Author: admin

London, May 5, 2022

“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted. The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide. We have been engaging with governments, our customers and suppliers to work through the challenging implications and provide support and solutions where we can.

Generating value through strong earnings and cash flow, coupled with maintaining a healthy balance sheet and continuing the disciplined delivery of our strategy, are crucial for Shell to play a leading role in the energy transition. This allows us to support our customers as they shift to cleaner energy. It’s also the best way for us to contribute to the security of energy supplies. Today’s results, the progress we are making with our $8.5 billion share buyback programme and the reduction of our net debt to $48.5 billion all show we remain on track, and give us the confidence to plan future shareholder distributions and disciplined investments that will accelerate our strategy.”

Shell plc Chief Executive Officer, Ben van Beurden

STRONG RESULTS IN VOLATILE TIMES

• Strong Q1 2022 Adjusted Earnings of $9.1 billion in a volatile geopolitical and macroeconomic environment. Adjusted EBITDA of $19.0 billion in Q1 2022 versus $16.3 billion in Q4 2021.
• Dividend increased by ~4% to $0.25 per share for Q1 2022. Of the $8.5 billion share buyback programme announced for the first half of 2022, $4 billion has been completed to date. The remaining $4.5 billion share buybacks are expected to be completed before the Q2 2022 results announcement. With the current macro outlook and subject to Board approval, shareholder distributions for the second half of 2022 are expected to be in excess of 30% of CFFO.
• Following decisive action on Russia, taken $3.9 billion of post-tax charges in Q1 2022 as part of Identified items.
• Share simplification completed and new reporting segments launched – additional Renewables & Energy Solutions and Marketing disclosures.

$ million		Adj. Earnings1	Adj. EBITDA (CCS)	CFFO	Cash capex
Integrated Gas		4,093	6,315	6,443	863
Upstream		3,450	8,977	5,964	1,707
Marketing		737	1,323	(530)	473
Mobility		277	664		319
Lubricants		338	470		39
Sectors & Decarbonisation		121	188		115
Chemicals & Products		1,168	2,006	3,673	998
Chemicals		31	176		714
Products		1,137	1,830		284
Renewables & Energy Solutions		344	521	(459)	985
Corporate		(548)	(114)	(277)	37
Less: Non-controlling interest		114
Shell	Q1 2022	9,130	19,028	14,815	5,064
	Q4 2021	6,391	16,349	8,170	6,500

¹ Income/( loss) attributable to shareholders for Q1 2022 is $7.1 billion. Reconciliation of non-GAAP measures can be found in the unaudited results, available on www.shell.com/investors.

• Strong CFFO reflecting net favourable derivatives movements, mainly due to settlement of derivative contracts in Q1 2022 for which variation margins cash outflows have taken place in 2021. Tax paid & other includes a tax paid outflow of $2.2 billion, offset by current cost of supply adjustment and other movements. Working capital mainly impacted by inventory price effect of $6.4 billion and Initial Margin outflows of $1.7 billion.
• Net debt reduced by ~8%, from $52.6 billion in Q4 2021 to $48.5 billion in Q1 2022.

$ billion	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022
Divestment proceeds	3.4	1.3	1.3	9.1	0.7
Free cash flow	7.7	9.7	12.2	10.7	10.5
Net debt	71.3	65.7	57.5	52.6	48.5

Q1 2022 FINANCIAL PERFORMANCE DRIVERS

INTEGRATED GAS

Key data	Q4 2021	Q1 2022	Q2 2022 outlook
Realised liquids price ($/bbl)	77.20	88.76	—
Realised gas price ($/mscf)	9.07	10.31	—
Production (kboe/d)	978	896	910 – 960
LNG liquefaction volumes (MT)	7.94	8.00	7.4 – 8.0
LNG sales volumes (MT)	16.72	18.29	—

• Adjusted Earnings benefited from higher realised prices offset by lower production due to maintenance activities, including the planned turnaround of one of the trains at Pearl GTL and maintenance at Prelude FLNG.
• Trading and optimisation results for Integrated Gas were similar to Q4 2021, continuing to benefit from favourable trading conditions.
• The Q2 2022 outlook reflects the derecognition of Sakhalin-related volumes (a reduction of 0.8 MT in LNG liquefaction volumes compared with Q1 2022).

