Hello, thank you for standing by, and welcome to Fortinet Q4 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Peter Salkowski, Vice President of Investor Relations. Please go ahead. Thank you, Josh. Good afternoon, everyone. This is Peter Salkowski, Vice President of Investor Relations at Fortinet. I'm pleased to welcome everyone to our call to discuss Fortinet's financial results for the fourth quarter and full year of 2021. Speakers on today's call are Ken Xie, Fortinet Founder, Chairman, and CEO, and Keith Jensen, our Chief Financial Officer. This is a live call and that will be available via replay via our website on our investor relations website. Ken will begin our call today by providing a high level perspective on our business. Keith will then review our financial and operating results for the fourth quarter before providing guidance for the Q1 and full year of next year. We'll then open the call for questions. During the Q&A, 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 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. Also, 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 is located in the earnings press release and in the presentation that accompanies 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. Thanks, Peter, and thank you for everyone for joining to this call to review our outstanding Q4 and full year 2021 results. For the Q4, bookings increased 49% to $1.428 billion. Billings increased 36% to $1.306 billion. Global 2000 billings growth accelerated to over 90%. Secure SD-WAN billings was up 67%, accounting for 16% of total billings. Total revenue growth 29% to $964 million, with product revenue up 31%. Our team navigate well through a challenging supply chain environment to deliver outstanding results. For the full year, revenue was $3.3 billion, and a GAAP operating margin was 20%. We generate a record of $1.2 billion of free cash flow, and we reported our 13 consecutive year of GAAP profitability. Three growth drivers, convergence of security and networking, vendor consolidation with our Security Fabric mesh platform, and an elevated threat environment are driving our strong financial result and market share gain. The move to work from anywhere has rapidly expanded the attack surface, which traditional network security firm has to protect. Fortinet's Security-Driven Networking approach converges networking and security, including next-generation firewall, SD-WAN, 5G, ZTNA, and OT to reduce complexity while securing and connecting remote user to advanced security and performance and the networking speed. Enterprise organizations are increasingly consolidating to a Zero Trust security mesh approach. Fortinet's Security Fabric platform delivers unparalleled protection through a separate security mesh architecture that provide broad, integrated, and automated protection across multiple edge, from endpoint to data center and hybrid cloud environment. Today, we announced the FortiGate 3000F, the latest FortiGate next-generation firewall powered by Fortinet's Fortinet ASIC NP7 SPU to deliver scalable high-performance convergence of networking and security for Zero Trust Edge and core network. The FortiGate 3000F Security Compute Rating offers an average 5x better performance than competitive offerings. Fortinet recently stood out amongst 19 network firewall vendors in Gartner Critical Capabilities for network firewall. Evaluated for their performance across nine critical capabilities, Fortinet FortiGate solution received overall high score in the enterprise data center, distributed enterprise edge, and SMB use case, and the second high score in public cloud use case. Our FortiGate product is the only leader in both Gartner Magic Quadrant for network firewall and SD-WAN. Over the last several years, Fortinet industry-leading innovation has transformed our company into one of the most influential and fastest-growing cybersecurity leaders. This, in addition to our growth drivers, strongly positions us to capture market share and move to the next level of growth. Before turning the call over to Keith, I would like to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work. I would especially like to thank our operations team for doing a great job supporting Fortinet's fast growth. Keith? Thank you, Ken, and good afternoon, everyone. I'll start with a summary of our very strong 2021 performance. Customer demand was strong and broad-based across geographies, customer sizes, industries, use cases, and security solutions, reflecting the three key demand drivers that Ken mentioned, convergence of security and networking, vendor consolidation on our Security Fabric mesh platform, and the elevated threat environment. Convergence or Security-Driven Networking requires integrated security solutions to be delivered at networking speeds across a company's entire threat landscape of edges, including data centers, endpoints, work from anywhere, and clouds, as well as across multiple use cases such as secure SD-WAN, Wi-Fi, switching, 5G, and OT. The networking speed and computing capabilities of our ASIC-powered FortiGates can be 5 to 10 times more than competitor firewalls with their off-the-shelf silicon products. Vendor consolidation is driven by customer focus on security effectiveness, performance, and cost management. We deliver vendor consolidation through our Security Fabric platform and its broad range of products integrated with a single operating system, offering increased automation. As we saw in 2021, we expect strong customer demand fueled by these key drivers to continue. Turning to our 2021 performance, billings growth accelerated to 35% or $4.2 billion, representing our highest annual billings growth rate in six years. Revenue growth also accelerated, coming in at 29%, representing the fourth consecutive year of revenue growth of 20% or more. Despite the supply chain environment, product revenue growth came in at 37% growth, our highest annual product revenue growth rate in 10 years. Driven by strong demand for our fabric and cloud security solutions, non-FortiGate billings and