Key Highlights

  • Consensus EPS of 0.86 sits within third-quarter non-GAAP EPS guidance of 0.83 to 0.87, against second-quarter 0.90.
  • Consensus revenue of USD 2.06 billion sits within guidance of USD 2.01 billion to USD 2.1 billion for the quarter.
  • Management guided full-year revenue of USD 8.02 billion to USD 8.18 billion and non-GAAP EPS of 3.41 to 3.47.
  • Second-quarter revenue was USD 2,047.9 million against USD 1,630.0 million, with diluted EPS of 0.82 against 0.57.

Fortinet (NASDAQ:FTNT) reports third-quarter results on Wednesday, Oct. 28, after the market closes. Consensus stands at EPS of 0.86 on revenue of USD 2.06 billion, and the company has a market capitalization of USD 134.51 billion.

Fortinet provides network security products and services, including firewalls and secure access offerings. Second-quarter revenue was USD 2,047.9 million against USD 1,630.0 million, and net income was USD 606.3 million against USD 440.1 million.

Estimates Against Third-Quarter Guidance

The EPS estimate of 0.86 is within the third-quarter non-GAAP EPS guidance of 0.83 to 0.87, which assumes a share count between 741 million and 745 million. The estimates table does not state its EPS basis, and second-quarter non-GAAP EPS was 0.90 against diluted EPS of 0.82.

The revenue estimate of USD 2.06 billion is within third-quarter revenue guidance of USD 2.01 billion to USD 2.1 billion. Management also guided third-quarter billings of USD 2.25 billion to USD 2.35 billion, non-GAAP gross margin of 79% to 81% and non-GAAP operating margin of 35% to 37%.

What Management Guided and What It Left Open

For the full year, management guided revenue of USD 8.02 billion to USD 8.18 billion, billings of USD 9.35 billion to USD 9.55 billion and service revenue of USD 5.18 billion to USD 5.22 billion. It guided non-GAAP EPS of 3.41 to 3.47 and infrastructure investments of USD 350 million to USD 550 million.

Management left open supply chain timing, noting in the filing that shortages or customer order delays could affect backlog and the conversion of backlog to billings. It guided a non-GAAP tax rate of 18% and cash taxes of USD 100 million to USD 130 million for the third quarter.

Billings, Services and Cash Flow Detail

Second-quarter billings were USD 2.37 billion, up 33%, and product revenue was USD 773 million, up 52%. Service revenue was USD 1.27 billion, up 14%, and total deferred revenue increased 17%. Non-GAAP EPS of 0.90 was up 41%.

Free cash flow was USD 966 million, and non-GAAP operating margin was 38.0%. Non-GAAP gross margin was 80.9%. Share repurchases were USD 146 million in the quarter for 1.9 million shares.

Income Statement Lines and Balance Sheet

Gross profit was USD 1,643.2 million against USD 1,315.1 million, and operating expenses were USD 953.9 million against USD 857.1 million. Operating income was USD 689.3 million against USD 458.0 million, and income before income taxes was USD 720.2 million against USD 517.3 million.

Cash and cash equivalents were USD 2,934.9 million against USD 2,495.3 million at the prior year end, and remaining performance obligations were USD 7.73 billion. The estimates table lists a market capitalization of USD 134.51 billion.

Figures to Follow in the Release

Reported EPS against 0.86 and revenue against USD 2.06 billion are the headline comparisons. Other markers are billings, service revenue and the full-year guidance ranges.