Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Fortinet Inc., solvency ratios
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 solvency profile indicates a significant transition in the capital structure beginning in 2021, characterized by a marked increase in debt utilization. While leverage ratios have risen, coverage metrics remain strong, suggesting that the company maintains sufficient capacity to service its obligations despite the higher debt load.
- Debt Leverage Ratios
- A substantial increase in leverage is evident starting in 2021. The debt to equity ratio, including operating lease liabilities, rose from 0.06 in 2020 to 1.35 in 2021. Similarly, the debt to capital ratio expanded from 0.56 in 2021 to 1.40 by the end of 2022. This suggests a strategic shift toward debt financing during this period.
- Asset-Based Solvency
- Despite the rise in absolute debt levels, the debt to assets ratio remains relatively low and stable, moving from 0.17 in 2021 to 0.16 in 2022. This indicates that a small fraction of the total asset base is financed through debt, providing a significant buffer against insolvency.
- Financial Leverage and Coverage
- Financial leverage showed a consistent upward trend from 2019 to 2021, increasing from 2.94 to 7.57. However, the company's ability to manage this leverage is supported by high coverage ratios. Interest coverage improved from 42.66 in 2021 to 50.30 in 2022, indicating a very high capacity to meet interest payments. Fixed charge coverage peaked at 30.28 in 2020 before stabilizing between 16.00 and 17.11 in 2021 and 2022.
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Debt to Equity
Fortinet Inc., debt to equity 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) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Total Fortinet, Inc. stockholders’ equity (deficit) | (281,600) | 781,700) | 856,000) | 1,321,900) | 1,010,200) | |
| Solvency Ratio | ||||||
| Debt to equity1 | — | 1.26 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.29 | 0.28 | 0.31 | — | — | |
| AppLovin Corp. | 1.72 | 1.53 | — | — | — | |
| Cadence Design Systems Inc. | 0.27 | 0.13 | — | — | — | |
| Datadog Inc. | 0.52 | 0.71 | — | — | — | |
| International Business Machines Corp. | 2.32 | 2.74 | — | — | — | |
| Intuit Inc. | 0.42 | 0.21 | — | — | — | |
| Microsoft Corp. | 0.39 | 0.50 | — | — | — | |
| Oracle Corp. | — | 16.08 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 17.51 | 5.08 | — | — | — | |
| Salesforce Inc. | 0.19 | 0.07 | — | — | — | |
| ServiceNow Inc. | 0.30 | 0.43 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.02 | 0.03 | — | — | |
| Workday Inc. | 0.41 | 0.55 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Software & Services | 0.71 | 0.83 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Information Technology | 0.70 | 0.83 | — | — | — | |
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 2022 Calculation
Debt to equity = Total debt ÷ Total Fortinet, Inc. stockholders’ equity (deficit)
= 990,400 ÷ -281,600 = —
2 Click competitor name to see calculations.
The solvency profile exhibits a significant degradation in the capital structure, characterized by a transition from a positive equity position to a stockholders' deficit over the analyzed period.
- Stockholders' Equity Trend
- Equity reached a peak of 1,321,900 thousand US dollars in 2019. Subsequently, a consistent downward trajectory was observed, with equity declining to 856,000 thousand US dollars in 2020 and further to 781,700 thousand US dollars in 2021. By December 31, 2022, the position shifted to a deficit of 281,600 thousand US dollars.
- Debt Stability
- Total debt remained relatively stable between 2021 and 2022, moving from 988,400 thousand US dollars to 990,400 thousand US dollars, indicating a minimal increase in borrowed capital during this timeframe.
- Debt to Equity Interpretation
- A debt to equity ratio of 1.26 was recorded for 2021, signifying that total debt exceeded total equity. The subsequent shift to negative equity in 2022 represents a critical solvency inflection point, as the negative balance indicates that total liabilities exceed total assets, rendering the standard debt to equity ratio mathematically negative or undefined.
