FTNT - Earnings call transcript Q3 2021

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Operator

Good day and thank you for standing by. Welcome to Fortinet, third quarter 2021 earnings announcement conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

further any require you assistance, please. If X. star Press conference I first your the would like to now over speaker. to hand

For today. Mr. Please Peter Zarkowski, Vice President sir. go of ahead, Investor Relations.

Peter Zarkowski

via Keith Thank will updating results and be for to today's Xie call a welcome Peter our available to on Officer. our open operating Speakers is the Jensen, third Investor quarter everyone. results, on discuss Keith call to and will third guidance Relations everyone for you. get Fortinet's Fortinet's then quarter Is to the business. and President call XXXX. today, financial Relations our pleased replay website. Ken we Ken Vice for CEO, the providing the the our then Financial of Founder, of Mr. call fourth providing quarter webcast live will full I'm Fortinet. call Good before follow afternoon, for financial Investor are and Zarkowski, Chief Chairman, the questions. for a We'll perspective level year. high our This of that with

allow the to we ask that to brief and you participate. During limit yourself Q&A X question keep your to please session, questions others

actual most our to refer like factors recent to we Please begin, risk cause on In and we today's differ our call be projected. everyone Before I'd materially Filings. Form those to making forward-looking are results Form remind uncertainties XX-Q. particular, subject could and in which that statements will from these statements forward-looking SEC the XX-K to risks

are undertake obligation update that unless our to stated of the opinions our specifically forward-looking statements. call only today disclaim this otherwise. non-GAAP, metrics any information, of to more For reflect and statements financial make presentation. today's we And obligation forward-looking on date Also we references no while as

on the results of our website. that Investor presentation press posted GAAP remarks, which and accompany both today's non-GAAP in reconciliations located earnings GAAP is in are and to Our release the Relations

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

Ken Xie

the Gartner, individual mesh the cybersecurity recent security called accelerates momentum, joining our XX% $X $XXXX architecture a to According over to million, solution, many to going with our billion by revenue time increased optimizations to Security the review you separate thank offers this for product cellos. $X third History. revenue of quarter $XXX in in challenge, our the architecture negro complexity. with growth quarterly financial revenue XX% with integration XX% to which that out, incident to up operated And XXXX everyone To add will on growth the for report, Gartner adopt Fortinet that by focused impact, of parameter result. product is And public predicting are security producing Fabric security to the total remains growth. first XXXX, XXXX quarter address an best strong in today's Billings average highest a billion reduce business platform fragmented to billion Gartner In as approach. is since very and growth $XXX team that tools mash exceeding November Fortinet web only million XX%. call our outstanding XX%, Global

run-up Or like lab lower better consumption Fabry with much functionality and late end-point agenda to most the email solution Fortinet protection. results tightly These XX is firewall, the our XX performance, it offers platform, helping customers security for ton capacity networking together with approach softening again, factor security security integrated fabric compared basic the as power. offers computing issue and through power cost, FortiGate, CPU. for our of broader driven [Indiscernible] in

While competitive solutions. you other than automation integration at a better

network area expand secured a to and consolidate a continue for cloud. to aware the any powerful to walk approach. And [Indiscernible] solutions as local towards to wide As environment ad the

than capture billion strongly addressable significantly positioned our market projected more of market is total to by of $XXX XXXX. a share Fortinet

drive We on are increased. to a to most COVID-XX long-term [Indiscernible]. to confident will focused Walk authorizations announcement average expectation According enable anywhere anywhere organization has solution anywhere. for working Gardner, growth future pandemic with walk of flexibility that industry this Fortinet. secure here from trend expanded their together connect facing for better-than-industry -- warfare workers is completes are relented XX% with hybrid to seeing innovation for the stay. Fortinet our has organic The greatly and Today, this

Fortinet Our unions the network solution and fly Fortinet, security within portfolio endpoint, Trust, fabric. Aviva security of broad

user security quadrant office that magic for The to announced. protection address and provide and infrastructure grade enterprise the the home productivity. load on XXXX Gartner XAG wager follows delivers Fortinet are in the

Fortinet SD-WAN, was Wolchok the outfront ability Fortinet war nowhere. named enterprise leader, The SD-WAN. once number solution placed customer. our the provide connect to critical mode, and The execute leadership Fortinet highest solution with is the a rent for Gray market global capability. not X to designed rising expansion networking business recently a Was at converged again to on are of -- and and in secure for secure their security wireless box of

kind the SASE to continue see largest of accounting which foreign months AT&T, for employees, These branch solution providers. service among the to SDB worldwide announce others. support secure We SD-WAN including and and XG our customers, and turning cloud momentum thank when work. Keith, on like coming We would our its over the IKA of to in adoption their continued of Ted plan farmers board the is to and our providers, delivered I worlds before call

