Ladies and gentlemen, thank you for standing by, and welcome to the Fortinet Q1 2021 earnings announcement call. I would now like to hand the conference over to your speaker for today, Peter Salkowski, Vice President, Investor Relations. You may begin, sir. Thank you, Tawanda. Good afternoon, everyone. This is Peter Salkowski, Vice President of Investor Relations at Fortinet. I am pleased to welcome everyone to our call to discuss Fortinet's financial results for the first quarter of 2021. Speakers on today's call are Ken Xie, Fortinet's Founder, Chairman, and CEO, and Keith Jensen, our Chief Financial Officer. This is a live call that will be available for replay via webcast on our investor relations website. Ken will begin our call today by providing a high-level perspective on our business. Keith will review our financial and operating results for the first quarter before providing guidance for the second quarter and updating the full year. We will open the call for questions. During the Q&A session, we ask that you please keep your questions brief and limit yourself to one question to allow others to participate. Before we begin, I'd like to remind everyone that on today's call, we will be making forward-looking statements, and these forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Please refer to our SEC filings, in particular, the risk factors in our most recent Form 10-K and Form 10-Q for more information. All forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation and specifically disclaim any obligation to update forward-looking statements. All references to financial metrics that we make on today's call are non-GAAP unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in the earnings press release and in the presentation that accompanied today's remarks, both of which are posted on the investor relations website. Lastly, all references to growth are on a year-over-year basis unless noted otherwise. I'll now turn the call over to Ken. Thank you, Peter, and thank you to everyone for joining today's call to review our first quarter 2021 results. We are well pleased with our strong first quarter performance. Billing increased 27%, to $851 million, driven by solid execution across our broad and integrated products and services. Secure SD-WAN contributed 14% to first quarter billing. Total revenue grew 23% to $710 million, with product revenue growth of 25%, the highest quarterly product revenue growth in the last five years. With strong business momentum and good visibility, we remain focused on growth. In the first quarter, we released FortiOS 7.0, which offered the industry's first OS level with tight integration of broad security and network functions, including SASE, SD-WAN, Zero Trust Network Access, CASB, and 5G capability. Today, we announced the FortiGate 7121F, the world's fastest next-generation firewall and the only firewall with hyperscale 400G interface. The 7121F enables 5G mobile network operators to secure multiple edges within their infrastructure and enable MSPs to build out scalable security offerings. Powered by a new NP7 security process unit, the 7121F delivers security compute routines of 2x- 19x greater than competitive solutions. We continue to see momentum and adoption of our SD-WAN, SASE, and Zero Trust Network Access solution among the world's largest service providers. Today, we announced British Telecom, a new managed secure SD-WAN service powered by Fortinet. In March, Fortinet and AT&T announced the availability of a new managed SASE solution for enterprise customers. Increasingly, organizations are consolidating towards a holistic platform approach, delivering integrated and ultimate security that cover on-premise network, endpoint, and cloud secure edge. The Fortinet Security Fabric is a cybersecurity platform organically built on a broad and deep set of networking and security technology designed to seamlessly operate together. The high profile of security incidents that occurred over the past few months, along with the pandemic, has elevated the need for a broad platform that can secure an enterprise entire infrastructure across multiple edge in a zero trust environment. We expect companies to increase the percentage of IT spending used for security in an effort to address their cybersecurity needs. Our security-driven networking approach is a key growth driver. Additionally, we expect that our significant organic product growth will lead to increased service revenue. Before turning the call over to Keith, I would like to thank our employees, customers, partners worldwide for their continued support and hard work. Keith? Thank you, Ken. To add to your comment, we should note that billings growth, product revenue growth, and total revenue growth were each at five-year highs. Let's start the more detailed Q1 discussion with revenue. Total revenue of $710 million was up 23%, driven by industry-leading product revenue growth of 25%. Product revenue growth was broad-based across geographies, Security Fabric products, and use cases, illustrating the market acceptance of our integrated single platform security strategy. Customer demand for security across their entire infrastructure and the diversity of our customer base. Product revenue growth was over 30% for both infrastructure and cloud fabric products, and all three geographic regions increased 20% or more. Demand for Security Fabric products was strong across all form factors, hardware, software, and virtual machines. The growth we experienced for product revenue was not the result of a few large deals, lower backlog, or higher channel partner inventory levels. The product revenue growth also enables increases in services billings and future services revenue. In the first quarter, service revenue of $470 million was up 22%. Support and related services revenue increased 23% to $214 million. Security subscription services revenue increased 21% to $255 million, benefiting from outsized growth from our cloud provider and SaaS security offerings. Moving to the mix of FortiGate and non-FortiGate platform revenue. The FortiGate segment of the fabric platform saw revenue increase 17%, driven by demand for entry-level and high-end FortiGate products. High-end includes 10 new NP7-powered FortiGates that were introduced in the past, which includes today's announcement of the 7121F. These new products now represent approximately 20% of high-end FortiGate shipments. Our ASIC-driven FortiGates give customers 5x to 10x more computing power than firewalls that run on common CPUs. The advanced computing power creates not only speed, but also the capacity to continue to add functionality to our operating system, driving our price for performance advantage. The non-FortiGate segment saw revenue grow over 40% and now accounts for 31% of total revenue, up four percentage points. The integrated Security Fabric solutions consist of a complete range of form factors and delivery methods, including