We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fortinet (FTNT - Free Report) delivered third-quarter non-GAAP earnings per share of 99 cents, beating the Zacks Consensus Estimate of 94 cents. The reported figure also improved significantly from the year-ago quarter’s earnings of 88 cents per share.
Moreover, revenues of $867.2 million topped the consensus mark of $809.9 million and increased 33.2% year over year as well. This top-line growth was driven by advanced FortiGate technology with SPU, integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided the company’s quarterly performance.
Segment wise, Product revenues jumped 50.6% year over year to $337.1 million. This uptick was supported by the continued adoption of the FortiGate-based secure SD-WAN solution, as well as strong revenue growth at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 24.1% to $530.1 million.
Billings were up 41.9% to $1.06 billion on solid execution and growth across all regions.
Geographically, the APAC region registered the highest top-line growth with a 43.2% increase, followed by the EMEA’s 32.8%, and then the America’s 28.5%.
During the June-end quarter, the company secured 83 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth, in terms of the number of deals worth more than $1 million in the September-end quarter as well. Secure SD-WAN accounted for 19 of the large deals won during the reported quarter.
Margins
The gross margin shrunk 300 basis points (bps) year on year to 76.5% during the July-September period. This reflects a contraction of 160 bps in Services gross margin and a decline of 220 bps in the Product gross margin.
The non-GAAP operating income jumped 25.2% to $223.6 million in the reported quarter, while the non-GAAP operating margin shrunk 160 bps to 25.8%.
Balance Sheet & Cash Flow
Fortinet exited the third quarter with cash and cash equivalents, and short-term investments of $3.08 billion, up from the $3.11 billion reported at the end of the previous quarter.
During the April-June period, the company generated operating and free cash flow of $398.8 million and $329.8 million, respectively. During the first nine months of 2021, it generated operating cash flow of $1.13 billion.
Notably, in October 2021, the company increased its share-repurchase authorization by $1.25 billion. During the first three quarters of 2021, it repurchased shares worth $170 million. As of Nov 1, 2021, the company had $2 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Buoyed by the impressive third-quarter performance, the company raised its guidance for full-year 2021. For 2021, Fortinet now forecasts revenues and billings in the band of $3.32-$3.35 billion and $4.04-$4.09 billion, respectively. Previously, it had projected revenues and billings in the range of $3.21-$3.25 billion and $3.87-$3.92 billion, respectively.
The non-GAAP earnings per share are now anticipated to lie between $3.85 and $3.95, up from the earlier guided range of $3.75-$3.90.
However, the company lowered its non-GAAP gross and narrowed the operating margin guidance range. Non-GAAP gross is now estimated to be in the range of 76.5-77.5%, down from the previous forecast of 77-79%. The operating margin is now anticipated to be in the band of 25.5-26.5% compared with the earlier guided range of 25-27%.
For fourth-quarter 2021, the company estimates revenues of $940-$970 million. Billings are estimated in the band of $1.165-$1.215billion.
Non-GAAP earnings per share are projected at $1.10-$1.15.
The non-GAAP gross margin is expected in the range of 75-76%, whereas the non-GAAP operating margin is anticipated between 27% and 28%.
Image: Bigstock
Fortinet (FTNT) Beats on Q3 Earnings & Revenues, Ups '21 View
Fortinet (FTNT - Free Report) delivered third-quarter non-GAAP earnings per share of 99 cents, beating the Zacks Consensus Estimate of 94 cents. The reported figure also improved significantly from the year-ago quarter’s earnings of 88 cents per share.
Moreover, revenues of $867.2 million topped the consensus mark of $809.9 million and increased 33.2% year over year as well. This top-line growth was driven by advanced FortiGate technology with SPU, integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided the company’s quarterly performance.
Fortinet, Inc. Price, Consensus and EPS Surprise
Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote
Quarter in Detail
Segment wise, Product revenues jumped 50.6% year over year to $337.1 million. This uptick was supported by the continued adoption of the FortiGate-based secure SD-WAN solution, as well as strong revenue growth at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 24.1% to $530.1 million.
Billings were up 41.9% to $1.06 billion on solid execution and growth across all regions.
Geographically, the APAC region registered the highest top-line growth with a 43.2% increase, followed by the EMEA’s 32.8%, and then the America’s 28.5%.
During the June-end quarter, the company secured 83 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth, in terms of the number of deals worth more than $1 million in the September-end quarter as well. Secure SD-WAN accounted for 19 of the large deals won during the reported quarter.
Margins
The gross margin shrunk 300 basis points (bps) year on year to 76.5% during the July-September period. This reflects a contraction of 160 bps in Services gross margin and a decline of 220 bps in the Product gross margin.
The non-GAAP operating income jumped 25.2% to $223.6 million in the reported quarter, while the non-GAAP operating margin shrunk 160 bps to 25.8%.
Balance Sheet & Cash Flow
Fortinet exited the third quarter with cash and cash equivalents, and short-term investments of $3.08 billion, up from the $3.11 billion reported at the end of the previous quarter.
During the April-June period, the company generated operating and free cash flow of $398.8 million and $329.8 million, respectively. During the first nine months of 2021, it generated operating cash flow of $1.13 billion.
Notably, in October 2021, the company increased its share-repurchase authorization by $1.25 billion. During the first three quarters of 2021, it repurchased shares worth $170 million. As of Nov 1, 2021, the company had $2 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Buoyed by the impressive third-quarter performance, the company raised its guidance for full-year 2021. For 2021, Fortinet now forecasts revenues and billings in the band of $3.32-$3.35 billion and $4.04-$4.09 billion, respectively. Previously, it had projected revenues and billings in the range of $3.21-$3.25 billion and $3.87-$3.92 billion, respectively.
The non-GAAP earnings per share are now anticipated to lie between $3.85 and $3.95, up from the earlier guided range of $3.75-$3.90.
However, the company lowered its non-GAAP gross and narrowed the operating margin guidance range. Non-GAAP gross is now estimated to be in the range of 76.5-77.5%, down from the previous forecast of 77-79%. The operating margin is now anticipated to be in the band of 25.5-26.5% compared with the earlier guided range of 25-27%.
For fourth-quarter 2021, the company estimates revenues of $940-$970 million. Billings are estimated in the band of $1.165-$1.215billion.
Non-GAAP earnings per share are projected at $1.10-$1.15.
The non-GAAP gross margin is expected in the range of 75-76%, whereas the non-GAAP operating margin is anticipated between 27% and 28%.
Zacks Rank and Other Stocks to Consider
Fortinet currently carries a Zacks Rank #2 (Buy).
Other similarly-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Broadcom (AVGO - Free Report) and Perficient (PRFT - Free Report) , at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Applied Materials, Broadcom and Perficient is currently pegged at 19.4%, 15% and 18%, respectively.