Fortinet, Inc.

Good day and thank you for standing by. Welcome to the Fortinet OneQ24 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Peter Salkowski, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Brianna. Good afternoon, everyone. This is Peter Salkowski, Senior Vice President of Finance and Investor Relations at Fortinet. I am pleased to welcome everyone to our call to discuss Fortinet's financial results for the first quarter of 2024. Joining me on today's call are Ken Zee, Fortinet's founder, chairman, and CEO, Keith Jensen, our CFO, and John Whittle, our Chief Operating Officer. This is a live call that will be available for replay via webcast on our Investor Relations website. Ken will bring our call today by providing a high-level perspective on our business, Keith will then review our financial and operating results for the first quarter of 2024 before providing guidance for the second quarter of 2024 and updating the full year. We'll then open the call for questions. During the Q&A session, we 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 which we make on today's call are non-GAAP unless stated otherwise. Our GAAP results and GAAP to non-GAAP reconciliations are located in our earnings press release and in the presentation that accompanied today's remarks, both of which are posted on our investor relations website. The prepared remarks for today's call will be posted on the quarterly earnings section of the investor relations website immediately following the 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.

Thank you, Peter, and thank you to everyone for joining our call. Q1, we managed business with strong spending discipline and increased our operation margin 200 basis points to a first quarter record of 28.5%. We also generated record cash flow from operation of 830 million, and our adjusted free cash flow margin was 61%. We remain focused on investing in a fast-growing, unified, sassy, and secure operation market. which combined accounted for one-third of first-quarter billions. We continue to gain security networking market share, leveraging our advanced, differentiated 40OS and 40AC technologies, with an increasing number of large customers adopting our industry-leading secure networking solutions. Last month, attendance at our annual Accelerate Conference increased 25% year-over-year to nearly 5,000 participants, Our Unified SASE and new AI offering dominant the discussion with our partners and customers. For the first quarter, Unified SASE accounted for 24% of total buildings. To introduce customers and prospects to our new Unified SASE solution, we plan to run attractive promotions this year in 2024. For several reasons. we believe no cybersecurity company comes close to our differentiated Unified CELSI solutions. First, we have developed all Unified CELSI functionality into one single operating system, the 4DOS. This includes a full networking and security stack, comprised of APNA, Secure Web Gateway, CASB, and our market-leading SD-WAN and firewall technologies, providing content, applications, user, device, and location awareness to reduce attacks. Second, our unified SASE solution can be deployed on-premise in the cloud of both. Peer solutions send traffic to cloud-based POP, increasing security risk and latency, and it's less efficient. Last, Fortinet unified SASE offers both traditional software endpoint agents and hardware agents such as 40 Wi-Fi access points and 40 switches for customers, with easier deployment and more broad use cases such as Unified SASE for OT and IoT devices. We expect our differentiated Unified SASE offering to emerge as a SASE leader. Fortinet's advanced platform approach has been earning third-party awards for many years. Last month, we entered Ghana Magic Quadrant for Secure Service Edge, as shown on the slide 12 in the investor presentation. Fortinet is the only vendor recognized in the Ghana Magic Quadrant report for Secure Service Edge, SD-WAN, Single Vendor SASE, Network Firewall, and Enterprise Wired and Wireless LAN infrastructure. All five security and network offerings from Fortinet are uniquely built on one operating system, the FortiOS, and a leverage of FortiASIC to increase secure computing power for more functions and better performance while lowering the cost and energy consumption. Fortinet's SecureOps solutions, which are better integrated and automated together than competitors, accounted for 9% of total billions. Initially launched as part of our FortiSIM and FortiSource, our GenAI technology, FortiAI, is being deployed across both networking and security products. And today, we announced Energy First IoT Security Generative AI Assistant. Customers can ask FortiAI to help in 30-plus languages. Fortinet is also the market leader in OT security solutions. the fastest growing space in network security, with billions of devices connected online. And most OT devices have limited computing power, making network security the most effective means of security. Today, we announced the FortiGate 200G, a mid-range firewall powered by a new SP5 for ASIC, with secure computing rating of 3 to 10 expected performance around competitors and industry average We're enforcing our leading security networking and unified SaaS advantage that provide customers with industry-leading security functions, performance, and power efficiency. Before turning the call over to Keith, I wish to thank our employees, customers, partners, and suppliers worldwide for their continued support and hard work.