physical and virtual appliances, cloud, SaaS, and perpetual software, as well as hosted and non-hosted solutions. Together, they provide a range of security solutions and form factors, enabling integrated protection for hybrid environments and the expanding digital attack surface from the data center to the endpoint to the cloud. Given the strong first quarter revenue performance, we believe our non-FortiGate platform is now on a pace to be a $1 billion business this year, representing an acceleration of this milestone. Let's turn to revenue by geographies. A summary is on slide five. Revenue in the Asia-Pacific area increased 26%. EMEA revenue increased 25%. The Americas posted revenue growth of 20%. As I mentioned earlier, all three regions experienced product revenue growth of 20% or more. Moving to billings. The first quarter billings were $851 million, up 27%. We saw strong growth in both the FortiGate and non-FortiGate segments of the Security Fabric platform. The FortiGate segment delivered billings growth of 20%, accounting for 70% of total billings. As shown on slide six, entry-level FortiGates posted very strong billings growth in the quarter. The non-FortiGate segment accounted for 30% of total billings and delivered billings growth of 50%, driving a four-point year-over-year mix shift to non-FortiGate. Taken together, these data points highlight the market acceptance of our single integrated security platform strategy. In terms of billing growth by geos, the APAC outperformed all geos, followed by Europe and the Americas. In the Americas, Canada had a very strong quarter, and Latin America rebounded from the pandemic-induced slowdown, posted billings growth in the mid-20% range. Moving to billings by customer segments, the small enterprise segment posted solid growth across all geos. This segment is driven by new customer acquisitions, customer Security Fabric expansions, solid execution by our channel partners, and the large, diverse makeup of this international customer segment. At the same time, we saw strong growth in our larger deals. The number of deals over $1 million grew 74% to 66 deals in the first quarter. The pipeline for deals over $1 million looks good for the remainder of the year. As Ken noted, secure SD-WAN billings were 14% of total billings. SD-WAN is a key functionality in an integrated SASE solution. Moving to worldwide billings by industry verticals. With another strong international performance, the worldwide government sector topped all verticals at 19% of total billings and was up 60%. Service providers and MSSPs accounted for 16% of total billings. The rebound for education accelerated with billings growth of 50%. Retail turned in a solid quarter with billings growth of 21%. Our strong and consistent billings and revenue performance over the past several years is testament to our geographic and customer diversity, the growing success of the single integrated security platform strategy, and our ASIC advantage, which enables a shared operating system across the Security Fabric platform, drives our price or performance advantage, increase the capacity to add features and functions while maintaining price points. Moving back to the income statement. As shown on slide four, total gross margin improved 10 basis points to 78.9%. Product gross margin improved 120 basis points to 62.6%, benefiting from lower direct product costs. The increase in product gross margin offsets the drag on total gross margins from the revenue mix shift driven by the strong product revenue growth and a gross margin FX headwind of about 25 basis points. Operating margin for the first quarter increased 210 basis points to 24.5%, benefiting from the strong revenue performance in the quarter. The benefit from lower travel and marketing program expenses of approximately 100 basis points was more than offset by an operating margin headwind from foreign exchange of about 150 basis points. To end the quarter with total headcount of 8,615, an increase of 16%. Moving to the statement of cash flow summarized on slide seven and eight. Free cash flow for the first quarter came in at $264 million, up $22 million from the first quarter of 2020, despite a $24.5 million year-over-year increase in CapEx spending. We end of the year with total cash and investments of $3.1 billion, an increase of $1.5 billion. The increase includes the proceeds from our $1 billion investment-grade debt issuance during the first quarter. The issuance followed our inaugural strong BBB credit ratings. Throughout the pandemic, we have leveraged the strength of our balance sheet as a competitive advantage to support our partners and customers as they experience geo-specific economic challenges. As a result, Days Sales Outstanding increased seven days to 81 days, in line with our expectations and reflecting our earlier decision to provide geographically targeted extended payment terms. Compared to the fourth quarter of 2020, DSOs in the first quarter of 2021 decreased six days, as we saw early progress towards returning to pre-pandemic payment terms. Inventory turns declined to 2.1 x from 2.5 x, reflecting the efforts we took to mitigate supply chain risk, including increasing our inventory levels starting earlier in 2020. We expect extended payment terms and higher inventory balances to be in effect as we move through 2021. Capital expenditures for the first quarter were $52 million, including $38 million related to construction and other real estate activity. We expect to begin moving employees into the new Sunnyvale campus building in the middle of the year, although the timing will depend on local pandemic protocols and employee safety considerations. We estimate capital expenditures for the second quarter to be between $30 million and $40 million, and for all of 2021 to between $150 million and $170 million. The average contract term in the first quarter was approximately 27 months, up less than two months from the first quarter of 2020 and down approximately one month from the fourth quarter of 2020. Secure SD-WAN accounted for 15 deals over $1 million versus four in the first quarter of 2020 and contributed to the increase in average contract term. As we look forward, our goal remains to balance growth and profitability, and given the growth opportunities we highlighted during the March Analyst Day, and as confirmed in our first quarter results, we have tilted our bias towards growth for at least the next several quarters. The opportunities we see are supported by a strong pipeline, increased sales capacity, and our development efforts, which include the NP7 chip and our new FortiOS 7.0 operating system that was recently released. Now I'd like to review our outlook for the second quarter guidance, summarized on slide nine, which is subject to the disclaimers regarding forward-looking information that Peter provided at the beginning of the call. For the second quarter, we expect billings in the range of $860 million-$880 