Keith Jensen

Ken. you, Thank

more demand the Clearly, industry-leading $XXX by XX% revenue XX%. Total strong. start was million up growth for growth. revenue drivers driven is revenue product of revenue detailed our and the of record-setting product Let's with discussion QX

product Looking rate closer to in drivers. a at X we our Company, growth, public can the growth years highest product XX% XX quarterly as revenue point

networking, what First, of driven the convergence or security security networking. call and we

set And platforms. threat consolidation of third, on for of entities. a Second, broader vendor heightened across strong today's elevated a awareness customer demand landscape

innovative and platform. fabric be proud driven security convergence an our functionality With to leader security security in of networking a and automated networking. broad is incorporated into Fortinet integrated

automation, switching, driven security deliver can security attack a in to Customers enabled unifying services Cloud for enabling organizations network home our provide secure are networking connect SD-WAN integrated datacenter integrated, the edges. and And and anywhere. vectors. the and range networking a solution, provide from -- enterprise-grade the our to platform broad, Wi-Fi to strategies effectively threat security intelligence LAN, consolidation. follows secure XG, that at to office. of wide users Our security, consolidation, we The vec with single security us on focused and approach zero-trust and the from at and solution end-points unified solutions. the That's speeds investments from at datacenter, We in cloud. an Today increasingly announced to endpoint the road on attack seamlessly security platform protect and that and vendor the work

fabric platform, Fortinet or driven computing gates, approach, to fabric as operating that dramatic on fabric security taxes a provides and The of XX%. single called led across security Florida range power as system. on recently taxes CSMA average times week a entities AC mesh approach factors, from record-setting is has cybersecurity FortiGate was Our non-hosted our firewalls than ramps may architecture more of foreign broad landscape a provide ransomware X which all July competitors, June platform out XX CSMA. increased solution. to a of cornerstone security security of Gartner integrated products, both technologies. a turning price Fortinet. virtual provides cybersecurity mash more product and revenue of suite revenue OEM factors CPU's. the greater our of cybersecurity with architecture, with solutions. adoption of and The threat our security increase methods, growth system, FortiGate power contribute form X of a in the XXXX including perpetual These the in physical consists awareness range sizes, engineers of and across revenue hosted and need to Cloud, awareness the SaaS, It -ready published of of labs. Those and security latest gains And market delivery XXXX. geographies, and complete awareness, industries. lastly, appliances, enhancing integration software. networking, by posting on extends share our performance attacks running They're of of integration the operating for explosion computing drove greater allows per software times into and than number our to common the advantage. -- to global landscape growth functionality to FortiGate embed rates broad-based, The threat product approximately The to convergence unique the growth The for greater ten product According of for report Non-FortiGate, additional

to revenue points tilting higher our revenue XXX services While basis from current product revenue. mix margin

we of firewalls. growth of were million. our up related revenues growth sandbox, products revenues, Rounding FortiGate by saw in was including revenue revenue and to million up respectively. product XX%. XX% product subscription XX% platform entry-level was services revenue driven revenue Non-FortiGate driven $XXX was XX% while $XXX switches, SIM, XX% by up and out security to revenue Support product and virtual $XXX several high-end service mail, services million FortiGate

In Turning to revenue And revenue by XX%. increased X, the revenue APAC revenue on XX%. EMEA increased posted Americas in of Slide growth Geo, XX%. that summarize

quarters. is quarter, global with logos X over for consecutive performance expanding XX%, leaders, for At to were added especially in billings., enterprise large the in as $XX threat million threshold, the evident we strategies. $X second XX history. crossed customer And This time the over billings up billion, segments. enterprise to in integrated consecutive the first X,XXX Favoring sector, growth responded XXXX up platform costs CSMA all our across were for new accelerating billings landscape. billion Moving the segments, were $X across the billings example, or XX%, last enterprises the

for FortiGate billings billings. were and up XX% of accounted total XX%

X, increased $X growth. a for total months to billings we're term XX% billings billings top XX three Driving mix up of up large As increased doubled on the and months. XX was The XX%. Slide ten by of The in accounted entry over XX%. quarter-over-quarter GXXXX more than to deals. deals approximately continue billings X-point contract driven solutions in strong XX% high-end receive of accounted XX%, Non-FortiGate deals to one-month, increase over billings the very and significant SD-WAN shown FortiGate were XX. billings to and posted accolades. industry enterprise to and Non deals SD-WAN Company's saw on number were Non-FortiGate. XX% million term outpacing billings to year-over-year, growth up and contract for shift The level secure Average other FortiGate increase

