FTNT - Earnings call transcript Q4 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello. Thank you for standing by, and welcome to the Fortinet Fourth Quarter 2021 Earnings Announcement Conference Call. At this time, all participants are in a 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. now today, hand of Peter would to conference Investor I speaker your Salkowski, Instructions] like the to over Relations. [Operator Vice President ahead. go Please

Peter Salkowski

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

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

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

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

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

Ken Xie

thank for joining today's and and full to outstanding review XXXX you fourth Peter, our Thanks, to everyone year call results. quarter

to the billings. XX%, bookings with million billings up up XX%. product For accelerated to quarter, XX%. fourth Global XX% over billion. $X.XXX growth, of XX% GXXXX XX% increased Total $X.XXX revenue $XXX for to Billings to billion. billings increased total Q-on-Q XX% revenue growth was accounting

chain well team through outstanding challenging Our a supply navigated results. environment to deliver

growth vendor consolidation We from traditionally share attack our security driving match protect. strong and Work financial has security the $X.X a to Three $X.X the flow, market hard and threat network convergence For profitability. GAAP a platform are consecutive margin and billion to full surface, year found The with move we revenue XXth fabric and environment expanded gains. security which of an of year, was operation GAAP of results rapidly XX%. Anywhere elevated networking, free generated and our was cash billion recorded of record drivers,

to user speed Fortinet -- to performance approach. Security OT securing increasingly reduce and a capacity, of converges XG, SD-WAN, and match security, connecting [indiscernible] and a networking driven including and cybersecurity next-generation networking firewall, approach remote while advance networking are to consolidating security

Xx edge for routing better secure cloud and convergence of through broad, FortiGate FortiGate announced an offerings. to platform core architecture offers ultimate SPU unparalleled match delivers XXXX to data networking and a that FortiGate by environment. computing changing edge the zero integrated protection trust center powered across cybersecurity hybrid multiple firewall, Fabric competitive a XXXX, The deliver we next Today, from Fortinet and average endpoint high-performance security NPX and network. performance latest Security basic protection than Fortinet sustainable, provide

critical firewall. into recently network vendors firewall for capability XX network amongst We stood across evaluated out Fortinet a non-critical the capability. performance

received center, enterprise highest use the use SMB score and FortiGate data the public case. in distributed overall score and case enterprise in edge Fortinet solution cloud second high

product in Gartner firewall is FortiGate network and Quadrant Magic Our for the SD-WAN. leader only both

move last next Fortinet's position fastest-growing addition the of the Over several our growth. drivers, level strongly our share This, industry-leading influential innovation one us in transformed capture has into market most to and leaders. growth years, of to and the company to cybersecurity

and for Keith, turning our for call fast like job like work, would Before employees, Keith? a growth. and continued send doing and to support hard we the to especially team great our supporting their worldwide I over to partners suppliers Fortinet thank customers, operations

Keith Jensen

integrated as deliver system, effectiveness, and is on our of vendor the and well by capabilities our afternoon, through industries, switching, automation. single strong entire focus threat Ken, as Fabric mesh elevated with broad-based networking networking broad performance can be a across I'll speed platform consolidation networking, on drivers be platform silicon mentioned, multiple its of Convergence company's demand security-driven increased security and consolidation and Fabric a the Thank gates driven strong Vendor Security of across of demand XXXX endpoints, solutions sizes, good that the their X key for or management. customer start products. firewalls than offering integrated solutions, We environment. summary landscape including Customer reflecting performance. security with XX WiFi, across cost off-the-shelf and ASIC-powered very of edges, at anywhere customer vendor operating our consolidation security and products as with range requires use The and SD-WAN, XG such to use Ken Security times centers, competitor everyone. was speeds and you, three work secure convergence from networking cases and OT. our more threat to computing security and delivered geographies, clouds, data cases

despite XX% representing performance, our to drivers to And of or by six environment, XXXX and growth rate the for came rate saw key annual solutions, Driven or XX.X% XX.X%. and billings growth, we margin in XX strong XX% XX% XX% in revenue customer billion. billion, turning growth annual for revenue billion to non-FortiGate security highest also product and we each revenue billion, As strong fourth first XX%, Non-FortiGate years. $X continue. fabric exceeded in these product accelerated billings was cloud revenue our increased operating year coming Revenue growth in $X.X XX% expect demand more. $X.X at growth accelerated in supply highest margin $X.XX by history. growth XXXX, Gross time in fueled chain our increased the demand billings growth our to to billings of representing And the our consecutive non-FortiGate and revenue years. was

the highest the Our GAAP XX.X%. was margin industry. one It's operating of in

Our mentioned, XX for in the years. cash $X.X deferred first Free near at deferred flow history. revenue XX%. came billion. increased XX% to billion increased adjusted XX% for time flow revenue Ken as GAAP cash a was was consecutive $X investments when exceeding Total in XX%. estate Free short-term our record real to And margin $X.X billion, billion, profitable, $X.X for and

exceeds than strong exceptionally are experiencing historical demand We that norms. supply more by demand,

provide expanding fulfilled. value When of we greater disclosures represents but billings fulfilled, Bookings of backlog orders value from our orders order to not and As received all recognize a product include are all received represent business. result, the to the our strength visibility the of customers. revenue. is we into both the bookings Backlog and