million. Revenue in the range of $733 million-$747 million. Non-GAAP gross margins of 78.5%-79.5%. Non-GAAP operating margin of 24.5%-25.5%, which includes an expected 100-150 basis point headwind from foreign exchange. Non-GAAP earnings per share of $0.83-$0.88, which assumes a share count of between 168 and 170 million. We expect a non-GAAP tax rate of 21%. Before raising our 2021 guidance, I'd like to congratulate every member of the Fortinet team for the truly outstanding start to 2021. With that, for 2021, we expect billings in the range of $3.685 billion-$3.745 billion, which at the midpoint represents growth of approximately 20%. Revenue in the range of $3.080 billion-$3.130 billion, which at the midpoint represents growth of approximately 20%. Total service revenue in the range of $2.020 billion-$2.050 billion, which represents growth of approximately 21% and implies product revenue growth of approximately 17%. Non-GAAP gross margin of 78%-80%. Non-GAAP operating margin of 25%-27%. When backing out the 2020 T&E benefit, the midpoint of the guidance represents a 50-100 basis point increase in 2021 operating margin, despite an expected headwind from foreign exchange. Non-GAAP earnings per share of $3.65 or $3.80, which assumes a share count of between 170 and 172 million and about $0.07 per share impact from the debt issuance. We expect our non-GAAP tax rate to be 21%. We expect cash taxes to be approximately $80 million. Along with Ken, I'd like to thank our partners, our customers, and the Fortinet team for all their support and hard work during these difficult and unique times. I now hand the call back over to Peter to begin the Q&A. Thank you, Keith. As a reminder, during the Q&A session, we ask that you please limit yourself to one question to allow others to participate. We've got a fairly large queue today, so I'd like to get through everybody at least once. Tawanda, please open the call for questions. Thank you. Ladies and gentlemen, as as reminder, to ask a question you will need to press star the one on the telephone. To withdraw you question, press the pound key, Our first question comes from the line of Rob Owens with Piper Sandler. Your line is open. Great, thank you for taking my question. With a lot of other verticals in the media seeing issues with chip shortages and some supply chain issues, is that starting to sneak into the security market relative to firewall appliance shipments? Can you talk a little bit about your potential exposure? Thanks. Well, I think the chip shortages, this is Keith, Rob, I think the chip shortage that you point out can touch a lot of different industries. I think one thing about Fortinet, in addition to having different form factors, is these inventory balances that we carry. At two times inventory turns, you're looking at basically six months of inventory that we're carrying on our balance sheet. I do expect that the supply chain issues will be something, particularly as it relates to chips, that will be a constant conversation point throughout 2021 and into 2022. I think in terms of when we sit down and talk about our expectations for the year, I think we have a pretty good understanding of how to work that in. Thanks, Keith. Thank you. Our next question comes from the line of Brian Essex with Goldman Sachs. Your line is open. Great. Thank you. Thank you very much for taking the question. Ken, I was just wondering, Billings commentary, worldwide government up 60%, some really nice acceleration there. MSSP and service providers still 16% of total. Maybe if you can talk about, obviously, we know what the secular drivers in MSSP are. How durable is that, maybe the factors that are driving that acceleration in government spend? Maybe talk a little bit about, particularly on the service provider side, it doesn't seem as though we're seeing an acceleration from 5G and IoT yet. Who are the buyers there? How do you anticipate that segment will play out through the rest of the year as you look to work your way through the remainder of the year? Yeah, the carrier and this lot of service provider starting reshaping their wider security network offer, whether it's 5G, SD-WAN, all the SASE, and also supporting work from home, kind of still in the early stage, I put it this way. That's where we working more closely with all the service provider, like the BT we announced today, the AT&T we announced last month, and pretty much all the service provider, to support in all this shifting of the business model. I say it's still early stage, but we do involve a lot of a testing trial. The same time, I do believe eventually the service provider business will go back up to the number one. It's tend to be like a high 20, like if you back four, five years ago. It's because it's a new kind of a shifting. They do have some work to do and also some big investments we see going forward. We're working together with them to keeping growing this business right now. Got it. Very helpful. Thank you. Thank you. Thank you. Our next question comes from the line of Jonathan Ho with William Blair. Your line is open. Good afternoon. Congratulations on the strong quarter. I just wanted to get a better sense of what you're seeing in terms of demand for the SASE and ZTNA-oriented products. Are you seeing that pipeline sort of continue to rise, especially as we look at sort of replacements for the traditional VPN connections and other sort of more legacy technologies? Thank you. Yeah, that is a new fast-growing market. Also they probably replace some of the traditional approach, but some other traditional approach also expand inside campus, inside enterprise, inside the data center. It go through the internal segmentation. On the other side, we do believe whether the SASE, Zero Trust Network Access, we said few years ago, it's the best position probably for the service provider carrier. We tend to be more working with them, partner with them, and also offer kind of more tighter integrated solution. Like we said in the FortiOS 7.0, it's very integrated into OS level instead of some different vendor using different box or even kind of a different infrastructure to do that. That's actually working much better with the wider service provider, with the customer directly. That's where we do see there's some fast-growing going forward, but it's just part of the whole infrastructure solution will now replace the traditional approach. Also the whole thing's security is more dynamic space. There's a new thing come up, and also that old things also not goes away. That's where we try to address is the new trend, at the same time, keeping enhance the traditional solution and to supporting the customer in all different vertical, different region. Thank you. Thank you. Our next question comes from the line of Ben Bollin with Cleveland Research. Your line is open. Good evening Ken, Peter, Keith, Peter. Thanks for taking the question. I was hoping you could talk a little bit about how