After the market closed on Monday, Fortinet reported a 14.8 percent year-over-year increase in revenues to $416.7 million. That result came in just ahead of expectations.
Fortinet management cited robust growth in the number of deals valued at more than $100,000, deals worth more than $250,000, and deals worth more than $500,000. Billing overall increased 15 percent year-over-year to $534 million.
Fortinet CEO Ken Xie told financial analysts that the company’s cloud security business was its fastest growing, according to an earnings call transcript. Xie also cited the firm having this week added its FortiGate virtual machine (VM) firewall to Google Cloud Platform.
However, a steeper increase in expenses moderated income growth from $43.5 million in the last quarter of 2016, to $45.1 million in 2017. Fortinet also took a deeper hit on income tax provisions during fourth-quarter 2017. That move turned the previous year’s net income gain of $25.2 million to a loss of $29 million for the quarter.
For the year, revenues surged more than 17 percent to $1.49 billion. Before the recent tax provision, net income increased from $43.1 million in 2016, to $124 million in 2017. The tax provision slashed actual net income from $32.2 million in 2016, to $31.4 million last year.
Fortinet had previously lowered its forecasts. Full-year guidance was cut from $1.495 billion to $1.49 billion, which the carrier did manage to match.
During the company’s third-quarter financial release, CFO Andrew Del Matto noted several reasons for the adjustment. These included a strong uptick in fourth-quarter 2016 results compared with the previous quarter that it did not feel it could maintain; pay-as-you-go models used by telecommunication operations that make it harder to forecast potential upsell opportunities; and regional issues surrounding natural disasters in Latin America and geopolitical issues in Southeast Asia.
On the call with analysts, Del Matto explained that most of those concerns moderated during the quarter. “It all turned out to go really smoothly,” he said.
Analysts highlighted Fortinet’s robust free cash flow during fourth-quarter 2017, which increased approximately 71 percent year-over-year to $560 million in 2017. BMO Capital Markets analyst Keith Bachman in a research note said he thinks Fortinet can generate up to $600 million in yearly free cash flow moving forward.
Positive sentiment also helped Fortinet’s stock outpace a wildly fluctuating market on Tuesday, closing up more than 6 percent at $46.54 per share. The company’s stock also posted a new 52-week high of $47 per share during the trading day.
Expectations, New CFO
Looking ahead, company management guided around $390 million in first-quarter 2018 revenues. That would be a similar year-over-year increase to what the company reported in the fourth quarter of 2017.
Full-year 2018 revenues are forecast to increase just over 13 percent, which is down from 2017 growth. Billing for 2018 is forecast to come in at less than $2.05 billion, which would be about flat with where it exited 2017.
Fortinet also announced that Del Matto would be leaving the company for an unnamed opportunity effective Feb. 16. He will be replaced by Keith Jensen, who currently serves as Fortinet’s chief accounting officer.
BMO Capital Markets’ Bachman noted in his report that Del Matto was leaving for the CFO job at Citrix.
Del Matto has held the CFO position at Fortinet since early 2014. Jensen had previously held CAO or CFO titles at DataDirect Networks, Sybase, and Dorado Network Systems.