UPSTREAM

Key data	Q4 2021	Q1 2022	Q2 2022 outlook
Realised liquids price ($/bbl)	73.54	88.63	—
Realised gas price ($/mscf)	9.29	8.79	—
Liquids production (kboe/d)	1,456	1,403	—
Gas production (mscf/d)	3,799	3,606	—
Total production (kboe/d)	2,110	2,025	1,750 – 1,950

• Production 4% below Q4 2021, mainly driven by Permian divestment and lower demand due to a milder winter, partly offset by comparative help from Hurricane Ida recovery and lower maintenance.
• Adjusted Earnings benefited from higher prices, partly offset by impacts from the Permian divestment.
• The Q2 2022 production outlook reflects lower seasonal gas demand and higher scheduled maintenance, mainly in the US Gulf of Mexico.

MARKETING

Key data	Q4 2021	Q1 2022	Q2 2022 outlook
Marketing sales volumes (kb/d)	2,522	2,372	2,300 – 2,800
Mobility (kb/d)	1,798	1,591	—
Lubricants (kb/d)	81	92	—
Sectors & Decarbonisation (kb/d)	644	690	—

• Marketing margins are in line with Q4 2021, with the effect of lower volumes in Mobility being offset by higher volumes in Lubricants.
• Marketing Adjusted Earnings better than Q4 2021 due to lower Opex driven by seasonal trends.

CHEMICALS & PRODUCTS

Key data	Q4 2021	Q1 2022	Q2 2022 outlook
Refining & Trading sales volumes (kb/d)	1,929	1,598	—
Chemicals sales volumes (kT)	3,475	3,330	3,100 – 3,500
Refinery utilisation (%)	68	71	65 – 73
Chemicals manufacturing plant utilisation (%)	75	78	69 – 77
Global indicative refining margin ($/bbl)	7	10	—
Global indicative chemical margin ($/t)	147	98	—

• Higher realised refining margins due to market volatility and improved utilisation. Trading and optimisation significantly higher than Q4 2021.
• Chemicals margins are in line with the Q4 2021 break-even, reflecting higher utilisation offsetting lower unit margins.
• The utilisation for both refineries and chemicals manufacturing plants in Q2 2022 is expected to be impacted by scheduled turnarounds and maintenance.

RENEWABLES & ENERGY SOUTIONS

Key data	Q4 2021	Q1 2022
Adj. Earnings ($ billion)	0.0	0.3
Adj. EBITDA ($ billion)	0.1	0.5
External power sales (TWh)	59	57
Sales of pipeline gas to end-use customers (TWh)	249	257
Renewable power generation capacity	4.6	4.6
in operation (GW)	1.2	1.0
under construction and/or committed for sale (GW)	3.4	3.6

• Adjusted Earnings and Adjusted EBITDA benefited from higher trading and optimisation margins for gas and power, due to exceptional market environment, particularly in Europe, as well as seasonality.
• Signed an agreement in April 2022, to acquire Sprng Energy group, one of India’s leading renewable power platforms.
• Won bids for 6.5 GW of offshore wind power generation, 5 GW in the UK with ScottishPower and 1.5 GW in the USA through the Atlantic Shores joint venture with a 50% Shell share in each.
• Completed the Powershop Australia acquisition and announced the acquisition of 49% of WestWind, a wind farm developer with a 3 GW project pipeline.
• Started production of green hydrogen at a 20 MW electrolyser in China, supplying fuel cell vehicles at the Olympic Games.  The start-up increases Shell’s decarbonised hydrogen capacity in operation to 30 MW or 10% of global electrolyser capacity today.

The Renewables and Energy Solutions segment includes Shell’s Integrated Power activities, comprising electricity generation, marketing, trading and optimisation of power and pipeline gas, and digitally enabled customer solutions. The segment also includes production and marketing of hydrogen, development of commercial carbon capture & storage hubs, trading of carbon credits and investment in nature-based projects that avoid or reduce carbon.

CORPORATE

Key data	Q4 2021	Q1 2022	Q2 2022 outlook
Adjusted Earnings ($ million)	(889)	(548)	(650) – (550)

• The Adjusted Earnings outlook is unchanged with a net expense of $2,200 – 2,600 million for the full year 2022. This excludes the impact of currency exchange rate effects.

