Cyber security firm Fortinet total revenue was $441.3 million for the second quarter of 2018, an increase of 21% compared to $363.5 million in the same quarter of 2017, said the company.
“We delivered strong second-quarter revenue and billings growth. Our market share gains are being driven by the competitive advantages of our Security Fabric architecture,” said Ken Xie, Founder, Chairman and Chief Executive Officer.
“We remain focused on solving customers’ pressing security needs and helping them drive their digital transformation. We are very excited about the sizable opportunities that lie ahead. Fortinet is in a position to empower our customers with the latest evolution in network security,” Xie added.
Product revenue was $166.3 million, an increase of 17% compared to $142.7 million in the same quarter of 2017. Service revenue was $275.0 million, an increase of 25% compared to $220.8 million in the same quarter of 2017.
Total billings were $513.4 million, an increase of 20% compared to $426.9 million in the same quarter of 2017. While total deferred revenue was $1.47 billion, an increase of 27% compared to $1.16 billion as of June 30, 2017.
GAAP operating income was $50.7 million for the second quarter of 2018, representing a GAAP operating margin of 11%. GAAP operating income was $28.5 million for the same quarter of 2017, representing a GAAP operating margin of 8%.
Non-GAAP operating income was $93.1 million for the second quarter of 2018, representing a non-GAAP operating margin of 21%. Non-GAAP operating income was $65.7 million for the second quarter of 2017, representing a non-GAAP operating margin of 18%.
GAAP net income was $49.3 million for the second quarter of 2018, compared to GAAP net income of $23.0 million for the same quarter of 2017. GAAP diluted net income per share was $0.28 for the second quarter of 2018, based on 173.5 million diluted weighted-average shares outstanding, compared to $0.13 for the same quarter of 2017, based on 179.7 million diluted weighted-average shares outstanding. GAAP effective tax rate was 4% in the second quarter of 2018, compared to an effective tax rate of 30% for the same quarter in 2017.
Non-GAAP net income was $71.4 million for the second quarter of 2018, compared to non-GAAP net income of $47.7 million for the same quarter of 2017. Non-GAAP diluted net income per share was $0.41 for the second quarter of 2018, based on 173.5 million diluted weighted-average shares outstanding, compared to $0.27 for the same quarter of 2017, based on 179.7 million diluted weighted-average shares outstanding. The non-gaap effective tax rate was 24% in the second quarter of 2018, compared to 32% for the same quarter in 2017.
As of June 30, 2018, cash, cash equivalents and investments were $1.50 billion, compared to $1.39 billion as of March 31, 2018. In the second quarter of 2018, cash flow from operations was $142.2 million, compared to $144.8 million in the same quarter of 2017. Free cash flow1 was $130.6 million during the second quarter of 2018, compared to $58.4 million in the same quarter of 2017.
During the quarter, we acquired Bradford Networks, further enhancing the Fortinet Security Fabric by converging access control and IoT security solutions to provide large enterprises with broader visibility and security for their complex networks.
In July 2018, Fortinet’s Board of Directors approved an increase of $500.0 million in the current share repurchase program, bringing the total amount authorized for repurchase to $1.5 billion, and extended the term of the repurchase program to December 31, 2019. As of June 30, 2018, $325.8 million remained available for future share repurchases under the repurchase program.
For the third quarter of 2018, Fortinet expects: revenue in the range of $445.0 million to $455.0 million; billings in the range of $500.0 million to $515.0 million; non-GAAP gross margin in the range of 75% to 76%; non-GAAP operating margin in the range of 21.5% to 22.0%, including a benefit associated with the adoption of ASC 606 of approximately 350 basis points; diluted non-GAAP earnings per share in the range of $0.41 to $0.43, assuming a non-GAAP effective tax rate of 24%. This assumes a diluted share count of 175 million to 177 million, said the company.
For the fiscal year of 2018, Fortinet said it expects: revenue in the range of $1.770 billion to $1.790 billion; billings in the range of $2.085 billion to $2.110 billion; non-GAAP gross margin in the range of 75% to 76%; non-GAAP operating margin in the range of 21.2% to 21.7%, including a benefit associated with the adoption of ASC 606 of approximately 350 basis points; diluted non-GAAP earnings per share in the range of $1.63 to $1.67, assuming a non-GAAP effective tax rate of 24%. This assumes a diluted share count of 174 million to 176 million, said the company.