Magic For positioned ability the the to for number for Gartner Edge Quadrant one was Fortinet year, execute. WAN in named a second leader infrastructure consecutive and

worldwide billings OT the ranked and elevated investments consistent breadth And XX%. up and SD-WAN Moving share cases. Fortinet capabilities XX% ransomware use expand top work billings by government and the remote growth other verticals, WAN, small critical attacks, verticals. the We've five the worldwide and with and first Among in engagement to mix environment our saw made sensitive presence of grab industry were a ranch For the of security threat largest the with XX% government sector. to with billings of

believe another Center manufacturing, that EPS U.S., Adam for X, Board in an construction, to fabric For example, the billings high-performance XX additional routers networking added been for investment total reflects and leadership million. announced Are and their less transportation, The market. security in investments driving in combined and other controlling in in Internationally, shown addressable net of security the for for XXst, security. provides on networks. federal industries affluent and Directors. $XX the of Alexa local is growth Defense Japan yesterday before levels. approximately landscape, that our federal where year. Fortinet consistently recently Australia in Elster Innovation of networking set and We top end Utilities, market, [Indiscernible] have verticals not a Company open and budgets, of acquired growth solutions. On lower stake increases integration the threat approval Forestar the Department for the the to of Alexa convergence our nature of verticals our our over government base indicator of And have we're XX%. we retired and certification switches internal resource labor these network is of security broadening may August

per was margin gross to largely the from year-to-date approximately increased margin returned product Alexa points XXX,XXX remaining statement, mix. a at the for We Inventory in -pandemic were margins authorization repurchase pricing gross building answers $XX the and billion some supply Services of XX.X% authorization end the top the The our from higher with XX.X%. Capital new from and a chain share $X.XX. same, date cost XXXX. to approximately February good points associated and of the free change supply from cash -- product at operating sales in campus stock actions. pressure. chain XX%. the the billion. the ended DSO's results the total extended growth flow times cash of quarter XXXX. [Indiscernible] repurchased [Indiscernible], of representing pressure Reflecting product reflecting with XX Product above increases of strong moving or cash basis, cash and Despite Income XX, the Headcount datacenter net constraints pre points free $XXX $X billings, footprint. investments to due levels. Free on to summarize basis The associated were XX% billings, X.XX board Slide days our to billion. payment strong On event. X,XXX, to with basis back $X.X XXX X.X increased a the basis XX gross margins The of expiration by quarter a the total declined benefited for in flow repurchase our quarter, guidance. increased margin the of foreign million, marketing to second for million share was XXX second flow expenditures lower an linearity. consolidation of margin decreased costs times shares X.X turns XX.X% cash by our was from of including of XX.X% XXX flow offset primarily our million. a $XX expenses, We and and expansion average price common quarter Moving to cost million is championship, in

and pivoted call, include expenditures strategy infrastructure we to capital fourth investments operations out support in accelerating our expenditures capital to future between As facilities in sequential estimate the our noted account we've to quarter million We last CapEx. facilities for earnings $XXX growth. $XXX our infrastructure in our operations increase our and and building

rapidly providing guidance, like to consumer sizes, chain, in supply widely comment macroeconomic is chains I'd the companies of environment changing and the for all that Before industries. the on supply causing disruption global publicized,

situation for being of truly outstanding the for worldwide regards pipeline our and and entered offset in this expect value. to reputation we leverage supply of with growth. the to able to provide pricing operations have team, customers with fourth We supply issues or thank each our price will evolving this We constraints The and performance be and like current to pricing, largely chain present supply customers, chain met strong evidenced have the proven challenges been we QX dynamic. by our cost. understanding excellent We we demand our as a our by We actions reputation can increased view not quarter, And as challenge. challenge, acknowledge believe to extremely XXXX. to to here into believe results, With member our believe space pause their performance. harder

Slide forward-looking beginning to which to like The call. our guidance review provided disclaimers the Peter information efforts supply of subject our best outlook chain on is fourth quarter summarized impact. at for regarding the nine, estimate reflects the I'd that Now the following

count estimated acquisitions, a of the margin XX foreign expect and of million one billings XXX Non-GAAP Non-GAAP assumes $X.XX which the and Non-GAAP to travel includes and marketing $X.XX, from XXX which XXX in XXX basis XX%, of XXX XXX increased exchange, to million. were For of XX million to earnings-per-share an gross of to point operating between million. we costs. fourth range share X range quarter, headwind million. the in margin billion, to XXX Revenue billion XX%. to

on for XX%. third upside of just strong and performance, the Based rate are very our fourth-quarter tax non-GAAP provided guidance. expectations, a we XXXX the our quarter expect once I raising We again

of the to We of which of the $X.XXX revenue the $X.XX range expect Total growth Non-GAAP share represents XX.X%. gross midpoint the $X.XX at at operating share service of to product $X.XX Revenue to XX.X% per of applies margin the growth of growth midpoint approximate which XX.X%, Non-GAAP billion in billings billion assumes billion, revenue range XXX $X.XX million. and of billion XX.X%. in count between of margin full-year growth of represents billion, XX%. This to $X.XX of at earnings a in range to XX.X% XXX which to and billion, represents XX.X%. $X.XXX XX% $X.XX. non-GAAP

fourth $XX We success. approximately expect be with to quarter. the over Along for outstanding hand begin million made thank and the now cash back in our taxes members Q&A. Non-GAAP rate the our will We tax their and includes which payment XX% a to expect customers, execution Peter the all of our be partners, million, I Ken, Fortinet XXX I'd like to work, to tax hard team all to call