revenue each exceeded $1 billion for the first time in our history. Non-FortiGate billings increased 46% to $1.25 billion, and non-FortiGate revenue increased 42% to $1.1 billion. Gross margin was 77.5%, and operating margin was 26.2%. Our GAAP operating margin was 19.5%. It's one of the highest in the industry, and we were GAAP profitable, as Ken mentioned, for 13 consecutive years. Free cash flow was a record $1.2 billion, exceeding $1 billion for the first time in our history. Free cash flow margin was 36%, and when adjusted for real estate investments, came in at 43%. Total deferred revenue increased 33% to $3.5 billion, and short-term deferred revenue increased 28% to $1.8 billion. We are experiencing exceptionally strong demand that exceeds supply by more than historical norms. As a result, we are expanding our disclosures to include bookings and backlog to provide greater visibility into the strength of our business. Bookings represent the value of all orders received from customers. Backlog represents the value of all orders received but not fulfilled. When an order is fulfilled, we recognize both billings and product revenue. Turning to Q4 results, as noted on slide four, bookings were $1.4 billion, up 49%. On a sequential basis, backlog increased $122 million due to very strong demand. On a year-over-year basis, backlog increased $150 million to end the year at $162 million. Breaking down the backlog between product and services, approximately 75% relates to future product shipments, while the remaining 25% relates to various services. While it's difficult to forecast if an order might be canceled, several factors support our view that our backlog is strong and should provide a tailwind of growth later this year and into next year. Existing customers account for approximately 90% of our backlog. No single end customer accounts for more than, say, a low single-digit percentage of backlog. Many competitors are also impacted by supply chain constraints. Our products, along with our integrated operating system, are not commodities readily exchanged with offerings from other vendors. We actively manage our own supply chain, and the most deployed security network solution has over 1/3 of all firewall unit shipments. We are an attractive volume buyer for many suppliers. Lastly, our price for performance advantage may be difficult for our competition to match. I apologize for the sound in the background. We don't know what's causing it, but I'll continue on. Moving to Q4 billings at $1.3 billion, billings are up 36%, which compares to 49% bookings growth noted earlier. Enterprises favor Fortinet's leading cost for performance and integrated platform. This is especially evident in the 5-point increase in the large enterprise billing mix. To add more color to this, we can share Global 2000 billings were up over 90%, the third consecutive quarter of accelerating growth. The number of deals over $1 million increased 79% to 122 deals, breaking the 100 deal threshold for the first time in our history. We saw a record of four low eight-figure transactions in the quarter, all in the Americas. And lastly- We're gonna take one second to see if we can fix this phone line. We think it might be our phone for some reason. We're gonna dial back in and be right back. Everybody else stay put. Be right back. Josh, we're back. Can you hear us? Yes, I can hear you. You're in the main room right now, and I still hear the sound. That was better, Josh? I'm sorry, but the sound is still coming in pretty bad. Okay, we're gonna drop this line. I'll call from a different phone. I'm back. Okay. Sounds good. Everybody just hang on, please. Right back there. Josh, we're back. Can you hear me? Yep. J osh, can you hear me? No. Hello. Yes, I can hear you, but the noise came back as soon as you got connected again. Yeah, we're on a totally different phone. I'm on my cell phone now. Yeah, it's not our phone. Sounds like it's on your end, guys. Let me chat with you on FortiView, and we'll get this fixed in just a moment. [Audio distortion] Josh, are you there? Okay. I'm gonna sit right here. All right, we're gonna start. Keith's gonna back up a little bit. Hopefully, you can hear us now, and we'll start where he kinda left off and go from there. Yeah. [Crosstalk] Apologies for the interlude there. I'll back up a couple of paragraphs to my best recollection of where the challenge started. I believe that was around when I was mentioning that we were breaking down our backlog between product and services. Approximately 75% relates to product, future product shipments, while the remaining 25% relates to various services. While it's difficult to forecast if an order might be canceled, several factors support our view that our backlog is strong and should provide a tailwind for growth later this year and into next year. Existing customers account for approximately 90% of our backlog. No single end customer accounts for more than a low single-digit percentage of backlog. Many competitors are also impacted by supply chain constraints. Our products, along with our integrated operating system, are not commodities readily exchanged with offerings from other vendors. We actively manage our own supply chain, and as the most deployed network security solution with over 1/3 of all firewall unit shipments, we're an attractive volume buyer for many suppliers. Lastly, our price for performance advantage can be difficult for our competition to match. Moving to Q4 billings at $1.3 billion, billings are up 36%, which compares to the 49% bookings growth noted earlier. Enterprises favored Fortinet's leading cost for performance and integrated platform. This was especially evident in the 5-point increase in the large enterprise billings mix. To add more color to this, we can share that Global 2000 billings are up over 90%, the third consecutive quarter of accelerating growth. The number of deals over $1 million increased 79% to 122 deals, breaking the 100+ deal threshold for the first time in our history. We saw a record of four low eight-figure transactions, all in the