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Debt to Equity (including Operating Lease Liability)
Fortinet Inc., debt to equity (including operating lease liability) 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) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Operating lease liabilities, current (classification: Accrued liabilities) | 33,200) | 26,300) | 19,100) | 15,500) | —) | |
| Operating lease liabilities, non-current (classification: Other liabilities) | 62,500) | 40,500) | 34,000) | 30,600) | —) | |
| Total debt (including operating lease liability) | 1,086,100) | 1,055,200) | 53,100) | 46,100) | —) | |
| Total Fortinet, Inc. stockholders’ equity (deficit) | (281,600) | 781,700) | 856,000) | 1,321,900) | 1,010,200) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | — | 1.35 | 0.06 | 0.03 | 0.00 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.15 | 0.18 | 0.21 | — | — | |
| Adobe Inc. | 0.33 | 0.32 | 0.35 | — | — | |
| AppLovin Corp. | 1.76 | 1.57 | — | — | — | |
| Cadence Design Systems Inc. | 0.34 | 0.18 | — | — | — | |
| Datadog Inc. | 0.59 | 0.78 | — | — | — | |
| International Business Machines Corp. | 2.46 | 2.92 | — | — | — | |
| Intuit Inc. | 0.46 | 0.25 | — | — | — | |
| Microsoft Corp. | 0.47 | 0.58 | — | — | — | |
| Oracle Corp. | — | 16.61 | — | — | — | |
| Palantir Technologies Inc. | 0.10 | 0.11 | — | — | — | |
| Palo Alto Networks Inc. | 19.12 | 5.68 | — | — | — | |
| Salesforce Inc. | 0.25 | 0.15 | — | — | — | |
| ServiceNow Inc. | 0.44 | 0.60 | — | — | — | |
| Synopsys Inc. | 0.12 | 0.13 | 0.14 | — | — | |
| Workday Inc. | 0.46 | 0.68 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.81 | 0.93 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.76 | 0.90 | — | — | — | |
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 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total Fortinet, Inc. stockholders’ equity (deficit)
= 1,086,100 ÷ -281,600 = —
2 Click competitor name to see calculations.
A significant shift in the solvency profile is observed between 2018 and 2022, characterized by a transition from a low-leverage position to a state of negative stockholders' equity and substantially higher debt levels.
- Total Debt Obligations
- Debt levels remained minimal and relatively stable through 2020, with a value of $53.1 million. A sharp increase occurred in 2021, where total debt, including operating lease liabilities, rose to $1.055 billion. This upward trajectory continued into 2022, with total debt reaching $1.086 billion.
- Stockholders' Equity Trends
- Equity reached a peak in 2019 at $1.322 billion before entering a period of steady decline. By 2021, equity had decreased to $781.7 million, and by December 31, 2022, the balance transitioned into a deficit of $281.6 million.
- Debt to Equity Ratio Analysis
- The debt-to-equity ratio highlights a rapid escalation in financial leverage. The ratio remained negligible from 2019 (0.03) to 2020 (0.06), but jumped significantly to 1.35 by 2021. The emergence of a stockholders' equity deficit in 2022 indicates that total liabilities now exceed total assets, representing a critical change in the solvency structure.
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Debt to Capital
Fortinet Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Total Fortinet, Inc. stockholders’ equity (deficit) | (281,600) | 781,700) | 856,000) | 1,321,900) | 1,010,200) | |
| Total capital | 708,800) | 1,770,100) | 856,000) | 1,321,900) | 1,010,200) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 1.40 | 0.56 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.23 | 0.22 | 0.24 | — | — | |
| AppLovin Corp. | 0.63 | 0.60 | — | — | — | |
| Cadence Design Systems Inc. | 0.21 | 0.11 | — | — | — | |
| Datadog Inc. | 0.34 | 0.41 | — | — | — | |
| International Business Machines Corp. | 0.70 | 0.73 | — | — | — | |
| Intuit Inc. | 0.30 | 0.17 | — | — | — | |
| Microsoft Corp. | 0.28 | 0.33 | — | — | — | |
| Oracle Corp. | 1.09 | 0.94 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 0.95 | 0.84 | — | — | — | |
| Salesforce Inc. | 0.16 | 0.06 | — | — | — | |
| ServiceNow Inc. | 0.23 | 0.30 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.02 | 0.03 | — | — | |
| Workday Inc. | 0.29 | 0.35 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Software & Services | 0.42 | 0.45 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Information Technology | 0.41 | 0.45 | — | — | — | |
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 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 990,400 ÷ 708,800 = 1.40
2 Click competitor name to see calculations.
The solvency profile reveals a substantial shift in the capital structure over the period ending December 31, 2022. The organization transitioned from a position with no reported debt through 2020 to a leveraged state in 2021 and 2022.