UPCOMING INVESTOR EVENTS

10 May 2022	Annual ESG Update
24 May 2022	Annual General Meeting
28 July 2022	Second quarter 2022 results and dividends
27 October 2022	Third quarter 2022 results and dividends

USEFUL LINKS

Results materials Q1 2022

Quarterly Databook Q1 2022

Dividend announcement Q1 2022

Webcast registration Q1 2022

New reporting segments video

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

This announcement includes certain measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP) such as IFRS, including Adjusted Earnings, Adjusted EBITDA, CFFO excluding working capital movements, Cash capital expenditure, free cash flow, Divestment proceeds and Net debt. This information, along with comparable GAAP measures, is useful to investors because it provides a basis for measuring Shell plc’s operating performance and ability to retire debt and invest in new business opportunities. Shell plc’s management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating the business performance.

This announcement contains a forward-looking Non-GAAP measure for cash capital expenditure. We are unable to provide a reconciliation of this forward-looking Non-GAAP measure to the most comparable GAAP financial measure because certain information needed to reconcile the Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some of which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are estimated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.

 CAUTIONARY STATEMENT

All amounts shown throughout this announcement are unaudited. The numbers presented throughout this announcement may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.

The companies in which Shell plc directly and indirectly owns investments are separate legal entities. In this announcement “Shell”, “Shell Group” and “Group” are sometimes used for convenience where references are made to Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. “Subsidiaries”, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to entities over which Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. “Joint ventures” and “joint operations” are collectively referred to as “joint arrangements”. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.

This announcement contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “milestones”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “schedule”, “seek”, “should”, “target”, “will” and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, judicial, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions;                     (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Shell plc’s Form 20-F for the year ended December 31, 2021 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, May 5, 2022. Neither Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

Shell’s Net Carbon Footprint

Also, in this announcement we may refer to Shell’s “Net Carbon Footprint” or “Net Carbon Intensity”, which include Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the terms Shell’s “Net Carbon Footprint” or “Net Carbon Intensity” is for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.

Shell’s Net-Zero Emissions Target

Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and Net Carbon Footprint (NCF) targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCF target, as these targets are currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.

The content of websites referred to in this announcement does not form part of this announcement.

We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.

The financial information presented in this announcement does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 (“the Act”). Statutory accounts for the year ended December 31, 2021 were published in Shell’s Annual Report and Accounts, a copy of which was delivered to the Registrar of Companies for England and Wales, and in Shell’s Form 20-F. The auditor’s report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.

The information in this announcement does not constitute the unaudited condensed consolidated financial statements which are contained in Shell’s first quarter 2022 unaudited results available on www.shell.com/investors.

CONTACTS

• Media: International +44 207 934 5550; USA +1 832 337 4355

Next-generation appointment booking application leverages real-time supply chain visibility to facilitate collaboration between shippers and carriers

CHENNAI, India, May 05, 2022 (GLOBE NEWSWIRE) — FourKites^®, the #1 real-time supply chain visibility platform, today announced that it has launched Appointment Manager℠, its universal appointment booking solution, in India, Australia and New Zealand. The cloud-based solution helps warehouses, distribution centres and manufacturing facilities collaborate efficiently on pickup and receiving time slots, saving significant time and improving daily operations and partner relationships. In addition, the highly configurable solution allows shippers and carriers to eliminate excess dwell time on site, eliminating detention fees and significantly reducing carbon emissions.

Facility schedule management is a notoriously time-consuming task for shippers and carriers alike. With carrier dwell averaging over 3 hours per day, according to FourKites data, Appointment Manager improves facility productivity and reduces carrier wait time by more than 50%. Highly configurable for personalised requirements, Appointment Manager enables shippers and carriers to collaborate in real time, and allows carriers to self-book their preferred time based on real-time transit conditions, thereby eliminating hours of daily administrative work and error-prone manual processes.