Americas in the quarter. Lastly, secure SD-WAN deals over $1 million increased 63% to 26, contributing to SD-WAN use case billings growth of 67% and putting SD-WAN at 16% of total billings. FortiGate billings were up 33% and accounted for 69% of total billings. As shown on slide 11, high-end FortiGates posted very strong billings growth. Non-FortiGate billings were up 43%, driving a point and a half mix shift to non-FortiGate. Top 10 non-FortiGate solutions with growth over 40% included virtual firewalls, endpoints, and switches. At the same time, several smaller solutions posted triple-digit growth rates. Consistent with the elevated threat environment and the breadth of ransomware and other attacks, OT use case billings were up 70% and accounted for 8% of total billings. Average contract term was consistent year- over- year and quarter- over- quarter at 28 months. For the third consecutive quarter, we added approximately 6,000 new logos. Worldwide government billings grabbed the largest share of the mix at 16%. Financial services accounted for 14% of billings on billings growth of 63%. Billings and manufacturing, transportation, utilities, construction, and other verticals that have not consistently been in our top five remained elevated with billings growth of 40%. We believe the growth of these verticals is an indication of the broadening nature and greater awareness of the threat landscape, which is driving cybersecurity investments in industries that have historically perhaps spent a little bit less on security budgets. Moving over to the income statement, revenue growth was 29%. Product revenue growth was 31%. Illustrating the impact of backlog on product revenue growth. If backlog had remained flat quarter-over-quarter, the product revenue growth would have been as high as the mid-60s. Service revenue was up 27% to $585 million. Support and related services revenue was up 31% to $275 million, while security subscription services were up 24% to $309 million. Non-FortiGate product and service revenue of $324 million grew 41% and accounted for approximately 34% of total revenue, up 3 percentage points. FortiGate product and services revenue of $639 million grew 23% and accounted for 66% of total revenue. Total gross margin of 77.3% was 180 basis points above the midpoint of our guidance range and up 80 basis points quarter-over-quarter. A lower than expected drag from acquisitions and pricing actions taken to offset supplier cost increases contributed to the better-than-expected total gross margin and product gross margin. Product gross margin of 62.1% increased 140 basis points sequentially. Service gross margin of 87.1% increased 50 basis points sequentially. Operating margin of 28.5% improved 270 basis points sequentially and exceeded the midpoint of our guidance range by 100 basis points. Better than expected gross margin performance and a slightly less than expected impact from acquisitions contributed to the better-than-expected operating margin. Headcount increased 24% to 10,195. Moving to the statement of cash flows summarized on slides 12 and 15. Capital expenditures were $151 million, including $129 million for real estate investments. Our capital strategy includes increasing our office and warehouse capacity to support our higher levels of growth. We repurchased 1.8 million shares of common stock for a cost of $541 million. For the year, we repurchased approximately 2.6 million shares for a cost of $742 million. At year-end, the remaining share authorization was approximately $1.5 billion and set to expire in February 2023. Inventory turns of 2.7 were flat year-over-year and on par with 2.9x in the prior quarter. Overall, with what we believe was better than market growth for the Q4 and full year, we believe we again gained market share. Supported by strong pipeline growth and the key growth drivers outlined earlier, we believe we are in the early innings of a sustained high-growth period for the cybersecurity industry and Fortinet, driven by digital transformation, hybrid cloud, and the moving of data and security to the edge. The products we've created, the channel and customer relationships we've developed, and the investments we've made to build a broad and integrated Security Fabric platform powered by our proprietary ASIC FortiGates are expected to drive our continued growth and market share gains. Now I'd like to review our outlook for the Q1 summarized on slide 16, which is subject to disclaimers regarding forward-looking information that Peter provided at the beginning of the call. For at least the first half of the year, we expect elevated demand to outpace supply chain capacity, increasing backlog. An increase in backlog is a headwind to billings and revenue growth and provides interim pressure on margins. For the Q1, assuming bookings in the range of $1.1 billion-$1.15 billion, which at the midpoint represents bookings growth of 32%, we expect billings in the range of $1.05 billion-$1.09 billion, which at the midpoint represents growth of 26%. Revenue in the range of $865 million-$895 million. Non-GAAP gross margin of 75.5%-76.5%. Non-GAAP operating margin of 19.5%-20.5%. Non-GAAP earnings per share of $0.75-$0.80, which assumes a share count of between 166 million and 168 million. We estimate first quarter capital expenditures to be between $140 million and $150 million. We expect a non-GAAP tax rate of 18%. Before providing our full year 2022 guidance, I'd like to congratulate every member of the Fortinet team for the truly outstanding execution in 2021. The efforts and results have been outstanding, and this is on top of now several years of consistent, predictable performance and improvements in key growth and profitability metrics. In 2022, we expect a small shift in our seasonality towards the H2 of the year by two or three points. For the full year, assuming bookings in the range of $5.58 billion-$5.68 billion, which at the midpoint represents growth of 30%, we expect billings in the range of $5.4 billion-$5.48 billion, which at the midpoint represents growth of 30%. Revenue in the range