Keith Jensen
Chief Financial Officer at Fortinet
Thank you, Ken, and good afternoon, everyone. I'll start with a summary of our very strong 2021 performance. Customer demand was strong and broad-based across geographies, customer sizes, industries, use cases and security solutions, reflecting the three key demand drivers that Ken mentioned, convergence of security and networking, vendor consolidation on our Security Fabric mesh platform and the elevated threat environment.
Convergence or security-driven networking requires integrated security solutions to be delivered at networking speeds across the company's entire threat landscape of edges, including data centers, endpoints, work from anywhere and clouds, as well as across multiple use cases such as secure SD-WAN, WiFi, switching, 5G and OT.
The networking speed and computing capabilities of our ASIC-powered for gates can be five to 10 times more than competitor firewalls with their off-the-shelf silicon products. Vendor consolidation is driven by customer focus on security effectiveness, performance and cost management. We deliver vendor consolidation through our Security Fabric platform and its broad range of products integrated with a single operating system, offering increased automation. As we saw in 2021, we expect strong customer demand fueled by these key drivers to continue.
And turning to our 2021 performance, billings growth accelerated to 35% or $4.2 billion, representing our highest annual billings growth rate in six years. Revenue growth also accelerated coming in at 29%, representing the fourth consecutive year of revenue growth of 20% or more. And despite the supply chain environment, product revenue growth came in 37% growth, our highest annual product revenue growth rate in 10 years.
Driven by strong demand for our fabric and cloud security solutions, non-FortiGate billings and revenue each exceeded $1 billion for the first time in our history. Non-FortiGate billings increased 46% to $1.25 billion, and non-FortiGate revenue increased 42% to $1.1 billion. Gross margin was 77.5% and operating margin was 26.2%. Our GAAP operating margin was 19.5%. It's one of the highest in the industry. Our near GAAP profitable, as Ken mentioned, for 13 consecutive years.
Free cash flow was a record $1.2 billion, exceeding $1 billion for the first time in our history. Free cash flow margin was 36%. And when adjusted for real estate investments came in at 43%. Total deferred revenue increased 33% to $3.5 billion, and short-term deferred revenue increased 28% to $1.8 billion.
We are experiencing exceptionally strong demand, demand that exceeds supply by more than historical norms. As a result, we are expanding our disclosures to include bookings and backlog to provide greater visibility into the strength of our business. Bookings represent the value of all orders received from customers. Backlog represents the value of all orders received but not fulfilled. When the order is fulfilled, we recognize both billings and product revenue.
Turning to Q4 results. As noted on Slide 4, bookings were $1.4 billion, up 49%. On a sequential basis, backlog increased $122 million due to very strong demand. On a year-over-year basis, backlog increased $150 million to end the year at $162 million. Breaking down the backlog between product and services, approximately 75% relates to future product shipments, while the remaining 25% relates to various services.
While it's difficult to forecast if an order might be canceled, several factors support our view that our backlog is strong, it should provide a tailwind of growth later this year and into next year. Existing customers account for approximately 90% of our backlog. No single end customer accounts for more than a, say, a low single-digit percentage of backlog. Many competitors are also impacted by supply chain constraints.
Our products, along with our integrated operating system are not commodities really changed with offerings from other vendors. We actively manage our own supply chain and for the most employed security network solution over one-third of all firewall unit shipments, we are an attractive volume buyer from any suppliers.
And lastly, our price for performance advantage may be difficult for our competition to match. And I apologize for the sound in the background, we don't know what's causing it, but I'll continue on. Moving to Q4 billings of $1.3 billion, billings are up 36%, which compares to 49% bookings in noted earlier. Enterprises favorites Fortinet's leading cost performance and integrated platform.
This is especially evident in the 5-point increase in the large enterprise billing mix. Add more color to this, we could share, global 2000 buildings were up over 90%, the third consecutive quarter of accelerating growth. The number of deals over $1 million increased 79% to 122 deals, breaking the 100 deal threshold for time in our history. We saw a record of four low eight-figure transactions all in the Americas in the quarter. And lastly, Secure SD-WAN deals over $1 million increased 63% to 26%, contributing to SD-WAN use case billings growth of 67% and putting SD-WAN at 16% of total billings.
FortiGate billings were up 33% and accounted for 69% of total billings. As shown on slide 11, high-end FortiGates posted very strong billings growth. Non-FortiGate billings were up 43%, driving 1.5 points mix shift to non-FortiGate. Top 10 non-FortiGate solutions with growth over 40% included virtual firewalls, endpoints and switches.
At the same time, several smaller solutions posted triple-digit growth rates. Consistent with the elevated threat environment and the breadth of Ransomware and other attacks, OT use case billings were up 70% and accounted for 8% of total billings. Average contract term was consistent year-over-year and quarter-over-quarter at 28 months. For the third consecutive quarter, we added approximately 6,000 new logos. Worldwide government billings grab the largest share of the mix at 16%. Financial services accounted for 14% of billings on billings growth of 63%.