Specifically, Appointment Manager offers the following benefits:

• Labour optimisation: Leveraging FourKites’ Dynamic ETA^® to provide the most accurate times of arrival, teams can better allocate labour and resources based on real-time data and shifts in expected arrival time.
• Ease and compliance with carrier scheduling: Appointment Manager creates a single appointment layer accessible to both shippers and carriers to streamline communication and facilitate collaboration. Time slots are created by the facility to ensure adherence to preferred scheduling, business rules and specific commodity requirements.
• True end-to-end visibility: Powered by real-time supply chain visibility data from FourKites, Appointment Manager extends visibility even further into the facility via one streamlined interface. With FourKites, stakeholders receive a comprehensive, end-to-end view of shipments from point of origin to predictive insights that help orchestrate activities in the facility.
• Diminished carrier detention costs: With optimised scheduling, carrier dwell on site can be virtually eliminated, helping shippers avoid detention fees and fines for truck queues on public roads.
• Reduced carbon emissions: Scheduling and operational efficiencies driven by Appointment Manager reduce time carriers spend in the yard by hours and eliminate a significant amount of on-site carbon dioxide emissions.

“We are excited to extend the easiest, most flexible appointment booking application to the APAC market,” said Mathew Elenjickal, FourKites Founder and CEO. “This groundbreaking solution helps shippers across the globe optimise end-to-end visibility, efficiency and sustainability, as well as adapt quickly as their business needs change. We’re thrilled to be launching Appointment Manager in Asia Pacific, specifically tailored to the needs of local facilities.”

About FourKites
FourKites^® is the #1 supply chain visibility platform in the world, extending visibility beyond transportation into yards, warehouses, stores and beyond. Tracking more than 2.5 million shipments daily across road, rail, ocean, air, parcel and courier, and reaching more than 200 countries, FourKites combines real-time data and powerful machine learning to help companies digitize their end-to-end supply chains. More than 1,000 of the world’s most recognized brands — including 9 of the top-10 CPG and 18 of the top-20 food and beverage companies — trust FourKites to transform their business and create more agile, efficient and sustainable supply chains. To learn more, visit https://www.fourkites.com/.

Media Contacts
Marianna Vyridi
Big Valley Marketing for FourKites
mvyridi@bigvalley.co
(650) 468-3263

A photo accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/575786c4-0298-4ce7-84ea-8bf78d04557d

Partnership aims to accelerate customers’ digital & network transformation journeys leveraging the unique Pluribus Unified Cloud Fabric solution

SINGAPORE and SANTA CLARA, CA, USA, May 04, 2022 (GLOBE NEWSWIRE) — Tech Data, a TD SYNNEX Company, and Pluribus Networks have today announced a new partnership which will leverage Pluribus Networks’ unique vision of Unified Cloud Networking and their Unified Cloud Fabric™ solution to accelerate the digital and network transformation journey for customers across the Asia Pacific & Japan region.

“With Asia Pacific region’s data center market slated to grow at a CAGR of 6.3 percent during 2022 – 2027 with investments of USD94 billion by 2027¹, this partnership with Pluribus Networks is timely and perfectly complements our rich data center infrastructure solutions portfolio,” shared Anand Chakravarthy, Head of Business Development for Networking, Tech Data Asia Pacific & Japan. “We are excited to introduce Pluribus Networks’ Unified Cloud Fabric solution and Netvisor ONE networking operating system, which we predict will be game-changers for our data center infrastructure customers and partners.”

“We are delighted to welcome Tech Data to the Pluribus Partners First Program as a distributor and to tap into Tech Data’s vast reach across the Asia Pacific & Japan region’s Channel Partner Community, while also complementing their existing solutions portfolio,” said Nitin Acharekar, Head of APAC Sales, Pluribus Networks. “Both companies are aligned in our vision of incubating and growing disruptive technologies, as well as simplifying the go-to-market for all channel partners in the region.”

The benefits of this new partnership include:

• Faster time-to-market & enriched datacenter infrastructure offerings for all channel partners
• Easy access to Pluribus Networks’ uniquely differentiated network solutions
• Value-added services such as pre and post-sales support to partners and customers

The Pluribus Unified Cloud Fabric solution is a next generation data center fabric that unifies and automates networking and distributed security across switches and servers, overlay and underlay networks and distributed cloud data centers. Based on the principles of open networking, the SDN automated fabric reduces network operations tasks by orders of magnitude, strengthens data center security with microsegmentation and enables pervasive network visibility, all at the lowest total cost of ownership.