you see customer discussions changing or evolving as they contemplate and start to return to their offices and to work. Then I also hoping you could touch on how you view the growth opportunity over time from completely new customers versus wallet share expansion with your existing customers. Thanks. The customer definitely view security is starting to become more and more important. Also they need to cover much broad infrastructure and all edges, instead of just the traditional security, whatever the border or the data in and out of company. That's more device, more user, more infrastructure need to be covered. It's not a simple refresh. It's really changing to the whole infrastructure approach and also working together with traditionally different vendor cover, whether networking or endpoint or some other part of security. Now they looking for some consolidation, and they prefer vendor have a multiple cover of different part of infrastructure working together. That you can see that the fabric approach we did a few years ago starting doing quite well and almost pretty much every quarter double the growth compared to the traditional network security. On the network security, we also see very healthy growth. It's really not just expanding beyond the traditional border security approach, but also because the ASIC advantage, which increased the secure computing power five to 10 times compared to the other vendor software load on the traditional CPU. That's able to add more function and also kind of increase performance, lower the cost, and also a lower power consumption, more green. That's actually making the product growth, like we said, keeping to better and better. We do see this whole infrastructure approach will keeping going for the next probably a few quarter, even to a few years, and the consolidation will keeping going within the industry. Ben, just to continue on with Ken's comments, I think the headline that he's talked about previously is that the combination of back to work and many companies being in a hybrid model, that the attack surface now seems to be permanently expanded for many, many companies. In terms of growth and how we see it with new logos and expansion opportunities, we easily add several thousand new customers every quarter. If you look at the mix of billings, the mix of billings is going to come from our install base of customers, if you will. I think the simple model to look at is, from that initial sale of perhaps a firewall or something else, there's two different ways to expand. One is finding more and more use cases inside organizations for firewalls and increasing the displacement opportunities. The second is, and this is where Ken was going, is the expansion opportunity with those non-FortiGate fabric partner products. What we're seeing there with that mix shift from FortiGates to non-FortiGates and now being 30% of our business or 31% of our business, I think is taking as one affirmation of the strategy and two, you're seeing it in the numbers. Thank you. Thank you. Our next question comes from the line of Tal Liani with Bank of America. Your line is open. Hi, guys. I'm going to take you to the basics with my question. Last year was strong and there was some concern that the firewall market is being driven by COVID-related demand just because of work from home. The question is whether you expect any slowdown of demand related to the anniversary of the trends last year. The second question is, your non-FortiGate grew extremely strong again. If you can take us through the basics, what are the products that are growing there? Just what are the trends and what do you bring to the market? Thanks. I can take the first part, maybe Keith gets the second part. I don't see any slowdown even for the FortiGate side. We're keeping gaining market share, like I said, because there's a fundamental technology architecture difference, with the five to 10 times the computing power compared to our competitor, we can easily add a function performance. Even for work from home, it's more like a one single FortiGate box can replace three, four different box from an endpoint security side, all these apart and also manage home Wi-Fi and the traffic there. That's also a lot of company also starting to do this kind of expand the branch to the home, called a home branch or whatever, to meet working standard, like a better networking reliability, security to the home environment. That's also need this solution. That's also one of the reason we see some of the lower side keeping growth pretty fast. It's work from home actually helping driving some of these FortiGate sales. Also going forward, whether the service providers and other, I have to say most enterprise not even changing much of the infrastructure to adopt this work from home yet. They are still in the early stage. We do see there's a big potential going forward. Yeah, Tal. It's Keith. Yeah. Boy, it's a little tough for me to look back at the second quarter of last year and where the billings growth was and the product revenue growth and think that I didn't feel like I was getting a tailwind from VPN or something like that in the second quarter of last year. That said, I think we're very pleased with how the year continued to play out and the growth numbers that we've provided. I don't know that early on in the stages of work from home, that that was something that necessarily Fortinet participated in to the same level that maybe some of the other firewall vendors did. In the second part of your question, you'll be glad to know that Ken and Peter and I sit down every quarter and look at the non-FortiGate products and try and find the one that's really distinguishing itself, and we keep coming to the same conclusion each quarter. It's a rising tide that's lifting all boats. It's not that any one product is really standing out more so than the other over an extended period of time. Yeah, the key reason. Yeah, it's really because most of the products we develop internally from day one, it's making them integrate and operate together. That's probably the key number one reason customers want to buy it, they try to consolidate, make it easy to manage. It's different than some other company when they acquire some product or company from outside, it takes a long time or more difficult to integrate. If we internally develop from day one, we make it work together. Right. My question was much more basic. What are the key products that are driving up the growth of non-FortiGate? We know it's one of SD-WAN. What else? SD-WAN actually is a part of FortiGate, put it this way. Got it. Yes. We don't count SD-WAN as a non-FortiGate, but we have 20- 30 different product, touching all part of the infrastructure. like Keith said, it's difficult to point out which one is really Yeah, it's pretty, like you say, the high rate, the whole sense. Got it. Thank you. Okay. Thank you. Our next question comes from the line of Sterling Auty with JP