Billings and manufacturing, transportation, utilities, construction and other verticals that have not consistently been in our top five remained elevated with billings growth of 40%. We believe the growth of these verticals is an indication of the broadening nature and greater awareness of the threat landscape, which is driving cybersecurity investments in industries that have historically perhaps spent a little bit less on security budgets.
Moving over to the income statement. Revenue growth was 29%. Product revenue growth was 31%, illustrating the impact of backlog on product revenue growth. If backlog had remained flat quarter-over-quarter, the product revenue growth would have been as high as the mid-60s.
Service revenue was up 27% to $585 million. Support and related services revenue was up 31% to $275 million, while security subscription services were up 24% to $309 million. Non-FortiGate products and service revenue of $324 million grew 41% and accounted for approximately 34% of total revenue, up 3 percentage points.
FortiGate product and services revenue of $639 million grew 23% and accounted for 66% of total revenue. Total gross margin of 77.3% was 180 basis points above the midpoint of our guidance range and up 80 basis points quarter-over-quarter. A lower-than-expected drag from acquisitions and pricing actions taken to offset supplier cost increases contributed to the better-than-expected total gross margin and product gross margin.
Product gross margin of 62.1% increased 140 basis points sequentially. Service gross margin of 87.1% increased 50 basis points sequentially. Operating margin of 28.5% improved 270 basis points sequentially and exceeded the midpoint of our guidance range by 100 basis points. Better-than-expected gross margin performance and a slightly less-than-expected impact from acquisitions contributed to the better-than-expected operating margin. Headcount increased 24% to 10,195.
Moving to the statement of cash flow summarized on slides 12 and 15. Capital expenditures were $151 million, including $129 million for real estate investments. Our capital strategy includes increasing our office and warehouse capacity to support our higher levels of growth. We repurchased 1.8 million shares of common stock for a cost of $541 million. For the year, we repurchased approximately 2.6 million shares for a cost of $742 million. At year-end, the remaining share authorization was approximately $1.5 billion and set to expire in February of 2023.
Inventory turns at 2.7 were flat year-over-year and on par with 2.9 times in the prior quarter. Overall, what we believe was better than market growth for the fourth quarter and full year, we believe we again gained market share. Supported by a strong pipeline growth and the key growth drivers outlined earlier, we believe we are in the early innings of a sustained high growth period for the cybersecurity industry and Fortinet, driven by digital transformation, hybrid cloud and the moving of data and security to the edge.
The products we've created, the channel and customer relationships we've developed and the investments we've made to build a broad and integrated security fabric platform powered by our proprietary Hasek FortiGates, are expected to drive our continued growth and market share gains.
Now I'd like to review our outlook for the first quarter summarized on slide 16, which is subject to disclaimers regarding forward-looking information that Peter provided at the beginning of the call. For at least the first half of the year, we expect elevated demand to outpace supply chain capacity, increasing backlog, an increase in backlog as a headwind to billings and revenue growth and provides interim pressure on margins.
For the first quarter, assuming bookings in the range of $1.100 billion to $1.150 billion, which at the midpoint represents bookings growth of 32%, we expect billings in the range of $1.50 billion to $1.90 billion, which at the midpoint represents growth of 26%; revenue in the range of $865 million to $895 million, non-GAAP gross margin of 75.5% to 76.5%, non-GAAP operating margin of 19.5% to 20.5%.
Non-GAAP earnings per share of $0.75 to $0.80, which assumes a share count of between $166 million and $168 million. We estimate first quarter capital expenditures to be between $140 million and $150 million. We expect a non-GAAP tax rate of 18%.
Before providing our full year 2022 guidance, I'd like to congratulate every member of the Fortinet team for the truly outstanding execution in 2021. The efforts and results have been outstanding and this is on top of now several years of consistent, predictable performance and improvements in key growth and profitability metrics.
In 2022, we expect a small shift in our seasonality towards the second half of the year by two or three points. And for the full year, assuming bookings in the range of $5.580 billion to $5.680 billion, which at the midpoint represents growth of 30%, we expect billings in the range of $5.400 billion to $5.480 billion, which at the midpoint represents growth of 30%. Revenue in the range of $4.275 billion to $4.325 billion, which at the midpoint represents growth of 29%.
Total service revenue in the range of $2.685 billion to $2.715 billion, which represents growth of approximately 29% and implies full-year product revenue growth of approximately 27%. Non-GAAP gross margin of 74% to 76%, non-GAAP operating margin of 24% to 26%, non-GAAP earnings per share of $4.85 to $5, which assumes a share count of between $169 million and $171 million. We estimate full-year capital expenditures to be between $270 million and $300 million. We expect our non-GAAP tax rate to be 18%, we expect cash taxes to be approximately $210 million.
Lastly, I want to inform everyone that this we will be holding an Analyst Day on May 10th coinciding with Accelerate 2022, where we expect to update our medium-term financial model. Along with Ken, I'd like to thank our partners, customers, suppliers and all members of the Fortinet team for all their hard work, execution and outstanding success.
I'll now hand the call back over to Peter.