To learn more about the Unified Cloud Fabric please visit https://pluribusnetworks.com/products/unified-cloud-fabric/

To learn more about Tech Data’s Modern Data Center offerings, please visit:

https://asia.techdata.com/solutions/data-center-solutions/

1Ariston Advisory & Intelligence, APAC Data Center Market – Industry Outlook & Forecast 2022-  2027, January 2022

About Tech Data

Tech Data, a TD SYNNEX (NYSE: SNX) company, is a leading global distributor and solutions aggregator for the IT ecosystem. We’re an innovative partner helping more than 150,000 customers in 100+ countries to maximize the value of technology investments, demonstrate business outcomes and unlock growth opportunities. Headquartered in Clearwater, Florida, and Fremont, California, TD SYNNEX’ 22,000 co-workers are dedicated to uniting compelling IT products, services and solutions from 1,500+ best-in-class technology vendors. Our edge-to-cloud portfolio is anchored in some of the highest-growth technology segments including cloud, cybersecurity, big data/analytics, IoT, mobility and everything as a service. TD SYNNEX is committed to serving customers and communities, and we believe we can have a positive impact on our people and our planet, intentionally acting as a respected corporate citizen. We aspire to be a diverse and inclusive employer of choice for talent across the IT ecosystem. For more information, visit www.TDSYNNEX.com or follow us on Twitter, LinkedIn, Facebook and Instagram.

About Pluribus Networks

Pluribus Networks, the Unified Cloud Networking company, delivers solutions based on the principles of open networking and distributed, controllerless SDN automation. The Linux-based Netvisor® ONE operating system and the Unified Cloud Fabric™ software have been purpose built to deliver radically automated and simplified cloud networking along with superior economics by leveraging white box switches from open networking partners as well as Pluribus’ own Freedom™ Series of switches. The Unified Cloud Fabric is optimized to deliver a modern cloud network fabric across distributed clouds and data center sites with rich services, automated operations, intrinsic security and visibility and no single point of failure. Pluribus is deployed by hundreds of customers, including more than 100 tier one mobile network operators, in mission critical networks around the globe. Visit Pluribus Networks to learn more.

Jason Loo
Tech Data Asia Pacific & Japan
jason.loo@techdata.com

Andy Meltzer
Guyer Group for Pluribus Networks
andy.meltzer@guyergroup.com

First Quarter 2022 Highlights

• Product revenue of $371.0 million, up 54% year over year
• Total revenue of $954.8 million, up 34% year over year
• Bookings of $1.28 billion, up 50% year over year¹
• Billings of $1.16 billion, up 36% year over year²
• Deferred revenue of $3.66 billion, up 33% year over year
• GAAP operating margin of 15.8%
• Non-GAAP operating margin of 22.0%²
• GAAP diluted net income per share attributable to Fortinet, Inc. of $0.84
• Non-GAAP diluted net income per share attributable to Fortinet, Inc. of $0.94²
• Cash flow from operations of $396.1 million
• Free cash flow of $273.5 million²

SUNNYVALE, Calif., May 04, 2022 (GLOBE NEWSWIRE) — Fortinet® (Nasdaq: FTNT), a global leader in broad, integrated and automated cybersecurity solutions, today announced financial results for the first quarter ended March 31, 2022.

“We delivered better than expected first quarter revenue growth of 34% year over year, driven by record quarterly product revenue growth of 54% year over year. The outstanding results we achieved reflect exceptionally strong demand across our broad portfolio of cybersecurity and networking solutions as our teams skillfully navigated the challenging supply chain environment. At the same time, we improved visibility to our future business by increasing backlog by $116 million in the first quarter,” said Ken Xie, Founder, Chairman, and Chief Executive Officer. “Fortinet’s industry leading operating system, FortiASIC SPU, and core platform innovations are geared towards making our customers’ entire infrastructure more secure. We have prioritized providing integrated security products on a single operating system and converging networking functionality with security capabilities.”

