Billion Dollar Unicorns: Can Fortinet Get To $10 Billion In Revenue?

I interviewed the CEO of Fortinet Ken Xie way back in 2010, a year after it went public. Ken had also co-founded NetScreen, which was acquired by Juniper for $4 billion stock in 2004 when it had revenue of $200 million. Both companies bootstrapped first and raised money later. Today, Fortinet (Nasdaq: FTNT) is a global leader in broad, automated, and integrated cyber security solutions with a market cap of close to $10 billion.

Fortinet’s Financials

Sunnyvale, California-based Fortinet was founded in 2000 by brothers Ken and Michael Xie. Fortinet provides cyber security solutions to enterprises, service providers, and government organizations across the world. Its flagship network security solutions include FortiGate physical, virtual machine, and cloud platforms, which provide integrated security and networking functions to protect data, applications, and users from network-and content-level security threats.

Fortinet has four focus areas: FortiGate network security appliances; Fortinet Security Fabric for unified security across the entire digital attack surface; cloud security with FortiCASB, which is available across all major cloud providers, including Microsoft Azure, Amazon Web Services, Google Cloud, IBM Cloud and Oracle Cloud; and IoT.

Fortinet recently reported fourth quarter results that beat earnings and revenue estimates. Q4 revenue was $416.7 million, up 15%. GAAP net loss was $29 million, impacted by a one-time tax expense of $63 million. Non GAAP net income was $55.5 million or $0.32 per share. Analysts estimated earnings of $0.29 per share on revenue of $409.1 million.

Product revenue was $162.1 million, up 2% compared and Service revenue grew 25% to $254.6 million. Service revenue is generated primarily from FortiCare technical support services and FortiGuard security subscription services. A small portion of services revenue is also generated from professional services and training services.

For the full year 2017, revenue increased 17% to $1.49 billion. GAAP net income was $31.4 million for 2017, compared to GAAP net income of $32.2 million for 2016. Non-GAAP net income was $184.7 million for 2017, compared to non-GAAP net income of $129.5 million for 2016.