Peter Zarkowski

please Eli Q&A others that yourself you up As question allow a (ph), to to Q&A. the one open during reminder, we ask session, the participate. for call limit to please

Operator

Instructions]. [Operator you. Thank

question, Essex your have For from first we Goldman Sachs. Brian

Your line now is open.

Brian Essex

really Great. taking And and the supply certainly and for congrats question three the the it's from quarter. about on you question gotten nice talking some particularly investors, this Keith, past you time extra afternoon. I've some guess, chain most I the spent results over weeks. thank frequent Good

then, us peers what guide? not XQ you're see risks accounting product? help your Where in you be supply where could may supply seeing of you having from may or for benefiting from you particularly might So what kind the in your peers, you quantifying chain? headwind And be might have maybe understand, where

Keith Jensen

that the articulated that don't I answers questions know all at and all. anybody knows Brian Thanks to you the

color give well. I'll thought some you You as

nothing alluded I to, I in will, a in see pressure noteworthy. think the we've is the I but what third you bit for the obviously in supply saw that terribly was we little chain conservative, for we chain would of think number's the supply of appropriately quarters that in quarter. given what do the terms quarter we call backlog -- fourth or if fourth guidance second the

about feel that we guidance good think the I we've given.

at from think I you operations general -- if the we're tone look our hearing team. and the what

see with And fabric very bit is that's of I component the point, or supply or what and commitments fourth on. we the -- appears I quarter in manufacturing improvement. quarter. a that'll Getting gets year. gets extent think less to have about in next about into understand probably offer think every actually something was calling I'm everybody improvement them and in the providing the to out third products, dynamic commenting to think is very before boat hearing market them. And hold mark it sometime we'll some you tell until the we're get probably fourth matters for Non-FortiGate. to this that and probably day backlog contract that, the continue you. us think to XXXX, on quarter the as I I scramble to that in there people little also where having when early the kind would -- And chain for for that, first guidance at for also several of the some I With back months going closer trying next on real same well.

Ken Xie

we competitor. position XX bit Brian I compare little [Indiscernible] is a better are feel to

our have we the much First, louder it's competitor. why quantity than

earlier. these also power other, given probably a to fiscal supply, of competitor maybe negotiation act more compared like which and visibility better [Indiscernible] our We some us out unit all also to [Indiscernible] Xx will be of that's similar us manage some on directly pulled and can a better quicker compared are party. sort the gave shipment,

line a and NAMA the and quite the is for the then line. we of products FortiGate has to customer an FortiOS our performance a FortiOS. to go similar running in Bolstering Second, broad all easier have next product also FortiGate

more some their sales market to in a years And to ago, than even shortage. culture XX easy more keep sell And a customer and me of trade less to have urgent needs. great different [Indiscernible] me, our better also, their some side. tend [Indiscernible] we time, long same a term on it's inventories some XX, more a some -- competitor. both To product we operation So compared to use have than the we X, to product team

So actually issue. that that's been for supply chain

Brian Essex

question back for very Great. On Peter's Thank in request much. step one our the just and queue. you

Operator

Liani Next we America. of Bank have Tal from

Your line is now open.

Tal Liani

this on focus is with thing. me acceleration. killing want to one which you're important guys, the Hey growth the question I most part,

XX%, growth, that to XX% XX% Your from revenue lot major X growing, your a billing in question I growth, of to to from last And went acceleration. the a are is, quarters. key areas? the product just went identify areas -- you it's can revenue And XX% the XX% your know the to but growth when where you highest material you key the also What on the share are meaning areas? the that SD-WAN Thanks. key an you you us of acceleration. specifically? look at areas, -- give in growth can areas, And most see to terms dollars? us contribution with the Can the XX% highest update

Ken Xie

can you growth both FortiGate and XX%. see, all also like, revenue As Non-FortiGate, of

read legacy, the the really reduce to stick small you tied single fabric which internal -- our Fortinet all Gartner is I protect by to more core or somewhere SEC can a story, security the FortiGate fabric, financial promoting XX%. architecture, is also the which And mash sat went. also these us, of when to to Non-FortiGate like, the whether costs because event go cybersecurity communications the in the

this the gross, falls some I consolidation, got think also weaker we And starting like some for key see and weaker. a vendor that said. vendors contributor smaller

gain some share market also. see here do we So

Tal Liani

support you with forward, high when Okay? don't continuing to I growth And see do or but how you deal provide know acceleration when at you targets next same look the and the XXXX guidance, look these year? you do you drivers

