Fortinet (FTNT) 3 Nov 222022 Q3 Earnings call transcript

Fortinet’s Third Quarter Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. And without further ado, I will now hand the conference over to your first speaker, Peter Salkowski, Vice President of Investor Relations at Fortinet. ahead. go please Peter,

fiscal Good via on Xie, webcast our will Investor – This call Officer. call year. full am Relations to and replay today’s our discuss quarter welcome Eric. our of then Jensen, third will Investor Vice by third Speakers Ken Keith Founder, open for that then XXXX. pleased review Pete financial We’ll be our a website. Chairman President It’s on everyone on begin the Fortinet’s fourth for and to call of at are our providing Financial for afternoon, quarter, Relations available updating questions. you, live of follow the is operating a for the quarter Ken with everyone. call Salkowski, to results a our providing Fortinet’s the Thank Chief Fortinet. call CEO; I and the today’s guidance high-level perspective business, for and

the yourself one to you allow one please Q&A, limit others and question to follow-up that question we During participate. to ask

make otherwise. update unless call forward-looking cause Before we forward-looking no the are forward-looking and more materially to today’s we factors references All to remind of these for Form we non-GAAP, will statements particular, risk our disclaim Please SEC to and everyone subject XX-K recent like from actual could in refer be the results making are projected. stated begin, that to financial XX-Q uncertainties, in metrics all statements, specifically those Also, and any on obligation which as undertake information. today’s date we risks to forward-looking our our filings, that opinions reflect I’d and call, on statements this statements. presentation, differ most to and obligation only of

both non-GAAP the our posted on earnings will of posted Our that today accompany GAAP GAAP in website. Investor following call remarks, section for in today’s Relations and and immediately to remarks today’s presentation Relations the earnings website earnings on call. Ken press the prepared quarterly of reconciliations release located Investor and today’s which the are results Keith’s our be are

to otherwise. now year-over-year call on a references I to all growth will Ken. noted over turn unless basis Lastly, the are

Thanks, that for our value for Peter, the operating is provided revenue to to third product and thank by everyone proposition growth today’s the significantly joining industry very our customer FortiOS to you the system XX%, high our of position outpacing grew ability results. recognition share. revenue industry. XXXX exceptional cybersecurity We driving in leader Product call we take XX%, integrated cyber our the security strong performance a and market believe Revenue quarter rate. review as was quarter Forti-ASIC technology at extending outstanding growth

together demand the the vendors, security convergence security significant the additional services our heightened to security and threat Our drivers, along product solutions execution built are to consolidation networking, have security managing base the we chain functionality the our to growth XX in with the of of over of and strong and growth. reflects with future the successful internal revenue expected teams the across our opportunity Three past drive environment, upsell performance challenges. supply installed months the

that approach user, on driving of and for triple-digit wide any zero device a delivering are ZTNA Universal To anywhere, any companies landscape, hybrid continue all we trust of consistent implementing the targeting unique our across counter product First, is workforce. and supporting a expand to evolving threat including location threat ransomware, the landscape, and industries. range this for customers, growth today’s size, to and comprehensive

to $XX will has the market security now and that companies for increase security of operational seamlessly network, estimate digital span every We accelerates billion especially XXXX. NOC are security. combining in transformation total the part merging of Fortinet dynamic the years costs by with convergence modernization networking many together. billion strategies that reduce today networking operations around and Convergence and and for substantially Second, addressable led from networking $XX SOC

the of trend leading with convergence a a a software, and is which Security, SD-WAN, Segmentation, technologies Fortinet Secure and and Network Service. deployed XG as including range hardware, wide cloud, in operating system single OT As be Firewall can

more The SD-WAN announced contributing believe gain to factor Today, X% XXXXF, quarter, higher achieve and was Powered lower S&P converging In delivers the integrated share Corporate innovation can functions total major competitive in accounted networking market by X of delivers the Secure NPX for of security. times grew in and SD-WAN over efficiencies and continues XX%, versus solutions. latest network Fortinet security, FortiGate years. new a XX% over solution our and next consumption XX% less our in XX bookings Global SD-WAN we performance one power SD-WAN in consuming in six share security our couple We power bookings. we market ranking together OT XX% over as Assessment. performance Sustainability traditional the better SPU, XXXXF and respectively, Secure our the offerings. top across while to number

products With competitors, Forti-ASIC’s driver network the from to power functions security XX FortiOS together the more computing vendors our with can than growth key third to over endpoint product cloud consolidation Our ranging huge of is security. integrate and a advantage, functionality.

while easier of the cost Fortinet provides our customers and total lower ownership. with management the costs operation

for customer at share upselling basis to security very XXX units we one points. quarter are hold on share up second According base. value-added IDC’s Additionally, significant our services unit XX%, market Fortinet to shipped number data, focused position a

substantial upsell few reach scale share We a next base creates economy This attractive to market of security leadership the years. installed in the XX% the position and opportunity to services. and expect additional

I for Keith? partners, turning customers, and worldwide continued to like suppliers would Before call Keith, support our hard thank the to and over their employees, work.

