Q3 2021 Fortinet Inc Earnings Call
Yeah.
Good day, and thank you for standing by welcome to the Fortinet third quarter 2021 earnings announcement conference call.
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I would now like to hand, the conference over to your first speaker for today, Mr. Peterson Repasky Vice President of Investor Relations. Please go ahead Sir.
Thank you. Good afternoon, everyone. This is Peter <unk>, Vice President of Investor Relations at Fortinet I am pleased to welcome everyone to our call to discuss Fortinet as financial results for the third quarter of 2021 speakers on today's call are Ken Xie, Fortinet, founder Chairman and CEO and Keith Jensen, Our Chief Financial Officer, There's a live call that will be available for replay via webcast on our investor.
Relations website, Ken will begin our call today, providing a high level perspective, our business. Keith will then follow with the financial and operating results for the third quarter before providing guidance for the fourth quarter and up and updating the full year. We will then open the call for questions. During the Q&A session. We ask that you. Please keep your quick questions brief and limit yourself to one question to allow others to participate.
Again, 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 today on today's call are non-GAAP unless stated otherwise our GAAP results and GAAP to non-GAAP reconciliation is located in the earnings press release and in the presentation that accompanies today's remarks, both of which are posted on our Investor Relations website.
Lastly, all references to growth are on a year over year basis, unless noted otherwise I will now turn the call over to Ken.
Yes.
Thank you to everyone, who joined today's call to review all spending third quarter 2020 was himself.
Increased 42% to one beat in Q4 million exceeding our 1 billion quarterly billing for the first time Fortinet history.
Global G 2000 boom growth sentiment to over 50% total revenue growth of 2% to 867 units.
Revenue up 51%, our highest quarterly enrollment growth since going public in November 2009 with.
Our strong business momentum with Ya Man Footstock World.
I'll call them to combat the novel parameter is flattening, but with many security team and the tools all producing samples.
And best of breed solution that only adds to the complexity.
Just as tonnage Gartner is predicting that by 'twenty 'twenty four optimizations that adopt cypress to kindred mesh architecture reduce the financial impact hopefully in can you just acute incidents by an average of 90%.
Now this is Paul.
One common cold cold out Fortinet security fabric as a platform that offers cyber security mesh architecture approach.
Fortinet is helping customers solve the issue of complexity through our security driven networking as acute effect with thoughtful approach.
That doesn't Vaivode 48 take all from supply ton. Most acute example, empower each result, entitling liquid functionality with better performance.
Lower cost and power consumption compared with the agenda CPU.
I'll again may be one of them 40 fabric solution like E Mail web and end point to gradually fortinet firewall offerings much broader protection molten accretion at a better automation and other competitive solutions.
Assam Nations continue to consolidate towards a powerful approach.
Nevertheless, acute expand to local and wide area network.
Anywhere environment to the cloud Fortinet is strongly positioned to significantly temperature.
Market share of our projected total addressable market of more than 174 feet. It by 2025.
We are confident that these trends together with our relentless focus on organic innovation will drive better than average long term growth for fortinet.
Walk her anywhere he is here to stay the COVID-19 pandemic has greatly expand the work from anywhere bundle I'll cut into Gardner organizations are facing a hybrid future with 75% of Walker seen their expectation for walking flexibility has increased.
Today, Fortinet announced the industry's most complete solution placebo, our condition to securely connect will find anywhere.
Our unified Fortinet has a broad portfolio of legal cost endpoint and network security solution within the Fortinet security fabric Fortinet delivers to acuity not the full dose used to wedge or on the road in home or in the office to provide enterprise screen protection and productivity.
And the 21 Gartner Magic quadrant for one H infrastructure, just announced Fortinet was once again named a meter.
Yeah.
Highest in our ability to execute and ranked number one for green multiple critical capability.
Guiliano leadership your SD Wan Fortinet, I know Mark Wiseman recently announced the expansion of our lending global offering with Fortinet secure SD Wan.
Solution is designed to provide enterprise and opinions market customer.
Homewards metalworking, a security solution, you know box to secure and connect will final where we.
We continue to see momentum and adoption of our secure SD Wan five G I bought SD branch.