Ken Xie

helping down. look years. really which close enterprise secure slowed the we're and network the security to our provider in are last obviously. not we driven service it's better for trend probably security customer Well What few a or this see at do We fabric,

feel slowed gaining we're So well far be positioned see We keeping back market down. share. anything to

Keith Jensen

but I as now. in landscape think anytime for abate right conversation world echo of quarters have hot what seen just topic seem I to a the And Ken -- doesn't said that's all other like it Tal of going threat would soon.

have partners needs architecture can platform this -- I built our it, cybersecurity think with architecture, all the It's I now exist to we commented with about, of it. calling consolidation, of reports to to those But networking speeds certainly the -- I percentage is team poised network for Ken's that, think also here think on XXXX how going -- security and call companies seemed gardeners body tailwinds, I are are continue mesh and as the that's increase we mesh critical. into consistent looking the think to to and the continue what get

Tal Liani

Great, thanks.

Operator

Our next Eyal Shaul Cowen. have we from

Your open. now is line

Shaul Eyal

Federal on Thank that performance as of the given so that good third see vertical? vertical do a Keith, guidance, you performance. seasonality? government Was your just -- Or this you. typical and sustainable of sustainable had it buoying quarter forward, Congrats guys. investments, recent within

Keith Jensen

talk about for when we Keep name a government the it. is mind worldwide in us,

that been now. very any you U.S. overlay governments, Federal, down. I now local certainly team. are that, as that includes the reason over see team state So think year, with vertical and it for not a to and relates of it investments a some was Ken international years well that on has Federal making, don't particularly that X if etc. And slowed it And U.S. I strong also governments, It if just basis ours

to hopefully move we and is us exploit explore some as think there's opportunities I forward. for

Shaul Eyal

Thanks.

Operator

Turits from Our have KeyBanc. we next Michael

is now Your open. line

Michael Turits

are the and for drill really understand. perhaps is place good surprising the And The purchasing what side is some we considering I guys, FortiGate Is it move on displacements? Cloud. has see, modernizing that and datacenters, to would think down or Hey, datacenter to again, expansion? taken

quarter down drill just So slashed gate side. Bahram physical the on

Keith Jensen

think peers. we're the and is sales team. compliments here -- really I think hate seeing to my really from starting to what execution give what I I But we're

came I then hear see very about we hear products they're feeling sales think it they're using a strategy. coming There's to I competitor some comes -- and in expand the just the strong and we of think that, and same suite. them think team certainly to Whereas done if conversation had talked them job. And I me. And the them, stellar I that confidence them product no articulate you from? that, when and into strategy, I the the we've a asked this the I can platform But technologies invested has question I and leveraging website. successfully. -- can very the in can Display's land can afraid off. tools back them. invested we and

a going before, a lifting So with we quarter. that we I I There and a a back, geography, strongly. asked very term rising boats. there this and -- wasn't a I think -- wasn't have that, think in Tal the all about, used tide going product And question weak think, weak sweep, saw weak I everybody performed

Ken Xie

is end year up [Indiscernible], to some like XX% also last active before. [Indiscernible] peak off. made in service some and provider over global price paying an the the in solving, is Keith growing Yes. set In

Michael Turits

in of a where way. trying why I'm course, I to datacenter seen it cloud it's terms too, doing buying just not a is in just hopefully put and same Yes, in competition stuff well really that we of we're that are people think to refresh, but out, mode so or the But question, here. figure investment? we've Is execution because when of

Ken Xie

the a strategy add the lower, the and setting of then the expands XG. low I inside the all also. That's which and security long-term function, see wan Company, center X time inside where cost network, performance it's like claims a data lot and same all also [Indiscernible] internal think ASIC more I and to side.

for goal. that driving of lot end a see also We

selling really security expense Internet the just whole border. are traditionally it's for So instead infrastructures

because people really a has much driven most the strong market smart how networking. secure market that's it's So total security. addressable suspended But and sometime

Michael Turits

guys. Thanks

Operator

Morgan. Next JP from Sterling we have Auty

Your line is now open.