Thank All afternoon, everyone. right. you, and good Ken,

year-over-year record performance. was third $X.XX sequential and growth sequentially; quarterly quarter of Revenue rate in XX% our third Let’s our strong highest XX% start quarter with another an eleven years. overview increasing Fortinet, of billion for

to continue and deliver industry average profitability. top-line strong We better than growth generate

cash at XX%, the driving to flow guidance free adjusted operating margin XX%. over exceeded Our margin

as Our company Rule growth at QX revenue measured public operating in XX. of of the Impressively, XX, total the and total came combined a over the has around margin. revolved history as

We and bookings million increased of see The driven value success over XX%. increased expanding billings our XXX continue large of by the deals. enterprise in XX% to strategy a than over over number for million record The to deals GXXXX deals $X million, doubled total segment. of $X more over further $X number into deals over

our our Technologies and of the the challenging Enhanced demand Platform strong environment. and our go-to-market exceptional made Our believe in the digital enables We Core and team in reflect third performance customer we’ve engine customers’ quarter our both a results solid transformation chain platform building journey. investments across supply

capabilities it products, Our Firewalls their grew XX%, X with product while to given over services. related FortiGate the has offers providing sequentially growth Enhanced placing entire with array their sequentially sequentially, platform bang-for-the-buck security, up as capable revenue first security for consolidating Wave our to a impressive seven investment costs. products accelerating XX platform Fortinet report up and success and points strategy especially growth the Taking operating its accelerating driven lowering increased cybersecurity consecutive toughest Forrester, of that XX%, comparison revenue for acknowledged in a points income was over networking the known term built growth closer $XXX allows our According statement, across adjacent digital Platform accelerated Recently, customers Long security look flagship Product The while years. functionality Enterprise revenue its the strategy, Service and to Support converge infrastructure Forrester Fortinet product the Core time leader at over product value its year-over-year deferred and revenue was rates. “Fortinet network X approach excels is in for revenue revenue X of XX%. product, by growth Technology a flexible service points wide for increased Firewall." performance XX% respectively. a million. rate at strong XX%, revenue and history. our to our quarters and

leverage XX%. While APAC growth increased up EMEA Billings increased billings. for billings X revenue the points service quarter consecutive were Core revenue sixth revenue $XXX XX%. were million. of security Total XX% up and revenue to was XX.X% excess revenues. was that Operating year-over-year, comes accelerating XX from margin higher margin of but end of guidance and sequentially. basis up benefiting our of points, Product in billion of XX%, representing points billings was FX gross XXX subscription XX% XX.X% posted gross range. with in Services total up billings. the up at margin sequentially Americas XX% of of operating margin high growth margin the gross $X.X year-over-year. flat exceeded up the XX%. to Shifting basis XX Total was basis XX% XX.X% points and accounted XX%, platform of of

As shown XX X, for FortiGates X supply. improved and months. term posted mix in we platform growth very shift billings points with flat driven mix were XX up on by we a the points. Average shifting expected favor, billings and Slide XX% XX% positive at contract of Enhanced their strong billings, as demand entry-level year-over-year technology of accounted was total

free $XXX which common cash expenditures a summarized billion. Looking million, investments, a estate million flow remaining repurchased $XXX the taxes excludes cost XX totals year-to-date million, $XX was X totals increasing five $XX at XX were Cash to flow to flow, our million. the million shares days. on days for authorization and Adjusted cash cash $XX cost of flow margin. million. of a cash estate We DSOs repurchase $X at XX% $XXX investments. down for of total million. Capital sequentially million, year-over-year Free stock representing including $XXX days real XX.X The bringing statement XX Slide was adjusted shares while X. of free were real million were

with the up from of the one-third end third backlog, prior of backlog. backlog the the Regarding slightly quarter, of end accounting total was FortiGate Firewalls just for the quarter at

be of quarter seeing normalized quarter customer as fourth we more backlog backlog are a back transition signs expect to behaviors. with relatively the to consistent third We buying ending early

our to across invest current favors market share Moving capabilities environment a of solutions that our the plan our To to and capture large guidance. innovation enhance integrated attractive strong offerings. platform security style in to Fortinet ability we platform offers of to continue integrated an opportunity, cost ownership. The and

factors, of contributed line less emphasis bookings with more customers normalized setting the considered comparison, buying certain it, growth. greater the when the is guidance get uncertainty larger in tighter, XX% top there year like timing couple we regarding I’d our Slide have fourth we the comparisons of at start, forward-looking lastly, service And early to Peter guidance is part of X, backlog increased slightly acquisition. subject elevated And the that for of Now provided to Alaxala to place on that to to beginning fourth information onetime risk of our which ordering transition line which online. million include the several fully an year behaviors, response, quarter a the of was items of increased macro certain ranges. for cycling widened the to on over including top And of outlook quarter process, points forecasting revenue XXXX, a today The supply In and summarized review QX call. growth the as and and disclaimers transactions. means $XXX adding

of per billion, For billion and of $X.XXX represents XX%, again million. of $X.XXX metrics the $X.XXX to margin share Rule $X.XX, with operating assumes the of of Revenue to to range $XXX of key fourth that, a of of include share count $XXX to growth which range the quarter, of the the XX%, XX% represents XX. XX%. $X.XX XX% margin gross reach to midpoint billion, growth $X.XXX XX%. earnings And in million non-GAAP at which in non-GAAP billings between billion Non-GAAP which to we the expect

We $XX to $XX expenditures capital expect million. of million

at year, increasing February, of and Billings billion for the year-over-year the We the to growth the above full February expected expect gross and than interest implies XX%, of backlog of to points. range billion in year. growth of of and in revenue XX%. $X.XXX which at to for full the billings to share midpoint the a of XX% midpoint estimate XXX And share expect $X.XX we $X.XXX the represents macro $XXX Ukraine importantly, to Non-GAAP provided And XX% second in $XXX to which we revenue represents billion, $X.XXX of are year midpoint, XX growth early exceed $X.XXX operating XX%. non-GAAP February should rates the for assumes billion, growth million. service non-GAAP increase year of the in billion which XX%; of margin of and note again, XX% earnings in and $X.XXX billings $XXX range of operating which revenue is the between context, rate gross Total product a in $X.XXX year to the higher of revenue were Perhaps $X.XX, a and at the for guide, XX% late Non-GAAP tax represents XX% above million consecutive rates and be of XX million. war X count February, respectively. basis billion, to points basis margin we revenue per margin significant midpoint, points the in XX%. of at context, the initial increases full range expectations growth growth the despite environment, start rates in these full uncertainty and