QX to Turning results.

basis, On various relates on increased the On down very product year were million. $XXX demand. XX% services. billion, noted basis, $XXX to XX%. strong $X.X and future relates $XXX million Breaking backlog the bookings between As to backlog year-over-year a approximately X, Slide up to a increased the million product while end services, XX% backlog sequential shipments, to remaining due at

growth difficult account supply into it's for several canceled, are year. later customers accounts approximately backlog provide view backlog. competitors an be a of single-digit end percentage customer our Existing strong, by for should of a, a if our impacted Many backlog. also No tailwind to forecast than single constraints. While low this chain is and say, more year XX% support it factors next that might our order of

buyer any to Our products, competition suppliers. our solution volume And firewall the And don't most shipments, apologize one-third actively for know over match. but network price vendors. difficult chain be attractive may lastly, unit the an really from and supply operating are advantage along sound other our commodities it, own what's for with I'll We are our for all our we system employed security offerings for background, on. from integrated I we of performance changed with not continue causing the manage in

accelerating in increase we $X.X especially Add large platform. cost global billings are QX of to more earlier. evident could performance Enterprises to compares bookings share, noted to integrated Moving which XX% this, up is XX%, billing enterprise This billings the XXXX color favorites in quarter Fortinet's X-point threshold time were leading buildings of in and mix. record billion, the to low XXX the of breaking up of the in all deals And over deal growth. transactions lastly… deals, four XX% Americas. in eight-figure consecutive $X history. million in XX%, our XXX quarter, increased saw for a The over the We third number the

Peter Salkowski

think can Everybody it Difficulty] we back for in to to else, We our going be [Technical right phone some mix reason. We're stayput. We're XXX back. line. might take going and be the second dial phone

Operator

Please remain online.

resume Your conference shortly. will

Peter Salkowski

us? hear Josh, can you

Operator

can I Yes, hear you.

I can still room these You're right in main And hear the now. sounds.

Peter Salkowski

Josh?

Operator

coming in still pretty bad. sorry, the I'm sound but is

Peter Salkowski

going to this back. drop We're Okay. right be We’ll line.

Operator

remain Please online.

conference resume Your will shortly.

Peter Salkowski

Josh, me? you Josh, hear we're hear you back. Can can me?

Operator

the can got I connected noise came as again. you, soon as but Yes, you Hello. hear back

Peter Salkowski

I’m on guys. on end, a Yeah. it's totally cellphone your sounds different We're now. like It at line. my

Operator

with a chat me you in moment. we'll get Let on and just

Peter Salkowski

please. everybody Put hold, Okay. on

Operator

I the the will hold on back music, put call.

that at this sir. are connected time, You

proceed. may You

Peter Salkowski

are there. Josh, you

little kind for going go interlude to We're now, where from can there. left and to All the up there. you of Okay. a start. Apologies we'll Hopefully, start right. he going back us hear off Keith's bit. and

Keith Jensen

up paragraphs to the challenge started. best my I'll couple where back of recollection a of

was -- to services. So XX% XX% mentioning future product was believe that I -- that approximately around I remaining product shipments, services, and to our were backlog when while down breaking product relates we between and relates various the

forecast competitors difficult a be into for it's that year chain factors also should later an is customer by percentage customers and tailwind order view of backlog. single our growth of for constraints. this accounts several to year. and impacted approximately strong Many supply might next XX% Existing backlog provide canceled, No backlog. support While our than our are if single-digit account for a more low end

exchanged products, many be can the difficult volume We Our not system, advantage integrated for with own one-third our are is for unit with readily other vendors. deployed are suppliers. solution over performance competition And firewall lastly, match. buyer for attractive we shipments, our of with an our price and chain to most operating from security network supply offerings our manage commodities along actively all

increase for to over Secure XX% XX% five-point all billings putting QX was to At in bookings quarter. add large history. XX% XX%, the $X XXX $X deals consecutive SD-WAN in favored contributing of Moving were XX% use Americas billings at cost share accelerating mix. million evident for color deals, performance compares To of to the in case XX%, quarter more figure, And especially were our and billings eight-figure growth the billion, of billings the growth of number We to in first the growth. million which platform. a to billings. four The in XX% to leading the earlier. deals SD-WAN $X.X total transactions, and noted lastly, XXXX Enterprise this, increased over billings. up low Fortinet's This breaking XX%, up threshold of over Global enterprise increased record we saw that XXX-plus third the time SD-WAN can the deal integrated