Sterling Auty

how question an guys. how Hi in is help characterize us can versus their displacement of talking both is of is An coming much from about. expansion. of you product look if build-out additional growth The just Thanks. extension even you much the actual just a customers, at Michael growth I'm the it's additional was asked coming qualitative, curious as traditional handle of needs. Yes. existing from for my is networking, solutions, X ongoing what and growth the that cybersecurity buying quarter, that growth

Keith Jensen

the think logos. is I new X,XXX I metric give would

logos, go strong and I'm there getting seeing was that, and that installed now at we've across-the-board. I same some it. about But the think doubt always small back-to-back the mean, I quarters the Absolutely. of I as execution enterprises. I you execution stronger our that's we're But was back X,XXX at-bats very coming new at-bats, think I going that penetration greater And the think customers? well. added Did penetration, coveted. two time, more base were we say, with are those -- to we've No in know of [Indiscernible]

Ken Xie

Also, the keep expanding customers [Indiscernible]. existing

security like Wi expand segmentation to structure I one side, security data approach, the also and - and see Something Fi X adding XG like plus with center security. internal

I that's see So security probably maybe boast I about. from what do come infrastructure. cost can expanding more keeping their the

Sterling Auty

Thank Understood. you.

Operator

Rob Owens we Next Piper have Sandler. from

now is open. line Your

Rob Owens

think products in relationships you getting just this guess little these taking about question. my for the in you I and coming I'll bit related, Thanks. what do ask share accounts driving from pivot and billings. Is who better distribution is specifically, GXK GXK that a it are that Thanks and market? into is strength Yeah. Sterling from is

Keith Jensen

are -- of, mentioned -- I be gainers terms market I've actually the of the names any surprises. would a I share were. who I -- general and the the where who market is there'll those comment don't give I thought who think share terms think in in donors?

Company, as particularly superior I large a And from opportunities with of we product, getting that, distribution, will, lifting we a to got them superior you think distributors invest team a you've do in in, the those terms that. enterprise that, got bring a previously. large not distributors, I think offering. -- has U.S. if and done momentum, are more have time you've market maybe did the you on that, a in to and And heavy U.S. focused when believe you I demonstrate In get the have that,

the coverage our assigned that experience, we both to marketing. etc. we're now outside in and more knew had a sales in I unless So needed and maybe improve accounts continued of all that, people think that, we're I for [Indiscernible] of years from enterprise that. several of think terms to And some an then there's to the in wraps. we've the channel of bringing And that We invest along experience

So I have out, growth those do for GXXXX pointed three success, quarters. the think you the things that and all and are accelerated as XX% over combined at last demonstrating

Rob Owens

you. Thank

Operator

All right.

from Morgan have we Fodderwala Now Stanley. Hamza

Your line is open. now

Hamza Fodderwala

just I'm side, OT on taking that thanks to XX% guys, question. But going Hey keep you my it growing the quarter. question. one this about for talked to

the I that first-time mentioned you think are those product specifically.

billings can what's Just curious, how give us driving you been becoming quarters? that rough of sense overall material your and more to that's any in recent

Keith Jensen

we that don't those growing making worthwhile SD-WAN will But I if as outside we it's the with not you faster. sure comfortable that think a as big in it's think of growth think but size think also, with I Company -- its levels. that terms I share we're and people point, reached we're

If percentage to to you billings, together an of you're get something. a as SD-WAN combine going and OT

XX% our I over total of billings. think that's

Hamza Fodderwala

Thank you.

Operator

we Next Adam have Morgens Stifel. from

line open. now Your is

Adam Morgens

so so announced Hey your September, thanks signed question. Maybe segmenting partnership also corporate from of back guys guys and you idea. and a competitors securing And at environments know one with networks. taking Linksys Ken, similar I work home personal around a for just and much the for

office from opportunity home this think of branch one becoming So we much. to how we should forward? the a and idea the extension live Thanks going that networks about anywhere effectively so and the whole work world as in securing of do of

Ken Xie

combined lot That's and has the all IOT and connect online. SASE. a our new which sales a area networking workforce amount modest if network of a a security school while of which also is for it's are clouds partnered LNG down lot of we when from and also -- in we reasons [Indiscernible] the with market. quite of do with And all while. there supporting where in home It at it's neither these a anywhere. we a It's kind from work Security, lot security endpoint potential has since eventually believe And

contribute a business up revenue quite. potential. ramp for will more -- the it's Company. I big as mean eventually it's feel So we do But an a but actually the that quickly, not long-term it's

Adam Morgens

thanks Great, so much.

Ken Xie

Thank you.