$XXX capital of million. expect year million We to $XXX full expenditures

We tax to non-GAAP our expect XX%. be rate

million. taxes cash to expect We be $XXX

offer Before XXXX I’d heels XXXX in a like on growth thoughts very of wrapping and our targets preliminary up, on of in set and midterm to some XXXX. strong the

profitability, strength of rich higher-margin that to growth growth. future investment its go-to-market and business our investing of model longer-term and recurring future initiatives includes a and service We successfully in while margins for continue revenues. to The diversification, capacity balance mix provide innovation

highs As the economic the we pandemic, risk saw diversification in helps mitigate slowdowns. of of the

our the of XX new, in months, of about capacity XXXX, targets, we in And and during increasing while have cash operating delivered future by and growth flow headcount line free margin including engineering target non-tenured, XX% XX% XX%, sales our XX%, nearly our a margins greater operating over increasing really XX% past XX%. significantly of exceeded by salespeople. increase we margin top than Specifically, over adjusted

cybersecurity guidance this continued of fourth when deferred more years XXXX noting above results, report product it’s growth We see revenue, quarters growth. revenue our strong quarter of are and hovering for and and relatively drivers, remain that threat continue growth point seven XX%. of revenue the a are growth we two strategic convergence Cyber networking model safe business our the investments, our we slowdowns momentum is the able accounts While by security, execute, revenue driven will with consolidation. immune being confident environment, including to margins strong detailed history to provide heightened will worth XX% a securities total not harbor. to With to we key the short-term and gross very economic of consecutive service accelerating revenue expected

on our margin also our CAGR each remain guidance. in our targets Day, from average including we billion $XX of XX% three-year or call such, As to billion and financial XXXX the from and midpoint a adjusted of years range. in in achieve in begin to least the profitability, the all now mid-to-high hand XXXX at margin Illustrating better. the representing balancing $X growth targets XXXX XX% committed to and non-GAAP over The four medium-term Analyst our billings XX% Rule flow remain XXXX, cash revenue focus included Peter long-term our XXXX an Q&A. XX of targets I’ll operating the from to back the track free May to for of XXXX a for

Q&A. Thank you, ready for we Keith. Eric, Instructions] [Operator are

line Citi. is Excellent. open. from Boolani [Operator comes Fatima question your our at Instructions] Fatima, And first

went you, it factors Thank buying of my the you down the the about made with relates appreciate But dig guidance build. specifically you wanted you. the normalized to principal taking Good in into that. comment to XQ that kind one’s afternoon. you outlook. backlog questions. behavior I the as breaking just this I on for Keith, appreciate three I and to respect

what inferred you think pointed were telegraphing. be from higher sequentially below to That’s initially comments ending while your than that of of backlog the previously sort I and is going is million that I So out $XXX be $XXX certainly million maybe up you backlog. the to what

So to I’ll sort normalized modulation buying then I and backlog there the how that? contributes on my better sort of just follow-up. understand to the And ask of downward behavior wanted

Okay.

to I’ll a certainly the I And behavior appropriate get during inventory ago that, around an the there They for when line line normalized available. so to we’re uncertainty placing about was chain that talk is a customers in in they’re the hold their place do supply behavior, XXXX. we buying some were when that I challenges. was think say and enterprise to U.S. what think year I think or chain supply the in we when saw going lot planning maybe in of orders

people the easier. more easy, easier it, back do I general this, the a market somewhat in to easier and but would to emphasis but think the I little are which we supply talk starting somewhat stretch maybe more they’re about to with Ken is placing mean think and that are, any certainly, drift think by now, traditional is I to when don’t getting that, And I I think forecast I it’s that manage. is chain start towards – will buying, order. you’re need call what they see the the bit

industry And in security is changeable, networking more to than to AP, one-third also like switch of the only problem a networking FortiGate backlog, kind device side or standard which equipment looking the a related which be half it’s more at related our our is more in networking driven. network tend to platform composition of the less an because

of can double, whatever try triple the ahead got of they once chain and sometimes customers, them easily the issue product. cancel to order of supply lot a get some So also

installation the forecast security, should more we service So FortiGate on and the business, may focused the keeping on be security that’s driving based backlog to future related, track way especially best in feel be base. the probably huge why not we

revenue And on services about more just a and trajectory Keith, next the clarification Thank year. broadly thinking you.

So the this we revenue. reacceleration quarter in services saw

registrations So quick next year us the are about and trending wondering from earlier flowing on into Thank if and filtering models from our could year? earlier give transactions update and the delayed we for think in a should you that year how how the you. in

Yes.