- Total Debt Trends
- Debt obligations were nonexistent or unreported from 2018 through 2020. A significant introduction of debt occurred in 2021, amounting to 988,400 thousand USD, which remained relatively stable through 2022, ending at 990,400 thousand USD.
- Total Capital Volatility
- Total capital exhibited considerable fluctuation. After increasing from 1,010,200 thousand USD in 2018 to 1,321,900 thousand USD in 2019, it declined to 856,000 thousand USD in 2020. A sharp increase followed in 2021 to 1,770,100 thousand USD, before a substantial contraction to 708,800 thousand USD by the end of 2022.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose sharply from 0.56 in 2021 to 1.40 in 2022. This increase is primarily driven by the simultaneous maintenance of high debt levels and a significant reduction in total capital during the final year of the period.
The escalation of the debt to capital ratio to 1.40 indicates that total debt now exceeds total capital. This pattern suggests a diminished equity cushion and an increased reliance on leverage, as the total capital base contracted significantly while debt obligations remained constant.
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Debt to Capital (including Operating Lease Liability)
Fortinet Inc., debt to capital (including operating lease liability) 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) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Operating lease liabilities, current (classification: Accrued liabilities) | 33,200) | 26,300) | 19,100) | 15,500) | —) | |
| Operating lease liabilities, non-current (classification: Other liabilities) | 62,500) | 40,500) | 34,000) | 30,600) | —) | |
| Total debt (including operating lease liability) | 1,086,100) | 1,055,200) | 53,100) | 46,100) | —) | |
| Total Fortinet, Inc. stockholders’ equity (deficit) | (281,600) | 781,700) | 856,000) | 1,321,900) | 1,010,200) | |
| Total capital (including operating lease liability) | 804,500) | 1,836,900) | 909,100) | 1,368,000) | 1,010,200) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 1.35 | 0.57 | 0.06 | 0.03 | 0.00 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.13 | 0.15 | 0.17 | — | — | |
| Adobe Inc. | 0.25 | 0.24 | 0.26 | — | — | |
| AppLovin Corp. | 0.64 | 0.61 | — | — | — | |
| Cadence Design Systems Inc. | 0.25 | 0.15 | — | — | — | |
| Datadog Inc. | 0.37 | 0.44 | — | — | — | |
| International Business Machines Corp. | 0.71 | 0.74 | — | — | — | |
| Intuit Inc. | 0.31 | 0.20 | — | — | — | |
| Microsoft Corp. | 0.32 | 0.37 | — | — | — | |
| Oracle Corp. | 1.08 | 0.94 | — | — | — | |
| Palantir Technologies Inc. | 0.09 | 0.10 | — | — | — | |
| Palo Alto Networks Inc. | 0.95 | 0.85 | — | — | — | |
| Salesforce Inc. | 0.20 | 0.13 | — | — | — | |
| ServiceNow Inc. | 0.31 | 0.37 | — | — | — | |
| Synopsys Inc. | 0.11 | 0.11 | 0.12 | — | — | |
| Workday Inc. | 0.32 | 0.41 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.45 | 0.48 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.43 | 0.47 | — | — | — | |
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 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 1,086,100 ÷ 804,500 = 1.35
2 Click competitor name to see calculations.
The solvency profile of the organization has undergone a significant transformation between 2019 and 2022, characterized by a substantial increase in leverage and a contraction of the capital base.
- Total Debt Trends
- Total debt, including operating lease liabilities, remained relatively stable and low through 2019 and 2020, with values of US$ 46.1 million and US$ 53.1 million, respectively. A sharp escalation occurred in 2021, as debt surged to US$ 1.055 billion, subsequently increasing slightly to US$ 1.086 billion by the end of 2022.
