01—Abstract
Summary
Summary of the 10-K filed February 27, 2019. Cited figures are marked; the original filing is the authoritative source.
Fortinet, Inc. (FTNT) reported strong financial performance for the fiscal year ending December 31, 2018, with total revenue reaching $1.80 billiona, marking a 20% increase year-over-year.
This growth was fueled by a robust 17% increase in product revenue and a significant 23% rise in service revenue, driven by its subscription and support services. The company demonstrated substantial improvement in profitability, with operating income more than doubling to $231.0 millionb, resulting in a healthy operating margin of 13%. Fortinet's strategic focus on its Security Fabric platform, which integrates various cybersecurity solutions, appears to be resonating with customers across diverse sectors, including enterprises, service providers, and small businesses.
Financially, Fortinet ended 2018 with a strong balance sheet, holding $1.72 billionc in cash, cash equivalents, and investments, and experienced substantial growth in deferred revenue, up 26% to $1.69 billion, indicating strong future revenue potential. The company also generated robust operating cash flow of $638.9 million.
Fortinet continued its share repurchase program, demonstrating a commitment to returning value to shareholders. Despite a competitive cybersecurity landscape, Fortinet's consistent revenue growth, expanding service revenue, and improving operational efficiency position it favorably for continued expansion.
02—Key points
Key Highlights
- Total revenue grew 20% to $1.80 billion in 2018.
- Service revenue increased 23% year-over-year, outperforming product revenue growth.
- Operating income more than doubled to $231.0 million, with operating margin improving to 13%.
- Cash, cash equivalents, and investments grew 27% to $1.72 billion.
- Deferred revenue saw a significant 26% increase, reaching $1.69 billion.
- Operating cash flow increased by 7% to $638.9 million.
- Fortinet is investing in its sales and marketing resources to drive enterprise market penetration.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Fortinet, Inc. kept $0.19.
- Revenue$1.80B100.0%
- Cost of revenue−$450.4M25.0%
- Gross profit$1.35B75.0%
- Operating costs−$1.12B62.1%
- Operating income$234.4M13.0%
- Interest, other & tax$100.5M5.6%
- Net income$334.9M18.6%
Where FY2018 revenue went
$1.80B- Other operating costs: $875.3M, 49% of revenue
- Cost of revenue: $450.4M, 25% of revenue
- R&D: $244.5M, 14% of revenue
- Operating income: $234.4M, 13% of revenue
Kept 13% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 27, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $1.80B$1.49B | +20.7% |
| Cost of Revenue | $450.40M$385.30M | +16.9% |
| Gross Profit | $1.35B$1.11B | +22.0% |
| R&D Expenses | $244.50M$210.60M | +16.1% |
| Operating Expenses | $1.12B$999.80M | +12.0% |
| Operating Income | $234.40M$109.80M | +113.5% |
| Net Income | $334.90M$31.40M | +966.6% |
| EPS (Basic) | $0.40$0.04 | +1000.0% |
| EPS (Diluted) | $0.38$0.04 | +966.7% |
| Shares Outstanding (Basic) | 845.50M871.50M | −3.0% |
| Shares Outstanding (Diluted) | 871.00M890.50M | −2.2% |
05—Questions
Frequently Asked Questions
What was Fortinet's revenue growth in 2018?
Fortinet's total revenue grew by 20% in 2018, reaching $1.80 billion, compared to $1.49 billion in 2017. This growth was driven by both product revenue (up 17%) and service revenue (up 23%).
How did Fortinet's profitability change in 2018?
Fortinet showed significant improvement in profitability, with operating income increasing by 110% to $231.0 million in 2018, up from $109.8 million in 2017. This resulted in an operating margin of 13% in 2018, a substantial increase from 7% in 2017.
What is the company's financial health and liquidity position as of year-end 2018?
As of December 31, 2018, Fortinet maintained a strong financial position with $1.72 billion in cash, cash equivalents, and investments. The company also reported a significant increase in deferred revenue to $1.69 billion, indicating strong future revenue potential. Operating cash flow was robust at $638.9 million.
What are Fortinet's key growth drivers and strategic initiatives?
Fortinet's growth is driven by its integrated Security Fabric platform, which provides broad visibility and automated protection across the digital attack surface. The company is focusing on increasing sales to enterprise customers and expanding its cloud security offerings, alongside continued investment in its sales and marketing infrastructure.
06—Continue