Operator

And Blair. next Jonathan from William we Ho have

line open. now Your is

Jonathan Ho

results. Congrats the strong afternoon. on Hi, good

chain a sense beyond to a Thank us even there wanted some Can I for Just price a impact And guess, you. of to the better dynamics you increases that these the to, bit potential base. of stick magnitude supply increases? those or understand little give around your challenges? of the quarter is the from

Ken Xie

by Yes. increase on the also cost which especially side. partner time. increase, price based Because same We XX-k also much and better price more and carefully work how on some have ratio, our supporting at we performance function, the the

customers price, have like we by to some product. the address feel do still, more we do So and room the of

And So we offset some we'll just the increase. probably And online. do price we'll increase. margin cost back soon get

Keith Jensen

line because -- give to look to certain the at say which hold were get can is orders you partners, I quarter, to taking you metrics would increases, the will. I'd channel is largely have August if of which that, Xst. the And we one in of on largely month actions appropriate. which quarter, to of add notice the Jonathan, third to our Xst the the that effective them ability the imagine you in your price

were back bit that you to increase, not little do that, product we're look is the and the way. discounting at ASPs a gets headline direct think will. we if it and So our sure on we are think distorted giving overall, that I we price that, wanting But And line. make

well, predicting into emphasize as the sometimes, because it the is, direct, think secretive I quarter. like and the volatile as expedite And freight fees margin as come I line. can that it prayed things in to was

when we're for in the So wash I in think overall, and a factor probably direct indirect, you quarter.

Jonathan Ho

Great. Thank you.

Operator

Next BTIG a we have your line now Powell Gray open. from is

Gray Powell

for and the numbers. question on good congratulations taking the thanks Great,

a how then So we potentially you software think should within can sense how related And give your versus and issues to to Non-FortiGate in Cloud? QX? Non-FortiGate appliances roughly us as is yeah, much billings, chain impacting about supply

Keith Jensen

Yeah.

of about software. will is a or order the we Non-FortiGate think form remainder that the at factor. is before, something mix we something hardware XX% Cloud be talked this the And to I were of -- XX% about on

chain I was pressure As access in more place I non-FortiGate, this first and specifically switches mentioned we in supply points. in the around third think call, quarter, the that saw

Gray Powell

Got it. That's helpful. Thanks.

Operator

Next we have Andrew Niwinski from Wells Fargo.

Your line open. is

Andrew Niwinski

quarter. Great. great to Thank you high-end, that a on the about congrats I certainly better and was than expected. want ask

level contributing last I rollouts in spend market sales, least leadership might whether years. the it Can your like that? looks the XX% be of of to the the you carrier the at highest FortiGate two about the was over talk in of which your think in And XG high-end? drivers position

Ken Xie

the fresh high-end The we a we enterprise, that And I refresh the on have XXXX higher-end. product X And X the big also last in think Yeah. growth. some contributes Global also years, [Indiscernible] to

You've has and with -X, of seen I the X already. which maybe scratched more latest ASIC x the were MPS probably better which the like, XX% MPX, the is for performances high-end function previous compared have [Indiscernible] see we

in years. benefit these we some also refresh we made in the X of to that's X said So last

Andrew Niwinski

more from contribution carrier-class enterprise? on No There's customers the the XG there?

Ken Xie

ramp steering There's contribution but stage. SD-WAN. from I the don't potential. much, the the But I some huge see do XG see up it's

Andrew Niwinski

you. Super. Thank

Ken Xie

you. Thank

Operator

Evercore And next ISI. from Liu we have Irvin

now is open. line Your

Irvin Liu

the or thanks Keith. Ken question. Hi, either is for This question for

of Security post a event perspective, sponsored Summit, opportunity whether just place from partners perhaps event. if event. a what that's you're meet you're the And the seeing had new mindshare notable customers the visibility with to talk along led several that, and Can uptick PGA about prospects have you kind to You customer traction seeing the championship and with its Fortinet in -- customers. you’re first among you're that

Keith Jensen

question. that marketing head the of question. asked good think I But it's a

Ken Xie

the these using definitely A to lot advance And had customer a we platform to all for the appreciate it of as different -- Barb except PGA worse their will a probably and and see been investments experience a marketing made, really pun upon fully that, that biggest result. customer communicate to share, education. altogether, beer. have of champing training It's also we also one bring of but lot

a event. And also helping and have of [Indiscernible] generate put we a do way. this successful the already [Indiscernible] sales more see so of we this is lot lot in marketing Is

Keith Jensen

fantastic. over and names out. we and call I've come about event just the was on that with and how look the at, our whitespace -- shocked that, story Ken what from, say came about us more XXX. echo, would were what I topic I enthusiastic that it to how of had sit I'm sessions we and names at Whether am completely that percentage we it say. SMP The got one-to-one and was attendees household there, were non-customers, hear

of with conversation. the think Silverado comments I we extremely think that, Country Club, team with successful. pulled the also, together with marketing made to the it the branding was goes And I together back earlier some in

meeting I right that think good time yesterday a at here team in large come its execute event. call really of right? very I a that I -- was, with Company maturity, struck position against to in the to was really customer the think Fortinet the it that. was it a in here its terms Sunnyvale, in

companies Sunnyvale. just I'm there event, ABC just come half the and first have a a was been events other And Guys have month follow-up. the it And guys that our to large so ladies and in in what And with the impressed after did. between. very really here

Irvin Liu

Got it. Thanks for the color.