- Total Capital Volatility
- Total capital experienced notable fluctuations during the period. After peaking at US$ 1.368 billion in 2019 and reaching a second high of US$ 1.837 billion in 2021, the capital base declined sharply to US$ 804.5 million by December 31, 2022.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio exhibits an exponential upward trajectory. The ratio was negligible in 2019 (0.03) and 2020 (0.06), but rose significantly to 0.57 in 2021. By 2022, the ratio reached 1.35, indicating that total debt has surpassed total capital. This trend reflects a fundamental shift in the capital structure, moving from a nearly debt-free position to one characterized by high leverage and increased solvency risk.
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Debt to Assets
Fortinet Inc., debt to assets 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) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Total assets | 6,228,000) | 5,919,100) | 4,044,500) | 3,885,500) | 3,078,000) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.16 | 0.17 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Accenture PLC | 0.00 | 0.00 | 0.00 | — | — | |
| Adobe Inc. | 0.15 | 0.15 | 0.17 | — | — | |
| AppLovin Corp. | 0.56 | 0.53 | — | — | — | |
| Cadence Design Systems Inc. | 0.15 | 0.08 | — | — | — | |
| Datadog Inc. | 0.25 | 0.31 | — | — | — | |
| International Business Machines Corp. | 0.40 | 0.39 | — | — | — | |
| Intuit Inc. | 0.25 | 0.13 | — | — | — | |
| Microsoft Corp. | 0.18 | 0.21 | — | — | — | |
| Oracle Corp. | 0.69 | 0.64 | — | — | — | |
| Palantir Technologies Inc. | 0.00 | 0.00 | — | — | — | |
| Palo Alto Networks Inc. | 0.30 | 0.31 | — | — | — | |
| Salesforce Inc. | 0.12 | 0.04 | — | — | — | |
| ServiceNow Inc. | 0.11 | 0.15 | — | — | — | |
| Synopsys Inc. | 0.00 | 0.01 | 0.02 | — | — | |
| Workday Inc. | 0.18 | 0.21 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Software & Services | 0.26 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Information Technology | 0.26 | 0.29 | — | — | — | |
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 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 990,400 ÷ 6,228,000 = 0.16
2 Click competitor name to see calculations.
The financial data indicates a period of consistent growth in the asset base accompanied by a stable debt profile in the most recent reporting years, leading to a slight improvement in the solvency position.
- Total Asset Growth
- A steady upward trajectory in total assets is observed from 2018 to 2022. The asset base grew from 3,078,000 thousand US dollars in 2018 to 6,228,000 thousand US dollars by the end of 2022. A significant acceleration in asset accumulation occurred between 2020 and 2021, where assets increased from 4,044,500 thousand US dollars to 5,919,100 thousand US dollars.
- Debt Stability and Solvency Ratio
- Total debt remained nearly constant between 2021 and 2022, moving from 988,400 thousand US dollars to 990,400 thousand US dollars. Because the growth in total assets outpaced the marginal increase in debt during this period, the debt to assets ratio experienced a downward trend, decreasing from 0.17 in 2021 to 0.16 in 2022. This indicates that a smaller proportion of the company's assets is financed through debt, reflecting a strengthened solvency profile.
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Debt to Assets (including Operating Lease Liability)
Fortinet Inc., debt to assets (including operating lease liability) 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) | ||||||
| Long-term debt | 990,400) | 988,400) | —) | —) | —) | |
| Total debt | 990,400) | 988,400) | —) | —) | —) | |
| Operating lease liabilities, current (classification: Accrued liabilities) | 33,200) | 26,300) | 19,100) | 15,500) | —) | |
| Operating lease liabilities, non-current (classification: Other liabilities) | 62,500) | 40,500) | 34,000) | 30,600) | —) | |
| Total debt (including operating lease liability) | 1,086,100) | 1,055,200) | 53,100) | 46,100) | —) | |
| Total assets | 6,228,000) | 5,919,100) | 4,044,500) | 3,885,500) | 3,078,000) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.17 | 0.18 | 0.01 | 0.01 | 0.00 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Accenture PLC | 0.07 | 0.08 | 0.09 | — | — | |
| Adobe Inc. | 0.17 | 0.17 | 0.19 | — | — | |
| AppLovin Corp. | 0.57 | 0.54 | — | — | — | |
| Cadence Design Systems Inc. | 0.18 | 0.11 | — | — | — | |
| Datadog Inc. | 0.28 | 0.34 | — | — | — | |
| International Business Machines Corp. | 0.42 | 0.42 | — | — | — | |
| Intuit Inc. | 0.27 | 0.16 | — | — | — | |
| Microsoft Corp. | 0.21 | 0.25 | — | — | — | |
| Oracle Corp. | 0.73 | 0.66 | — | — | — | |
| Palantir Technologies Inc. | 0.07 | 0.08 | — | — | — | |
| Palo Alto Networks Inc. | 0.33 | 0.35 | — | — | — | |
| Salesforce Inc. | 0.15 | 0.10 | — | — | — | |
| ServiceNow Inc. | 0.17 | 0.21 | — | — | — | |
| Synopsys Inc. | 0.07 | 0.08 | 0.08 | — | — | |
| Workday Inc. | 0.20 | 0.26 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Software & Services | 0.30 | 0.32 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Information Technology | 0.29 | 0.31 | — | — | — | |
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 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 1,086,100 ÷ 6,228,000 = 0.17