of $4.275 billion-$4.325 billion, which at the midpoint represents growth of 29%. Total service revenue in the range of $2.685 billion-$2.715 billion, which represents growth of approximately 29% and implies full year product revenue growth of approximately 27%. Non-GAAP gross margin of 74%-76%. Non-GAAP operating margin of 24%-26%. Non-GAAP earnings per share of $4.85-$5, which assumes a share count of between $169 million and $171 million. We estimate full year capital expenditures to be between $270 million and $300 million. We expect our non-GAAP tax rate to be 18%. We expect cash taxes to be approximately $210 million. Lastly, I want to inform everyone that we will be holding an Analyst Day on May 10, coinciding with Accelerate 2022, where we expect to update our medium-term financial model. Along with Ken, I'd like to thank our partners, customers, suppliers, and all members of the Fortinet team for all their hard work, execution, and outstanding success. I'll now hand the call back over to Peter. Thank you, Keith. As a reminder, everyone, please limit yourself to one question. I know we lost a little time there due to the technical delays. Apologies for all of that. Operator, can you open it up for Q&A, please? Sure. Thank you, Sir. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Brian Essex from Goldman Sachs. Please go ahead. Hi, good afternoon. Thank you for taking the question, and thank you. Congratulations on a nice set of results. Thanks as well for the additional disclosure. I guess maybe on that point, maybe could you help us understand what qualifies as a booking from a timing perspective? You know, if an order is placed with a timing event maybe nine months from now, is that still included in bookings? And then maybe any other incremental color you can provide us on the supply chain management, you know, how you're managing the supply chain. You mentioned pricing increases offsetting, you know, any incremental supplier costs, but maybe a view on are the issues abating at all? Are lead times still consistent with where they were last quarter? any other nuances we should be aware of, like, you know, channel partners pre-buying inventory, which is one of the things that we picked up a little bit this quarter. Thank you. Yeah. A lot of good stuff there. I don't know if we'll get to all of it, Brian, maybe a couple All right. Surprise. Look, keep in mind our [Crosstalk] That's my one question. Thank you. Yeah, I know. You did really well. Keep in mind our business model, right? End users buy from resellers who buy from distributors who buy from us. It's not, you know, like a large, complex, $50 million solution that's gonna be deployed over time. When we get orders, it's typically the customers want the product. So I don't know that we would see something like you described at the beginning of the conversation in terms of order, what a booking is. For us, a booking is a distributor sends an order to us, and they would like to have shipment. That counts as a booking. If we ship it, then it becomes a billing, and it becomes product revenue. If we don't, it becomes backlog. I'll just pause with that one. Sorry. In terms of supply chain, and maybe Ken would offer some additional thoughts on that. We've talked previously, I think, that we felt that September, October, and maybe very early in November could turn out to be the low water mark for supply chain challenges, at least in terms of what we call decommitments from our contract manufacturers and from our component suppliers. I think that, to this point, has shown to be the case. You know, we do still from time to time have, you know, decommitments, but they're much, much smaller than they were back in that timeframe. I think the general tone, if you will, with our channel, whether it's components or it's contract manufacturers, is much better than it was. We do, you know, like everybody else, we read the reports, and we see conversations and commentary around, you know, things like particularly consumer electronics, where there could be some improvement in auto manufacturing. You know, I think we have reason to believe that the situation continues, excuse me, to improve as we move forward. At the same time, you know, working extremely closely with our suppliers, conversations at very high levels and talking about, you know, maybe some longer term projects that we may work on together, for example, making them aware of what our volume of business is. Also, you know, a bit of a tip of the cap to our engineering team, you know, who's been going through the process of redesigning and recertifying, you know, some of the components and some of the other changes, if you will. You know, all of that I think kinda gives us a feeling that the H2 of this year should see improvement. Ken? Yeah. I think, you know, you covered pretty much all of it. I think just different compared to most of our competitors, we handle the design, manufacture operation pretty much all directly ourselves. We also have a bigger quantity compared to our competitors and can better negotiate with supplier. The engineers also starting last year also starting to redesign some of the products to avoid certain shortage of the components, which are working well with us. Some of the redesign may take about six months. I think overall that's where we feel pretty confident the H2 of this year, things will be improving, both because the supply chain itself and also some alternative design and also kind of a better planning. I have to say, last quarter, the demand environment was strong with the booking growth 49%, which even kind of beyond our planning. That's caused some of the shortage. Overall, we have a much better shape compared to our competitors in the inventory and in the supply. Also the other question, we don't see increased inventory in the channel, in the distributor there. Pretty much the same as they have in the last few years, so we don't see any increase of the channel to stock up the product. That's not the case for us. Yeah. Since Brian did such a good job of only answering one