Keith Jensen

Yeah

Operator

have Bachman BMO. we [Operator from Instructions] Next Keith

line now Your open. is

Keith Bachman

very Keith, sequentially, think -- in years, about billing billings high-end, you Thank XX%. you to would EBITDA the about guide, about X grown past the you're I billings' wanted this sequential towards Keith. suggesting much. what be was the direct growth as XX% you've

a product? to color might customers And concerns me were thoughts guide. concerned the of some ask -- if wondering I of follow-up. or reflecting of to And about I that And/or to have So I'm then it are And there that. less some product is on follow-up getting a availability I'm pull billings, around bit a of in think I reflection the you tamp down could you you told Peter kind is was give the could, a the allowed if because previously enough little on not should going in therefore, just little in or have QX. particular, just a obviously supply about need we that chain say. mentioned any we about availability us

Keith Jensen

what up conversation, think think that, and in I decided you of to as we we and I it. And we very we not should would we this number conversation is how what they our To earlier And that a a have the at team, supply ability But say whether we I just unpack seeing bookings you're we that's we've Look, bookings put just I bit, in bookings -- Again. against I at with to time indicator a metric look then ship. with is just not the strong things that that on will. the conservative, guided in sales them. provide basis we hope, number, healthy, long terms or If had if a do extremely internal look if about the little I that, and chain. manage that appropriately there to. it's said a business been the

something and of maybe behavior or it bit you. or have not a That's you no customer of deployment over In the that in always what quarter. early, longer-term buying they $XX in probably eight there's in the quarter, million little like is are the or deal if seven terms have deal they somebody largest will. That third getting or line new with

customers product plans in they're are And They've where got say when be XXXX. where make deploying going available. time, for they deployments to sure line I'd orders. they to need We the the getting going have they to our things trying that, and to the in seen product fourth-quarter are is actually when want

early the exhibiting have a So in seen behavior. I that companies few quarter,

Keith Bachman

to not demand reflected that's so and mouth. be all able reflects little it number a customers saying, But billings times, lead the more. essentially from make you might the shipment they're We're in -- you're like about what words are I ordering the not -- getting out, quarter the bit sounds maybe early I'm concerned some putting because channel, in from are your hope you in hearing that not

Keith Jensen

No, absolutely.

around shift, not going I I prudent think train but with I'm to come you just of thing been can't there's does behavior in, side, think work environment say, XXXX take to supply continues. a more predict very more into we're to number now, that it absolute on fair -- of give us we as that this amount be that I just the other a internal will, the the would predictability if the booking take

as something So I has we that that do. to fourth we've reason not bookings into And or as that about been of because maybe then don't But may the had cause something in the of a has about. Company that as Ford that Backlog -- past. had talk the really know or be with, XXXX, helps we and we get talking next moving into further year. predictability quarter that that it today

Keith Bachman

at do mix. little not how about previous in changing you the of Okay. but that questions, And you course demand question my if couple I but supply talking if constraint, Peter mentioned of over a quarters, related then, you bit all? I'm pools. really that the about know see the is And a next one talk chain non-FortiGate -sanctioned And just the on of second

on Thank existing you floor. do up, penetration software moving the may greater they're non-FortiGate that the then you. incremental I if -- as cede will, your component. see customers deploying customers And side and As look X,XXX you in will the

Ken Xie

a both are the Fabry from customer that new where we That's solution. customer his products, do demand repurchase amount increased about matched mash. We see multiple what call put the we also anything Fabry on strong and

can So the hall and carrier we restaurant Canadian be SaaS on And a Also we'll east where said assemblies provide solution. modest non-op XX-k. we growth that's few sound

customer benefit also will eventually base. You broader

Keith Bachman

All incredible and the thanks Many congratulations results. for Okay. right.

Ken Xie

Thank you.

Operator

And I to this Peter the concludes the for there at are now time. That Q&A session. closing turn will no further Zarkowski call remarks. questions back

Peter Zarkowski

this for evening. appreciate everyone would your Eli. a time. joining you today. lot I have Thank I calls know you, like to. Really Thanks the call of

on NASDAQ the of Conference eighth on the will is Fargo December Conference December fortinet the first, Investor attending on the the Well seventh Fortinet fourth the and conferences the at webcast conference on Conference Barclays December following investor.com. UBS to links webcast be website Wells will on during will XXth, second, investor the available. in with November quarter events be was be Relations presentations

questions, If time. day. free please to you very follow-up good have much day. your a Have for any good feel out. reach Thanks Have a

Operator

Thank concludes today's all conference participating. this And you call. for

now disconnect. You may

Fortinet (FTNT) 5 Nov 212021 Q3 Earnings call transcript