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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Fortinet Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	1,822,720)	1,371,124)	966,259)	773,545)	554,165)
Cost of capital²	16.02%	16.02%	16.29%	16.28%	16.26%
Invested capital³	4,282,000)	3,286,100)	2,218,800)	2,227,800)	1,886,300)

Economic profit⁴	1,136,569)	844,634)	604,862)	410,889)	247,458)

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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,822,720 – 16.02% × 4,282,000 = 1,136,569

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Fortinet Inc. economic profit increased from 2020 to 2021 and from 2021 to 2022.

Fortinet Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to Fortinet, Inc.	857,300)	606,800)	488,500)	326,500)	332,200)
Deferred income tax expense (benefit)¹	(225,600)	(92,400)	(7,100)	30,200)	(107,600)
Increase (decrease) in allowance for credit losses²	1,200)	(100)	1,300)	300)	—)
Increase (decrease) in deferred revenue³	1,187,400)	847,600)	496,200)	449,100)	350,500)
Increase (decrease) in equity equivalents⁴	963,000)	755,100)	490,400)	479,600)	242,900)
Interest expense	18,000)	14,900)	—)	—)	—)
Interest expense, operating lease liability⁵	3,350)	1,403)	1,699)	1,291)	—)
Adjusted interest expense	21,350)	16,303)	1,699)	1,291)	—)
Tax benefit of interest expense⁶	(4,483)	(3,424)	(357)	(271)	—)
Adjusted interest expense, after taxes⁷	16,866)	12,879)	1,342)	1,020)	—)
Interest income	(17,400)	(4,500)	(17,700)	(42,500)	(26,500)
Investment income, before taxes	(17,400)	(4,500)	(17,700)	(42,500)	(26,500)
Tax expense (benefit) of investment income⁸	3,654)	945)	3,717)	8,925)	5,565)
Investment income, after taxes⁹	(13,746)	(3,555)	(13,983)	(33,575)	(20,935)
Net income (loss) attributable to noncontrolling interest	(700)	(100)	—)	—)	—)
Net operating profit after taxes (NOPAT)	1,822,720)	1,371,124)	966,259)	773,545)	554,165)

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).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to Fortinet, Inc..

⁵ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 95,700 × 3.50% = 3,350

⁶ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 21,350 × 21.00% = 4,483

⁷ Addition of after taxes interest expense to net income attributable to Fortinet, Inc..

⁸ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 17,400 × 21.00% = 3,654

⁹ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Fortinet Inc. NOPAT increased from 2020 to 2021 and from 2021 to 2022.

Fortinet Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for (benefit from) income taxes	30,800)	14,100)	53,200)	52,700)	(81,300)
Less: Deferred income tax expense (benefit)	(225,600)	(92,400)	(7,100)	30,200)	(107,600)
Add: Tax savings from interest expense	4,483)	3,424)	357)	271)	—)
Less: Tax imposed on investment income	3,654)	945)	3,717)	8,925)	5,565)
Cash operating taxes	257,229)	108,979)	56,940)	13,846)	20,735)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Fortinet Inc. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

Fortinet Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Long-term debt	990,400)	988,400)	—)	—)	—)
Operating lease liability¹	95,700)	66,800)	53,100)	46,100)	50,100)
Total reported debt & leases	1,086,100)	1,055,200)	53,100)	46,100)	50,100)
Total Fortinet, Inc. stockholders’ equity (deficit)	(281,600)	781,700)	856,000)	1,321,900)	1,010,200)
Net deferred tax (assets) liabilities²	(561,300)	(334,300)	(237,200)	(227,600)	(246,000)
Allowance for credit losses³	3,600)	2,400)	2,500)	1,200)	900)
Deferred revenue⁴	4,640,300)	3,452,900)	2,605,300)	2,135,900)	1,686,800)
Equity equivalents⁵	4,082,600)	3,121,000)	2,370,600)	1,909,500)	1,441,700)
Accumulated other comprehensive (income) loss, net of tax⁶	20,200)	4,800)	(700)	(1,100)	800)
Non-controlling interests	—)	16,700)	—)	—)	—)
Adjusted total Fortinet, Inc. stockholders’ equity (deficit)	3,821,200)	3,924,200)	3,225,900)	3,230,300)	2,452,700)
Construction-in-progress⁷	(51,700)	(19,900)	(166,400)	(61,200)	(12,300)
Marketable securities⁸	(573,600)	(1,673,400)	(893,800)	(987,400)	(604,200)
Invested capital	4,282,000)	3,286,100)	2,218,800)	2,227,800)	1,886,300)

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).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of equity equivalents to total Fortinet, Inc. stockholders’ equity (deficit).

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction-in-progress.

