Name: Fortinet Inc. (NASDAQ:FTNT) | Cash Flow Statement
Creator: Stock Analysis on Net

Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

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Fortinet Inc., consolidated cash flow statement

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income including non-controlling interests	856,600)	606,700)	488,500)	326,500)	332,200)
Stock-based compensation	217,300)	207,900)	191,700)	174,100)	162,900)
Amortization of deferred contract costs	223,300)	175,900)	137,400)	107,900)	90,900)
Depreciation and amortization	104,300)	84,400)	68,800)	61,600)	55,700)
Amortization of investment premiums (discounts)	4,400)	6,900)	1,300)	(6,000)	(600)
Loss from equity method investment	68,100)	7,600)	—)	—)	—)
Other	23,600)	7,900)	6,000)	5,700)	(900)
Accounts receivable, net	(456,700)	(72,500)	(176,400)	(96,700)	(82,000)
Inventory	(109,100)	(19,400)	(42,200)	(48,500)	(33,400)
Prepaid expenses and other current assets	(7,700)	(17,700)	(2,800)	(2,100)	4,200)
Deferred contract costs	(318,200)	(294,500)	(205,100)	(162,300)	(136,400)
Deferred tax assets	(226,400)	(94,000)	(10,500)	17,800)	(127,800)
Other assets	(35,300)	(19,000)	(4,600)	(1,300)	(3,800)
Accounts payable	105,200)	(13,100)	37,400)	7,700)	14,600)
Accrued liabilities	55,200)	49,900)	45,800)	(20,200)	8,500)
Accrued payroll and compensation	25,000)	44,000)	43,100)	(2,700)	3,500)
Other liabilities	23,500)	(700)	9,700)	(200)	(800)
Deferred revenue	1,177,500)	839,400)	495,600)	446,700)	352,100)
Changes in operating assets and liabilities, net of impact of business combinations	233,000)	402,400)	190,000)	138,200)	(1,300)
Adjustments to reconcile net income to net cash provided by operating activities	874,000)	893,000)	595,200)	481,500)	306,700)
Net cash provided by operating activities	1,730,600)	1,499,700)	1,083,700)	808,000)	638,900)
Purchases of investments	(389,100)	(2,308,000)	(1,079,000)	(1,332,300)	(681,800)
Sales of investments	3,000)	85,500)	152,200)	31,300)	42,800)
Maturities of investments	1,462,000)	1,470,300)	1,018,800)	925,500)	578,800)
Purchases of property and equipment	(281,200)	(295,900)	(125,900)	(92,200)	(53,000)
Investment in privately held company	—)	(160,000)	—)	—)	—)
Payments made in connection with business combinations, net of cash acquired	(30,800)	(74,900)	(40,200)	(34,600)	(21,700)
Purchases of marketable equity securities	—)	(42,500)	—)	—)	—)
Other	—)	400)	1,300)	—)	—)
Net cash (used in) provided by investing activities	763,900)	(1,325,100)	(72,800)	(502,300)	(134,900)
Proceeds from long-term borrowings, net of discount and underwriting fees	—)	989,400)	—)	—)	—)
Payments for debt issuance costs	—)	(2,400)	—)	—)	—)
Payments of debt assumed in connection with business combination	—)	(19,500)	(4,100)	(3,700)	(10,100)
Repurchase and retirement of common stock	(1,991,200)	(741,800)	(1,080,100)	(145,100)	(211,800)
Proceeds from issuance of common stock	26,100)	26,000)	22,100)	49,500)	86,500)
Taxes paid related to net share settlement of equity awards	(160,400)	(167,900)	(108,200)	(96,000)	(67,200)
Other	(4,800)	(1,000)	(1,300)	(300)	—)
Net cash provided by (used in) financing activities	(2,130,300)	82,800)	(1,171,600)	(195,600)	(202,600)
Effect of exchange rate changes on cash and cash equivalents	(400)	(100)	—)	—)	—)
Net increase (decrease) in cash and cash equivalents	363,800)	257,300)	(160,700)	110,100)	301,400)
Cash and cash equivalents, beginning of year	1,319,100)	1,061,800)	1,222,500)	1,112,400)	811,000)
Cash and cash equivalents, end of year	1,682,900)	1,319,100)	1,061,800)	1,222,500)	1,112,400)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The financial trajectory from 2018 to 2022 is characterized by a consistent and significant increase in cash generation from operations, coupled with an aggressive capital return strategy through share repurchases.

Operating Cash Flow Generation: Net cash provided by operating activities exhibited steady growth over the five-year period, rising from 638.9 million US dollars in 2018 to 1.73 billion US dollars in 2022. This growth was supported by a substantial increase in net income, which climbed from 332.2 million US dollars to 856.6 million US dollars. The ability to generate cash significantly in excess of net income is further highlighted by the adjustments to reconcile net income, which peaked at 893 million US dollars in 2021.
Working Capital and Revenue Recognition: A primary driver of operating cash flow is the marked increase in deferred revenue, which grew from 352.1 million US dollars in 2018 to 1.177 billion US dollars in 2022. This suggests a strong growth trend in prepaid contracts or subscription-based services. Conversely, a significant cash outflow was noted in 2022 due to a substantial increase in accounts receivable, which reached 456.7 million US dollars, indicating a potential lag in collections relative to the growth in revenue.
Investment Activity and Capital Expenditures: Expenditures for property and equipment showed a general upward trend, increasing from 53 million US dollars in 2018 to a peak of 295.9 million US dollars in 2021, before slightly moderating to 281.2 million US dollars in 2022. Investing activities were highly volatile, influenced by the strategic movement of funds between marketable securities and cash. In 2022, a net cash inflow from investing activities of 763.9 million US dollars was primarily driven by 1.46 billion US dollars in investment maturities.
Financing Strategy and Shareholder Returns: Financing activities are dominated by a robust share repurchase program. Repurchases and retirement of common stock surged over the period, reaching a peak of 1.99 billion US dollars in 2022. To support liquidity and operational needs, the company secured 989.4 million US dollars through long-term borrowings in 2021. The net cash used in financing activities reached 2.13 billion US dollars in 2022, reflecting a prioritized commitment to returning capital to shareholders.
Liquidity Position: Despite the aggressive expenditure on share buybacks, the overall cash and cash equivalents position strengthened. The end-of-year balance increased from 1.11 billion US dollars in 2018 to 1.68 billion US dollars in 2022, indicating that operating cash flows are sufficient to fund both capital expenditures and shareholder returns while simultaneously growing the cash reserve.

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