<unk> delivered a SaaS solution among the world's largest service providers.
These service providers, including AT&T, British Telecom, California, and others, we plan to announce in the coming months.
Before turning the call over to Pete I would like to thank all of them.
Customers and partners worldwide for their continued support and hard work.
Thank you Ken.
Okay, let's start the more detailed Q3 discussion with revenue and the drivers for our record setting product revenue growth clearly demand is strong.
Total revenue of $867 million was up 33% driven.
Driven by industry, leading product revenue growth of 51%.
Looking closer at the 51% product revenue growth, our highest quarterly product growth rate and 12 years as a public company, we can point to three drivers.
The convergence of security and networking or what we call security driven networking.
Second strong customer demand for vendor consolidation on platforms.
And third a heightened awareness of today's elevated threat landscape across a broader set of entities.
What it is fortinet is proud to be an innovative leader in security driven networking.
With the convergence of security and networking functionality incorporated into our broad integrated and automated security fabric platform.
Our security driven networking investments in Wi Fi switching Wan.
Data Center cloud <unk> Iot.
Enable us to provide integrated security at networking speeds from the data center to endpoints and to the cloud.
And with our secure SD Wan solution security at the edges.
Today, we announced a unified solution, enabling organizations to secure and connect work from anywhere.
A unifying our zero trust endpoint and network security solutions.
We can deliver enterprise grade security services and threat intelligence that seamlessly follows.
Users on the road at home and in the office.
That's for consolidation.
Customers are increasingly focused on vendor consolidation.
Automation and platform strategies that provide a broad integrated and single platform approach security that effectively protect from the wide range of attack attack vectors.
Our security fabric platform provides a broad range of security products integrated on a single operating system.
Gartner recently called out Fortinet security fabric is a platform that provides.
Cyber security mesh architecture approach or SMA.
The cornerstone afford CSMA approach is our ASIC driven Florida gates.
Which provide on average five to 10 times more computing power than competitors firewall, it's running on common Cpus.
The greater computing power allows our software engineers to embed additional security functionality and integration into the operating system enhancing our price for performance advantage.
The integration extends across our suite of security fabric solutions, because that's 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 solution.
And lastly, turning to awareness the.
The explosion of ransomware attacks has led to a greater awareness of the need for cyber security technologies.
According to the latest global threat landscape report published by our 40 gig photo Guard labs.
The number of unique Rancho Texas per week increased more than 10 times from July of 2020 to June of 2021.
The increase in attacks with across entities of all sizes geographies and industries.
These three factors the convergence of security and networking.
The adoption of a cyber security mesh architecture.
And a greater awareness of the threat landscape drove record setting product revenue growth contributing to market share gains for fortinet.
The dramatic product revenue growth was broad based.
With 40 gate and non Florida gate, both posting product revenue growth rates of approximately 50%.
While tilting our current revenue mix 450 basis points from higher margin services revenue to product revenue.
40 gig product revenues were driven by entry level and high end <unk> product revenue growth of 60% and 57% respectively.
Non Florida gave product revenue growth was driven by several platform products, including mail sandbox Sim switches and virtual firewalls.
Rounding out our revenues, we saw service revenue of $530 million up 24%.
Support and related services revenue was up 26% to $243 million, while security subscription services revenue was up 22% to $287 million.
Turning to revenue by Geos are summarized on slide five revenue in EMEA increased 33% in the Americas revenue increased 29%.
In APAC posted revenue growth of 43%.
Moving to billings.
Billings crossed the $1 billion threshold for the first time in our history.
At $1 $64 million billings were up 42% at enterprises.
<unk> responded to the expanding threat landscape favoring costs were performance leaders and integrated platform our CSMA strategies.
This was especially evident across the enterprise segments for example in the large enterprise sector.
2000, and billings were up 52% with growth accelerating over the last three consecutive quarters.
And for the second consecutive quarter, we added over 6000, new logos across all customer segments.
40 gig billings were up 39% and accounted for 70% of total billings.
As shown on slide six entry level and high end <unk> posted very strong billings growth.
Non <unk> billings were up 49% driving.