I think in expectation had we’ve even growth we throughout a accelerated. revenue has clear the messaging various been prior service – that that at conferences quarter the that quarter and

see very pleased that. to we’re So

I that things is providing are Customer tailwind think a of number there’s units a into that. registering that. of part

its sense and we making contracts that years, a mind is give increase may renewals orders sometimes into as income price five the increases and or the as long we now have tailwind Keeping also at old think way cycle replace to that revenue you to in as statement. into first and contracts. will I of at prices deferred relate them with new how through the will price continue long

So our feel direction the service fact revenue margins the we I of with about of good business. it’s think the provides, it that the XX% together and that

Okay. Thank you.

comes next ahead. at go Our is question Please line Kalia from Saket, Saket open. Barclays. your

about kind be think Okay. year? for like price here. revenue adjustments, Great. growth what of we bit Can keeping you product thinking we should product, kind Alaxala years. expected very of following year maybe might next about for years. normalized just total for love look just billings that following just detail to what in are helpful little I’d with product in some mind aren’t Thanks Again, in year. to of about zero question very product things the you. to just think of that repeat for sort the like one-off in this start as some of the much about But drivers to for a to growth revenue Keith, taking on start my growth maybe talk this

Yes.

their We’ve that one million $XXX that easiest Alaxala about of probably of think bit a terms are we order a them million people providing in cycle. revenue the in off numbers. something the little about talked fact I fourth the their quarter was to talk XX is March stream acquired $XXX is probably year-end, when and so reminded they to

I single digits. think that it’s growth

run we people things gives you probably a have is a there level IP that interest more if Alaxala think longer good reminder lot our do term, and I some there at to will. that in the to opportunities that expectation So

certainly here as about revenue In terms I backlog mean, of product comes of as the other things I think unique in revenue the XXXX end we and through into go get is the will revenue that fairly growth quarter, what see. we drawn into may assuming be a tailwind XXXX in we product in again, backlog to provide, significant tend XXXX, the to that the

network Also, think and driving the the to in XX growth don’t Yes. years. that’s security. growth keeping slowdown. the next a believe we X driver, product the converged We revenue be We’ll especially

XX the a will had we see can potential. and secure X in continue OT a time, huge growth pretty healthy the market SD-WAN And next to the at You both growth. in to same years

a for follow-up, of my Got it. here. you, ball it. Got really I’ll Maybe for jump both make

we QX, operating about in think margins of XX%. I had

When guide sort like of for that I the near-term. at of is, than is do normalizing think of you or Maybe long-term versus think guide in I lot of the margins that it you’re a that balance, right, doing that question little sort for we least, terms QX maybe in margin? a higher. XX% to as moderating bit here mentioned long-term about feels out how think growth, the better

history, as balance we always we – the if look public the with XX-year that’s margin. at the company, think a you I where and growth

healthy we’re where in then be continue we where will is margin. the helping to to the the can space. we leader but the definitely growth margin become a invest the slowdown that’s growth in above in the feel and also give That’s money if balance, So XX% more a

So last reached that’s XX, Rule XX in now. probably keep we of few saying Rule of the the kind what quarters, we of the even in

the a plus not the the expect security additional slowed next sometimes installation yet. we but growth base, margin, mentioned drivers the three big I with has do revenue of few in and the lot also help years service unable revenue service revenue quite a growth the service our in are to continue can when down the which – higher growth So will that’s where also and margin,

detail it. FX U.S. Yes. would more a sell with so just dollars, not impact agree on we that mind little our certainly Ken a direct there. in in probably Keeping – operate really I there’s

from On a line, our of of because you little intense. certain get XX% a discounting, where But XX% U.S. OpEx the the years tailwind can strength from seeing you more the And the think And do and OpEx, get exchange because now talked that business in in rest around revenue can it’s is We and reference of in is U.S. on rates you’re QX. will, we’ve to that for probably the if why you’re of a countries the the seeing obviously, QX made I operating important is into pressure and that margin. be on number international.

in go averaging operating If ago, to XX%, I XX% think we’ve margin. a XX%. years target and the you a other get we well help reference floor invest It four people probably of then, makes And five Ken has about back was so ago, to certainly as it to about talked since years business, understand us as way served how it. to a

some, those seeing have innovation our necessarily that be we that reinvested go-to-market dollars back for over strategy. funds not XX% opportunities all and As margin, back creates in it into you’re operating margin to currently available of

helpful. Got it. Very Thanks.

Okay.

line lining Stanley. comes at And the Fodderwala next next Please from your just go Hamza, ahead. We’re question. the open. Morgan up Hamza is question

have give you like good creates for guided more about seems XX% noise. to on on the the you us bookings. that for you trajectory it’s front, chain your getting my backlog at taking it booking Keith, supply think too were question. and growth sometimes could to too granularity midpoint saying it, you But metrics how Hi, the relative that I look, many guidance, Thank And a looked appreciate, backlog, many clearer. when any bit evening. on which I you that

out how So QX. just that curious in shook

Yes.

I commentary is come bookings. about think really Ken’s of kind drives to backlog, back around what the conversation kind of I’ll which

look first some to we providing questions, came to going there’s and think and help introduced easing lot get year. of reasonable itself. million And second full this something at the then environment million in around that’s in the impact investors the a for one then business and disclosure in messages metric, execute than of out the And to beginning quarter message of crisis the was forward. the think environment I kind of from that we’re I I supply question net-net, ability to – our it a purpose there as and how year think And think back $XXX in seems now backlog it the the to said, secondly, backlog less it our think heard to much at uncertainty maybe the chain of where I we’re round a model the it’s that what from year, disclosure in And closer floor might when that, always was swag of and looking like swag was booking was ago, then go to and about our going and of we the business at. with the our two the I as growth maybe earlier the backlog we’re becoming more $XXX quarter, we what more in understand number going of with kind a intention. probably comfortable be kind

to disclosing. on a bring and more that bring with we’ve – – investors messaged well it provide time us metrics but disclosing I that and they’ve feel that for and will if are us short-term we you we better that control us I now will, what it’s back time, online, gotten these be our not extended think our think of period probably an this competitors industry we served

sense. total Makes

is Obviously, your than bookings follow to grew. growth Just your up to growth. fair quickly. really backlog your that still billings mean, it say is I higher

year. XX% So this bookings you’re to than higher still expecting be underlying

bookings, going down more about given talking to to going forward we’re of our we’ve as from point. I specifically just mentioned Yes, not detail this the backlog, than what

Okay. Thank you.