question, I'm gonna jump also in and give some more color on it. Yeah. You know, did somebody order a product early, you know, someplace in the world? Sure. I'm sure that happened. You know, when we try and look at our own business, you know, we try to identify possibilities of that happening. The best number we can come up with is something that represents extremely low single digits of our business, may have been impacted by that. And at the same time, you immediately pivot over to look at your pipeline, and even if that was happening, it's certainly not evident in the pipeline. We're extremely pleased with what we're seeing in terms of the pipeline growth. Just to follow on to Ken's comment about distributor inventory levels, again, with our model, you know, we do have visibility of the inventory that's in the channel. Those inventory levels are actually down a little bit year-over-year. I don't think we're seeing the types of things that maybe you may have some concerns about. Yeah. The shortage is more limited, pretty much mostly limited in the very low end. The middle and high end. Indeed, we do have well enough inventory even for the more strong, like 49% booking growth. We have a very broad product portfolio. There's a lot of alternative product the customer the channel controls. At the same time, some of the redesign already working will be ready in a few months. Fantastic color. Thank you. Thank you. Our next question comes from the line of Fatima Boolani from Citi. Please go ahead. Good afternoon. Thank you for taking my questions. Keith, I'm gonna focus this one for you. At the risk of oversimplification, I know you've given us the bookings growth, you've given us the billings growth, and certainly the product growth, and the guidance for fiscal 2022. Between the 49% growth you saw in bookings, 36% billings growth that you saw this quarter, and the 31% in product, can you talk us through how that is dovetailing into your guidance for next year? Frankly, how much of this backlog you're expecting to amortize into your revenue and billings profile over the course of 2022? As related to that, you know, I understand you've taken some pretty substantial pricing increases for your subscription packages for the portfolio. I'm curious how much of that is contemplated in your guidance across these metrics? Thank you. Okay. Brian set the standard, and Fatima's following it for how many questions count as one here. Let's start with the easy one first, pricing. You know, when we raise prices, we've talked before, we raised prices in August and again in November. On our price list, keep in mind, those get discounted down. The price, because services, whether it's support or security, attaches to the pricing attaches to the box, so to speak. When you raise prices on the appliance, you're also effectively raising prices on the services. But then if you think through revenue recognition, obviously you'll get the price increase in revenue for the product more currently than you will for the services. You're going to recognize that over time. I think your question, you know, of what are we expecting in terms of backlog and amortization or what have you. You know, as you can imagine, we've done a fair amount of scenario planning to go through the year. I don't know that there is a one scenario that we would point to as opposed to a combination of scenarios. I think you can kind of solve for that, maybe not on the phone right now, with some of the information that we've provided in terms of our expectation for backlog increasing, right, for the year. If backlog is increasing for the year, you know, I don't think that would be reflective of us bleeding into the income statement backlog that currently exists. The components of the backlog will shift, but net-net, it's going up. Thank you. Thank you. Our next question comes from the line of Ittai Kidron from Oppenheimer. Please go ahead. Thanks, guys. Great numbers. I had a clarification and a question just on Keith, on the 2-point shift in seasonality the H2. Is that just tied to supply chain fulfillment? I would just wanna make sure I got that right and there's no other cause here. Then, Ken, maybe you could talk about from a competitive standpoint, are you seeing any changes? I wonder if you have any thoughts with respect to Check Point's recent introduction of their Lightspeed Firewall, which is extremely price-aggressive. How do you think about that in the market? Any thoughts there will be great. Yeah. I'll just jump in quickly on linearity. We just wanted to make sure we open the door to have the conversation with you guys about, you know, how linearity may be a little bit different this year than what it has been historically for us. And yes, you can point back to the supply chain on that. Yeah. I also listened to Check Point earnings this morning. Probably thank you, Gil, who mentioned Fortinet. They say their newest product probably like 20% faster than Fortinet product 1800F. But that's the product we released more than two years ago. I think based on Moore's Law every 18 months the speed will double. That I think the latest product already much faster now. I do see because we see Security-Driven Networking converging on network and security. The network security suddenly deploy pretty much in all the infrastructure and not just secure the border. When deployed internally, need a much higher speed. That's where the high-speed firewall is needed to do the internal segmentation, secure the servers, segment different departments, all these kind of things. That's where we see quite a strong demand and very strong growth with the current ransomware environment. But also we see, with working from anywhere, a lot of users have to call in remotely or can connect remotely. That's where the secure SD-WANs and 5Gs and others also see very strong demand. That's what we see. We're leading the innovation in both spaces with our own ASIC, with all the secure SD-WAN 5G connections. It's a much bigger total addressable market compared to the traditional network security. That's where