Financial Highlights for the First Quarter of 2022

• Revenue: Total revenue was $954.8 million for the first quarter of 2022, an increase of 34.4% compared to $710.3 million for the same quarter of 2021.
• Product Revenue: Product revenue was $371.0 million for the first quarter of 2022, an increase of 54.1% compared to $240.7 million for the same quarter of 2021.
• Service Revenue: Service revenue was $583.8 million for the first quarter of 2022, an increase of 24.3% compared to $469.6 million for the same quarter of 2021.
• Billings²: Total billings were $1.16 billion for the first quarter of 2022, an increase of 36.4% compared to $850.6 million for the same quarter of 2021.
• Deferred Revenue: Total deferred revenue was $3.66 billion as of March 31, 2022, an increase of 33.2% compared to $2.75 billion as of March 31, 2021.
• Bookings¹: Total bookings were $1.28 billion for the first quarter of 2022, an increase of 49.9% compared to $851.6 million for the same quarter of 2021. Backlog was $278.3 million as of March 31, 2022, an increase of $116.4 million compared to $161.9 million as of December 31, 2021.
• GAAP Operating Income and Margin: GAAP operating income was $151.0 million for the first quarter of 2022, representing a GAAP operating margin of 15.8%. GAAP operating income was $121.6 million for the same quarter of 2021, representing a GAAP operating margin of 17.1%.
• Non-GAAP Operating Income and Margin²: Non-GAAP operating income was $210.2 million for the first quarter of 2022, representing a non-GAAP operating margin of 22.0%. Non-GAAP operating income was $173.9 million for the same quarter of 2021, representing a non-GAAP operating margin of 24.5%.
• GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.: GAAP net income was $138.4 million for the first quarter of 2022, compared to GAAP net income of $107.2 million for the same quarter of 2021. GAAP diluted net income per share was $0.84 for the first quarter of 2022, based on 164.2 million diluted weighted-average shares outstanding, compared to GAAP diluted net income per share of $0.64 for the same quarter of 2021, based on 166.4 million diluted weighted-average shares outstanding.
• Non-GAAP Net Income and Diluted Net Income Per Share Attributable to Fortinet, Inc.²: Non-GAAP net income was $155.1 million for the first quarter of 2022, compared to non-GAAP net income of $135.6 million for the same quarter of 2021. Non-GAAP diluted net income per share was $0.94 for the first quarter of 2022, based on 164.2 million diluted weighted-average shares outstanding, compared to $0.81 for the same quarter of 2021, based on 166.4 million diluted weighted-average shares outstanding.
• Cash Flow: Cash flow from operations was $396.1 million for the first quarter of 2022, compared to $315.9 million for the same quarter of 2021.
• Free Cash Flow²: Free cash flow was $273.5 million for the first quarter of 2022, compared to $263.8 million for the same quarter of 2021.

Guidance

For the second quarter of 2022, Fortinet currently expects:

• Revenue in the range of $1.005 billion to $1.035 billion
• Billings in the range of $1.225 billion to $1.265 billion
• Non-GAAP gross margin in the range of 74.5% to 76.0%
• Non-GAAP operating margin in the range of 22.0% to 23.5%
• Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $1.05 to $1.10, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 165 million to 167 million.

For the fiscal year 2022, Fortinet currently expects:

• Revenue in the range of $4.350 billion to $4.400 billion
• Service revenue in the range of $2.640 billion to $2.700 billion
• Billings in the range of $5.500 billion to $5.580 billion
• Non-GAAP gross margin in the range of 74.0% to 76.0%
• Non-GAAP operating margin in the range of 24.0% to 26.0%
• Diluted non-GAAP net income per share attributable to Fortinet, Inc. in the range of $5.00 to $5.15, assuming a non-GAAP effective tax rate of 17%. This assumes a diluted share count of 166 million to 168 million.

These statements are forward looking and actual results may differ materially. Refer to the Forward-Looking Statements section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Our guidance with respect to non-GAAP financial measures excludes stock-based compensation, amortization of acquired intangible assets and gain on intellectual property matter. 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.

¹ Bookings represents the total value of all orders received during the period. Backlog represents orders received but not fulfilled and excludes Alaxala. When an order is fulfilled, billings and revenue are recognized.
² A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures”.

Conference Call Details

Fortinet will host a conference call today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the earnings results. The call can be accessed by dialing (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 7041149. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet’s website at https://investor.fortinet.com and a replay will be archived and accessible at https://investor.fortinet.com/events-and-presentations. A replay of this conference call can also be accessed through May 10, 2022 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 7041149.

Second Quarter 2022 Conference Participation Schedule:

• Fortinet Accelerate 2022 Management Keynotes & Analyst Day
  May 10, 2022

• J.P. Morgan 50th Annual Global Technology, Media and Communications Conference
  May 23, 2022

• Bank of America 2022 Global Technology Conference
  June 7, 2022

Members of Fortinet’s management team are expected to present at these conferences and discuss the latest company strategies and initiatives. Fortinet’s conference presentations are expected to be available via webcast on the company’s web site. To access the most updated information, pre-register and listen to the webcast of each event, please visit the Investor Presentation & Events page of Fortinet’s website at https://investor.fortinet.com/events-and-presentations. The schedule is subject to change.