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

total posted over slide growth shown solutions endpoints As XX%, growth. were XX% virtual At non-FortiGate to very XX, billings mix high-end shift X.X time, smaller Top driving non-FortiGate. firewalls, included billings. points several at months. use billings of Non-FortiGate and XX% and on digit were switches. XX quarter-over-quarter FortiGates up solutions for triple XX growth threat strong was accounted case same ransomware other the up attacks, environment with and Average breadth OT and year-over-year X% contract the with consistent term rates. posted and billings Consistent the of elevated

industries which that five of consistently with bit budgets. Worldwide billings XX% is accounted logos. top indication Billings cybersecurity is utilities, in driving We remained billings XX%. a the For on the and the landscape, our of broadening little construction X,XXX share largest Financial greater awareness of of manufacturing, verticals have XX%. investments at been buildings growth XX%. believe that of third quarter, nature the elevated consecutive these billings services an grab threat the and spent of not new we added growth on and growth other for in historically approximately the of verticals transportation, mix perhaps have government security less

growth services growth had to as Moving XX% growth. flat revenue million. up product services while Non-FortiGate revenue growth X XX% would were XX% up service over for revenue XX%. the $XXX Revenue to percentage and security up have was on Service product revenue, and was Product backlog illustrating was high of to income million. of the $XXX subscription remained statement. was total $XXX accounted Support related million products If revenue impact of $XXX points. quarter-over-quarter, grew revenue million, XX% approximately XX%, revenue XX% backlog been and mid-XXs. to the up as the

the of accounted XXX XX basis range above cost and XX,XXX. FortiGate Product margin Service from contributed margin XXX of Better-than-expected the supplier exceeded a product sequentially. of XX lower-than-expected gross our guidance points points gross XX.X% improved revenue increased and product XXX points. Operating our the basis margin XX.X% gross acquisitions up drag XXX of better-than-expected by of XX% contributed Total for basis total points margin. A XX% margin better-than-expected was actions range acquisitions increased and sequentially. basis margin. XX.X% services revenue. from and and points and gross million Headcount margin of impact total points to performance XX.X% operating taken pricing margin gross sequentially increases increased midpoint guidance offset gross midpoint slightly quarter-over-quarter. to basis and less-than-expected the basis grew of XX% $XXX to to of

statement XX. $XXX of Slides to including the XX Capital on million real estate Moving cash summarized million, flow and investments. were expenditures for $XXX

XXX strategy shares levels includes million support higher of capital X.X Our warehouse growth. for office stock our of to common a We increasing million. repurchased our and of capacity cost

the products believe a the our for hybrid moving we've FortiGates, the by early and continued proprietary a are earlier, of period At and the sustained better Supported the was of and year-over-year market million on data we repurchased market for we've industry the in customer security billion year-end, high X.X we were The we growth we believe and full was the drivers share at to integrated year, pipeline believe year, driven to growth security to outlined and par relationships a and gained we've platform set growth X.X quarter the flat key million. quarter. drive For strong remaining are Inventory XXXX. approximately for the in digital what Fortinet, and cybersecurity in innings share. times a of by authorization cost created, developed Overall, edge. growth than the $X.X transformation, with gains. cloud broad expire and Hasek channel fourth X.X our powered shares to made build share and February the fabric growth we by we prior of XXX approximately investments turns expected again and market and

to quarter for the forward-looking on disclaimers outlook provided first summarized of our that the at which regarding like slide to XX, is call. review beginning I'd subject the information Now Peter

margins. half For headwind and the backlog, increase interim backlog expect and chain least provides the demand revenue at as pressure year, to on in outpace elevated billings a capacity, first of growth increasing we to supply an

to share which in million the $XXX growth margin non-GAAP quarter, bookings $X.XXX the at to operating we $X.XX non-GAAP which and range XX%; of growth to assuming billion, quarter range of XX.X%. of of first estimate $XXX XX.X%, $X.XXX first of earnings and We of million. of Non-GAAP XX%, million between margin in the assumes XX.X% share of $XXX expenditures $XXX million. the For expect $X.XX $X.XX billion of midpoint the $XXX bookings represents to billings the to which $X.XX, revenue million, count per a between be XX.X% represents billion to in to gross $XXX at range billion, capital million midpoint

rate non-GAAP XX%. expect tax a of We

XXXX. expect seasonality midpoint billion, the of three we represents shift $X.XXX been and XX%, the efforts midpoint XX% the small of of of guidance, year, which or In two to our XX, in at margin of several the a estimate growth key by capital full Revenue half year which product XX% which midpoint congratulate we non-GAAP to margin The to to billings for providing expect this range to billion, billion points. $X, share of service growth range the between the in $X.XXX truly in XX%. of of predictable approximately for range every now implies on non-GAAP of metrics. like million $XXX to full of non-GAAP have $XXX towards XX%, operating which year XX%, second full $XXX $X.XXX range top our a in represents $X.XXX expenditures to approximately consistent, of results in improvements years execution count the and XXXX revenue the between We Fortinet is outstanding and growth billion product $X.XXX member assumes of gross at of per $X.XX and which year the year growth full $XXX bookings revenue to year implies Total in Before and million. billion, at in full the billion XXXX, million share $X.XXX billion, XX%. million. -- of represents of and to $X.XXX the the and $X.XXX XX% I'd be earnings growth of growth represents outstanding profitability team performance of billion And assuming

