10-KPeriod: FY2014

Fortinet, Inc. Annual Report, Year Ended Dec 31, 2014

Filed March 2, 2015For Securities:FTNT

Summary

Fortinet, Inc. reported strong revenue growth of 25% in fiscal year 2014, reaching $770.4 million, up from $615.3 million in fiscal year 2013. This growth was driven by a 30% increase in product revenue and a 22% increase in services and other revenue. The company's core FortiGate product line, enhanced by its proprietary FortiASIC technology and FortiOS operating system, continues to be a primary revenue driver, with particular strength in high-end appliance sales to large enterprises and service providers. Fortinet also saw a significant increase in deferred revenue, growing 29% to $558.8 million, indicating strong future revenue potential from its subscription and support services. Financially, Fortinet maintained a healthy balance sheet with cash, cash equivalents, and investments reaching $991.7 million. Operating cash flow also increased by 33% to $196.6 million. The company continued its investment in sales and marketing to expand market share, particularly in the enterprise segment, which is expected to support sustained growth. Despite increased operating expenses due to these investments, Fortinet's financial performance demonstrates a robust growth trajectory and a solid market position in the cybersecurity landscape.

Financial Highlights

51 data points
Beta

Revenue

$770.36M

70.0% Gross Margin

Net Income

$25.34M

3.3% Net Margin

EPS (Diluted)

$0.03

Total Assets

$1.42B

Cash & Equivalents

$283.25M

Free Cash Flow

$196.58M

Financial Statements
Beta
Revenue$770.36M
Cost of Revenue$231.01M
Gross Profit$539.36M
R&D Expenses$122.88M
Operating Expenses$480.03M
Operating Income$59.32M
Net Income$25.34M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)819.15M
Shares Outstanding (Diluted)846.45M

Key Highlights

  • 1Total revenue grew 25% year-over-year to $770.4 million in fiscal 2014.
  • 2Product revenue increased by 30% to $360.6 million, driven by strong demand for FortiGate appliances, especially high-end models.
  • 3Services and other revenue increased by 22% to $409.8 million, reflecting growth in subscription and support services.
  • 4Deferred revenue increased 29% to $558.8 million, providing visibility into future revenue.
  • 5Cash, cash equivalents, and investments stood at $991.7 million, indicating strong liquidity.
  • 6Operating cash flow increased 33% to $196.6 million, demonstrating effective cash generation.
  • 7The company repurchased $38.6 million of its common stock under its share repurchase program.

Frequently Asked Questions

Fortinet reported total revenue of $770.4 million for fiscal year 2014, representing a 25% increase compared to $615.3 million in fiscal year 2013. This growth was fueled by both product revenue (up 30%) and services and other revenue (up 22%).

Product revenue saw a substantial increase of 30% year-over-year, reaching $360.6 million. This growth was primarily attributed to increased sales volume of FortiGate appliances, particularly the high-end models (FortiGate-1000 to -5000 series), which saw their share of FortiGate billings increase to 38%.

Deferred revenue increased by 29% to $558.8 million as of December 31, 2014. This significant growth indicates a strong pipeline of future recognized revenue from FortiGuard security subscription and FortiCare technical support services, providing good revenue visibility.

Fortinet made significant investments in sales and marketing during fiscal 2014, increasing these expenses by 40% to capture market share, especially in the enterprise segment. They also continued to invest in research and development to maintain technological leadership, with R&D expenses increasing by 20%.