Fortinet, Inc. (NASDAQ:FTNT) Barclays 22nd Annual Global Technology Conference December 11, 2024 4:55 PM ET Company Participants Michael Xie - Founder, President and Chief Technology Officer Keith Jensen - Chief Financial Officer Conference Call Participants Saket Kalia - Barclays Saket Kalia All right. Well, hey, good afternoon, everyone. Welcome to day one of the Barclays Tech Conference. My name is Saket Kalia. I cover software here. I'm honored to have with us the team here from Fortinet. So we've got M ...

Company and Industry Overview * **Company**: Fortinet, Inc. (NASDAQ: FTNT) * **Industry**: Network Security, Unified SASE, SecOps Key Points and Arguments 1. **Secure Networking Growth**: Fortinet expects a normalized growth rate of approximately 7% in the network security market, driven by factors such as: * **OT Market**: Robust growth in the Operational Technology (OT) market, where Fortinet has a leadership position. * **Regulatory Influence**: Increased regulatory influence, including cyber insurance companies and governmental regulators, driving new firewall use cases. * **Convergence of Switches and Access Points**: Strong customer demand for automation and consolidation functions provided by switches and access points. * **Firewall Upgrade Cycle**: A significant firewall upgrade cycle in 2025 due to end of support in 2026 for products announced in 2021, potentially contributing $400 million to $450 million in incremental product billings. 2. **Unified SASE**: Fortinet's SASE offering includes SSE (Secure Service Edge), SD-WAN, and other cloud functionalities. SD-WAN currently represents over half of the unified SASE mix, with SSE expected to be the fastest-growing component. 3. **SecOps**: Fortinet leverages its data lake to aggregate security data from various sources and offer features like SIEM and SOAR, providing a comprehensive view of security across different geolocations and devices. 4. **Financial Targets**: Fortinet expects a greater than 12% CAGR on billings and revenue over the next three to five years, driven by growth in all three business segments. 5. **Product Gross Margins**: Fortinet's product gross margins have improved due to factors such as reduced supply chain costs and inventory optimization. Normalized product gross margins are expected to be in the 65% to 67% range. 6. **Operating Margins**: Fortinet has raised its long-term operating margin target to 30% plus, driven by factors such as investment in go-to-market initiatives, channel development, and leveraging cost advantages. 7. **Security Spending Environment**: Both Michael Xie and Keith Jensen agree that security remains a top priority for enterprise customers, driven by the increasing threat environment and the need for robust cybersecurity solutions. Additional Important Points * Fortinet has built a significant number of Points of Presence (PoPs) and data centers to support its SASE offerings, providing operational and economic advantages. * Fortinet's sales team and channel partners are well-positioned to capitalize on the growing demand for cybersecurity solutions. * The threat environment remains elevated, and CISOs and CIOs are actively seeking solutions to protect their organizations.

Core Viewpoint - Fortinet's strong performance in the cybersecurity sector, with a year-to-date surge of 65.1%, significantly outpacing the Zacks Computer and Technology sector's return of 32.4% [1] Group 1: Market Position and Growth - The cybersecurity market is expanding due to global digital transformation, positioning Fortinet favorably to capture this growth with its integrated security and networking approach [2] - Fortinet's projected fourth-quarter revenue growth is 12%, with full-year service revenue growth expected at 19%, indicating a strong financial outlook [10] - The Zacks Consensus Estimate for 2024 revenues is $5.89 billion, suggesting an 11.02% year-over-year growth [11] Group 2: Innovation and Product Development - The launch of FortiAppSec Cloud represents a significant advancement in Fortinet's product evolution, integrating web application security and performance management tools [5] - Fortinet's 2024 Cloud Security Report indicates that 95% of cybersecurity professionals support a single-dashboard approach, aligning with FortiAppSec Cloud's strategy [6] - The integration of generative AI capabilities across Fortinet's product portfolio enhances threat detection and response, providing a competitive advantage [9] Group 3: Strategic Expansion and Partnerships - Fortinet's new 215,000-square-foot Innovation Hub in Atlanta reflects its commitment to physical expansion and talent development [7] - The partnership with NHL Vancouver Canucks as the Preferred Partner for the 2024-2025 season showcases Fortinet's ability to secure high-profile enterprise customers [8] Group 4: Investment Appeal and Future Outlook - Fortinet's Security Fabric platform is gaining enterprise customer adoption, driving recurring revenue growth and addressing management complexity [17] - The company's investment in R&D and commitment to infrastructure in Canada, including over $200 million and 2,600 employees, supports long-term growth [18] - Fortinet aims to train one million people globally by 2026, addressing the cybersecurity skills gap and building a loyal customer base [19] - The convergence of networking and security, along with increasing cyber threats, creates a favorable market environment for Fortinet's continued success [21]