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

million. $XXX to taxes cash approximately expect We be

members Analyst Along Ken, that we to where suppliers all the expect all XX outstanding everyone holding coinciding now to partners, to with May this Fortinet I'll for and we thank hand their work, hard like execution medium-term financial and call update over Day our inform an to I'd with the XXXX, our on team model. want of I Lastly, Peter. success. Accelerate be will back customers,

Peter Salkowski

Thank you, Keith.

a lost operator, the for technical delays, As limit time a on reminder apologies up all to question we you one please? to Q&A, it of please little how there due open can yourself But for everyone, that.

Operator

show sir. from Brian comes our Sure. ahead. of Instructions] I Goldman [Operator question you, from the Essex Thank first Sachs. Please go line

Brian Essex

view what results. How for the on that on consistent still afternoon. as times supply are other good supplier issues set increases maybe is But the of placed us an and us I managing an Thank provide as understand qualifies help chain on supply can timing chain? mentioned management? Thanks lead the with guess from now, nine the on at maybe Are all? Congratulations And months a abating any You you're is channel for a a and perspective incremental is pricing a maybe offsetting quarter? bookings? order this where you Hi, you a pre-buying should the the thank point, any from were nuances little maybe that incremental partners could of, you well nice other you. color additional they which last be up event taking one booking And question picked disclosure. maybe Thank then a inventory, timing bit like if included that quarter? costs. in And we still we things of aware with you.

Keith Jensen

couple I of... we'll A know lot stuff if Yes. get good don't of there.

Brian Essex

in question. keep I one

Keith Jensen

buy well. Keep who End in model, business from buy from resellers did right? from you I buy our us. know who distributors really mind, Yes, users

want to orders, it's complex we that's the $XX like deployed customers over get going million So a typically time. When the not very it's product. solution large be

So at we we in order conversation terms something would beginning know of the of see don't that like described bookings. I the

at sends distributor And building a we so a have it, order like an becomes as it it ship product it's if would to shipment we booking. the they and booking us, that if that we throughout was, to counts if I'll sorry. backlog. us, becomes then -- For just and revenue. pause And don't, becomes

they're do terms October And that. and much time, the turn maybe that at and thoughts we of this that what chain from on low and very in have in think the -- to supply contract decommitments component out of September, challenges, Ken do watermark terms chain I case. supply previously, time still they point, be think suppliers. in we felt I So talked were be to some I could call much, would in our early offer least November manufacturers smaller We maybe we the to is shown additional for commitments, from than frame. to that, back from time our but that

be components like conversations much I like read think contract general tone, and our electronics, it channel, there's things reports, you and everybody We improvement we was. auto better manufacturing. particularly do, with will, than we some in around is manufacturers, as in the here commentary much, whether if see else, the where consumer -- there

that what of I will. and with have of together, a of situation the we also or if aware other of bit closely who's of the extremely the forward. projects the working our volume maybe and believe you business capital team, some of some high changes, been engineering tip longer-term At process improve of that talking on as to think for components redesigning very we work through example, going them a about some and we recertifying making is to our same continues at reason the may and the move time, levels suppliers, conversations

us that All second the of half year I a gives of improvement. should kind Ken? this see that, feeling of think,

Ken Xie

Yes.

I commented you think all of them.

component, the the starting them of -- to with engineering are them of think year award six some the also design, to handle us, certain also ourselves. product we our is the with but And shortage may take last operation, a bigger redesigned manufacture can well compare which about most working some starting also suppliers. compared our competitors of of better months. I a And to directly competitors, have negotiate we also out quantity different put

very, design itself we'll kind planning. kind pretty and of feel say planning. have better think beyond what supply demand we quarter, because alternative was I that's year chain I in since which some last overall, to of of also be of the with our improving also the grew the confident this very XX%, booking even and second strong, kind half both --

So some increased caused inventory inventory supply. channel to the the in distributor question, and the that's shape have we better in same much last have other also shortage. competitors the in in overall, there, a pretty But as in we see much the the few years. of compared the don't the they And

So we don't the product. see setup of increase to channel any the

So case that's not for us. the

Keith Jensen

bit Ken's it's just not pivot immediately of you pipeline. to look time, such Yeah. in And even in if do answering actually what in have was growth. good again, pleased our a question, give terms early, I And And year-over-year. little of and a We're the it. one channel. somebody inventory -- job a certainly same visibility possibilities are only do that -- Brian place a the model, extremely try our of those the pipeline I'm some levels your at in that with some inventory is we world? we're did happening, try own going business have also distributor orders something to When in seeing jump extremely sure been And single the business, the inventory on color we that's the Sure. can of product follow best by on at of the up we I'm evident down that represents over that look that identify And inventory about impacted that. with our and we may number with happened. low then levels, to come And to happening. pipeline. digits comment at more

have think don't we're I about. things that concerns you the seeing of So some types may maybe