Driving a one point billings mix shift to non Florida gate.
The top 10 solutions accounted for 68% of non Florida gave billings and were up 48%.
The number of deals over $1 million increased over 70% to 83 deals.
So I'll secure secure SD Wan deals more than doubled to 19.
Average contract term increased three months year over year, and one month quarter over quarter to 29 months.
The increase in contract term was driven by the significant increase in <unk> 2000, and other large enterprise deals.
SD Wan billings were up 52% outpacing the company's billings growth and accounted for approximately 14% of total billings.
<unk> to receive industry accolades for.
For the second consecutive year Fortinet was named a leader in the Gartner Magic quadrant for Wan edge infrastructure.
And position number one for ability to execute.
For critical capabilities.
FTE Wan ranked first in the small branch Wan security sensitive.
And remote work use cases.
And consistent with the elevated threat environment and the breadth of ransomware and other attacks Ot billings were up 77%.
Moving to worldwide billings by industry verticals.
Among the top five verticals worldwide government grabbed the largest share with a mix of 17% and saw billings growth of 22%.
We've made investments to expand our presence and engagement with the government sector. For example in the U S.
<unk> recently added retired four star Admiral stir videos to our board of directors.
Yesterday, Fortinet Federal announced department of Defense certification approval for an additional 26 security fabric solutions.
Internationally.
We are set to open opened for a net federal government integration innovation Center in Australia before the end of the year.
Utilities manufacturing transportation construction and other verticals that have not consistently been in our top five <unk>.
Combined for billings growth of 68%.
We believe the growth of these verticals is another indicator of the broadening nature of the threat landscape.
And is driving security investments in industries that may have shown less affluent security budgets and lower internal legal recent labor resource levels.
On August 31, four net acquired a controlling stake in <unk> networks.
The Japan based networking company for approximately $64 million.
All excellent provides high performance network switches and routers in their local market.
The investment increases our total addressable market and reflects our leadership in the convergence of networking and security.
Moving back to the income statement.
Gross margin declined 220 basis points to 67%.
Reflecting the consolidation of <unk> results in a change in our product mix.
Product cost increases associated with supply chain constraints were largely offset by our pricing actions.
Services gross margins decreased 150 basis points to 86, 6%.
Due to <unk> and costs associated with the expansion of our data center footprint.
The 25, 8% operating margin was 30 basis points above the top end of our guidance.
Despite pressure from lower gross margins and higher marketing expenses, primarily from the Fortinet Championship PGA tour events.
Head count increased 20% to 9700.
Moving to the statement of cash flows summarized on slides seven and eight.
Free cash flow was $330 million, representing a margin of 38%.
Free cash flow benefited from strong billings growth and good billings linearity.
On a year to date basis free cash flow margin was 41, 5%.
We repurchased approximately 300000 370000 shares of our common stock.
Total cost of $109 million at an average price per share of $2 94.
The board increased the share repurchase authorization by $1 $2 5 billion.
And extended the expiration date to February 2023.
The remaining repurchase authorization is approximately $2 billion.
We ended the quarter with total cash and investments of $3 4 billion.
Inventory turns increased to two nine times from two seven times in the second from the second time second quarter of 2021.
Reflecting strong product sales in the quarter Anthos and some supply chain pressure.
Dsos at 63 days returned to pre pandemic levels.
Capital expenditures for the quarter was $69 million.
Putting a payment for the new campus building a $13 million.
As we noted in our last earnings call, we've pivoted pivoted our capital expenditure strategy to include building out our facilities and operations infrastructure to support our accelerating growth.
We estimate fourth quarter capital expenditures to be between 170 and $190 million invest.
Investments in our future facilities and operations infrastructure to account for the sequential increase in Capex.
Before providing guidance I would like to comment on the supply chain because.
It's been widely publicized that the rapidly changing macroeconomic environment is causing disruption in global supply chains for companies of all sizes and industries.
We expect the worldwide supply chain constraints will present evolving challenges in the fourth quarter and into 2022.
The supply chain issues have proven to be extremely dynamic.
I'd like to pause here to acknowledge and thank each member of our operations team for their truly outstanding performance.