Okay.

comes Owens open. Our your Rob, at ahead. line is go Rob Piper Sandler. next from Please question

Thanks Great. for Good taking evening. the question.

chain term well supply term. the how gross the you’re short medium getting in from kind little curious a one of margin, of thinking the as both with as about bit easier, Just Thanks.

component continue cost also think up. go I the and to the

pretty – So we also, of still that’s make by instead and to tight ocean. a shipments inventory shipping have where by most air

average where it to we’ll these may probably some we have keep price continue we of that’s increase, with and ourselves, the competitive some feel all of but compared to we some by wet price some industry a even products. So do advantage also so adjusted them – our price increase, costs own

feel more the probably where be And overall supply that’s probably that’s stabilized. keep we will the probably margin So improving.

Ken, with more a a on granularity. probably Yes. couple spot I that. little

maybe look think at related I what gross manufacturers there’s certainly probably maybe things is heard any little we’re you that chip are sort between the product the I gross the savings but it to indication that’s the that of cost say commentary volatile and more or bit, margin, product reduction easing coming that seeing. chip services a would from We’ve suppliers. manufacturers, win are no one margin either of component if

that how see out. plays we’ll what So

raise target all price a our I believing plus of of that margin. the not into lost has way we this was quarter. we been, target Ken formas remain move X% extent our it we’ve would we we to pro have doesn’t that into increases, because performance imagine came that most can our to elevated well, that as not advantage. strategy is every variables. quarter year had pass strategy ago, and that seen as price and price It’s but a to be along kind that minus alluded XXXX, the we could Our And to really prices advantage and every into of this, fall kind that call or economic the various prices because for starting point signs that’s again, the XXXX cycle It

In appropriate compensation is then in fact, its think to the way. and has from – to service about largest look you on company And which so we you increases. back, kind reference little of in increase of the month get bit COGS conversation you Service it. continue the mean, part is why immediate a first component year, to grow margin into certainly different. have of increases, that’s cost labor. that saw the rather the revenue second job a from if we’re I the line the is you sequential annual those I And that win a or services merit the

and On price the But gets revenue through about started pace, price kind complex. at you complex. ago if deferred periods. year a what it Well, quarterly it the is fairly first make each how off will thinking and and that item maybe in side, going price how sheet all in increases how increases their of to those balance will those will, balance way on reflect sheet the future then that increases come a extent revenue to

expect price an from to, of time. tailwind I increases. tailwind would And will period extended for get you So the that continue should particular

Ken and Keith, you. thank

Okay.

just question, connecting Cowen. ahead. comes Please from Shaul open. your go next Our Eyal is at the line now line Shaul,

that? two And Thank what afternoon, years, much. question guys. was Good I a driving performance follow-up. in, you think, I have so softest Keith, APAC, like on

Yes.

very made it I we end transition of kind all leaders, we’ve leadership I we I July, their a around a change you’re about there feel on. very, because lapping you that’s June, think But of think was And of I so retirement just is in to the will, the the if of see terms had think we And retirement. of one other Alaxala abilities. part sitting and effect Alaxala of beginning brought in APAC. into the exiting think is of good of starting

to now going the full roll you’re see that comparisons so And on quarter impact. basically that up

sales, maybe it a mid-range most growth representing and end. Understood. versus high And at FortiGate actually quarters, tier prior slightly perspective, more entry it mixed from was the looking level than on Understood.

front? So any on color that

to where but product have time, strong where we right able also – low some little improvements chain the supply and the and the more bit. some some products using had growth see in the be it’s SD-WAN now line end related low to That’s high the pretty chain a redesign better the same the which a help end, backlog of low shipping unit at by end – and we’ll That’s more middle We the the improvement OT, side. in supply still

we availability QX our end past, in we think the QX product the I in And to second the that. new see quarter expected a supply and little ability quarter, will, messaged kind low low or and XXF of bit last on talked we conversations in Ken you if jump, the the Yes. end. introduce bit that over so did to the really in beginning in third were this of hamstrung about We a back quarter. really even into the the QX

more So some conversation a it’s supply as demand it a much is conversation. really in as ways of

the for you color. Thank it. Appreciate

Okay.

from just bringing Brad, Bank. live. Brad next our line is live. We’re your Zelnick Deutsche caller

the big Thank you and with. out thank for so you you taking start picture to just Ken, much question questions. for a

the adding consolidation? is vendor product to You success there in does of part compete Fortinet for is Why inform your that in of other from Fortinet for well consolidation. out and as And functionality. development positioned coming a need so keep this the even product additional roadmap product trend breadth more platform competitors terms corporate platform and industry mentioned how with

I have advantage. think we few unique a

day The from FortiASIC, companion we huge to side FortiASIC also increase with CPU. a but which by power the working using also compared first CPU, the developed one, traditional side have

