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Cybersecurity company Fortinet (NASDAQ: FTNT) announced its first-quarter results after the market closed on May 3. The report featured double-digit revenue expansion and explosive earnings growth, and the company expects its third-generation network security products to drive continued growth for the next few years. Here's what investors need to know about Fortinet's first-quarter results.
Fortinet results: The raw numbers
| Metric | Q1 2018 | Q1 2017 | Year-Over-Year |
|---|---|---|---|
| Revenue | $399.0 | $340.6 | 17.1% |
| Net income | $41.6 million | $10.7 million | 288.8% |
| Non-GAAP earnings per share | $0.33 | $0.17 | 94.1% |
Data source: Fortinet.
What happened with Fortinet this quarter?
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Product revenue grew 6% year over year to $142.8 million. Service revenue was $256.2 million, up 25% year over year.
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Total billings increased 15% from the prior-year period to $463.2 million.
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Total deferred revenue was $1.4 billion, up from $1.1 billion at the end of the prior-year period, and up from $1.34 billion at the end of the fourth quarter of 2017.
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Fortinet produced $139.7 million of operating cash flow and $128.1 million of free cash flow during the quarter. Free cash flow grew from $116.2 million in the first quarter of 2017.
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The company had cash, cash equivalents, and investments of $1.39 billion at the end of the quarter, up from $1.35 billion at the end of 2017.
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Fortinet spent $115.5 million buying back 2.5 million of its own shares during the first quarter.
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Interim CFO Keith Jensen was named CFO by the board of directors.
Fortinet provided the following guidance for the second quarter and the full year:
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Second-quarter revenue is expected between $420 million and $430 million, along with billings between $485 million and $495 million, and non-GAAP EPS between $0.34 and $0.36. The company produced revenue of $363.5 million and non-GAAP EPS of $0.27 during the second quarter of 2017.
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Full-year revenue is expected between $1.715 billion and $1.735 billion, along with billings between $2.040 billion and $2.065 billion, and non-GAAP EPS between $1.51 and $1.55. The company produced revenue of $1.49 billion and non-GAAP EPS of $1.04 during 2017.
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The adoption of the ASC 606 revenue recognition standard will provide a non-GAAP EPS benefit of $0.05 for the second quarter and $0.19 for the full year. Those benefits are included in the company's guidance.
Image source: Fortinet.
What management had to say
During the earnings call, Fortinet CEO Ken Xie gave an update on its third-generation network security products:
As of Q1, the Security Fabric is fully available within AWS environments. During the quarter, we announced 11 new Fabric-Ready partners, including Arista, IBM, McAfee, ServiceNow, and VMware. To date, Fortinet has 43 Fabric-Ready partners which further expands our Security Fabric across the hybrid cloud.