2 Click competitor name to see calculations.
Total assets exhibited a consistent growth trajectory from 2018 to 2022, increasing from $3.078 billion to $6.228 billion. This expansion in the asset base provided a foundation for the company's shifting solvency profile, particularly during a period of significant debt acquisition.
- Debt Accumulation Trends
- Total debt, including operating lease liabilities, remained minimal between 2019 and 2020, moving from $46.1 million to $53.1 million. A substantial increase occurred in 2021, with total debt rising to $1.055 billion, before reaching $1.086 billion by the end of 2022. This represents a sharp transition from a low-leverage capital structure to one with significantly higher borrowed funds.
- Debt to Assets Ratio Analysis
- The debt to assets ratio remained stagnant at 0.01 during 2019 and 2020, indicating that debt represented a negligible portion of the total asset base. In 2021, the ratio increased sharply to 0.18, reflecting the impact of the debt surge. By 2022, the ratio moderated slightly to 0.17, as the growth in total assets began to offset the continued incremental increase in debt.
- Solvency and Leverage Insights
- The data indicates a strategic shift in leverage in 2021. Despite the magnitude of the increase in total debt, the resulting debt to assets ratio of 0.17 suggests that the company remains in a strong solvency position, with assets significantly exceeding total debt obligations. The stability of the ratio between 2021 and 2022 demonstrates a balanced growth between liabilities and asset acquisition.
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Financial Leverage
Fortinet Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Total assets | 6,228,000) | 5,919,100) | 4,044,500) | 3,885,500) | 3,078,000) | |
| Total Fortinet, Inc. stockholders’ equity (deficit) | (281,600) | 781,700) | 856,000) | 1,321,900) | 1,010,200) | |
| Solvency Ratio | ||||||
| Financial leverage1 | — | 7.57 | 4.72 | 2.94 | 3.05 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Accenture PLC | 2.14 | 2.21 | 2.18 | — | — | |
| Adobe Inc. | 1.93 | 1.84 | 1.83 | — | — | |
| AppLovin Corp. | 3.07 | 2.88 | — | — | — | |
| Cadence Design Systems Inc. | 1.87 | 1.60 | — | — | — | |
| Datadog Inc. | 2.13 | 2.29 | — | — | — | |
| International Business Machines Corp. | 5.80 | 6.98 | — | — | — | |
| Intuit Inc. | 1.69 | 1.57 | — | — | — | |
| Microsoft Corp. | 2.19 | 2.35 | — | — | — | |
| Oracle Corp. | — | 25.03 | — | — | — | |
| Palantir Technologies Inc. | 1.35 | 1.42 | — | — | — | |
| Palo Alto Networks Inc. | 58.35 | 16.14 | — | — | — | |
| Salesforce Inc. | 1.64 | 1.60 | — | — | — | |
| ServiceNow Inc. | 2.64 | 2.92 | — | — | — | |
| Synopsys Inc. | 1.71 | 1.65 | 1.64 | — | — | |
| Workday Inc. | 2.31 | 2.66 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Software & Services | 2.72 | 2.95 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Information Technology | 2.65 | 2.87 | — | — | — | |
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 2022 Calculation
Financial leverage = Total assets ÷ Total Fortinet, Inc. stockholders’ equity (deficit)
= 6,228,000 ÷ -281,600 = —
2 Click competitor name to see calculations.
An analysis of the company's capital structure between 2018 and 2022 reveals a significant divergence between asset growth and equity retention, resulting in a heightened solvency risk profile.