FortiASIC power including give for more a comes So networking us the power the security of function, more more computing huge function lot advantage function. to from that’s run FortiOS computing

that that. competitors So of advantage is none have our

we XX% also that’s I shipment market mentioned, So unit and unit shareholder the the driving like shipment, us our keeping there. making of market share

huge because give must the – forward a have need keeping power on also security convergence long-term we to networking and both address what of us security a it computing the that’s function going secure So networking there. growth

security integrate is power. and leverage, is function, with Second the FortiOS for well together more

for they of use to other that’s a So or some kind whether huge like have also us to They have competitor, to a compared third together. automate also XX or products, integrate, even cloud developed parts power and And different the there. computing address some home we to have mostly about one, secure some go to functions. then advantage different different to different blade

what we mesh on drive helping that’s So called wider security call the a fabric also network.

to lower helping that’s cost the and So management the total cost ownership. of also customer

position three strategy. on also for both different products a better think on single product the factors we’re into the Fortinet consolidation, I keeping driving and vendor all functionality platform these

strategy. very now for for I Maybe And results. Ken, the that much a question just with just that might these thank quite update Keith you’ve But very so bit information that. clearly disclosed guidance given you’ve so explained the billings you of for by reduction you, that it’s in simple Thanks. for your working just missed. I a year have you the us on – full clearly can have

Yes.

at I more you the will, somewhat last large a how I of manifests over very some really really think I specifically, think fourth if the you’re one when deals. few been economic the talking you activity, that I’m think look timing over successful point. the – the of and in terms in some same point environment little close cautious XX We’ve And I to year the forecasting would of about days seen we’ve years. of last in very quarter, full just at macro the what of this on getting

gotten appropriate with actually little a enterprise the two. the business last close You we about at to quarter environment the in business, actually itself two as cautious about the And other point very mix, we’ve is healthy. The significantly other saw – spectrum, be. the in larger the in part I for some it’s of forward. think the it If I of the expect be enterprise. that small of by rates more took of think, to the enterprise end from I The parts a of outgrew example, our deals have what to gone business on growth penetration numbers look the it

a forecast from go about business, cautious So macro the but what’s we team. feel I – environment forward, to how the the coming feel little as sales just good about

sense their sound on a sizes? shrinking like doesn’t would customers and are I the It it’s anything existing Any what helpful. time be points data that lot of out other is assets? – Are just doing? taking contributes they as there. to out other all more about think makes competitive, that you sweating and maybe seeing it we’re there color deal total just Thanks. with that, in line Are but they what guess

going the think see we’re the routine again, getting fact don’t going it kind more sizes enterprise, one established and and increase that corporate I only cycles numbers over caution If there’s in the looking saw were feel the by of over, deal going and America into we’re smaller the there I what to the through to growing average Yes. world is end probably rest not just the now their XXXX. was they’re and we enterprise. budgeting at we’re because same and for, of that moving of is XXXX itself, the and deal right is do you our size. certainly planning

it’s fantastic. in sort fourth would little that in good But develops, it some If that, budget I fairly forecasting think bit here. with we’ve get and I appropriate really flush don’t a comments the of other to significant this think is is time position probably think be of of the consistent again, I heard. aspect a I a the other quarter. think prudence

me. you total sense taking to the Thank for so It much makes questions.

Thank you.

your And next is Thank Baird, open. Kothari Thank up, Robert have is line at you. Shrenik line from we Shrenik sir. Baird, Shrenik Robert your you, Kothari, open.

Okay.

will move Tal, question. the America. Please next We open. to line standby. your at is Tal on Liani Bank of

is Tal Hi, here on today. Madeline for

or two apologize it, than this bookings little heard bit But me, a was and Just last mentioned about pointed just bookings quick be few right softer just has between ones we Steve already I and expected. for very earnings if been – to quarter, running a now. as

quarter. But I again, bookings this just why Keith, mentioned. was quarter, from this in last already get, directly, want This disclosure quarter your weaker after booking perspective no And of for no to apologize, quarter bookings. a

drivers. benefit, for conversation quickly everybody’s this to we’re the you the before really of we driver what and thought when bookings conversation felt was understand think of backlog, business and just the the it. Yes, which link Yes. that in go to kind of they’re seeing and a I year how to important We the I’ll a was track performing is on this a as into we ago, be talked call investors something got able we get through

earlier, you bit moved or of we made the think closer feel that. we fast XXX later, may I I comfortable about exit reference And if forward, year, some to forward we’ve that a little north As a more forecasting. now backlog the backlog of think that year something

also bringing we rates. so thought we that think And cancellation lot get was one conversations really appropriate else would mind, comment what offer of nobody year. that’s information, for it where in the I but a first ourselves around call backlog would we’re norms, with this and I I discloses industry back into important, about

X% extremely cancellation has and about quarter. been consistent at every Our each rate

in change and to composition the switching from and of to more backlog one high to of one-third now year they come a that Wi-Fi, is to compared is also switch which switch they design kind to compared the majority cost. kind less in, AP industry majority one the vendor easily and the a AP of security of problem, which customer related year of product, and whole say, have which ago, more FortiGate have can the different now ago, the to FortiGate backlog is is that different backlog of Also, have than I –

So we backlog from majority and with switch come of feel that’s unpredictable the AP. sometimes and the where

a just your Got it. for you the side, in to your on And visibility, talk less question seeing visibility? trends little Thanks are wondering also next visibility the much. follow-up year that just there having mentioned seeing so and there, of into just pipeline? guidance. going I’m just same one prudence just I you bit you’re the too. Can

the that. And back and I the booking think of numbers prepared guidance CAGR more went and we the one in I XXXX that I that reiterated of billion we’re we XX% think requires is forward. to from which and of that And million a did visibility the XX% I pipeline this company think, a in remarks gave, that or basically good. doing $XX end was, mid-term strong. $X very margins revenue we point growth is things very XXXX And at pipeline the the think

