Fortinet, Inc.

Good day and thank you for standing by. Welcome to the Fortinet's first quarter 2023 earnings announcement conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Peter Salkowski. Go ahead.

Thank you, Chris. Good afternoon, everyone. This is Peter Salkowski, Senior Vice President of Finance and Investor Relations at Fortinet. I'm pleased to welcome everyone to our call to discuss Fortinet's financial results for the first quarter of 2023. Speakers on today's call are Ken Zee, 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 the call today, providing a high-level perspective on our business. Keith will interview our financial and operating results for the first quarter of 2023 before providing guidance for the second quarter of 2023 and updating the full year. We'll then open the call for questions. During the Q&A session, we do ask that you please limit yourself to one question and one follow-up 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. Also, all references to financial metrics that we make today 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 accompanies today's remarks, both of which are posted on the Investor Relations website. Ken and Keith's prepared remarks for today's earnings call will be posted on the quarterly earnings section of our Investor Relations website immediately following today's call. 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 to everyone for joining today's call to review our outstanding first quarter 2023 result. For the first quarter, revenue growth was 32% due to strong growth in both product and service revenue. With 35% product revenue growth, we continue to gain market share while being a leading product revenue company in the cybersecurity industry. This strong product revenue growth will help drive future service revenue growth. Quarterly service revenue grew over 30% for the first time in six years. We believe we have a significant opportunity to upsell value-added secure service to a large installed base. In the first quarter, SD-WAN and OT bookings together continued to account for over 25% of total bookings. And our goal is to become the number one in network firewall, secure SD-WAN, and OT security market over the next couple of years. Fortinet is leading the trend of network and security convergence and cybersecurity consolidation. Gartner expects that by the year 2030, the secure networking market will be larger than traditional networking. Traditional networking lacks awareness and control of content applications, users, device, and location, and is still using the same network protocol that was developed 50 years ago. Fortinet's secure networking solution has expanded from next-gen firewall to SD-WAN, SD branch, 5G, internal segmentation, ETNA, and universal SASE. and we believe the secure networking market can achieve double-digit growth annually for the foreseeable future. In today's environment, other nations are looking to consolidate their multiple security vendors and functions that are deployed across their expanding attack surface to lower their total cost of ownership and management cost by improving visibility and automating real-time threat detection and response. Fortinet's latest release of FortiOS 7.4 together with the FortiSP5 ASIC leads the industry in better integration and automation, as well as the faster acceleration while lower total cost ownership. FortiOS enables organizations to deploy the Fortinet security fabric to every edge, allowing security to dynamically scale and adapt as network evolves. Last month, we announced Universal SASE, which is supporting hybrid infrastructure and enable the same networking and security features that are available in our plans to be delivered as a service, all within a single console. Many of our service provider partners are collaborating with us on these offerings. Also, we announced an enhancement to several of our 49 security fabric solutions, including endpoint security, cloud security, SOC, and so on. As network and security continue to converge and customers looking to consolidate vendors and point product, we believe we are well positioned to achieve our 2025 building target of 10 billions by generating an annual non-gap operation margin of at least 25% for each of the next three years. Before attending the call over to Keith, I would like to thank our employees, customers, partners, suppliers worldwide for their continued support and hard work. Keith.