About Fortinet (www.fortinet.com)

Fortinet (NASDAQ: FTNT) makes possible a digital world that we can trust through its mission to protect people, devices and data everywhere. This is why many of the world’s largest enterprises, service providers and government organizations choose Fortinet to securely accelerate their digital journey. The Fortinet Core Platform and Platform Extension products deliver broad, integrated and automated protections across the entire digital attack surface, securing critical devices, data, applications, and connections from the data center to the cloud to the home office. The Fortinet NSE Training Institute, an initiative of Fortinet’s Training Advancement Agenda (TAA), provides one of the largest and broadest training programs in the industry to make cyber training and new career opportunities available to everyone. Learn more at https://www.fortinet.com, the Fortinet Blog or FortiGuard Labs.

Copyright © 2022 Fortinet, Inc. All rights reserved. The symbols ® and ™ denote respectively federally registered trademarks and common law trademarks of Fortinet, Inc., its subsidiaries and affiliates. Fortinet’s trademarks include, but are not limited to, the following: Fortinet, the Fortinet logo, FortiGate, FortiOS, FortiGuard, FortiCare, FortiAnalyzer, FortiManager, FortiASIC, FortiClient, FortiCloud, FortiMail, FortiSandbox, FortiADC, FortiAI, FortiAIOps, FortiAntenna, FortiAP, FortiAPCam, FortiAuthenticator, FortiCache, FortiCall, FortiCam, FortiCamera, FortiCarrier, FortiCASB, FortiCentral, FortiConnect, FortiController, FortiConverter, FortiCWP, FortiDB, FortiDDoS, FortiDeceptor, FortiDeploy, FortiDevSec, FortiEdge, FortiEDR, FortiExplorer, FortiExtender, FortiFirewall, FortiFone, FortiGSLB, FortiHypervisor, FortiInsight, FortiIsolator, FortiLAN, FortiLink, FortiMoM, FortiMonitor, FortiNAC, FortiNDR, FortiPenTest, FortiPhish, FortiPlanner, FortiPolicy, FortiPortal, FortiPresence, FortiProxy, FortiRecon, FortiRecorder, FortiSASE, FortiSDNConnector, FortiSIEM, FortiSMS, FortiSOAR, FortiSwitch, FortiTester, FortiToken, FortiTrust, FortiVoice, FortiWAN, FortiWeb, FortiWiFi, FortiWLC, FortiWLM and FortiXDR. Other trademarks belong to their respective owners. Fortinet has not independently verified statements or certifications herein attributed to third parties and Fortinet does not independently endorse such statements. Notwithstanding anything to the contrary herein, nothing herein constitutes a warranty, guarantee, contract, binding specification or other binding commitment by Fortinet or any indication of intent related to a binding commitment, and performance and other specification information herein may be unique to certain environments.

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Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding demand for our products and services, guidance and expectations around future financial results, including guidance and expectations for the second quarter and full year 2022, statements regarding the momentum in our business and future growth expectations, and statements regarding our robust pipeline, market opportunity and market size, strong business momentum, and expectations of several more years of solid growth. Although we attempt to be accurate in making forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based such that actual results are materially different from our forward-looking statements in this release. Important factors that could cause results to differ materially from the statements herein include the following: general economic risks, including those caused by the COVID-19 pandemic, the war in Ukraine and the effects of increased inflation in certain geographies; significantly heightened supply chain challenges due to the current global environment; negative impacts from the COVID-19 pandemic on sales, billings, revenue, demand and buying patterns, component supply and ability to manufacture products to meet demand in a timely fashion, and costs such as possible increased costs for shipping and components; global economic conditions, country-specific economic conditions, and foreign currency risks; competitiveness in the security market; the dynamic nature of the security market and its products and services; specific economic risks worldwide and in different geographies, and among different customer segments; uncertainty regarding demand and increased business and renewals from existing customers; uncertainties around continued success in sales growth and market share gains; uncertainties in market opportunities and the market size; actual or perceived vulnerabilities in our supply chain, products or services, and any actual or perceived breach of our network or our customers’ networks; longer sales cycles, particularly for larger enterprise, service providers, government and other large organization customers; the effectiveness of our salesforce and failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; risks associated with integrating acquisitions and changes in circumstances and plans associated therewith, including, among other risks, changes in plans related to product and services integrations, product and services plans and sales strategies; sales and marketing execution risks; execution risks around new product development and introductions and innovation; litigation and disputes and the potential cost, distraction and damage to sales and reputation caused thereby or by other factors; cybersecurity threats, breaches and other disruptions; market acceptance of new products and services; the ability to attract and retain personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand for, our products and services in general and by specific customer segments, including those caused by the COVID-19 pandemic; competition and pricing pressure; product inventory shortages for any reason, including those caused by the COVID-19 pandemic, the war in Ukraine and the effects of increased inflation in certain geographies; risks associated with business disruption caused by natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health epidemics and viruses such as the COVID-19 pandemic, and by manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts such as the war in Ukraine, terrorism, wars, and critical infrastructure attacks; tariffs, trade disputes and other trade barriers, and negative impact on sales based on geo-political dynamics and disputes and protectionist policies; any political and government disruption around the world, including the impact of any future shutdowns of the U.S. government; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC), copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.

