Cyber ​​Potential: Fortinet, Rapid7 Impress Investors, Break Record Profits

Shares of cybersecurity companies Fortinet Inc. and Rapid7 Inc. rose in late trading today after their fiscal second-quarter earnings reports topped analysts’ expectations.

Fortinet reported adjusted earnings per share of 57 cents in the quarter ended June 30, compared with 38 cents in the same quarter a year earlier, on revenue of $1.43 billion, up 11% year over year. Both figures were ahead of expectations of 41 cents per share on revenue of $1.43 billion.

Fortinet reported services revenue of $982.4 million in the quarter, up 19.8% year over year, while the company’s product revenue fell 4.4% to $451.9 million. Billings totaled $1.54 billion, identical to the second quarter of fiscal 2023. Deferred revenue at the end of June rose 15% year over year to $5.9 billion.

Cash flow from operating activities for the quarter was $342 million, down from $515.1 million a year earlier, while free cash flow fell from $438.3 million in the second quarter of 2023 to $318.9 million this year.

“We balanced growth and profitability in the second quarter,” Ken Xie, Fortinet’s founder, chairman and CEO, said in the company’s earnings release. He noted that the company’s adjusted operating margin increased 820 basis points year over year to a record 35.1%, while billing and revenue were at the high end of their forecast ranges.

For the fiscal third quarter, Fortinet expects adjusted earnings per share of 56 cents to 58 cents on revenue of $1.445 billion to $1.505 billion. For the full year, the company expects earnings per share of $2.13 to $2.19 on revenue of $5.8 billion to $5.9 billion.

Fortinet shares were up about 17% in late trading.

Rapid7, which saw a more modest but still healthy 8% share price increase in the after-hours period, reported adjusted earnings per share of 58 cents a share, up from 18 cents a share a year earlier, on revenue of $208 million, up 9% year over year. Like Fortinet, both were beaten by analysts who had expected earnings per share of 52 cents on revenue of $204.1 million.

During the quarter, Rapid7 customer base grew 2% year-over-year, to 11,484. While 2% may not sound impressive, what’s more important is that these customers are spending more – Rapid7 saw a 9% increase in annual recurring revenue year-over-year, to $815.6 million, and annual recurring revenue per customer increased 7%, to $71,000.

The company reported a 10% year-over-year increase in product subscription revenue for the quarter, reaching $200.1 million, while professional services revenue declined 9% to $7.9 million. Clean cash provided by operating activities was $32.9 million, compared to $31 million in the prior year, and free cash flow increased from $25.8 million to $29.2 million.

“Rapid7 delivered solid second-quarter results in line with our expectations, increasing ARR 9% year over year to $816 million and continuing to innovate to provide customers with the strongest security operations data platform,” said Chairman and CEO Corey Thomas in the company’s earnings release.

For the third quarter, Rapid7 expects adjusted earnings per share of 50 cents to 53 cents on revenue of $209 million to $211 million. For the full year, the company expects earnings per share of $2.15 to $2.20 on revenue of $833 million to $837 million.

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