- Asset Expansion
- Total assets demonstrated consistent growth over the five-year period, rising from $3.08 billion in 2018 to $6.23 billion by the end of 2022. A notable acceleration in asset accumulation occurred between 2020 and 2021, during which assets increased from $4.04 billion to $5.92 billion.
- Equity Erosion and Deficit
- Stockholders' equity followed a contrasting trajectory to assets. After peaking at $1.32 billion in 2019, equity declined steadily over the subsequent three years. This trend culminated in a stockholders' deficit of $281.6 million by December 31, 2022, indicating that total liabilities exceeded total assets.
- Financial Leverage Acceleration
- The financial leverage ratio remained relatively stable between 2018 and 2019, moving slightly from 3.05 to 2.94. However, a sharp upward trend emerged thereafter, with the ratio climbing to 4.72 in 2020 and further escalating to 7.57 in 2021. This indicates a rapid increase in the proportion of debt or other liabilities used to finance assets relative to equity.
The combined effect of expanding total assets and a diminishing equity base resulted in a transition to a negative equity position by the end of 2022. The aggressive increase in financial leverage leading up to this deficit suggests a strategic or operational shift toward higher financial risk to support balance sheet growth.
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Interest Coverage
Fortinet Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to Fortinet, Inc. | 857,300) | 606,800) | 488,500) | 326,500) | 332,200) | |
| Add: Net income attributable to noncontrolling interest | (700) | (100) | —) | —) | —) | |
| Add: Income tax expense | 30,800) | 14,100) | 53,200) | 52,700) | (81,300) | |
| Add: Interest expense | 18,000) | 14,900) | —) | —) | —) | |
| Earnings before interest and tax (EBIT) | 905,400) | 635,700) | 541,700) | 379,200) | 250,900) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 50.30 | 42.66 | — | — | — | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Accenture PLC | 195.34 | 131.46 | 205.84 | — | — | |
| Adobe Inc. | 54.64 | 51.49 | 37.00 | — | — | |
| AppLovin Corp. | -0.19 | 1.45 | — | — | — | |
| Cadence Design Systems Inc. | 46.58 | 46.26 | — | — | — | |
| Datadog Inc. | -1.30 | 0.12 | — | — | — | |
| International Business Machines Corp. | 1.97 | 5.20 | — | — | — | |
| Intuit Inc. | 32.38 | 89.14 | — | — | — | |
| Microsoft Corp. | 41.58 | 31.31 | — | — | — | |
| Oracle Corp. | 3.84 | 6.28 | — | — | — | |
| Palantir Technologies Inc. | -87.97 | -133.20 | — | — | — | |
| Palo Alto Networks Inc. | -6.56 | -1.85 | — | — | — | |
| Salesforce Inc. | 7.93 | 21.49 | — | — | — | |
| ServiceNow Inc. | 15.78 | 9.89 | — | — | — | |
| Synopsys Inc. | 657.96 | 240.38 | 125.16 | — | — | |
| Workday Inc. | 1.97 | -3.00 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Software & Services | 17.77 | 17.09 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Information Technology | 22.18 | 19.66 | — | — | — | |
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 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 905,400 ÷ 18,000 = 50.30
2 Click competitor name to see calculations.
The financial performance from 2018 through 2022 is characterized by a consistent and significant expansion in operating profitability, which has substantially strengthened the company's solvency position.
- Earnings Before Interest and Tax (EBIT) Trend
- A continuous upward trajectory in EBIT is observed, rising from 250,900 thousand US$ in 2018 to 905,400 thousand US$ in 2022. This growth indicates a robust increase in operational earnings over the five-year period, providing an expanded capital base to cover financial obligations.
- Interest Expense and Coverage Analysis
- Interest expenses were recorded at 14,900 thousand US$ in 2021 and increased to 18,000 thousand US$ in 2022. Despite this increase in absolute interest costs, the interest coverage ratio improved from 42.66 to 50.30. This upward trend in the ratio confirms that the growth in EBIT has significantly outpaced the increase in interest expenses.