COVID-19 Impact

While the broader implications of the COVID-19 pandemic on our employees and overall financial performance remain uncertain, we have seen certain impacts on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. Going forward, the situation is uncertain, rapidly changing and hard to predict, and the COVID-19 pandemic may have a material negative impact on our future periods, including our results for the three months ending June 30, 2022, our annual results for 2022, and beyond. To highlight the uncertainty remaining for the three-month period ending June 30, 2022, it should be noted that, due to customer buying patterns and the efforts of our sales force and channel partners to meet or exceed quarterly quotas, we have historically received a substantial portion of each quarter’s sales orders and generated a substantial portion of each quarter’s billings and revenue during the last two weeks of the quarter. Additionally, significantly heightened supply chain challenges are impacting businesses around the globe. If we experience significant changes in our billings growth rates or if we are unable to supply product to meet demand, it will impact product revenue in the current quarter and FortiGuard and FortiCare service revenues in subsequent quarters, as we sell annual and multi-year service contracts that are recognized ratably over the contractual service term. In addition, the broader implications of the pandemic on our business and operations and our financial results, including the extent to which the effects of the pandemic will impact future results and growth in the cybersecurity industry, remain uncertain. The duration and severity of the economic downturn from the pandemic may negatively impact our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources in a material way. As a result, the effects of the pandemic may not be fully reflected in our results of operations until future periods.

Non-GAAP Financial Measures

We have provided in this release financial information that has not been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial and liquidity measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period, less any deferred revenue balances acquired from business combination(s) and adjustment due to adoption of new accounting standard during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.

Free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus purchases of property and equipment and excluding any significant non-recurring items, such as proceeds from intellectual property matter. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures and net of proceeds from intellectual property matter, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes cash flows from significant non-recurring items, such as proceeds from intellectual property matter, investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation, impairment and amortization of acquired intangible assets, less gain on intellectual property matter and, when applicable, other significant non-recurring items in a given quarter, such as non-recurring gains or losses on litigation-related matters. Non-GAAP operating margin is defined as non-GAAP operating income divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the items noted above so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income instead of operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes the items noted above. Second, the components of the costs that we exclude from our calculation of non-GAAP operating income may differ from the components that peer companies exclude when they report their non-GAAP results of operations. Management accounts for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and diluted net income per share attributable to Fortinet, Inc. We define non-GAAP net income as net income or loss plus the items noted above under non-GAAP operating income and operating margin. In addition, we adjust non-GAAP net income and diluted net income per share for gains or losses on investments in privately held companies, a tax adjustment required for an effective tax rate on a non-GAAP basis and adjustments attributable to non-controlling interests, which differs from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the non-GAAP diluted weighted-average shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a more complete picture of our recurring core business operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required resulting in an effective tax rate on a non-GAAP basis, which often differs from the GAAP tax rate. We believe the non-GAAP effective tax rates we use are reasonable estimates of normalized tax rates for our current and prior fiscal years under our global operating structure. The same limitations described above regarding our use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. We account for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income or loss and diluted net income per share calculated in accordance with GAAP.

FORTINET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)