Ken Xie

and limited also the like much limit XX% very and inventory the portfolio. also, the have growth. end billing do the strong And pretty for so high have in more low product enough the and end broad Yeah. we And we a middle most shortage very more FortiGate, even --

months. alternative product. it same The customer, a lot ready So at something the working, in there's be will redesigned channel few already a time, the And controls. of

Brian Essex

you. color. Thank Fantastic

Operator

show the I Please next Fatima comes from you. Boolani our of Thank from question go line ahead. Citi.

Fatima Boolani

my growth. Good risk focus for me bookings Thank know the I you. one the given you've for taking let afternoon. you Keith, oversimplification, question. of At us this

the certainly, and fiscal us and given billings You've guidance the product XXXX. growth the for growth

your the guidance of revenue how of curious XX% into saw growth through for how between backlog your your you how as is in expecting to talk you next that, to billings of profile in you've year? I'm metrics? much is this and Can product. for XXXX? billings Thank you these for guidance substantial course understand that you're dovetailing over I XX% frankly, saw subscription XX% pretty in quarter that growth bookings, you. portfolio. the this And and So amortize the into increases the some packages related taken that pricing contemplated And your across much us

Keith Jensen

Okay.

start it's -- also But pricing. How services. The talked August there amount in prices planning speak. point amortization scenario keep to go a that with as prices. and And get many I raising about discounted the list, November. When think before as question done first time. one then for backlog some that you're to attaches recognition, price the We so price over opposed the to that price We've get account through in of and product Brian obviously, in the Because raise mind, a through combination I through. on or whether easy down. what you increase questions think have will our for going you it terms one? box, scenarios. those to don't On attaches prices think will more set what appliance, currently standard and I on are following I you'll your Fatima again services effectively you'll you're of -- know recognize fair is you? the we can you scenario the of pricing imagine, the support services, And in in we've a would one -- than the or security, of the to As you the if revenue prices year. expecting because get we raised to is revenue

for in you think for can right phone expectation not for that the provided the year. increasing, some backlog the we've solve with I our information on maybe now, of of of right, that kind terms

is currently backlog backlog so the be up. increasing going backlog us year, it's the I income And statement that for of will shift, but exists. components into net-net, the reflective don't of bleeding think that The would

Fatima Boolani

you. Thank

Operator

the line I go Please show next Kidron Oppenheimer. from from ahead. our Ittai question comes of

Ittai Kidron

Great and a a Thanks, question. I numbers. guys. had clarification

a that in could that just fulfillment? Keith, And sure shift maybe seasonality to other then, Is there's from just here? you have on would And their about, talk in extremely there I introduction market? competitive make price I want on do you How Lightspeed be you firewall, to if chain the Just CheckPoint's in the right. that recent I second half. -- the seeing with Ken, of about And is any think no respect X-point aggressive? standpoint, are wonder tied Any great? thoughts you cause to changes? supply which any got thoughts

Keith Jensen

has you sure this to back linearity. been how supply conversation to that. bit historically open wanted quickly the make may be have different year chain than about just I'll Yes, on what with the you linearity we on We us. can little point And door yes, just the the come to for guys a

Ken Xie

mentioned earnings Checkpoint Yes. I sent this the mentioned I we deal probably also morning. to Fortinet.

that's years And XX% than faster product more so app, we XXXX product than ago. like probably the newest Fortinet but released their two product,

law. Moore’s on think I based

two So double. year speed – XX the every every will months,

So much faster now. a the latest product I think

security. – networking we because conversion do of I see So see security-driven and network the

the pretty not started security the all in So network infrastructure, the just much border. secure deploy

segment, security a that's needed do all internal at things. different the internally kind the server, department, speed firewalls much segmentation, deployed these and we where high-speed of when So to higher

So ransomware current in the that remotely strong quite connect demand growth or But of that's have a we with with our where see milestone from of see we working remotely. environment. connect a to kind also, anywhere, lot users

XG So very market security that's where also SD-WANs see strong the demand. and

total in ASIC leading So the innovation see. that's market It's XG much all the we own bigger security. space connection. both SD-WAN what traditional with network We're a secure addressable compared to our with

for the to in us to market up market potential all market three, large It's innovation, enough $XXX share. the as but we over keep competitors billion for four next where years. the pretty up have keeping that's So total and the to change much definitely compete, a keep addressable huge gaining identify

Ittai Kidron

Thanks. it. Got good. Very

Operator

line question show Eyal Cowen. I go the from you. from Thank ahead. of comes next Please Shaul our

Shaul Eyal

behave or you. supply one Thank make Back Good afternoon FortiGate want products to have question. Keith, entire non-FortiGate the also products, discussion? just supply myself in I'll some do guys. predominantly we that included Thank that sure, you. chain, Congrats. limiting is I to chain to

Keith Jensen

upon that touched just it And think clarity. little bit. Yeah. a for little build Ken I'll more out I

same not Ken pressure was FortiGate, order traditional, category, the such If one-third, making and the fit of XX%, roughly end what the you or FortiGates. the in in secure end in low in see entry look really would switches that the into that you're more sure we is And end. maybe majority call is that remainder access points, that and experiencing FortiGate. something at networking of we the high at and of probably Within We're then backlog as we midrange low looking products the the the level in two-thirds understood that.

