Fortinet Inc. (FTNT - Free Report) delivered third-quarter 2019 non-GAAP earnings per share of 67 cents, which beat the Zacks Consensus Estimate of 56 cents and also improved significantly from the year-ago figure of 44 cents.
Moreover, revenues of $548 million surpassed the consensus estimate of $533 million and increased 21% year over year as well, driven by strong growth in Fortinet Security Fabric, cloud and SD-WAN offerings. Strength in the Americas and EMEA regions was a key driver.
The better-than-expected third-quarter results coupled with a bullish guidance for the fourth quarter and the full year are expected to buoy investors’ confidence in the stock. Notably, the company’s guidance raised for the full year led to a share price rally of more than 10% in the extended trading session on Thursday.
For 2019, the company expects revenues in the range of $2.135-$2.150 billion compared with $2.10-$2.12 billion estimated earlier. The Zacks Consensus Estimate is pegged at $2.11 billion.
Moreover, non-GAAP earnings per share expectations were also lifted to $2.39-$2.41 from $2.23-$2.26. The Zacks Consensus Estimate stands at $2.25.
Quarter in Detail
Segment wise, Product revenues increased 20% year over year to $197.1 million. Services revenues too jumped 21% to $350.4 million.
Total deferred revenues of $1.95 billion as of Sep 30, 2019 grew 26%. Billings were up 19% as well on a year-over-year basis to $626.6 million.
During the quarter, the company secured 53 total deals worth more than $1 million compared with 30 deals in the year-ago period and 46 sequentially.
While revenues from the Americas (44% of total revenues) grew 24% year over year to $241 million, revenues from the EMEA (Europe, Middle East and Africa) region (37%) increased 21% to $201 million and that from APAC (Asia Pacific) region (19%) rose 12% to $106 million.
Margins
Gross margin expanded 170 basis points (bps) year over year to 78.2%. Also, services gross margin expanded 70 bps to 88% as well as product gross margin grew 330 bps to 60.7%.
Non-GAAP operating expense as a percentage of revenues declined 80 bps to 51.8%.
Non-GAAP operating income surged 33.3% to $144.6 million while non-GAAP operating margin expanded 200 bps to 26%.
Balance Sheet & Cash Flow
Fortinet exited the reported quarter with cash and cash equivalents, and short-term investments of approximately $1.94 billion, up from $1.83 billion recorded at the end of the previous quarter.
During the third quarter, the company generated operating cash flow of $221.2 million compared with $195.1 million in the previous quarter. Free cash flow was $203.7 million compared with $177.8 million in the second quarter.
Guidance
For 2019, billings are now expected within $2.55-$2.565 billion, up from $2.51-$2.54 billion.
Non-GAAP gross margin is projected in the range of 76.5-77%, up from 75.5-76.5% predicted earlier. Non-GAAP operating margin is now anticipated between 24% and 24.5%, up from the previously guided 23-23.5% range.
For the fourth quarter of 2019, the company expects revenues of $595-$610 million. The consensus estimate is pegged at $585.76 million. Billings are estimated in the band of $750-$765 million.
Non-GAAP earnings per share are envisioned within 69-71 cents. The Zacks Consensus Estimate is pegged at 64 cents.
Non-GAAP gross margin is forecast in the range of 75.5-76.5% whereas non-GAAP operating margin is anticipated between 25.5% and 26%.
Zacks Rank and Stocks to Consider
Fortinet currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Benefitfocus , Five9, Inc. (FIVN - Free Report) and Square (SQ - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Benefitfocus and Square are scheduled to report earnings on Nov 6 while Five9 will announce the same on Nov 5.
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Fortinet Inc. (FTNT - Free Report) delivered third-quarter 2019 non-GAAP earnings per share of 67 cents, which beat the Zacks Consensus Estimate of 56 cents and also improved significantly from the year-ago figure of 44 cents.
Moreover, revenues of $548 million surpassed the consensus estimate of $533 million and increased 21% year over year as well, driven by strong growth in Fortinet Security Fabric, cloud and SD-WAN offerings. Strength in the Americas and EMEA regions was a key driver.
The better-than-expected third-quarter results coupled with a bullish guidance for the fourth quarter and the full year are expected to buoy investors’ confidence in the stock. Notably, the company’s guidance raised for the full year led to a share price rally of more than 10% in the extended trading session on Thursday.
For 2019, the company expects revenues in the range of $2.135-$2.150 billion compared with $2.10-$2.12 billion estimated earlier. The Zacks Consensus Estimate is pegged at $2.11 billion.
Moreover, non-GAAP earnings per share expectations were also lifted to $2.39-$2.41 from $2.23-$2.26. The Zacks Consensus Estimate stands at $2.25.
Quarter in Detail
Segment wise, Product revenues increased 20% year over year to $197.1 million. Services revenues too jumped 21% to $350.4 million.
Total deferred revenues of $1.95 billion as of Sep 30, 2019 grew 26%. Billings were up 19% as well on a year-over-year basis to $626.6 million.
During the quarter, the company secured 53 total deals worth more than $1 million compared with 30 deals in the year-ago period and 46 sequentially.
While revenues from the Americas (44% of total revenues) grew 24% year over year to $241 million, revenues from the EMEA (Europe, Middle East and Africa) region (37%) increased 21% to $201 million and that from APAC (Asia Pacific) region (19%) rose 12% to $106 million.
Margins
Gross margin expanded 170 basis points (bps) year over year to 78.2%. Also, services gross margin expanded 70 bps to 88% as well as product gross margin grew 330 bps to 60.7%.
Non-GAAP operating expense as a percentage of revenues declined 80 bps to 51.8%.
Non-GAAP operating income surged 33.3% to $144.6 million while non-GAAP operating margin expanded 200 bps to 26%.
Balance Sheet & Cash Flow
Fortinet exited the reported quarter with cash and cash equivalents, and short-term investments of approximately $1.94 billion, up from $1.83 billion recorded at the end of the previous quarter.
During the third quarter, the company generated operating cash flow of $221.2 million compared with $195.1 million in the previous quarter. Free cash flow was $203.7 million compared with $177.8 million in the second quarter.
Guidance
For 2019, billings are now expected within $2.55-$2.565 billion, up from $2.51-$2.54 billion.
Non-GAAP gross margin is projected in the range of 76.5-77%, up from 75.5-76.5% predicted earlier. Non-GAAP operating margin is now anticipated between 24% and 24.5%, up from the previously guided 23-23.5% range.
For the fourth quarter of 2019, the company expects revenues of $595-$610 million. The consensus estimate is pegged at $585.76 million. Billings are estimated in the band of $750-$765 million.
Non-GAAP earnings per share are envisioned within 69-71 cents. The Zacks Consensus Estimate is pegged at 64 cents.
Non-GAAP gross margin is forecast in the range of 75.5-76.5% whereas non-GAAP operating margin is anticipated between 25.5% and 26%.
Zacks Rank and Stocks to Consider
Fortinet currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Benefitfocus , Five9, Inc. (FIVN - Free Report) and Square (SQ - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Benefitfocus and Square are scheduled to report earnings on Nov 6 while Five9 will announce the same on Nov 5.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.5% per year. So be sure to give these hand-picked 7 your immediate attention.
See them now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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