With regards to pricing.
We believe we entered this space with a hard earned reputation of being able to provide customers excellent price for performance or value.
We believe we can leverage this reputation to largely offset our increased cost.
We believe our pricing actions have been met with understanding by our customers as evidenced by our Q3 results and strong pipeline growth.
We view the current situation is that supply challenge not a demand challenge.
Now I'd like to review our outlook for the fourth quarter summarized on slide nine which is subject to the disclaimers regarding forward looking information that Peter provided at the beginning of the call.
The following guidance reflects our best effort to estimate the supply chain impact.
For the fourth quarter, we expect billings in the range of $1 billion $165 million to $1 billion $215 million.
Revenue in the range of $940 million to $970 million.
Non-GAAP gross margin of 75% to 76%.
Non-GAAP operating margin of 27% to 8%.
Which includes an estimated 200 basis point headwind from acquisitions foreign exchange and increased travel and marketing costs.
Non-GAAP earnings per share of $1 10, $2, 15, which assumes a share count of between 168 and $170 million.
We expect a non-GAAP tax rate of 21%.
Based on our very strong third quarter performance and the upside I just provided for the fourth quarter expectations. We.
We are once again, raising our 2021 guidance.
We expect billings in the range of $4 billion $40 million to $4 billion $90 million.
Which at the midpoint represents growth of approximately 31, 5%.
Revenue in the range of $3 billion $320 million.
To $3 billion $350 million.
Which at the midpoint represents growth of 28, 5%.
Total service revenue in the range of $2 billion $80 million to $2 billion $90 million.
Which represents growth of 24% and apply his full year product revenue growth of 36%.
Non-GAAP gross margin of $76 5 million to 77, 5% non-GAAP operating margin of $25 five to 26, 5%.
Non-GAAP earnings per share of $3 85 to $3 85.
Which assumes a share count of between 167 and $159 million.
We expect our non-GAAP tax rate to be 21%.
We expect cash taxes to be approximately $130 million.
Which includes a $47 million tax payment made in the fourth quarter.
Along with Ken I'd like to thank our partners our customers 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 to begin the Q&A.
As a reminder, during the Q&A session. We ask that you. Please limit yourself to one question to allow others to participate.
<unk>. Please open up the call for Q&A.
Thank you.
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And now for your first question, we have Brian Essex from Goldman Sachs. Your line is now open.
Great. Good afternoon, and thank you for taking the question and congrats on some really nice results this quarter.
I guess, Keith you spend some extra time talking about the supply chain and it's certainly the most frequent question I've gotten from investors, particularly over the past three weeks so.
Could you maybe help us understand.
What kind of headwind you are quantifying it.
Or accounting for in your <unk> Guide, where you might see risks in the supply chain and then what you might be seeing from peers, particularly where you may be benefiting from having supply where your peers may not have product.
Thanks, Ryan and I don't know that anybody knows all the answers to the questions that you've kind of articulated.
So I'll give you some color if you will.
I think we saw a little bit of supply chain pressure in the second and the third quarter as I alluded to it but obviously the number is nothing.
It was terribly noteworthy.
I do think the guidance that we've given for the fourth quarter.
Is appropriately conservative if you will in terms of what we see for supply chain and what we would call backlog in.
In the fourth quarter I think we feel good about the guidance that we've given.
I think the if you look at kind of the general tone and what we're hearing from our operations team I think there is.
Some point sometime in the third quarter were.
Every day was very dynamic with them with people, calling in them having to scramble about.
Component matters and contract manufacturer commitments or what have you.
I'm hearing less about that at this point, that's probably very early on.
I would also offer that the backlog.
Our supply chain first appears for us and some of the fabric products the non 40 gig.
And I think that will continue on a little bit into the fourth quarter and.
And probably also gets before it gets to some extent in the fourth quarter as well.
Getting out to 2022, I think everybody is kind of in the same boat and trying to understand when we're actually going to see something.
It's a real market improvement marked improvement.
And I think we'll probably kind of hold back commenting on that for the next several months until we get closer to providing guidance for that for next year.
Brian This is Ken.
Two other points to add on top of <unk>.