Morgan. Your line is open. Yeah, thanks. Hi, guys. Wondering if you could help me better understand the disproportionate improvement that you saw internationally, especially in EMEA, relative to the improvement you saw in the U.S. I think similar, like we comment the last couple quarter, is follow the pandemic. Once things starting at improving, they also try to think about how to go back to work or some other investing infrastructure since we'll be starting growth. That's where APAC, EMEA growth will be faster, but U.S. catch up very quickly. Thank you. Yeah, I'll just add onto that, Sterling. I think certainly for us, that the markets are somewhat different, and maybe that comes into play a little bit. The European, the international part of the market, we are oftentimes have the number one market share. We're the incumbent, and particularly during the pandemic, I think incumbents had an advantage. I think in the U.S., perhaps we're a bit more of a challenger, if you will, and I don't know that a lot of CIOs and CISOs were focused on firewall refreshes in the second quarter and third quarter of last year and going through competitive dynamics. I think there's also a bit of the partner ecosystem. When you're the incumbent, you probably have more mind share with the partners, than when you do when the challengers. Having said all that, as we look forward and we look at our pipeline, particularly as it relates to the U.S., as we go through into the second quarter here and through the rest of the year, I think we're feeling very good about the direction that that organization is headed. Yeah, we also were keeping invest more into the U.S. for supporting further growth, like we did for the PGA sponsorship and some other things. I think we'll be helping drive the growth in U.S. Got it. Thank you. Thank you. Our next question comes from the line of Gray Powell with BTIG. Your line is open. Okay, great. Thanks for taking my question, and congratulations on the good numbers. Yeah, maybe to follow up on the SASE side of the business, how quickly should we think of billings growth ramping on the FortiSASE product? Then I don't want to get too aggressive, but could it potentially have a similar ramp to what you saw in 2018 and 2019 with SD-WAN, back when that product was just getting started? Yeah, just how should we think about just the overall upsell there? Thanks. I also have I have to say a little bit similar question. We're also kind of looking at different market study, and also what's the best model to do this with partner together. I feel maybe similar like SD-WAN, but also SD-WAN is a part of a SASE solution. SASE including some other function there, which we also want to have a better integration and a better performance and easy to manage. That's why we take some time to really launch our SASE and also more closely working with our partner to do that. The market definitely growing, but we also closely watching what's the best way to position ourselves to catch this trend. Okay. Thank you very much. Thank you. Thank you. Our next question comes from the line of Shaul Eyal with Cowen. Your line is open. Thank you. Good afternoon, gentlemen. Congrats on the strong performance. Keith or Ken, historically, the refresh cycle concept used to provide some disruption at times, I would even say some noise around specifically Fortinet's business. It would appear that over the past, probably 18 months or so, there's less discussion and focus around it. Do you think that Fortinet is gradually shifting away from it? Or is that there's so many concurrent internal refresh cycles given the broadening of your platform, that it is becoming less of a relevant issue? What's the thinking about it? I'd probably hesitate to using the term refresh compared to last time. You can see the 2012, 2013, and that's where it's the next-gen firewall replacing the traditional firewall VPN, which with next-gen firewall has some intrusion prevention, antivirus, all the other function there, and proxy. This time, it's expanding into a much broader, bigger infrastructure, both go internal inside the company and also go to the outside company, the one side even expand work from home. It's more expanding, and same time, different part of security also need to be more working together. That's from company IT side. They look, and see if they can consolidate and help them to manage and integrate, automate will be more important. That's where, like I said, there's a multi-device, more people connected, and also a little bit more in the Zero Trust environment. this time it's a little bit different. That's where making a very broad integrate approach, I feel is more important. same time supporting whether the new technology, whether 5G, SD-WAN, and also, some kind of a little bit service model also will be important. we also feel once the product get in the customer hand, because of the huge computing power capability, we can also will be add additional service and helping customer adopt the new things they need, and also working with service provider. that's also keeping the business keeping growing. I think Keith probably has some. Yeah, Shaul, I think you and Ken are kind of touching on the same thing, which you've made a reference to. I would say it this way, it's going to get harder and harder, I think, to discern industry refresh cycles compared to where it was maybe five or six, seven years ago, for a number of reasons. One, the firewall vendors are simply larger. Their footprint is much, much bigger than it was before. Secondly, you have some of us that are showing success on the platform strategy, when 30% of your billings are coming from the platform, again, to your point, it's going to get a little harder to discern it. The sheer size, if you will, of the footprint in terms of customers, but also the number of different use cases that are starting to evolve and continue to evolve inside those organizations. I think all that comes together, it's going to get murkier and murkier as we go forward to find a refresh cycle. You may have some individual competitors that maybe have very, very large price points or machines or something like that, where they have their own internal refresh cycle that you may see some noise around, but that's certainly not the Fortinet approach to firewall refreshes. Yeah. To put it another way, the traditional firewall, or where they've been deployed is not going away. They also kind of every five years probably need to be upgraded to the new model to match networking speed or some other one. They also expanding beyond that one, and also need to be working that part of security infrastructure. Put it this way. Understood. Thank you so much. Well done. Yeah, thank you. Thank you. Our next question comes from the line of Adam Tindle with Raymond James. Your line is open. Okay, thanks. Good afternoon. Maybe one for Keith. You've talked about this being a year to invest for growth. Your Q1 results