CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited, in millions) Year Ended December 31,2024 December 31,2023CASH FLOWS FROM OPERATING ACTIVITIES: Net income$1,745.2 $1,147.8 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 257.9 249.0 Amortization of deferred contract costs 293.7 266.3 Depreciation and amortization 122.8 113.4 Amortization of investment discounts (48.8) (27.7)Loss from equity method investments 29.4 42.1 Gain on bargain purchase (106.3) — Other (15.2) 18.5 Changes in operating assets and liabilities, net of impact of business combinations: Accounts receivable—net (45.4) (146.4)Inventory 131.2 (253.5)Prepaid expenses and other current assets (13.7) (27.6)Deferred contract costs (311.1) (353.5)Deferred tax assets (223.2) (301.9)Other assets (11.0) 17.7 Accounts payable (10.2) (43.1)Accrued liabilities (106.7) 137.4 Accrued payroll and compensation — 23.4 Other liabilities (8.3) (21.7)Deferred revenue 577.8 1,095.3 Net cash provided by operating activities 2,258.1 1,935.5 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments (1,948.6) (1,855.8)Sales of investments 0.5 4.0 Maturities of investments 1,891.7 1,414.8 Purchases of property and equipment (378.9) (204.1)Purchase of investment in privately held company — (8.5)Payments made in connection with business combinations, net of cash acquired (275.5) — Purchases of marketable equity securities (16.7) — Other 0.1 0.3 Net cash used in investing activities (727.4) (649.3)CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase and retirement of common stock (0.6) (1,500.5)Proceeds from issuance of common stock 63.1 43.8 Taxes paid related to net share settlement of equity awards (100.9) (112.5)Other (11.7) (1.2) Net cash used in financing activities (50.1) (1,570.4)EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (2.6) (0.8)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,478.0 (285.0)CASH AND CASH EQUIVALENTS—Beginning of year 1,397.9 1,682.9 CASH AND CASH EQUIVALENTS—End of year$2,875.9 $1,397.9 Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures(Unaudited, in millions, except per share amounts) Reconciliation of GAAP operating income to non-GAAP operating income, operating margin, net income and diluted net income per share Three Months Ended Year Ended December 31,2024 December 31,2023 December 31,2024 December 31,2023Reconciliation of non-GAAP operating income: GAAP operating income$574.1 $385.4 $1,803.4 $1,241.1 GAAP operating margin 34.6% 27.2% 30.3% 23.4%Add back: Stock‐based compensation 66.5 64.0 260.2 251.6 Amortization of acquired intangible assets 11.5 5.3 23.1 18.9 Litigation-related matter (a) — — 3.2 — Gain on intellectual property matter (1.2) (1.2) (4.6) (4.6)Non‐GAAP operating income$650.9 $453.5 $2,085.3 $1,507.0 Non‐GAAP operating margin 39.2% 32.0% 35.0% 28.4% Reconciliation of non-GAAP net income: GAAP net income$526.2 $310.9 $1,745.2 $1,147.8 Add back: Stock‐based compensation 66.5 64.0 260.2 251.6 Amortization of acquired intangible assets 11.5 5.3 23.1 18.9 Litigation-related matter (a) — — 3.2 — Gain on intellectual property matter (1.2) (1.2) (4.6) (4.6)Gain on bargain purchase (b) — — (106.3) — Tax adjustment (c) (31.5) 13.0 (95.9) (128.1)Non-cash charge on equity method investment (d) — — 8.0 — Non-GAAP net income$571.5 $392.0 $1,832.9 $1,285.6 Non-GAAP net income per share, diluted Non-GAAP net income$571.5 $392.0 $1,832.9 $1,285.6 Non-GAAP shares used in diluted net income per share calculations 775.2 772.3 771.9 788.2 Non-GAAP net income per share, diluted$0.74 $0.51 $2.37 $1.63 Reconciliation of non-GAAP net income per share, diluted GAAP net income per share, diluted$0.68 $0.40 $2.26 $1.46 Add back: Non-GAAP adjustments to net income per share 0.06 0.11 0.11 0.17 Non-GAAP net income per share, diluted$0.74 $0.51 $2.37 $1.63 (a) To exclude a $3.2 million adjustment for a litigation settlement in the three months ended September 30, 2024.(b) To exclude a $106.3 million gain on bargain purchase related to our acquisition of Lacework Inc in the three months ended September 30, 2024.(c) Non-GAAP financial information is adjusted to an effective tax rate of 17% in the three months and year ended December 31, 2024 and 2023, respectively, on a non-GAAP basis, which differs from the GAAP effective tax rate.(d) To exclude an $8.0 million non-cash charge of impairment on our equity method investment in Linksys.