we identify as over $170 billion total addressable market for us in the next 3-4 years. It's a huge potential and a market large enough pretty much for all the competitors to compete, but definitely have to keep up the innovation, keep up the change to keep gaining market share. Got it. Very good. Thanks. Thank you. Our next question comes from the line of Shaul Eyal from Cowen. Please go ahead. Thank you. Good afternoon, guys. Congrats. I'll behave myself limiting to one question. Back to the supply chain, Keith, I just wanna make sure. Is that predominantly non-FortiGate products, or do we have some FortiGate products also included in that entire supply chain discussion? Thank you. Yeah, I think Ken touched upon that a little bit. I'll just build it out for a little more clarity. If you look at more traditional, what we call secure networking products such as switches and access points, you're looking at probably something in the order of 60%, maybe 2/3 of the backlog would fit into that category, and the remainder is in FortiGates. Ken was making sure that we understood that within FortiGates, that roughly 1/3, the majority of that is in the entry-level or low-end FortiGates. We're not really experiencing the same pressure in the mid-range and the high-end that we see in the low-end. Thanks, guys. On that note, operator, just a quick one. I just wanna let everybody know on the call, given the technical difficulties we had earlier, we'll post the prepared remarks for both the CEO script and the CFO script to the IR website as soon as we can after the call. Next question, please. Thank you. Our next question comes from the line of Ben Bollin from Cleveland Research. Please go ahead. Good evening, everyone. Thank you for taking the question. Ken or Keith, when you think about the elevated demand and placements on the product front, can you share any thoughts about how coincident that demand is or leading as it relates to additional fabric traction? Any thoughts or hooks around number of applications that are being deployed typically with that initial rollout versus, you know, what comes later? Thanks. Yeah, we see a lot of enterprise they need to protect their internal network because of ransomware attack like we released that research a few months ago. It's 11 times higher on the ransomware attack compared to one year ago. It's a big demand to secure company whole infrastructure. Also, working from home, work from anywhere also need more security, especially like secure SD-WAN, secure 5G, all these connections. We see the demand involved are strong. Also, for supply for some other chip manufacturer, even with its own chip, usually there's a lead time. That's where we see the backlog, and we're hoping now we'll go back, hope we'll be more normal towards the end of the year. Yeah, I think. Hi, Ben, how are you? Ken's pointing at me, so I'll follow up a little bit. I think in terms of pull-through of non-FortiGate products, maybe I kinda came into the conversation a few years ago thinking that was gonna be more of a commercial or mid-enterprise area where we see the quantity. In actuality, it seems to kinda move with customer size. The SMB is somewhat limited. We still see other products attaching and building that out. Then the mid-enterprise, the enterprise, and then the service providers are very strong buyers of multiple products. I think that's why that's relevant is that that's affirmation of the platform strategy. I think they very early on realized the overhead costs of managing, you know, point solutions from different vendors can be fairly onerous, and that was pretty challenging. It is moving its way through the rest of the customer chain, if you will. I think the other thing that's happening more currently now is we've seen, you know, we talk about these other verticals that represent, you know, not in the top five, but coming to the table and buying security. I think they're very clear with us in conversations that I've had with them, and Ken as well, that, you know, they're looking for a total solution and the ability to cobble together a series of integrated products into one solution. Not only does that save them in terms of the initial purchase, but also the management cost. I do think there's definitely a tailwind in that area. Yeah. The other validation point is really the Global 2000 account growth over 90%, so it's almost double year-over-year. There's very strong demand in there. Thank you. Thank you. Our next question comes from the line of Hamza Fodderwala from Morgan Stanley. Please go ahead. Hey, guys. Thanks for taking my question. I wanted to ask a question about just the appliance demand more broadly. Maybe a question for Ken. How do you think about the demand for hardware between factors like, you know, return to office, campus refresh, you know, data center? What's really driving that appliance demand as we go through 2022? I think the convergence of network and security will be long-term. I think during the pandemic and even after pandemic, you see a lot of things changing, whether the working environment or more access. That's where the Zero Trust since starting build out very strong demand there. Also the internal, they need to secure the whole infrastructure, both in the within the like campus network data center or remotely connecting a branch office. That's where you see the whole infrastructure need to be secured. Also all kind of consolidation among different vendor also starting happening more quickly, because like Keith mentioned, the management cost is very high if they have a different vendor for different part of the cybersecurity. That's where, since the vendor can provide more products integrate, automate together, definitely has more advantage and lower total management cost. I think that's where we see, like I mentioned, the three drivers converging of our network and security and the consolidation of the vendor and at the same time the strong elevated cybersecurity threat right now, especially like ransomware is a big impact to the business. It's all driving the strong