clearly say that's working. Billings growth in the high 20s at a scale approaching $1 billion, and doing that with healthy profit is pretty unique. For my question, I was just wondering, at this point, if you evaluated whether to lean even more on growth given the early results that you're seeing, and if you could maybe touch on the logic of why not. Are there diminishing returns above this level? Is this something you'd consider reevaluating as the year progresses? Thank you. Yeah. Adam Tindle, it sounds like you're listening into some of the conversations that Ken and I have with our respective points of view, I think. I think, look, we're really pleased with how the business executed in the first quarter. Putting up 27% billings growth and being 11 or 12 points above, and then raising to 22%, three and a half points on the billings line for the year, probably for the quarter, and then taking the year up at the same time by about four points. I think the level of execution has shown to be very, very high and the level of success with the FortiGate firewalls and the non-FortiGate products have been We're very, very pleased with what's happening there. I think we'll see how this year plays out. We felt that there were tailwinds coming into the year for us in a number of different ways, whether it was GDP, whether it was stimulus, whether it was the product suite that we had or our sales team's ability to execute. Let's see how we do as we continue on this trajectory, hopefully through the rest of the year. Thank you. That's fair. I'd love to be a fly on the wall for those conversations. Thank you. Our next question comes from the line of Andrew Nowinski with D.A. Davidson. Your line is open. Great, thank you, and congrats on another great quarter. I wanted to ask about the partnerships with some of the MSPs that you mentioned, AT&T and BT. Those have been historically strong partnerships for Zscaler. I'm wondering, do you think you're eating into Zscaler's mind share at those partners, or are they just trying to offer their customers maybe another SASE offering? Like I said, in the last few years, for some point, we view Zscaler as one of the service provider, could be partner. Also some of the telecom company, they do have their infrastructure and also some of their customer base, which we have been working with them for a long, long time. Is that, once, especially during the pandemic, IT has been putting high pressure to supporting whether internal or some other need, been in need. I think that's where SASE offers sort of more service-based approach, which also kind of adopt by some customer service provider quickly. That's where we also leverage all kind of our relation with the partner and also our product technology advantage and offer much tighter integrated SASE Zero Trust Network solution. Some bigger carrier partner, they like it a lot, I put it this way. That's where we continue to work with them. I do believe the business in the carrier service provider will be go back to the number one, like we are a few years ago, the high 20. It's also have to working closely with the partner and also some other infrastructure, new infrastructure, like I mentioned, whether the SD-WAN and the 5G or some other, like a lot of IoT, OT or some other things. I think that there's a lot of potential working with our kind of service provider to keeping expanding the security business together. Yeah, it sounds like it. Thanks a lot, Ken. Thank you. Thank you. Our next question comes from the line of Irvin Liu with Evercore. Congrats on the great quarter. You previously identified continued expansion into large enterprise as a key contributor to growth and share gains. Can you talk about whether this was a factor in your Q1 outperformance? Also, can you also talk about any key differences when selling to large enterprises versus SME customers? For example, the go-to-market motion and/or timetable required to close a deal. Any color here would be helpful. Thanks. I think we tried to give a little bit of color on that in the script, and I've used the term before, the growth being bookend, if you will, through the pandemic. You've had quarters where SMB did well, and I think we provided some metrics there about large deals over $1 million, which we think is a pretty good proxy for the success that we're seeing in the enterprise. I do think also the mid-segment is coming online for us a little bit stronger than maybe we saw in 2020. I continue to believe that 2020 was an unusual year, both geographically and across customer segments. In terms of the cadence, in terms of how to sell to enterprise versus SMB, I would say absolutely. You make a large investment, it plays very well with the channel partners, there's no doubt about that, the MSSPs, the carriers, et cetera. Those channel partners oftentimes, particularly distributors, play a role in the enterprise. To be successful there, you absolutely have to have a direct sales force that is helping to bring deals to those channel partners. I kind of made a comment earlier about incumbency versus challenger. I think that's perhaps even more important in a geography where you're the challenger and you're trying to get mind share from some of those large key resellers that are linked together with some of the legacy firewall vendors. You've really got to partner with them to bring deals to them and convince them of that strategy. I think we're starting to see that traction take hold for us. Got it. Thank you. Thank you. Our next question comes from the line of Fatima Boolani with UBS. Your line is open. Good afternoon. Thank you for taking my questions. Keith, for you, I was hoping you could share some more details around the expectations of the SD-WAN mix that you have embedded in your guidance. How should we think about that, certainly, how are you thinking about it? Where are the incremental areas of budgets or dollars and ultimately share gains within SD-WAN/SASE going to come from between the carrier market as well as the enterprise DIY market? Yeah, hi, Fatima, nice to hear from you again. I think in terms of SD-WAN, the way we go about budgeting, we would describe SD-WAN as you've heard us before. SD-WAN is a use case for the firewall similar to OT micro-segmentation, Zero Trust, and et cetera. We're not necessarily prone to building our models, if you will, by use cases for the firewalls, nor similarly necessarily by products. We do look at our pipeline, and we do sanity check it against Gartner projections for growth and things of that nature, to make sure that we're in the range, if you will. I would expect that the other comment I would offer is Ken's been quite clear, first setting the goal early on that he wanted SD-WAN to be 5% of billings, and we got there, and he moved it to 10%, and we got there, and now he's moved it to 15%. It's a little bit of who moved my cheese, I guess, with Ken in terms of setting goals for us, but that's fine. We