Shaul Eyal

Thanks guys.

Peter Salkowski

And CEO to as the website IR CFO given everybody then operator, soon call, on prepared earlier, just the script after and call. we I know post one. just had let to we'll remarks the about can we as the want script the a difficulties technical quick the the

please. Next question,

Operator

Thank you.

Our go Ben next question Bollin Cleveland from ahead. Research. of from comes the Please line

Ben Bollin

it you Keith, Ken the or that product about Good the how evening, elevated placements you question. any thoughts about applications are coincident deployed that later? share versus demand of everyone. can typically what Any on number the initial rollout with or that is Thank and as comes you for relates thoughts being traction? around leading Thanks. hooks think additional front, fabric to or demand taking when

Ken Xie

years We is few see internal protect need that to ransomware one like we the lot served a times ago, network we a its ago. attack to ransomware they released enterprise XX of because on attack their higher compared months

secure to I these connections. the company, also all demand especially SD-WAN, secure Also need secure whole XG, big there’s more infrastructure. we working security, think -- like So

the we So demand very see -- very, is strong.

-- even time. own supply lead usually, where other chip, manufacturer, and there's that's also with some for a for chip our So

towards and see normal we'll be So that's hope the will back, -- more we're hoping of be backlog go the the we where I end year.

Keith Jensen

a Yeah. me, Hi, bit. I'll you? pointing so Ben. little at How follow-up Ken's are

non-FortiGate we thinking other with platform are as a SMB quantity. out. terms move the in strong customer and ago buyers the that's enterprise, think actuality, products. was the And the that see the that service I of of we of of that's size. mid seems kind going still then of the I of relevant attaching it strategy. The conversation building is to that enterprise, In I a and the to years products where very why area And maybe think limited pull-through somewhat products, came more few multiple be then to and see that is affirmation providers commercial mid-enterprise

be I and from pretty solutions cost very fairly vendors of that think they realized early managing was the overhead different on onerous, point could challenging.

way so of the And it its rest you through moving the is customer will. if chain,

that -- the solution. that's the five, them they're as together also seen I've only about not initial integrated management ability now the buying clear with series think looking is total coming them very the I top verticals that the and other the more for products cost. Ken of currently a to and in but And we've solution. with they're conversations in represent security. us in thing think terms one purchase, And cobble but that well I had table save these that into we talk to Not does happening other of a

that So I area. a tailwind there's do in definitely think

Ken Xie

Yes.

the double account XX%, very demand really Global point almost XXXX grow it's in other year-over-year, strong The over so there. meditation is a

Ben Bollin

you. Thank

Operator

comes next Morgan from Please Hamza Thank you. I ahead. the Fodderwala question line go of from our Stanley. show

Hamza Fodderwala

my a between as Thanks broadly. question driving center? How office, refresh, about more I that like ask really What's think Ken. you guys. Hey, factors Maybe demand XXXX? appliance demand campus taking for to the for do the to wanted for question. data hardware question return a about just appliance we through go

Ken Xie

environment even convergence within up working I And security the what that's access, changing, long-term during a think I the and the think will network of or pandemic, lot and you and pandemic of more after see whether things office. internally, the the infrastructure also both there. they or starting trust connecting campus remote whole -- demand center data build the zero to branch need very to in like secure network, in in the be

need they because the infrastructure very cost management Keith cybersecurity. different secured. a mentioned, high, that's So quickly of consolidation more see where kind is also we vendor part for to happening different different vendors the whole among have if like also starting be And of

we Actually, that's driver So product together total provide definitely cost. more three the vendor why consolidation now, and ransomware the the elevated of and strong to same especially like the all is server and has advantage our where the can and I see management business is the and security time, threat convergence integrate, at the, vendor like growth. of the that's a big mentioned, the strong security driving network right more impact automate lower

Hamza Fodderwala

you. Thank

Keith Jensen

at to what have that has or would extremely a XX% the speaks that's say had product right but who out think And mean that our of that for huge was is this of look point, we the growth -- knows that's kind I product now. ask number. they revenue appliances I call go it if growth Yes, we the product backlog, Ken with one XX% to high the been of description to I revenue think didn't things deliver. was right? it And is I demand kind when that if us

Operator

show I from question Please the go from you. of Sterling our next JPMorgan. line ahead. Thank Auty comes

Sterling Auty

maybe Yes, thanks. wasn't gross at deliver of And are Hi, pressure, have in it XXXX. looking operating guys. correct, wage line? maybe office, underlying business curious I'm margins margin it that how you. looks expansion pickup for in and If with even able to like in you the travel the expanded nicely kind a things if for operating inflation, Keith, would margin like one return it to I'm

Keith Jensen

for -- -- at to don't year think I guiding versus a the to just think guiding closed XX% we're out at… to XX% XXXX XXXX, we're midpoint I and basically I

Peter Salkowski

XX%.