Core Viewpoint - The Zacks Internet Software industry is experiencing growth driven by digital transformation, cloud adoption, and increased demand for SaaS solutions, despite facing challenges from geopolitical risks and inflation [2][3][12]. Industry Overview - The Zacks Internet Software industry includes companies that provide application performance monitoring, infrastructure and application software, DevOps deployment, and security software [4]. - Key revenue sources for industry participants include subscription models and advertising, targeting various sectors such as banking, education, and government [5]. Trends Influencing the Industry - **Adoption of SaaS Growing**: The industry benefits from the rapid adoption of SaaS, which offers flexible and cost-effective application delivery, reducing deployment time compared to legacy systems [6][8]. - **Pay-As-You-Go Model Gaining Traction**: This model allows users to scale offerings based on their needs, ensuring recurring revenues and reducing the need for specialized training [9]. - **Ongoing Transition to Cloud Creating Opportunities**: The shift to cloud environments increases demand for web-based performance management and cybersecurity solutions [10][11]. Industry Performance - The Zacks Internet Software industry ranks 37, placing it in the top 15% of over 250 Zacks industries, indicating strong near-term prospects [12][13]. - The industry's earnings estimates for 2024 have increased by 8.3% since September 30, 2024, reflecting positive analyst sentiment [14]. Financial Performance - The industry has outperformed the S&P 500 and the broader Computer and Technology sector, returning 51.8% over the past year compared to the S&P 500's 32.2% [16]. - The current trailing 12-month price-to-sales (P/S) ratio for the industry is 3.94X, lower than the S&P 500's 5.81X and the sector's 7.17X [17]. Company Highlights - **Fortinet (FTNT)**: This company is experiencing strong demand from large enterprises, with shares gaining 80.9% in the past year and a consensus estimate for 2024 earnings at $2.23 per share, up 9.3% [19]. - **Twilio (TWLO)**: Benefiting from digital transformations, Twilio's shares have appreciated 54.8% in the past year, with a consensus estimate for 2024 earnings at $3.64 per share [21]. - **Zoom Communications (ZM)**: Gaining traction from the hybrid working trend, Zoom's shares returned 17.9% in the past year, with a fiscal 2025 earnings estimate of $5.42 per share, up 1.5% [23].

SUNNYVALE, Calif., Dec. 04, 2024 (GLOBE NEWSWIRE) -- News Summary   Fortinet® (NASDAQ: FTNT), the global cybersecurity leader driving the convergence of networking and security, today announced its Security Service Edge (SSE) offering, FortiSASE, received a “AAA” rating from CyberRatings.org, the industry’s only independent third-party cybersecurity testing nonprofit. “SSE is growing in importance as more organizations embrace Unified SASE to protect all devices, edges, and users within their hybrid networ ...

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with Fortinet (FTNT) being highlighted as a strong candidate due to its favorable growth metrics and Zacks Rank [2][12]. Earnings Growth - Fortinet has a historical EPS growth rate of 42%, with projected EPS growth of 33.6% for the current year, surpassing the industry average of 30.1% [5][4]. Cash Flow Growth - The company exhibits a year-over-year cash flow growth of 34.6%, significantly higher than the industry average of -14.4% [6]. Over the past 3-5 years, Fortinet's annualized cash flow growth rate has been 34.5%, compared to the industry average of 15.2% [7]. Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Fortinet, with the Zacks Consensus Estimate for the current year increasing by 7.8% over the past month [9][10]. This trend supports the stock's Zacks Rank of 1 (Strong Buy) [10].

Group 1 - Fortinet (FTNT) is outperforming its peers in the Computer and Technology sector, with a year-to-date return of 60.6% compared to the sector average of 28.3% [4] - The Zacks Rank for Fortinet is 1 (Strong Buy), indicating strong analyst sentiment and an improving earnings outlook [3][4] - The Zacks Consensus Estimate for Fortinet's full-year earnings has increased by 9.4% over the past quarter, reflecting positive analyst sentiment [4] Group 2 - Fortinet is part of the Internet - Software industry, which has an average year-to-date return of 31.7%, further highlighting Fortinet's strong performance [6] - Another stock in the same sector, Innovid Corp. (CTV), has also shown significant performance with a year-to-date increase of 100.7% and a Zacks Rank of 1 [5][6] - Both Fortinet and Innovid Corp. are expected to continue their solid performance, making them attractive options for investors in the Computer and Technology sector [7]

Fortinet, Inc. (NASDAQ:FTNT) Needham Security, Networking, & Communications Conference November 19, 2024 9:30 AM ET Company Participants Keith Jensen - CFO John Whittle - COO Christiane Ohlgart - Chief Accounting Officer Conference Call Participants Matt Dezort - Needham Matt Dezort Good morning. And welcome, everyone, to Needham Tech Week. My name is Matt Dezort, senior security analyst here at Needham. It's my pleasure to welcome next to the virtual stage the management team of Fortinet. We've been joined ...

Fortinet, Inc. (NASDAQ:FTNT) Needham Security, Networking, & Communications Conference November 19, 2024 9:30 AM ET Company Participants Keith Jensen - CFO John Whittle - COO Christiane Ohlgart - Chief Accounting Officer Conference Call Participants Matt Dezort - Needham Matt Dezort Good morning. And welcome, everyone, to Needham Tech Week. My name is Matt Dezort, senior security analyst here at Needham. It's my pleasure to welcome next to the virtual stage the management team of Fortinet. We've been joined ...

The cybersecurity industry is forecast to grow meaningfully over the next several decades.*Stock prices used were the afternoon prices of Nov. 15, 2024. The video was published on Nov. 17, 2024. ...