01—Abstract
Summary
Summary of the 10-K filed March 5, 2010. Cited figures are marked; the original filing is the authoritative source.
Fortinet, Inc. (FTNT) presented its 2009 annual report, highlighting significant growth and a shift towards profitability.
The company, a leader in Unified Threat Management (UTM) network security solutions, reported substantial revenue growth, driven by an increasing demand for its comprehensive security appliances and subscription services. Key financial metrics for 2009 indicated robust expansion, with total revenue reaching $252.1 milliona, a 19% increase year-over-year. The company also achieved profitability, marking a positive turnaround from previous years.
Fortinet's business model, heavily reliant on its channel partner network, successfully expanded its customer base to over 75,000 end-customers, including a majority of Fortune Global 100 companies. The company's proprietary technology, including FortiASICs and FortiOS, continues to be a core differentiator, enabling high-performance security solutions. Fortinet's strategic focus on expanding its services revenue, which accounted for over 55%b of total revenue in 2009, positions it for recurring revenue streams and continued growth.
02—Key points
Key Highlights
- Fortinet reported a 19% year-over-year increase in total revenue to $252.1 million for fiscal year 2009.
- The company achieved profitability in fiscal year 2009, a positive shift from previous years.
- Services revenue constituted 55.2% of total revenue in 2009, demonstrating the company's successful recurring revenue model.
- Fortinet expanded its customer base to over 75,000 end-customers, including a majority of the 2009 Fortune Global 100.
- The company's proprietary technology, including FortiASICs and FortiOS, remains a key competitive advantage.
- Fortinet ended 2009 with a strong cash position of $260.3 million, indicating healthy liquidity.
- The company's IPO in November 2009 provided net proceeds of $87.4 million, strengthening its financial position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Fortinet, Inc. kept $0.24.
- Revenue$252.1M100.0%
- Cost of revenue−$70.0M27.8%
- Gross profit$182.1M72.2%
- Operating costs−$156.8M62.2%
- Operating income$25.3M10.0%
- Interest, other & tax$34.8M13.8%
- Net income$60.2M23.9%
Where FY2009 revenue went
$252.1M- Other operating costs: $114.6M, 45% of revenue
- Cost of revenue: $70.0M, 28% of revenue
- R&D: $42.2M, 17% of revenue
- Operating income: $25.3M, 10% of revenue
Kept 10% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 5, 2010Financial Statements
| Revenue | $252.12M |
| Cost of Revenue | $69.97M |
| Gross Profit | $182.14M |
| R&D Expenses | $42.20M |
| Operating Expenses | $156.81M |
| Operating Income | $25.33M |
| Net Income | $60.18M |
| EPS (Basic) | $0.19 |
| EPS (Diluted) | $0.08 |
| Shares Outstanding (Basic) | 263.34M |
| Shares Outstanding (Diluted) | 652.19M |
05—Questions
Frequently Asked Questions
What is Fortinet's core business and market position as of the end of 2009?
Fortinet is a leading provider of network security appliances and the market leader in Unified Threat Management (UTM) solutions. They offer broad, integrated, and high-performance protection against dynamic security threats to enterprises, service providers, and government entities worldwide. Their core product is the FortiGate appliance, which integrates multiple security and networking functions.
How did Fortinet perform financially in 2009?
In 2009, Fortinet experienced significant growth, with total revenue increasing by 19% to $252.1 million. Importantly, the company achieved profitability, a positive development compared to prior years where it incurred net losses. The company also reported a strong cash position of $260.3 million and had positive cash flow from operations.
What is Fortinet's go-to-market strategy, and how does it generate revenue?
Fortinet primarily utilizes a channel partner model, selling through distributors to resellers and service providers who then reach end-customers. Revenue is generated from both product sales (FortiGate appliances, etc.) and recurring services, such as FortiGuard security subscription services and FortiCare technical support. Services revenue is recognized over the contract term, contributing to deferred revenue and a stable, recurring revenue stream.
What are the key risks highlighted in the 2009 report?
Key risks include the unpredictability of quarterly operating results due to order timing and customer buying patterns, reliance on channel partners for revenue, intense competition from larger players with more resources, potential for product defects or vulnerabilities, dependence on third-party manufacturers and component suppliers, and adverse economic conditions impacting IT spending. The company also faced litigation risks related to intellectual property.
06—Continue