Keith Jensen

mind that? XX%. about that I don't thinking up. Sterling, know you that's

Peter Salkowski

the think I gross if down. margin was

Keith Jensen

the leverage -- operating on coming expenses. the through On the is operating

Sterling Auty

Yeah. Exactly.

Keith Jensen

Yeah.

sales percentages we're in environment can at while in will, the spending, is back of the you biggest that terms of if I lot what of terms in of probably a look the think you current driver, sales think I very probably that productivity out in nice XXXX. not this. the productivity XXXX, we you leverage XXXX. numbers sales in if to Obviously, productivity get COVID, go With

sales increases increase tailwinds. at indeed looking will the price be we're productivity. must Now I honest,

Sterling Auty

Got you. it. Thank

Keith Jensen

Okay.

Peter Salkowski

Sterling. Thanks

Operator

Adam you. Stifel. from go Thank of our Borg show next question the I Please line ahead. from comes

Adam Borg

so much. there this maybe just for question. strength could from you in to see an first And much some and brownfield comment continuing on, more are you opportunities the Maybe greenfield guys, just coming years. those the Thanks great thanks guess, Hi trends taking seeing the displacements? sustainability so -- coming it's growth I of or SD-WAN,

Ken Xie

It's pretty broad.

a at starting all are say, same products look go leverage than a more lot And half of using end majority the can middle at SD-WAN. the or SD-WAN, I'd you lot time, As to range. high of probably, enterprise customers,

much more retail. So beyond -- the broad a it's quite

Peter Salkowski

please? Operator, next question,

Operator

Ho question line ahead. Thank go comes Please the you. next from of from I show Jonathan our Blair. William

Jonathan Ho

a quarter. you've quarter that on strong given afternoon. guess, my Yeah, a good several growth give with drive this particularly you bit is you to of can let the And been year. a Hi, that happening pipeline? the echo that that's what congratulations giving sustained years. And just you strong maybe Can sense the me of what's confidence continue us more for I delivered

that Thank you to are the gone seeing some rates? you've one one, think but in immediate term you. what the factors allows you at I continue growing through of by these

Keith Jensen

Look, of to the you the it we'll like pleased and talk some go to in our segment just it's use that Day we And looks the at get it. I'm how over the looking slicing is of really that before, And quarter. expansions enterprise We numbers what's and Ken terms pipeline really, is saw customers, through a then. about strategic. think, talked May want who plug the give don't -- customers, wants I Jonathan, I making deal the in saying at a I'll renewals, in I’m what geography? the much loss that shameless Analyst we've inside our fourth new in size? very dicing What's moment. with conversation tactical more Yeah, about for the Peter

growth without for we're into for three too three did and extremely at getting a think they a The XX% the of well row. accelerated row. a on details, GXXXX U I S. lot quarters in quarters in

other people we Looking a in the a at the SMB, execution. good reached sales execution have more looking and We've now has and comment that's think I had marketing position coming, at as company. some enterprise and maturity settings again, the pipeline in that the growth level upon, love

change. in pipeline see the I would that think execute, our ability don't to I why So

Ken Xie

potential Yes. the we And in of growth lot Global have a also, XXXX.

-- account, So like we lot grown also XX% year-over-year. is bigger of said cross-sell products. quarter last other you the last also, year this upsell, a can at And

the sales we do capacity. pretty we're the very very, aggressively net keeping keeping also the And see So enhance strong. sales and is and marketing pipeline in higher

still capacity we some competitors. have So the our regions, some of than far some less of vertical, much

the think years. capacity, the I with in few additional the marketing do growth will continue next sales see we

Operator

Turits KeyBank. Michael go ahead. next question the Please show our line comes from you. from Thank I of

Michael Turits

for well context statement just like very strong in numbers from reask high though making we just coming the appliances. is. strong had Hamza’s others. cloud of right I sources the Keith, Thanks, guess guys. I I'd for the as question Amazon in mean, of particularly about cloud as of to how demand very Hey, appliances demand for now, from

so should right cloud? some why now are even how So boxes in in your products the being that is spent of we much really opposed understand as to physical

Ken Xie

I same And there's converting secure a security, market. going to whole addressable billion. and bit probably or compared ported The little endpoint by cloud mentioned is definitely, the network security of market, lot common over much including total call, security the network XXXX, time, network to the bigger it and security, morning is current be market. the bigger will on in deal It's total billion much have $XXX at addressable a other one $XX innovation infrastructure. this a the

you So we also access price need all cloud, the even appliance. the these where see that's

this XG connection, SD-WAN, also this all need to You access the cloud.

lot potential. the. of that's we market see in the There’s fragmented There's potential growth market. a very huge So where a

Michael Turits

Thanks, Ken.