We’re so it after looking at of – with the pipeline, pipeline looking strength that our makes us. at our doing that the to sense

so much. Thanks it. Got

caller. Getting for next our Okay. ready

open. ahead. next go is Please Bachman Keith, your line Our caller at is Keith BMO.

start I the Many go QX. two, to to had for back to also commentary thanks. billings with I Keith, wanted you.

the you’re base DR essentially that lower. guiding is revenue the on therefore, and it’s a impact Just same,

expecting could maybe that billings, you guide to Ken, As into then the in could change. it it and mentioned a if of appears and had you you’re than less you flowing the but than little for a what even have follow-up any flesh million out you context backlog therefore, or Did the some that be actually $XXX please. that is is backlog, down actually draw worse weakness is where for bit other and on those billings specifically out, Europe then I billings

slightly, Yes. significantly, I QX want backlog QX, to be from to are increase expecting actually so. clear, not but to we

Okay.

then that in is into Q therefore, billings anticipated, backlog right? as of that So none flowing

revenue extremely and don’t remains we the the I say we it. I saw to going to very over pipeline and the strong backlog, that forward. as going quarter think always billings what want it to flows – total get the their Europe numbers well disclose form, – Europe. in you’re some to add existing an mean good backlog be the I new going net-net, the year. it’s to And it’s in Correct. would you’re you which about don’t Europe numbers performed buildings, I question get and very, for in a go that

and this really I would it very Now point, get that to are very, get well. certainly they’ve that tailwinds and agree But appropriate there XXXX, we’ll done for we are to through Europe. certain see as closer

that for Ken, it very to directly then relates. you, Okay. relates

we the in XXXX, to, a Europe is about calendar currency, headwind. year you As think as alluded

was bit. in a I dollars Europe customers that just gone view and So since up prices actually the you quite in have price

by next there that to because we might balance therefore, prices currency should sometime getting rather you down a prices be significant otherwise, there year? So because and that think is down of whereby pricing situation And/or felt a is is there need coming actually where would in and than prices risk if you a for currency some is into price risk? move see a any specifically risk Or CYXXXX will, the risk back start price supply come dollar-based there risk Europeans, to or increase, actually how we needing more increases lower? about the of broadly, demand the whether come that during to it’s is

on And probably But others a first we even service. like we’re think performance about increase, still do our the I ourself. price leading – some we take on with increase price then functionality we have when the another, to the policies the really, cost like price customer partner. industry pass some there’s like components

lot don’t year convergence a So in of and that’s especially the market like is and – gaining what a where keeping also leading very and a in last we we’re we we call share very, OT it so SD-WAN performance far have pricing because because price actually, fast-growing see area of area.

additional compared price average So it’s probably some to are offer competitors. less, some advantage charging competitor lot also, our all free, offer charge service to bundle. half And we service our sell some do a as about potential of see because in are a are of our some drive of

a area So the growth lot in do which of a see service, also margin. higher we have potential

Okay.

you. Thank Okay.

you. Thank

Okay.

it’s caller next and pulling Gregg, from Gregg our Mizuho. up ahead. please Just Moskowitz go

line Your open. is

in that that air Thank mind, the how that in Keith, of out? in you days period? Okay. XX pockets linearity call bit you Were you the the had would there QX June. a first know With pause a questions. or I of for anything taking experienced was any

saw I didn’t in We part anything like first orXX-day the two-week saw QX. see pause pause. think of see question. June good we didn’t Yes. the don’t like anything we – We the

– I be pretty it’s It of probably X/X, business in think linearity. and X/X, of not a linearity, look with a the see DSOs, we linearity. at at think never has X/X that I will and can when good we’re reflection where terms you

XX% about business really the in month get You’re final unusual of the always activity the going quarter, of to nothing there. your about but

Okay. we’re billings the Thanks. a about getting few And just as a quite follow-up, QX. for questions that guidance

just QX question, respect with to and guidance the going the the of for that’s sort earlier You fair, though, possibility that I to prudence to be be list do elongated. into point. outlined sales response the cycles Brad’s in want cash to on to

of As it any you relates even as to to month cycle? average perhaps are October, seeing the changes QX period relates sales it the and

very bottom same to the before. healthy, out will actually mentioned productive which line. tenure strong we stronger Keith probably a which both of demand. force XX% believe sales sales we a some time, the in And tenure like tenure the strong have X have actually line has more meet reach pretty months pipeline, about top yet, we still XX at drive become built capacity helping not also than the We next the to months, the will

just done so can because And if don’t already I’ve I that. you

up about we have the didn’t number, tenure people. XX% runs So of given XX% about the is – That but in as a it a a mix.

that So increased that organization. it’s new number we the a of significant people are starting to

affecting have might so that macro-related make wondering past Thank any changes where were just brief commentary months sense. possible. as there get It if been cycles noticed well. And helpful over that that will a just as that to perhaps I’m X sales would very or was on you months X you. be the to

conversation, subject seven-figure eight-figure our that, as perhaps deals we started than the the is some deals worth. enterprise, we’re more as to I just the more inspection much to in size inspection earlier said are than larger in I the – started see think getting deal certainly

Yes.

Okay. Makes sense. Thanks, guys.