like that. I think you really kind of answered your own question in terms of growth investments, where we would spend money. I think the carrier service provider opportunities for both SD-WAN and SASE are key areas for those investments, but I'll hand it back to Ken. Yeah, we do believe SD-WAN will be a bigger long-term market, and we want to be the number one. We do see a lot of potential, even with work from home, a lot of enterprise try to do, a lot of service provider try to support and still very small percentage, very early stage to use in the SD-WAN. We have huge advantage using our SoC4 chip to support in this one box solution, which has about 20 x better performance and a much lower cost compared to the second nearest competitor. That's where it's a huge opportunity with the best technology and working closely with the partner to keeping growing the SD-WAN. We do see there's a huge potential, and we also target to be the number one soon. Thank you. Thank you. Our next question comes from the line of Hamza Fodderwala with Morgan Stanley. Your line is open. Hi, guys. Good evening, and thank you for taking my question. I was wondering on the core sort of firewalling side, how much of the demand are you seeing come from use cases around micro-segmentation, particularly given some of these recent cyber attacks? We do have a lot of asking about how to secure internally, whether within a campus of end company or within a data center. I have to say, security still needs much more computing power to process the traffic compared to the routing switching. My estimate probably like easily 30, 50, even 100 times more computing power is needed. That's where, if we cannot solve that speed issue or some other kind of managed deployment issue, it's still more difficult. That's also the ASIC has more advantage, like 5-10 times better performance, computing power, and the costs are lower than other software-only approach. It's a lot of requests, but I have to say, it's not many solution can meet some requests because internal, whether within a campus or within a data center, the network speed tend to be easily 10- 100 times more faster than the WAN approach, I mean, the WAN connection. That's where we're working with whether the customer or the partner directly and also combine both the WAN security and the LAN security and the main whole infrastructure security is more important. It's today work from home with they call the Zero Trust Network Access, is that you have to make the whole infrastructure secure. We see a huge market potential for the internal segmentation inside data center or campus security, but it's also a challenging job to meet the speed requirement compared to networking and also make sure they can easily deploy and easily managed. Thank you for the color. Thank you. Thank you. Our next question comes from the line of Saket Kalia with Barclays. Your line is open. Okay, great. Hey, thanks for taking my question here, guys. Keith, maybe for you, just going back to the non-FortiGate part of the business, do you see any trends in perhaps market segment or geography that is adopting non-FortiGate at higher rates? I only ask that because with your growing enterprise business that is, I would imagine more of the enterprises would maybe be more willing to work with multiple specialist vendors. Is the non-FortiGate part of the business perhaps more weighted towards the mid-market or perhaps international? Relatedly, just kind of broad brushes, how is that non-FortiGate business sort of split between product and services? Sorry, there's a lot there. Does that make sense? Yes, there is a lot there. Depending upon my answer, we'll know if it made sense. How's that? Look, I don't think the product service mix between, and we've discussed and talked about previously, the FortiGate versus non-FortiGate, the product service mix is not different in any meaningful way, if you will, when you look at the mix. Again, we're selling solutions, so you're typically bundling that with a firewall sale. To see the non-FortiGate billings growth at that 50% number and seeing the mix of the business, I think obviously makes us very excited. It's actually a little bit counterintuitive in terms of where it sells. For the last several quarters, the Americas has done very well with selling the fabric. I've been on phone calls with very large enterprises that want to know much more about the Fabric now that they've become comfortable with the firewall. I probably went into those conversations, Saket, with much the same expectation that you perhaps described, which is that may be something that plays more to the SMB part of the business or the mid-enterprise, and I do think it does. I do think the enterprise willingness, and in the U.S., to see the enterprise willingness to engage on the Fabric is probably a sign of a number of things. One is, at the end of the day, everybody's got a budget, and this is a more cost-effective way to go about doing it. You can manage your infrastructure much easier, perhaps, with a single-vendor strategy than you might otherwise. I think the common operating system, with it running on or being integrated to OS7, is something that's very exciting. Then you start talking into the vision about a SASE offering that's running on an integrated OS7 system as well. I gave you a lot there. To give color to it, I think the long-winded response would be, it has not shown to be unique to a size of customer or to a geography. That makes sense. Thanks, Keith. Thank you. Our next questioning comes from the line of Keith Bachman with Bank of Montreal. Your line is open. Thank you very much. I'm going to follow on Saket. I have one question to keep within Peter's rules, but I'm going to break it into a couple sub-parts on the non-FortiGate side as well. I wanted to break it into A, is there anything over the next 12 months that you look at that you think in particular is interesting or exciting? B, Keith, is there anything you could break out on attach rates, where you currently stand on the non-FortiGate side to attach rates? It would seem to me that there's still a hell of a lot of room to run there, just if you look at your installed base, where some opportunities. C, if you had to partition the non-FortiGate into cloud and non-cloud, in other words, there's a lot of, I think, the FortiGate products that are relevant to on-premise situations versus cloud. Is there a way to just break it out in percentage, dollar-wise, 50% of it's aligned to on-premise deployments versus 50% is cloud deployments? Is there any way to break that out in the non-FortiGate side in particular? Thanks very much. We're going to charge him by the question, I think, as we go forward, Keith. I'm broke. Yeah. I'm going to leave the tough question or the fun question for Ken at the end, which is, as you look out over 12 months, what's going to take off in non-FortiGate? Keith, I would probably point you back to, if we didn't