Fortinet Q4 FY12/24 Earnings Review

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Keeping it Simple

By Hermit Warrior

More often than not, success is measured by simplicity. Simple ingredients transformed into a delicious meal, a simple message into a wildly successful campaign, or a small slab of glass and metal (with three buttons) into the most successful consumer electronics product ever developed. You get the picture.

Fortinet ($FTNT) has baked simplicity into their business model - and incorporated it into their messaging - to great effect judging from their results.

Ironically, given the popular narrative that software eats hardware, Fortinet has been able to convince customers that a physical box at each of their locations - now called a 'next generation' firewall (NGFW) - is the building block for a whole stack of additional services that can help them keep up with an ever changing security 'threatscape'. 

The keeping it simple part - from the customer perspective at least - is what this single box can do. This from the Q4 earnings prepared remarks delivered by CEO Ken Xie:

Existing firewall and SD-WAN customers can deploy FortiSASE in the cloud or on premise within minutes.

This is where the software comes in. Built into each device is a software stack capable of delivering virtually all of the additional security services available to customers - activated "within minutes" and without the need for additional hardware (and at very healthy margins). The unified FortiOS operating system provides a consistent user interface and 'dashboard', further aligning with the theme of simplicity.

Let's look at the Headlines.

Q4 revenue growth picked up, marking the third consecutive quarter of acceleration, and growing faster than arch-rival Palo Alto Networks ($PANW) for the first time since mid 2023 - although the guide for Q1 is for the growth rate to moderate.

EBITDA and unlevered free cashflow (UFCF) margins continued their steady upward trajectory and helped net cash tick up to over $3 billion. Overall a very solid quarter.