James your next Adam, is next our Tindle Raymond at for Please open. is ahead. Standby Adam our line caller. question. go

we’re puts and afternoon. bit growth exciting a line color these to item obviously, to obviously, asking, of is the on gave flip specific Not how that services XXXX tough other I little just side I’m revenue acceleration, comps. to think of for but think product I start growth. to Good unsure on takes Thanks. about Keith, wanted Okay. about the thinking appreciate catalyst an kind of really guidance, that you on

toughest that You in the experienced growth ever just you’ve strong had in QX. of very comps one

rate billings – down. exit coming guidance is Your is

supply cancellation could the that X%, increase at there’s are that think worry visibility. but ultimately chain with rates I

be So how revenue bad services revenue on a and ultimately of could on growth. certainty product fear lot growth

to product So realistic view about to growth maybe puts us of revenue how you in a could think for anything point XXXX. and to takes

the probably think we don’t mid-term some – One, old ground Yes, just XX% covering of negatively. here. that how we is again, indicator which kind of a I reiterated a guidance the I it. that is CAGR mean would good fact about

– it’s and understand have actually to it provide I that of think are and to we when impact think my as of product an provide it analysts will go the investors kind numbers and the I ourselves statement that, point another don’t And some have to going does going is Yes, and to happen, income trying apologize. timing when lost product from and look elevated train I reverse I backlog the of it. I to revenue thought. forward revenue. to

not driver I a – service elevate service growth. also also revenue feel like changed, think product environment. the the driving Yes. the the really And how growth all like like is The also convergence, product That’s threat the the leading we we’re consolidation, revenue. indicator of keeping has

service we revenue revenue the pretty do improve. a product So see two, last to continue the three growth in it’s strong years

not There’s customers. roughly us of part it. order which not go in specific agrees very And Street the think again, through talk because partially certainly about would to back rate that there is not Yes. to commodity. something delivered. existing about consistent with over the just in of And at that, been or it just them is all over at trying with would the people trying and again – X%, XX% there’s suggesting coming backlogs we backlog, order of the a probably provided again, to they’re something plausible not along that come off XX% has or that’s us XX% there’s It’s That’s me, and bit double to I and And Peter been think, challenge. can concern, I certainly, not be of as if cancellation comment metrics past, a other with firewall a to from what’s kind that. X/X remarkably like looking I little really

So they’re something. to unlikely going it’s cancel

but more a backlog are a as aging horizon bit. increases see to do now older, around here a have supply bit We of got little the in chain terms So backlog and starting about concerns we what certainly easing of on did, it. a the watched environment. around to plateau the Yes, we’re we be some

closely, there. concern the of we watch very, very rates are not do we cancellation while seeing indicators So

Yes.

I think stat. one other

recalling for but stack I to the think backlog. accounts think have of deals backlog in numbers I’m I X% correctly, look like I to top up, the XX

Yes, it that’s what was. Yes.

Yes.

I can it. in Got sneak quick a follow-up. Maybe

duration a think headwind become is lot out obviously contract potentially XX there flat so months. large get a for good about aftermarket on companies you to of is because seeing towards the fear. controlling to the suggests growth? all A at from for a decline average Thanks. that billings durations number software deals, Just term those which fear move On mixing of How thing particular larger billings business, this are in a you’re basis, but there’s your doesn’t multi-year deals. do

Yes.

I into with – bring continue as think said to enterprise that segment, that. for the that’s expect it we longer-term to as we’ve the has continue contracts. several expand going that we to And we years shown

believe a on success will, to continue be have put to business, if average were and of contract absolutely of will continue And we and to of rates that If larger XX go our continued enterprise, that the couple seeing you’re to you years, XX part think to closer or a a tailwind, contract expanding that continues bit I pressure. you I term. average it months months, as continue

that party. contract clearly when be I shown has longer-term come a also SD-WAN think customers to to the

kind last that to XX%, ended I we’ve So XX% happy was was continue and that. that going seeing and it see staying that I’m we’re to concerned month XXs. little to the few get low at not of into quarters the actually level. that grow a

Thank you.

Okay.

last at our Turits KeyBanc. the have We session. Michael question for

open, is line Your Michael.

Thanks.

COVID. where for down, around you Ken, do quarter? a to go this neglected have relative if level, cycle the you and demand not may you backlog Or extent seems whether realistic is to starts that it the or to point to So can after continue rise talk fundamental you think that and, been are a at we during refresh to centers will, data

last using years, because I in the have probably I – network the of some couple not in security change landscape. like were the refresh feel

So network data see probably I security position more we the starting center traditionally especially into using deploy convergence, is and not the also OT the segmentation, security SD-WAN, to internal which strong growth deployed. security, other

networking most security, big very, other the very working do So And that’s also. with see we actually at strong the into there for the there. do the enterprise the business big whether They’re also of growth area. some we part consolidation of looking the in growth that from plan We enterprise. how infrastructure our also like get

also not that’s times drive the of deployment. deploying lot home only but like is a to areas and fast and from new working So really lot the a of environment very also very, new new of probably remotely area the not a lot

a but in probably of see next the security to of it’s So the be at years long network very replacing drive old we some will the looking XX in kind more years. not the device, that’s for growth new where X we’re time area refresh, –

backlog? Keith And on

backlog. sorry, I’m

Yes.

a the – fourth maybe the the I inference we’re at be quarter would think think and that plateau. last quarter I would it

dynamic, supply, though, the Still to is going depend but. which still on

Yes.

Thanks.

to Salkowski, President Okay. turn like it Vice for would to Peter of this remarks. I closing time, At Investor Relations Peter? back

call. you, Thank Eric. everyone thank today’s I’d like for to joining

will fourth posted links and attending Fortinet Wells webcast website. investor our Presentations quarter. Stifel the be of Events Fireside by on conferences be section and Fargo during the Barclays, hosted will

have you much. follow-up [indiscernible] please you Thank any very If questions,

And program. this concludes our

You may you. now Thank disconnect.