growth. Thank you. Yeah. I would share. I think one of the things that Ken asked us to go look at was what would product revenue growth have been if we didn't have backlog, right? That's that kind of who knows when the call that was at that point, but it was, you know, 60, 65 or 66% product revenue growth if we had the product to deliver. I mean, that's a huge number. I think it speaks to, you know, the demand is extremely high for appliances right now. Thank you. I show our next question comes from the line of Sterling Auty from JP Morgan. Please go ahead. Yeah, thanks. Hi, guys. Keith, one for you. If I'm looking at it correct, if it wasn't for the gross margin pressure, it looks like operating margins would have expanded nicely in 2022. I'm curious with things like return to office, maybe a pickup in business travel and maybe even wage inflation, how are you able to deliver that kind of underlying margin expansion in the operating line? I don't for 2022 versus 2021? You know, I think we're guiding. Yeah. 24 at, I think we're guiding to basically 25% at the midpoint. I just closed out a year at- 26. 26. I don't know that that's up, Sterling. Am I thinking about that? I'm saying if the gross margin wasn't down. Oh, on the operating, the leverage that's coming through on the operating expenses, is that what you're thinking about? Yep, exactly. I think that well, you can look at the percentages in terms of what we're spending. I think sales productivity in the current environment is probably the biggest driver, if you will, in terms of the leverage that we get out of this. You know, obviously, if you go back to 2021, you know, not a lot of sales productivity, obviously, probably in 2020 with COVID. Very nice sales productivity numbers in 2021. You know, now we're looking at tailwinds. You know, let's be honest, the price increases will indeed increase sales productivity. Got it. Thank you. Okay. Thanks, Sterling. Thank you. Our next question comes from the line of Adam Borg from Stifel. Please go ahead. Hey, guys, and thanks so much for taking the question. Maybe just on SD-WAN, it's great to see the strength there continuing. Maybe you could comment just on, I guess first, just sustainability of those trends in coming years. Are you seeing this growth coming more from greenfield opportunities or some brownfield displacements? Thanks so much. It's pretty broad. You can look at SD-WAN, probably. I say more than half majority products go to the middle or high-end range. At the same time, a lot of enterprise customers are all starting using leverage SD-WAN. It's quite broad, much more beyond the retail. Operator, next question, please. Thank you. Our next question comes from the line of Jonathan Ho from William Blair. Please go ahead. Hi, good afternoon, and let me echo my congratulations on the strong quarter. Yeah, I guess, you know, just given that you've, you know, delivered a quarter that's been, you know, particularly strong this year, you know, can you give us a bit of a sense of what's happening with the pipeline and maybe what is giving you the confidence that you can continue to drive that sustained growth for several more years? I think you've gone through some of the factors one by one, but, you know, what are you seeing in sort of the immediate term that, you know, allows you to continue growing at these rates? Thank you. Yeah, let me look at Ken if he wants to get more strategic. I'll give you a very tactical, you know, conversation about it, and Peter's making a shameless plug for the Analyst Day in May and saying that we'll talk about that then. Look, I'm really pleased with what the pipeline looks like at the moment. You know, we go through our usual, we've talked before, I think, Jonathan, is slicing and dicing it in terms of how much are new customers, renewals, expansions inside customers, what's the deal size, what's the geography, you know. It's, you know, I don't wanna just gloss over some of the numbers that we saw in the enterprise segment in the fourth quarter. You know, I think we're at 90% growth on the G-2000 for three quarters in a row. The U.S. did extremely well and without getting into a lot of details, you know, they too have accelerated for three quarters in a row. You know, looking at the pipeline, you know, and looking at, again, more enterprise growth that's coming, we think we have a good position on the SMB. Love the execution. You know, we've had some people in other settings comment upon, you know, the maturity that the sales and marketing executional level has reached now as a company. So I think that, you know, the pipeline and our ability to execute, you know, I don't see why that would change. Yeah. We also have a lot of growth potential, especially in the Global 2000. We like we said last year, last quarter grow like 90% year-over-year. This is the bigger account. You also can upsell, cross-sell a lot of other product. We do see the pipelines very strong. We keeping enhancing the marketing and keeping pretty aggressively hiring the sales capacity. So far some regions, some of the vertical, we still have much less capacity than some of our competitors. I think with additional marketing sales capacity, we do see the growth will continue in the next release. Thank you. Our next question comes from the line of Michael Turits from KeyBanc. Please go ahead. Hey, guys. Thanks, Keith, for making the statement that demand is very high for appliances. I guess I'd just like to re-ask Hamza's question about the sources of demand for appliances right now, particularly in the context though of how strong cloud is. I mean, we just had very strong cloud numbers coming in from Amazon as well as from others. So how should we really understand why so much is being spent in physical boxes right now as opposed to even some of your products that are in the cloud? I probably borrow one comment Gil mentioned this morning in their call. Definitely the network security is a much bigger total addressable market. The cloud security probably by 2025 is just a little bit over $20 billion. Compared current