01—Abstract
Summary
Summary of the 10-K filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
Fortinet, Inc.'s 2012 10-K filing showcases robust growth in the network security market, with total revenue reaching $533.6 milliona, a 23% increase year-over-year.
This growth was driven by both product and services revenue, which saw increases of 26% and 24%, respectively. The company continues to invest heavily in research and development (R&D) and sales and marketing to expand its global footprint and product capabilities, indicating a strategic focus on long-term market leadership. Financially, Fortinet demonstrated strong operational cash flow of $183.9 millionb and ended the year with $739.6 million in cash, cash equivalents, and investments, highlighting a healthy balance sheet.
The company's proprietary technology, including FortiASICs and FortiOS, forms the backbone of its integrated network security solutions, catering to a diverse customer base from small businesses to large enterprises and government entities. Key risks highlighted include intense competition, reliance on channel partners, and the dynamic nature of the cybersecurity threat landscape.
02—Key points
Key Highlights
- Fortinet reported a 23% year-over-year increase in total revenue, reaching $533.6 million for fiscal year 2012.
- Product revenue grew by 26% and services revenue by 24%, demonstrating broad-based growth across the company's offerings.
- The company generated strong operating cash flow of $183.9 million in fiscal 2012, with cash, cash equivalents, and investments totaling $739.6 million.
- Fortinet continues to invest significantly in R&D (15% of revenue) and sales & marketing (33% of revenue) to drive future growth and innovation.
- The company's core offering, the FortiGate UTM/NGFW appliance, is built on proprietary FortiASIC processors and FortiOS, providing integrated security functions.
- Fortinet experienced an increase in larger deal sizes, with deals over $100,000 growing to 718 in fiscal 2012, up from 560 in fiscal 2011.
- The company highlighted its expanded reach into enterprise data centers and key sectors like retail, financial, and telecommunications.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Fortinet, Inc. kept $0.13.
- Revenue$533.6M100.0%
- Cost of revenue−$147.4M27.6%
- Gross profit$386.2M72.4%
- Operating costs−$285.7M53.5%
- Operating income$100.5M18.8%
- Interest, other & tax−$33.6M6.3%
- Net income$66.8M12.5%
Where FY2012 revenue went
$533.6M- Other operating costs: $204.7M, 38% of revenue
- Cost of revenue: $147.4M, 28% of revenue
- R&D: $81.1M, 15% of revenue
- Net income: $66.8M, 13% of revenue
- Interest, other & tax: $33.6M, 6.3% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $533.64M$433.58M | +23.1% |
| Cost of Revenue | $147.42M$113.60M | +29.8% |
| Gross Profit | $386.22M$319.98M | +20.7% |
| R&D Expenses | $81.08M$63.58M | +27.5% |
| Operating Expenses | $285.74M$231.07M | +23.7% |
| Operating Income | $100.47M$88.90M | +13.0% |
| Net Income | $66.84M$62.49M | +7.0% |
| EPS (Basic) | $0.08$0.08 | +2.4% |
| EPS (Diluted) | $0.08$0.08 | +5.3% |
| Shares Outstanding (Basic) | 790.37M762.90M | +3.6% |
| Shares Outstanding (Diluted) | 831.64M818.90M | +1.6% |
05—Questions
Frequently Asked Questions
What is Fortinet's primary business and product offering?
Fortinet provides integrated network security solutions, with its flagship product being the FortiGate physical and virtual appliance. These appliances offer a broad array of security and networking functions, including firewall, VPN, application control, anti-malware, and intrusion prevention. The company also offers complementary management and analysis products like FortiManager and FortiAnalyzer, and derives a significant portion of its revenue from subscription services (FortiGuard and FortiCare).
How is Fortinet performing financially based on this report?
In fiscal 2012, Fortinet demonstrated strong financial performance with a 23% increase in total revenue to $533.6 million. Both product and services revenue showed robust growth. The company generated substantial operating cash flow ($183.9 million) and maintained a healthy cash position ($739.6 million), indicating financial stability and capacity for continued investment.
What are the key investments Fortinet is making for future growth?
Fortinet is heavily investing in research and development (R&D) to enhance its technology and develop new products. Concurrently, the company is significantly increasing its investment in sales and marketing to expand its global presence, build brand awareness, and grow its sales force and distribution channels, particularly targeting larger enterprise and service provider customers.
What are the primary risks facing Fortinet as outlined in the filing?
Fortinet faces several key risks, including intense competition from larger and more established players in the cybersecurity market, reliance on a network of third-party channel partners for revenue generation, the rapidly evolving nature of cyber threats requiring continuous innovation, potential for product defects or vulnerabilities, and challenges in managing inventory and supply chains. The company also notes the unpredictability of quarterly operating results due to customer buying patterns and the concentration of sales at the end of quarters.
06—Continue