I think we are maybe better positioned congenital competitor.
First is weather.
You have the.
Quantity much larger than our competitor.
Mike.
Probably like a <unk> compared to the Cisco on a unit shipment, maybe probably pemex them.
Andre.
We should give us better negotiation power with some of the supply and also we manage all of the most directly comparable competitors local Samsung Party.
So thats gave us a benefit.
And also can act quickly earlier.
Second we have quite a broad part of online both in the <unk> and also non a 40 page it's easy for a customer.
But a score to the next level products have a similar performance.
Running a 40 OSA.
So it's a more easy to up until using some keeping part out to two sometimes some of them are shortage.
And also we have a we have a great team operation side at the same time, we have a culture multinational long term bolt on there.
Inventories of module <unk> compared to our competitor to meet them, even even think of.
510, 15 years ago, we intend to keep some 'twenty two.
Some customer urgent need so that's actually been for that this supply chain issue.
Great. Thank you very much on our Peters requests for just one question and step back in the queue.
Okay.
It is the target.
Next we have titled Liana <unk> from Bank of America. Your line is now open.
Hey, guys you are killing me with this one question. Thank you.
I wanted to focus on the most important part which is the growth acceleration in your your revenue your product revenue growth went from 25% to 41% to 51 in the last three quarters.
And Youre billing growth went from 14% to 35% to 42, just a major acceleration.
The question is can you identify the key areas I know that a lot of areas are growing but when you look at material areas, meaning that the most the highest contribution to the growth acceleration what are the key areas can you share with us the key areas, where you see the highest.
Growth in terms of dollars and.
Can you also give us an update on SD Wan specifically thanks.
You can see both the <unk> and also non a fully paid all kind of revenue growth 50%.
For the small greedy tool because.
To underprice, our service provider.
It does get better acuity to the customer all of this is so so far we don't see anything slow down and we feel we're well positioned to gain market share.
Got it thank you.
Echo what Ken said silence for I think the.
The threat landscape is a hot topic of conversation.
All quarters of the World is going right now and it doesn't seem like that's going to abate anytime soon.
I think the need.
And the team have built here with providing security and networking speeds is critical but I think also this platform of our gardener's now calling the mesh architecture cyber security mesh architecture, I think consistent with gardeners. Other reports about the percentage of companies that are looking for consolidation I think <unk> commented on that and how that is.
Going to continue to increase it certainly seemed to those tailwind are poised to continue to exist as we get into 2022.
Great. Thanks.
Yes.
Alright, and next we have Shaul Eyal from Cowen Your line is now open.
Congrats on the performance and guidance.
Keith.
Federal vertical had a good performance.
Was it just typical third quarter government seasonality or do you see that sustainable as sustainable going forward given your recent investments so within this vertical.
Yes, so keep in mind for us the government is a worldwide number when we talk about it. So that includes some U S. Federal and international government is also state and local commerce et cetera. It has been a very strong vertical of ours for well over a year if not two years now.
And I certainly don't see any reason that just on that basis that it would slow down.
And I think if you overlay that with investments that Ken and team are now, making particularly as it relates to the U S federal team.
There are some opportunities for us to explore and exploit hopefully as we move forward.
Okay.
Our next we have Michael <unk> from Keybanc. Your line is now open.
Used this term before a rising tide lifting all boats and I think we saw that in the quarter there wasn't a week.
Geography, there wasn't a week product suite.
I think everybody performed very strongly.
And cookies.
Global to sell them.
Almost 50% and also the last month it may made back diagnostic tool.
In some big enterprise and some service providers that in paying off.
Yes, I think it's the same question, so hopefully not too I'm just trying to figure out.
Of course execution competition doing well that way, but where are we in.
People just buying stuff to put in data centers. When we're really in a cloud mode. Here is it because of the refresh or why are we seeing that investment.
I think the all claims.
<unk> like along current ASIC strategy, which had a lot of performance.
The function and the same ton cost lower and lower power consumption also.
That's where the security starting spend inside a data center inside a company.
Arnold Network and also the one side <unk>. We also see a lot of excitement from that angle. So is there any I didn't expand for the whole infrastructure instead of traditional debt.
