01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
Fortinet, Inc. reported strong financial performance for the fiscal year ended December 31, 2019, with total revenue reaching $2.16 billiona, a 20% increase year-over-year.
This growth was driven by both product revenue (up 17%) and service revenue (up 21%), highlighting the continued demand for its comprehensive cybersecurity solutions, particularly within the FortiGate and FortiGuard offerings. The company also demonstrated improved profitability, with operating income increasing by 49% to $344.2 millionb, reflecting effective cost management and operating leverage. Financially, Fortinet ended the year with a healthy cash position of $2.21 billion, indicating robust cash flow generation from operations, which increased by 26%.
The company's strategy focuses on expanding its Security Fabric platform, which integrates various security functions across network, cloud, and endpoint environments. Acquisitions in late 2019 to bolster endpoint detection and response (enSilo) and security orchestration (CyberSponse) align with this strategy. Investors should note Fortinet's significant investments in sales and marketing to capture enterprise market share and its ongoing efforts in research and development for product innovation.
02—Key points
Key Highlights
- Total revenue grew 20% to $2.16 billion in 2019, driven by strong performance in both product and service segments.
- Operating income saw a significant increase of 49% to $344.2 million, indicating improved profitability and operational efficiency.
- Service revenue, particularly from FortiGuard subscriptions, continued to outpace product revenue growth, signaling a positive shift towards recurring revenue streams.
- The company maintained a strong balance sheet with $2.21 billion in cash, cash equivalents, and investments, supported by robust operating cash flows of $808.0 million.
- Fortinet continues to invest in its sales and marketing infrastructure, aiming to expand its presence in the enterprise market.
- Recent acquisitions of enSilo and CyberSponse aim to enhance the Fortinet Security Fabric with advanced endpoint and automation capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Fortinet, Inc. kept $0.15.
- Revenue$2.16B100.0%
- Cost of revenue−$505.9M23.4%
- Gross profit$1.66B76.6%
- Operating costs−$1.31B60.4%
- Operating income$351.0M16.2%
- Interest, other & tax−$19.3M0.9%
- Net income$331.7M15.3%
Where FY2019 revenue went
$2.16B- Other operating costs: $1.03B, 48% of revenue
- Cost of revenue: $505.9M, 23% of revenue
- Net income: $331.7M, 15% of revenue
- R&D: $277.1M, 13% of revenue
- Interest, other & tax: $19.3M, 0.9% of revenue
Kept 15% as net incomeR&D $277.1M · 13%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.16B$1.80B | +19.9% |
| Cost of Revenue | $505.90M$450.40M | +12.3% |
| Gross Profit | $1.66B$1.35B | +22.4% |
| R&D Expenses | $277.10M$244.50M | +13.3% |
| Operating Expenses | $1.31B$1.12B | +16.6% |
| Operating Income | $351.00M$234.40M | +49.7% |
| Interest Expense | $0— | — |
| Net Income | $331.70M$334.90M | −1.0% |
| EPS (Basic) | $0.39$0.40 | −2.0% |
| EPS (Diluted) | $0.38$0.38 | −1.0% |
| Shares Outstanding (Basic) | 855.00M845.50M | +1.1% |
| Shares Outstanding (Diluted) | 875.00M871.00M | +0.5% |
05—Questions
Frequently Asked Questions
What was Fortinet's total revenue for fiscal year 2019 and how does it compare to the previous year?
Fortinet's total revenue for the fiscal year ended December 31, 2019, was $2.16 billion, representing a 20% increase compared to $1.80 billion in 2018.
How did Fortinet's product and service revenues perform in 2019?
Product revenue increased by 17% to $788.5 million in 2019, while service revenue grew by 21% to $1.37 billion, indicating strong demand across both categories, with services showing a slightly higher growth rate.
What is Fortinet's strategy regarding growth and market expansion?
Fortinet's strategy focuses on expanding its integrated Fortinet Security Fabric platform, which covers network, infrastructure, cloud, and endpoint security. The company is making significant investments in its sales and marketing resources to gain market share, particularly in the enterprise sector, and is strategically acquiring companies like enSilo and CyberSponse to enhance its product capabilities.
How is Fortinet managing its financial resources and what is its cash position?
Fortinet ended 2019 with $2.21 billion in cash, cash equivalents, and investments, supported by $808.0 million in cash flow from operating activities. The company also had $1.6 billion available for future share repurchases under its existing program, indicating strong liquidity and financial flexibility.
06—Continue