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.

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).

Net Income and Expense Trends: Net income including non-controlling interests demonstrated a consistent upward trend over the five-year period, rising from $332.2 million in 2018 to $856.6 million in 2022. Stock-based compensation steadily increased each year, reflecting a growing allocation for employee incentives. Amortization of deferred contract costs and depreciation and amortization expenses both showed significant increases, suggesting growing capital investment and contract activations over time. The amortization of investment premiums fluctuated, with a negative value in 2019 but positive in other years. Loss from equity method investments was recorded only in 2021 and 2022, with a sharp rise to $68.1 million in 2022.
Working Capital and Assets: Accounts receivable experienced a considerable increase in net reductions, culminating in a $456.7 million decrease in 2022, indicating potentially faster collections or changes in revenue recognition. Inventory levels showed mixed trends but notably increased in net reduction in 2022. Prepaid expenses and other current assets generally declined, except for a small partial recovery in 2022. Deferred contract costs consistently increased, suggesting more contract activations or upfront costs capitalized over the years. Deferred tax assets were volatile, with a substantial negative shift in 2022. Other assets also showed a declining trend.
Liabilities: Accounts payable showed variability, including a negative balance in 2021 but rebounding strongly in 2022. Accrued liabilities and accrued payroll and compensation increased overall, which might reflect rising expenses or accrued obligations. Other liabilities fluctuated but sharply increased in 2022. Deferred revenue demonstrated a pronounced upward trend, almost tripling from $352.1 million in 2018 to $1.18 billion in 2022, indicating significant growth in unearned income and future service obligations.
Cash Flow from Operating Activities: Changes in operating assets and liabilities increased substantially, peaking in 2021. Adjustments to reconcile net income to net cash provided by operating activities also rose markedly each year. Consequently, net cash provided by operating activities showed a strong and steady increase, from $638.9 million in 2018 to $1.73 billion in 2022, illustrating improving operational cash generation capability.
Investing Activities: Purchases of investments increased notably, reaching $3.89 billion in 2022, indicating aggressive investment activity. Sales and maturities of investments showed fluctuations, with maturities peaking in 2021. Capital expenditures on property and equipment rose significantly in 2021 but slightly decreased in 2022 while remaining materially higher than earlier years, indicating continued infrastructure growth. Payments for business combinations and investments in privately held companies were intermittent, with notable activity in 2021. Net cash used in investing activities was negative in most years except for a positive $763.9 million in 2022, suggesting a partial recovery or divestiture that year.
Financing Activities: Proceeds from long-term borrowings were only recorded in 2021, amounting to $989.4 million. Debt issuance costs and payments of assumed debt related to business combinations were relatively minor but consistent. Share repurchases increased substantially over time, peaking at $1.99 billion in 2022, indicating an aggressive program to return capital to shareholders or reduce outstanding shares. Issuance of common stock was relatively stable but modest. Taxes paid related to net share settlements of equity awards increased over the period. Overall, net cash used in financing activities was negative in four of the five years, with a large outflow in 2022, reflecting high share repurchase activity overpowering other financing inflows.
Liquidity and Cash Position: Cash and cash equivalents showed overall growth from $811 million at the start of 2018 to $1.68 billion at the end of 2022, despite fluctuations during 2020 when a decline was observed. The company demonstrated strong liquidity expansion, supplemented by increased net cash provided by operating activities and strategic investment and financing decisions.

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Fortinet Inc. (NASDAQ:FTNT)

Cash Flow Statement