do it in the analyst day in March, we did do it in the analyst day in November of 2019, where we gave some breakdown of the Fabric products between what we call cloud and what we call infrastructure. You can think of that as being hardware, and that'll kind of help answer your question there. I think when you use the term attach rate, we may use the term penetration rate, and by that is. Yep for a customer that's a firewall vendor, as you start looking at your expansion opportunity, Keith, inside these customers, what type of penetration are you seeing, and how are you going to market, if you will, on encouraging the sales team and the marketing team to, whatever that number is, increasing the penetration? I would say that's something that's really been an area of focus, I would say, for us more recently over the last couple of quarters. I think that's really at the moment more of a, we're pleased with it, don't get me wrong. I think right now that's more of an internal metric that we're using with our sales team and our marketing team, and to some extent with our engineering team. Yep. Yeah, agree. I think also, I probably not go to detail myself, the number. So far, the non-FortiGate almost double the FortiGate growth in the last- few quarter, few years. I don't see any changing of the trend right now. Definitely, from customer angle, they also asked what's the reason that they really need to be more consolidate, make the whole infrastructure managed working together, all these kind of things, which are working quite well with us because, we designed the product of the non-FortiGate working with FortiGate from day one, and then making the whole fabric working together to integrate, automate all the security solution there. Also we say there's still small percentage customer has multiple FortiGate, still a lot of room to grow, and the same time as there's a new product even come up to working with the FortiGate. That's where we do see, we probably keep the trend that non-FortiGate will keep on grow faster and probably eventually even the business may be more than FortiGate, maybe within a few years. Okay. Thank you. Thank you. Our next question comes from the line of Michael Turits with KeyBanc. Your line is open. Hey, guys. For Ken and Keith, do you see any difference in the type of projects and security that you were seeing last year, primarily for the move to work from home versus this year where we have work from home as well as back to office? As part of that, Ken and Keith, you mentioned, I think, saying that you are seeing more willingness to do firewall replacements this year. Is that also a part of it? Yeah. Last year, work from home is more like a patch whatever they have and without changing much of infrastructure. This year, definitely thinking redesigning infrastructure, where to leverage like a better technology like SD-WAN or some other, and the same time, making kind of a better solution in a Zero Trust environment that is much more secure. It's still in early stage. We do see a lot of growth potential there. It's a whole infrastructure changing, compared to last year, the quick patch solution. Yeah, Mike, I would add to Ken's comments. I think the headline is, with the tailwinds coming to here, security is top of mind for so many companies right now, so many CIOs and CISOs, and whether that's SolarWinds or it's work from home, or it's Microsoft's little challenge, it's the ramp up in ransomware. It's a year, I think, that a lot of CIOs and CISOs are focused on security for a lot of different reasons. I do think that, for us in the U.S. market, if you will, and Ken's talked about this before, a little more difficult, say, in the middle part of last year, and it's kind of within the year, to get mind share from CIOs and CISOs to have a conversation about how you can save money while improving performance in their firewall. I think those opportunities are starting to appear more in terms of getting out and having customers take their prospects, take that meeting, if you will. I think there's also some of these larger deployments that can go on for well over a year or a couple of years. I think some of those deployments perhaps were a bit stalled, if you will, last year, and they're coming back online as we look to that 2021. Just to clarify, larger deployments are starting to come back online, and is that the answer, yes, that people are more willing to talk about displacements of competitors this year than last year? Are you asking if I'm seeing that? The answer is yes. If you're asking if that's a driver to the business, I would say yes. If you're asking if that's the driver to the business, I don't think so. No, just if you're seeing more of it. Yeah. Yeah, they are. Okay to be spent beyond the traditional deployment and also, like more device, more people, and more infrastructure need to be secured. Thanks, guys. Thank you. Our final question comes from the line of Patrick Colville with Deutsche Bank. Your line is open. Squeezing me in. Can I just finish off on a multi-parter? I guess the first one would be just about linearity. Last year, the linearity between one and 2Q was kind of unusual. Just help us understand how that might play out in fiscal 2021. I guess my kind of second part, if I may, is product revenue this quarter was phenomenal. Baked into guidance, I guess, is that there's a kind of the rest of the year is more like a mid-teens growth rate. Just help us understand, is there anything that is worth flagging in regards to the kind of performance in the rest of the year versus 1Q? Thank you. Yeah, I think that as you get comfortable with the business model, you understand the difference between product and services and how very predictable that higher margin services revenue is. I think that we did take this as the opportunity to raise product revenue, the implied product revenue guidance, if you will, when you reverse engineer it after we give the service revenue guidance by about five points, and I think that takes you to about 17% in terms of our guidance now for the full year. We'll see how the year plays out. I think we feel good about it. In terms of linearity from Q1 to Q2, I would probably point you to, one, our actual results that we had last year in Q1 and Q2, and our actual results in Q1 of this year and our guidance for Q2. That's very clear. Thanks for your time. Thank you. I would now like to turn the call back over to Peter for closing remarks. Thank you, Tawanda. I'd like to thank everyone for joining the call today. Fortinet will be attending a few conferences in the second quarter. We have the JP Morgan conference on May 25th, AllianceBernstein on June 2nd, and then Bank of America on June 8th. Event presentations and webcast links are up on our website. Thank you very much. Have a great day, and please reach out if you have any other questions. Have a great day. Thank you. Bye-bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.