Important factors that could cause results to differ materially from the statements herein include the following: general economic risks, including those caused by economic challenges, a possible economic downturn or recession and the effects of inflation or stagflation, rising interest rates or reduced information technology spending; supply chain challenges; negative impacts from the ongoing war in Ukraine and its related macroeconomic effects and our decision to reduce operations in Russia; competitiveness in the security market; the dynamic nature of the security market and its products and services; specific economic risks worldwide and in different geographies, and among different customer segments; uncertainty regarding demand and increased business and renewals from existing customers; sales execution risks, including risks in connection with the timing and completion of large strategic deals; uncertainties around continued success in sales growth and market share gains; uncertainties in market opportunities and the market size; actual or perceived vulnerabilities in our supply chain, products or services, and any actual or perceived breach of our network or our customers’ networks; longer sales cycles, particularly for larger enterprise, service providers, government and other large organization customers; the effectiveness of our salesforce and failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; risks associated with integrating acquisitions and changes in circumstances and plans associated therewith, including, among other risks, changes in plans related to product and services integrations, product and services plans and sales strategies; sales and marketing execution risks; execution risks around new product development and introductions and innovation; litigation and disputes and the potential cost, distraction and damage to sales and reputation caused thereby or by other factors; cybersecurity threats, breaches and other disruptions; market acceptance of new products and services; the ability to attract and retain personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive, including advances in artificial intelligence; risks associated with the adoption of, and demand for, our products and services in general and by specific customer segments, including those caused by competition and pricing pressure; excess product inventory for any reason, including those caused by the effects of increased inflation and interest rates in certain geographies and the war in Ukraine; risks associated with business disruption caused by natural disasters and health emergencies such as earthquakes, fires, power outages, typhoons, floods, health epidemics and viruses, and by manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts such as the war in Ukraine or tensions between China and Taiwan, terrorism, wars, and critical infrastructure attacks; tariffs, trade disputes and other trade barriers, and negative impact on sales based on geo-political dynamics and disputes and protectionist policies, including the impact of any future shutdowns of the U.S.government and the transition in administrations; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission ("SEC”), copies of which are available free of charge at the SEC’s website at upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.
Fourth Quarter 2024 Highlights Total revenue of $1.66 billion, up 17% year over yearProduct revenue of $574 million, up 18% year over yearBillings of $2.00 billion, up 7% year over year1Record GAAP operating margin of 35% Record Non-GAAP operating margin of 39%1Unified SASE ARR2 up 28% and Security Operations ARR2 up 32%, year over yearRanked #7 on the Forbes Most Trusted Companies in America 2025 list, the only cybersecurity company in the top 50 Full Year 2024 Highlights Total revenue of $5.96 billion, up 12% year over yearService revenue of $4.05 billion, up 20% year over yearRecord GAAP operating margin of 30%Record Non-GAAP operating margin of 35%1Remaining performance obligations of $6.42 billion, up 12% year over yearCash flow from operations of $2.26 billionFree cash flow of $1.88 billion1Exceeded the Rule of 45’ for the fifth consecutive year SUNNYVALE, Calif., Feb.06, 2025 (GLOBE NEWSWIRE) -- Fortinet® (Nasdaq: FTNT), a global cybersecurity leader driving the convergence of networking and security, today announced financial results for the fourth quarter of 2024 and full year ended December 31, 2024.
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