Securities on at border.
So thats a much bigger total addressable market some technical secure driven networking.
It's really more expanded market and has a smart strong security need.
Thanks, guys.
Alright next we have Sterling Auty from JP Morgan Your line is now open.
Understood. Thank you.
Our next we have Rob Owens from Piper Sandler Your line is now open.
Yes. Thanks for taking my question I guess I'll pivot a little bit from from Sterling and ask you about G. T. K, specifically and what is driving the strength in G. T. K billings is that a product related is it just better distribution relationships that are getting you into these accounts and who do you think share is coming from in this market.
Thanks.
I think the.
But I would.
I'll comment in terms of where it was the market share gainers in view of the market share donors.
I don't think there'd be any surprises or asking the management named in terms of who I thought those those work.
Terms of the distribution I think when you get in particularly into the U S market.
With a large enterprise focused distributors you got as a company you've got to invest some time and bring opportunities to them and demonstrate that you have.
Appear your product superior offering and I think that the team has done the heavy lifting on that and I do believe that we are getting.
More momentum if you will from those large U S distributors that maybe we did not have previously so I think theres some of that and then I think we've continued to invest in both the sales and marketing we knew all along for several years now that we needed to improve our coverage in terms of the number of accounts that were assigned to reps and.
And the people that we're bringing in from outside that maybe had more of an enterprise enterprise experience and less of a channel experience et cetera. So I do think that all those things are combined and are demonstrating the success as you point out G 2000 growth at over 52% and accelerated for the last three quarters.
Thank you.
Okay.
Alright, now we have Hamzah <unk> from Morgan Stanley. Your line is now open.
Hey, guys. Thanks for taking my question I'm going to keep it to one question.
But just on the.
Ot side, you talked about that growing 77%.
This quarter I think that was the first time you mentioned.
That product specifically.
Just curious can you give us any rough sense of how material coming to.
To your overall billings and whats been driving that and the more recent quarters.
On everything says and we tried down and that's a whole network here for quite a while and we do believe is eventually a lot of in a reasonably Valdez iot's, a modest and connect online and also a lot of a wolf a home and.
Like a school for homeowners kind of fans.
All we need a security, which combined with the network acuity.
Security and.
Also the clouds him under sassy solution. So we we do feel.
It's a big long term potential.
It's not quite.
I mean.
Actually ramp up quickly, but it's a eventually it will contribute more revenue to the company.
Great. Thanks, so much.
Thank you.
And next we have that Jonathan home from William Blurry line is now.
Hi, and congrats on the strong results just wanted to I guess I understand a little bit better is sort of the dynamics surround the price increases to your base can you give us a sense of maybe the magnitude are impacted the quarter from those increases and is there a potential for that to stick even beyond some of these supply chain challenges. Thank you.
Yeah, we kind of.
More carefully increase the price based on all cost increase beach.
Also kind of.
Supporting by some old partner and and.
And the same time, because we have a much better.
Like performance price ratio and also more function in special on the <unk> side. So we do feel we have more room to to address by some of the price.
And let's do a customers do like the product.
So probably we a decent price increase and what just off at a cost increase and woke at margin back online.
[noise], Yeah, I would add to that I think Jonathan the what are the metrics that we looked at in the third quarter was just our ability to.
Hold the line of the price increases which are largely effective in August one August 1st I'd say largely because.
Alright next we have Andrew and Iwinski from Wells Fargo. Your line is open.
Great. Thank you and congrats on a great.
Great quarter I wanted to ask about the high end.
That was certainly better than expected I think over 37% of your 40 gig sales.
Which looks like it was the highest level of spending at least the last two years can you just talk about the drivers of the high end and whether the <unk> Rollouts and your leadership position in the carrier market might be contributing to that.
Yes, the bigger enterprise the global 2000 definitely contribute with some of the high end growth and also.
On the product refresh side in the lab.
One to two years, we also refreshed our high end.
You've seen the latest ASIC.
With the NP seven.
You have to have five ton better performance and more function compared with the previous MP, six which I think at the high end, we probably refresh.