or total addressable market, including network security, converting network security endpoint or other, that will be $170 billion. It's much bigger market. Same time, there's a lot of innovation going on and have to secure the whole infrastructure. So that's where we see the appliance also. Even access the cloud, you need all these appliance. You also need this SD-WAN 5G connection in order to access the cloud. So that's where we see there's a huge market potential in the very fragmented market. It 's a lot of growth potential. Thanks, Ken. Thank you. I'm showing, we have time for one more question coming from Keith Bachman from BMO Capital Markets. Please go ahead. Yeah. I'm gonna ask a similar question to Michael before. Your product revenue growth has, you know, been 40%, 50%, and now the underlying growth this quarter was north of 60%. Your competitors are also experiencing good product revenues, not nearly the extent that you are. It's more than Check Point that's experiencing demand, and it's more than the what I characterize as the consolidation when you're taking share from the likes of Cisco and SD-WAN. I'm trying to understand, you know, if you thought about the aggregate demand is in the last three quarters been far exceeded anything that's happened in, say, the last five years, between not only yourself but your three primary competitors ex Cisco. The question is, if traffic is normally one of the key drivers, but what are some other drivers for not just yourself, but for the three primary vendors? Just trying to understand really, I think, consistent with some of the other questions about the durability of demand, not just for yourself, but for the industry in general. Yeah. I think the industry I do believe they need to start and secure the whole infrastructure, both the internal LAN and also the WAN connection to the outside. We see very strong demand to secure inside the company and also, like all these data centers, all these internal segmentation, which is, before the network security too slow to deploy it in a high-speed environment, internally. And then also the SD-WAN can see pretty strong growth. I think the overall is a convergence of, we keep saying the network security, that's a sweet driver we give out. I think probably in the Analyst Day, Peter keep mentioning May tenth. We'll probably give some more detail, some data, some analysis on the, we'll see how long. I do believe this will be pretty long-term changing in the whole space, in what we're seeing growth in the next 5 to 10 years. Also, the ASIC advantage and the economies of scale and scope are starting working for us because we have the quantity, which can help lower the per-chip cost, which none of our competitors have. We're probably the only semiconductor company design our own ASIC chip. We also leverage any other commercial chip available, including all the whatever Intel, Nvidia, GPU, TPU, IPU, all the other things we're using. We have unique advantage of our own ASIC chip, which helping drive one of our high speed, low cost network security solution. On the other side, the economy of scope also working because we have like a 30-some different product cover or we call the Security Fabric and now kinda call the mesh, the cybersecurity mesh architecture, which helping upsell, cross-sell. I think last quarter's first time over 30%. I think right now it's FortiGate count about 69%. Non-FortiGate is 41% and also over $1 billion last year. We also see very strong growth, grow faster than the FortiGate. That's also helping to supporting the whole infrastructure security and converging on network and security and also elevate the threat environment. Yeah. Thanks very much for the question. Shame on Peter for continuing to plug Holistics. Thank you. Hey, Ken. You know, earlier in the life cycle of the cybersecurity industry, maybe 10 or 15 years ago, where firewalls had a very specific use and the environment, if you will, was more stable. It may have been easier to identify refresh cycles that we keep looking for and have not yet seen in the last five years. I think that's perhaps going back to Ken's point. I think that's because the environment's not stable at all. I think the reality is what you're seeing out there right now in terms of use cases and data volumes. Data's all over the place. It's, you know, lots and lots of data. It's just getting more and more. The use cases, I mean, five years ago, a lot of things that were air-gapped away from the internet aren't anymore. Now you're seeing this probably what's driving the manufacturing vertical for us. I just don't know that you can presume that the environment, so to speak, you know, and the political interest in it, the insurance company's interest in it, CIO's management team's interest in it, you know, it is a hot topic of conversation. You know, even if you are due for a refresh cycle in the industry, and I don't know that we are, I don't think you're gonna see that because of what's happening in the world out there. Right. Okay. Thank you, gentlemen. Thank you. This concludes our Q&A session. At this time, I'd like to turn the call back over to Peter Salkowski for any closing comments. Please go ahead. Thank you. Again, apologies for the technical difficulties today. As I said earlier, we are planning to post the prepared remarks up on our website as soon as we can, so you can see all the numbers that Keith shared that I think help answer some of the questions with regards to bookings backlog and the sustainable growth in our business. I'd also like to remind everybody we'll be at the Morgan Stanley conference on March ninth, an in-person conference, our first in, gosh, I don't even know how long. The Fireside Chat at that event and the webcast link for that for the Morgan Stanley conference will be on our investor relations website, for you all to listen. If you have any follow questions, please feel free to contact me. Thank you very much for your time. Again, apologies for the technical difficulties, and have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect. Good day.