Operator

for question BMO showing ahead. Keith go Thank time from we Please Bachman from I'm Markets. now, Capital one you. have coming more

Keith Bachman

going to Michael a similar to ask I'm Yes, before. question

quarter and growth has underlying now XX% been north product this of XX%, the XX%. growth was Your revenue

competitors Your product the to are that nearly not revenues, you are. experiencing also good extent

than And Cisco the the from so you're it's demand of experiencing I more and it's share more than characterize and likes as what that's – Checkpoint when the consolidation SD-WAN. taking

that's understand, yourself, far to between trying years so in, if you not quarters the competitors demand last And I'm but exceeded have say, your ex-Cisco. happened been about only three anything in thought the the three aggregate is last five primary

normally primary the consistent that demand the to the for yourself trying I question general? of with so but but And one the in if drivers is not for durability just vendors? drivers, some is, of just traffic the questions think, yourself, for of Just other key what not understand really, industry but about three the for other some are

Ken Xie

Yes.

very see can both And to also the industry high-speed very, security to LAN secure pretty whole then do deploy also convergence I company they slow suite repeating you security, internal segmentation, put network we think and growth. of we that out. that's all the start too this or driver strong which is the to is And think before gave I in the also the like see internally. And network demand environment overall also the -- inside SD-WAN, center need to strong the outside. data the or the I the connection and internal infrastructure, WAN believe, like secure this

Day, in the May mentioned, I Keith think Peter, XXth. probably Analyst

-- quantity, ASIC growth give we for and long. and see and company-only of where be starting more other have. also only So we're scale years. advantage our helping XX help we TPU,IPU chip of any cost, chip we ASIC space all other how changing the lower which chip, to next also, own none in the we'll things details whatever GPU, using, were probably in whole unique our leverage this in us some competitors per security do And over commercial the the probably because available, but we'll continue data MV, which low-cost all which scope have will chip. working analysis believe I pretty we're solution. we the including advantage five And network keeping Intel, have And high-speed, long-term also on drive and the

call quarter basically us harbor, the and mesh some XX%. I the first economy different because other on cross-sell, is have the is mesh which time architecture, fabric we over to now On the helping a last also we that the set side, think scope working, like product of

a and faster FortiGate think billion XX%, I very, it's see about Also than XX% growth, year. right very non-FortiGate FortiGate. count grow $X also strong the last now, over

security, infrastructure network threat elevate also that's to environment. and and on So helping also security the converging whole supporting the

Keith Jensen

Thanks the to for for on plug… very question. much continuing Shameless Peter

Keith Bachman

you. Thank

Keith Jensen

the the where will, life that's of keep not industry, ago, more have perhaps cycle in in Early and going not that's and I firewalls seen a yet at five And the we looking if I because Ken's all. for back think that easier maybe identify XX cybersecurity is very may environment be is stable, to it stable refresh years XX cycles point, environment, had or specific last to you think use years. the

lots what's now now I in vertical and lots so five of for years that. in us. use is it's that getting team mean, more data cases, out of just and management And CIOs anymore. to presume -- see company hot you in in It's you aren't that speak, it, don't the topic the is manufacturing insurance gaped it, I I the is more. the from know air the over that data. seeing cases probably political conversation. interested the I interest reality think a environment, were the Internet interested is of use -- the probably all can -- and things volumes, and it's is just lot away data what ago, there It place terms And right a you're and of

don't industry, going the we to think you see I know a out world if the for in you're and refresh are that don't are, what's that I there. of because due cycle happening even So in

Keith Bachman

right. All

Okay. gentlemen. Thank you

Operator

session. Q&A our concludes This Salkowski you. ahead. turn for At I'd to closing go Please like to comments. any the call over Thank time, this back Peter

Peter Salkowski

Thank apologies you. difficulties for today. the Again, technical

website on we as prepared remarks As earlier, to we can. I said up the as are soon post planning our

numbers me. Fireside time. for great Stanley any and for webcast listen. very -- our apologies please the Investor Relations link contact follow-up will Do for the to the you technical to conference and free Again, website all day. that a event you chat questions, your think don't sustainable bookings Thank to So be have remind answer you even can be everybody and questions our of that backlog like Stanley I'd first the that all how help see to in business. the Keith at gosh, also the I an on regards growth we'll I with the conference, long. and for in-person March our shared Morgan some have at on Xth, Morgan the for feel know conference difficulties you much

Operator

conference today's Thank participating. concludes you for This call.

may Good You now disconnect. day.

Fortinet (FTNT) 3 Feb 222021 Q4 Earnings call transcript