Like maybe 80% of the appliance already so Thats also we started benefit some of the refresh we made in the last one that we have.
No no contribution from the <unk>.
Sir your class customers there was more on the enterprise.
Uh huh.
There is some contribution from SD Wan.
But it's a five SKU in the ramp up stage I don't see much but I do see is a huge potential.
Super Thank you. Thank you.
Sure.
All right next we have Irvin Liu from Evercore ISI. Your line is now open.
Hi, Thanks for the question.
Questions for either Ken or Keith.
You have the opportunity to meet with several customers and partners along with new prospects that your first of its kind security summit that took place at your sponsored PGA fortunate championship event can.
Can you just talk about whether youre seeing what youre seeing from a customer traction perspective post the event and perhaps if the event had led to notable uptick in visibility and mind share among customers.
I think the head of marketing asked that question.
But it's a good question I think well book.
Probably the one of the biggest marketing investment we have been made but definitely we see boggler successful.
Result.
Another customer in.
Other partnered really appreciate all this.
Yes.
That champion PTA for there.
There and also we use it as a platform to bring a different customer partner altogether too sure communicate experience and also to the training education.
So we do see this is really helping a lot of the marketing and sales platform. We have and also generate a lot of new lead put in this way is a large successful event.
Little less on the guide and I'm just wondering if you could just give us some color or thoughts around that and in particular is that a reflection of was there any kind of pull in that you think about on the billings where customers concerned about not getting product.
And or is it reflecting some of the concerns you previously mentioned about are we going to have enough of the supply chain availability of product availability I should say and therefore, we might need to tamped down a little bit in Q4, and then I had a follow up if I could because Peter told me I'm allowed to ask a follow up.
Okay.
[laughter].
I think what Youre seeing there is supply chain and as I said earlier in the conversation that I think.
We've been appropriately conservative I hope in terms of how we guided to it.
To unpack that just a little bit we do with our sales team and we manage things on a bookings basis with them and then we put that up against what.
We have the ability to shift if I looked at just the bookings number and we have a long internal conversation about whether or not thats a metric that we should provide at this time and decided not to but if we look at just the bookings number I would say that it's a very strong indicator that the business is extremely healthy if you will.
The customer in terms of customer buying behavior.
There's always there's always somebody getting in line early if you will.
They have longer term deployments or what have you.
That's not new.
Maybe a little bit of it in the in the <unk>.
Third quarter, no deals over $10 million.
Our largest deal is probably seven or eight or something like that.
In the quarter, we have seen in the fourth quarter things were.
Customers I'd say, they're getting line orders, they've got deployments, where our plants are declining in 2022 and they want to make sure that they are trying to time, when they're actually going to need the product and when the product is going to be available. So I have seen earlier in the quarter a few companies exhibiting that behavior.
Yes, we're hearing that a little bit from the channel.
Lead times, because they are getting our customers are ordering early and more.
But it sounds like what you are saying essentially you are concerned about maybe the billings number reflects some.
You might not be able to make all shipment demand and so that's reflected in the quarter from I hope I'm not putting words in your mouth.
That would be I think it's very prudent of me to say.
With the supply chain environment that we're in I'm, not just going to take the I can't just take the absolute looking number two shift so I think there has been okay.
The amount of internal work around that if you will now on the other side.
It does give us predict more predictability as we come into 2022 of this behavior continues and we've had in the past.
Backlog or bookings has not been something that.
February on mash solution. So that's where it's continuous you have a strong growth.
About 40 K and.
Also we started working with the service provider carrier on the sassy modest solution.
And it will also benefit.
Broad customer base.
Okay, alright, thanks, and congratulations for the incredible results.
Thank you.
And there are no further questions at this time that concludes the Q and a session I will now turn to call back to Peter So koskey for closing remarks.
Thank you I would like to thank everyone for joining the call today I know you have a lot of calls received any really appreciate your time for that will be attending the following investor conferences during the fourth quarter with the Wells Fargo Conference on November 30th at NASDAQ Conference on December 1st and second the UBS coverage on December 7th and the Barclays Conference on December 8th.
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And this concludes today's conference call. Thank you all for participating.
You may now disconnect.