- Solvency Implications
- The recorded interest coverage ratios for 2021 and 2022 indicate an exceptionally high capacity to service debt using operating profits. The progression toward a ratio of 50.30 suggests minimal credit risk and a very strong margin of safety regarding the company's ability to meet its interest payments.
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Fixed Charge Coverage
Fortinet Inc., fixed charge coverage 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) | ||||||
| Net income attributable to Fortinet, Inc. | 857,300) | 606,800) | 488,500) | 326,500) | 332,200) | |
| Add: Net income attributable to noncontrolling interest | (700) | (100) | —) | —) | —) | |
| Add: Income tax expense | 30,800) | 14,100) | 53,200) | 52,700) | (81,300) | |
| Add: Interest expense | 18,000) | 14,900) | —) | —) | —) | |
| Earnings before interest and tax (EBIT) | 905,400) | 635,700) | 541,700) | 379,200) | 250,900) | |
| Add: Operating lease expense | 37,100) | 26,500) | 18,500) | 15,300) | 17,100) | |
| Earnings before fixed charges and tax | 942,500) | 662,200) | 560,200) | 394,500) | 268,000) | |
| Interest expense | 18,000) | 14,900) | —) | —) | —) | |
| Operating lease expense | 37,100) | 26,500) | 18,500) | 15,300) | 17,100) | |
| Fixed charges | 55,100) | 41,400) | 18,500) | 15,300) | 17,100) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 17.11 | 16.00 | 30.28 | 25.78 | 15.67 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Accenture PLC | 12.25 | 10.41 | 9.66 | — | — | |
| Adobe Inc. | 26.79 | 25.59 | 18.77 | — | — | |
| AppLovin Corp. | -0.07 | 1.35 | — | — | — | |
| Cadence Design Systems Inc. | 15.50 | 13.77 | — | — | — | |
| Datadog Inc. | 0.09 | 0.55 | — | — | — | |
| International Business Machines Corp. | 1.52 | 3.13 | — | — | — | |
| Intuit Inc. | 14.67 | 25.58 | — | — | — | |
| Microsoft Corp. | 19.50 | 16.90 | — | — | — | |
| Oracle Corp. | 3.22 | 5.17 | — | — | — | |
| Palantir Technologies Inc. | -5.06 | -7.89 | — | — | — | |
| Palo Alto Networks Inc. | -1.18 | -1.09 | — | — | — | |
| Salesforce Inc. | 2.18 | 2.92 | — | — | — | |
| ServiceNow Inc. | 3.87 | 2.95 | — | — | — | |
| Synopsys Inc. | 12.91 | 9.29 | 7.46 | — | — | |
| Workday Inc. | 1.15 | -0.69 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Software & Services | 9.33 | 9.14 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Information Technology | 13.23 | 12.08 | — | — | — | |
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 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 942,500 ÷ 55,100 = 17.11
2 Click competitor name to see calculations.
An analysis of the solvency metrics from 2018 to 2022 reveals a period of significant earnings growth coupled with a strategic increase in fixed obligations, leading to a fluctuating fixed charge coverage ratio.
- Earnings before Fixed Charges and Tax
- A consistent and strong upward trajectory is observed in earnings, which grew from 268,000 thousand US$ in 2018 to 942,500 thousand US$ by 2022. This represents a substantial increase in the company's capacity to generate funds to meet its fixed obligations.
- Fixed Charges Trend
- Fixed charges remained relatively stable between 2018 and 2020, fluctuating within a narrow range of 15,300 to 18,500 thousand US$. However, a significant escalation occurred starting in 2021, with charges rising to 41,400 thousand US$, and further increasing to 55,100 thousand US$ in 2022.
- Fixed Charge Coverage Ratio Dynamics
- The coverage ratio exhibited a peak in 2020 at 30.28, driven by the combination of rising earnings and stable fixed charges. A sharp contraction is noted in 2021, where the ratio fell to 16.00, correlating with the sudden increase in fixed charges. By 2022, the ratio showed a slight recovery to 17.11, as the growth in earnings began to offset the increased cost of fixed obligations.
Overall, while the coverage ratio has normalized to levels similar to those seen in 2018, the company maintains a high margin of safety, as earnings continue to significantly exceed fixed charges.
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