⁸ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Fortinet Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

Fortinet Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	46,150,142)	46,150,142)	÷	47,075,342)	=	0.98	0.98	×	16.31%	=	15.99%
Long-term debt³	829,500)	829,500)	÷	47,075,342)	=	0.02	0.02	×	1.80% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	95,700)	95,700)	÷	47,075,342)	=	0.00	0.00	×	3.50% × (1 – 21.00%)	=	0.01%
Total:	47,075,342)					1.00					16.02%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,256,979)	52,256,979)	÷	53,304,279)	=	0.98	0.98	×	16.31%	=	15.99%
Long-term debt³	980,500)	980,500)	÷	53,304,279)	=	0.02	0.02	×	1.80% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	66,800)	66,800)	÷	53,304,279)	=	0.00	0.00	×	2.10% × (1 – 21.00%)	=	0.00%
Total:	53,304,279)					1.00					16.02%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,060,679)	28,060,679)	÷	28,113,779)	=	1.00	1.00	×	16.31%	=	16.28%
Long-term debt³	—)	—)	÷	28,113,779)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	53,100)	53,100)	÷	28,113,779)	=	0.00	0.00	×	3.20% × (1 – 21.00%)	=	0.00%
Total:	28,113,779)					1.00					16.29%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,329,689)	18,329,689)	÷	18,375,789)	=	1.00	1.00	×	16.31%	=	16.27%
Long-term debt³	—)	—)	÷	18,375,789)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	46,100)	46,100)	÷	18,375,789)	=	0.00	0.00	×	2.80% × (1 – 21.00%)	=	0.01%
Total:	18,375,789)					1.00					16.28%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	14,998,700)	14,998,700)	÷	15,048,800)	=	1.00	1.00	×	16.31%	=	16.26%
Long-term debt³	—)	—)	÷	15,048,800)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	50,100)	50,100)	÷	15,048,800)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Total:	15,048,800)					1.00					16.26%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Fortinet Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,136,569)	844,634)	604,862)	410,889)	247,458)
Invested capital²	4,282,000)	3,286,100)	2,218,800)	2,227,800)	1,886,300)
Performance Ratio
Economic spread ratio³	26.54%	25.70%	27.26%	18.44%	13.12%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	7.21%	9.04%	9.62%	8.36%	—
Adobe Inc.	9.48%	11.88%	4.15%	2.26%	—
Cadence Design Systems Inc.	8.93%	9.16%	9.97%	—	—
CrowdStrike Holdings Inc.	-3.41%	-5.68%	5.18%	—	—
International Business Machines Corp.	-10.26%	-5.21%	-4.87%	—	—
Intuit Inc.	-6.60%	1.08%	4.45%	18.07%	—
Microsoft Corp.	23.08%	32.09%	30.13%	25.27%	—
Oracle Corp.	-1.83%	6.25%	0.60%	3.19%	—
Palantir Technologies Inc.	-40.73%	-48.21%	-88.21%	—	—
Palo Alto Networks Inc.	5.37%	-3.32%	-4.28%	-1.14%	—
Salesforce Inc.	-11.14%	-8.87%	-11.89%	—	—
ServiceNow Inc.	3.03%	4.24%	5.86%	—	—
Synopsys Inc.	2.06%	-3.96%	-3.78%	-6.76%	—

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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,136,569 ÷ 4,282,000 = 26.54%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Fortinet Inc. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 not reaching 2020 level.

Fortinet Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,136,569)	844,634)	604,862)	410,889)	247,458)

Revenue	4,417,400)	3,342,200)	2,594,400)	2,156,200)	1,801,200)
Add: Increase (decrease) in deferred revenue	1,187,400)	847,600)	496,200)	449,100)	350,500)
Adjusted revenue	5,604,800)	4,189,800)	3,090,600)	2,605,300)	2,151,700)
Performance Ratio
Economic profit margin²	20.28%	20.16%	19.57%	15.77%	11.50%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	3.47%	4.64%	4.89%	3.86%	—
Adobe Inc.	11.04%	14.80%	5.96%	3.40%	—
Cadence Design Systems Inc.	8.91%	9.30%	10.04%	—	—
CrowdStrike Holdings Inc.	-5.35%	-11.81%	4.55%	—	—
International Business Machines Corp.	-17.82%	-9.94%	-8.46%	—	—
Intuit Inc.	-12.70%	1.37%	5.01%	12.04%	—
Microsoft Corp.	22.12%	26.64%	22.37%	18.69%	—
Oracle Corp.	-3.36%	12.35%	1.36%	5.82%	—
Palantir Technologies Inc.	-68.33%	-79.41%	-179.69%	—	—
Palo Alto Networks Inc.	6.25%	-4.47%	-6.94%	-1.26%	—
Salesforce Inc.	-30.94%	-20.34%	-29.26%	—	—
ServiceNow Inc.	2.43%	3.67%	4.78%	—	—
Synopsys Inc.	2.90%	-6.31%	-6.50%	-11.68%	—

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).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 1,136,569 ÷ 5,604,800 = 20.28%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Fortinet Inc. economic profit margin improved from 2020 to 2021 and from 2021 to 2022.

Fortinet Inc. (NASDAQ:FTNT)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin