net Income$138.40M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)803.40M
Shares Outstanding (Diluted)820.80M

Key Highlights

  • 1Total revenue grew 34% to $954.8 million in Q1 2022.
  • 2Product revenue saw a significant increase of 54% to $371.0 million.
  • 3Service revenue increased by 24% to $583.8 million.
  • 4Operating cash flow was strong at $396.1 million.
  • 5Deferred revenue increased by 6% to $3.66 billion, indicating future revenue potential.
  • 6Fortinet repurchased $691.2 million of its common stock during the quarter.
  • 7Total cash, cash equivalents, investments, and marketable equity securities stood at $2.50 billion as of March 31, 2022.

Frequently Asked Questions

Fortinet's revenue growth in Q1 2022 was primarily driven by strong demand for its cybersecurity solutions, particularly its product revenue, which saw a 54% year-over-year increase. This was supported by continued demand for its Core Platform products and growth across various Platform Extension products, including OT solutions and secure access products. Service revenue also contributed positively with a 24% increase.

Fortinet is actively managing supply chain challenges, including chip and component shortages, by increasing commitments with suppliers to secure capacity, regularly meeting with contract manufacturers and component suppliers, and transitioning primarily to air shipping to avoid port congestion. Despite these efforts, the company notes that it does not have enough inventory to promptly meet all demand for all products.

Fortinet's deferred revenue, which increased by 6% to $3.66 billion as of March 31, 2022, represents amounts invoiced but not yet recognized as revenue. The majority of this balance is from service contracts (FortiGuard and FortiCare), which are recognized over the contractual service period. A strong deferred revenue balance is a positive indicator of future revenue and recurring cash flow.

Fortinet is returning capital to shareholders through its Share Repurchase Program. In the first quarter of 2022, the company repurchased approximately 2.3 million shares of common stock for a total of $691.2 million. As of March 31, 2022, $829.6 million remained available for future repurchases under the program.