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Fortinet, Inc. 8-K/A Report, Financial Results (Aug 7, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed August 7, 2024
Period End
August 6, 2024
Security
FTNT
In the record · 2016–202610-K1210-Q328-K91

FTNT filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 91 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Apr ’20Apr ’20
  2. Leadership change8-K · May ’22May ’22

01—Abstract

Summary

Summary of the 8-K/A filed August 7, 2024. Cited figures are marked; the original filing is the authoritative source.

Fortinet (FTNT) filed this Form 8-K/A on August 7, 2024 solely to correct a clerical error in its third-quarter and full-year 2024 guidance for diluted non-GAAP net income per share.

The corrected ranges are $0.50 to $0.52a for Q3 2024 and $2.00 to $2.04 for fiscal 2024. No other changes were made to the original August 6, 2024 earnings release, so the underlying Q2 results and the rest of the guidance remain as originally reported. Investors should treat the corrected EPS figures as the operative guidance.

The underlying Q2 2024 results were strong on profitability. Total revenue rose 10.9% year over year to $1.43 billionb, service revenue grew 19.8% to $982 million, and product revenue declined 4.4%. Non-GAAP operating margin expanded 820 basis points to a record 35.1%, while GAAP operating margin was a record 30.5%.

Total billings were flat at $1.54 billionc, a point investors are likely to weigh against the revenue growth. The company raised its 2024 revenue and non-GAAP operating margin guidance, with full-year revenue now expected at $5.80 to $5.90 billion and non-GAAP operating margin at 30.0% to 31.5%.

Cash flow from operations fell to $342 milliond from $515 million a year earlier, and free cash flow fell to $319 million from $438 million, mainly due to higher capital expenditures. Management also flagged continued investment in Unified SASE and Security Operations.

02—Key points

Key Highlights

  1. Corrected guidance: Q3 2024 diluted non-GAAP EPS is $0.50 to $0.52 and FY2024 is $2.00 to $2.04; the 8-K/A fixes a clerical error and changes nothing else.
  2. Q2 2024 revenue of $1.43 billion grew 10.9% year over year, driven by 19.8% service revenue growth, while product revenue fell 4.4%.
  3. Non-GAAP operating margin hit a company record of 35.1%, up 820 basis points year over year; GAAP operating margin was a record 30.5%.
  4. Total billings were flat year over year at $1.54 billion, and deferred revenue rose 15.0% to $5.90 billion.
  5. Q2 operating cash flow fell to $342 million from $515 million, and free cash flow fell to $319 million from $438 million, largely on higher capital expenditures.
  6. Q2 GAAP diluted EPS was $0.49 versus $0.33 a year earlier; non-GAAP diluted EPS was $0.57 versus $0.38.
  7. FY2024 guidance was raised for revenue ($5.80 to $5.90 billion) and non-GAAP operating margin (30.0% to 31.5%).

03—Questions

Frequently Asked Questions

  1. Why did Fortinet file this 8-K/A?

    The company filed it to correct a clerical error in its guidance for diluted non-GAAP net income per share for Q3 2024 and fiscal 2024. Apart from that correction, the original August 6, 2024 earnings release and its contents are unchanged.

  2. What is the corrected guidance for non-GAAP diluted EPS?

    Fortinet expects non-GAAP diluted net income per share of $0.50 to $0.52 for Q3 2024 and $2.00 to $2.04 for fiscal 2024. Both assume a 17% non-GAAP effective tax rate and a diluted share count of 767 million to 777 million.

  3. Why did billings stay flat even though revenue grew?

    Billings are revenue plus the change in deferred revenue. Q2 2024 billings were $1.54 billion, the same as Q2 2023, because the change in deferred revenue slowed to $106 million from $248 million. Revenue growth was strong, but the smaller deferred revenue increase offset it, which investors will watch in upcoming quarters.

  4. Why did free cash flow decline despite higher profits?

    Q2 2024 free cash flow was $319 million versus $438 million a year earlier. Operating cash flow fell to $342 million from $515 million, and capital expenditures were $23 million in Q2 2024 versus $77 million in Q2 2023. The filing does not fully explain the operating cash flow decline, so investors should review the company's 10-Q and earnings call commentary.

  5. Are the non-GAAP figures comparable to GAAP results?

    Non-GAAP measures exclude stock-based compensation, amortization of acquired intangibles, and gains or charges such as the intellectual property gain and the Linksys equity-method impairment, and they apply a 17% tax rate. Fortinet did not reconcile its forward-looking non-GAAP guidance to GAAP, citing items that are uncertain or cannot be reasonably predicted. Investors should evaluate non-GAAP results alongside GAAP figures.

04—Continue

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