Fortinet at JPMorgan Conference: Strategic Growth Amid Challenges

On Tuesday, 13 May 2025, Fortinet (NASDAQ:FTNT) participated in the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company outlined its strategic direction, highlighting its strengths in cybersecurity while acknowledging macroeconomic uncertainties. Fortinet’s leadership discussed their focus on organic growth, leveraging their broad product suite to navigate the evolving threat landscape.

Key Takeaways

• Fortinet emphasizes organic growth, leveraging its robust R&D and unified platform approach.
• The company is cautiously optimistic about future growth amid macroeconomic uncertainties.
• Sales leadership restructuring aims to enhance market responsiveness and forecasting accuracy.
• Fortinet is expanding its presence in the SASE market, capitalizing on its SD-WAN customer base.
• AI investments are driving operational efficiencies and supporting threat intelligence analysis.

Financial Results

• Q2 Guidance: Reflects a conservative approach due to economic uncertainties, with expectations not to increase guidance as customer companies face macroeconomic challenges.
• Q1 Performance: Strong results, particularly in product revenue, driven by industry demand and refresh cycles.
• Fiscal Year 2025 Outlook: Prudent, with anticipated bookings and billings growth around 12%, aligning with their midterm CAGR.
• Maintenance Revenue: Softer than expected in Q1 due to out-of-period recognition, fewer days, and churn from the Lacework acquisition.

Operational Updates

• Sales Leadership: Restructured to include three regional leaders, bringing new energy and a focus on direct sales, especially in the US market.
• Technology Development: Prioritizes organic R&D and a unified platform. AI is utilized to improve support and threat intelligence, reducing the need for additional staff.
• Strategic Partnerships: Collaboration with GCP to enhance SASE network availability.

Future Outlook

• Growth Drivers: Expansion in OT security and SASE markets, leveraging existing customer bases for upselling opportunities.
• SASE Strategy: Viewed as an extension of SD-WAN, with common security policies applied across platforms.
• Threat Landscape: Increasing threats, including AI and nation-state actors, present opportunities for Fortinet’s security solutions.

Q&A Highlights

• Refresh Cycle: Larger companies are expected to lead the upgrade cycle, while smaller companies may delay.
• SASE Demand: Strong billings this quarter, driven by SD-WAN conversions and partnerships.
• OT Security: Growth area due to increased network connectivity and segmentation needs.
• Acquisition Churn: Higher than expected churn from Lacework customers, but risks of further churn have decreased.

For more detailed insights, please refer to the full transcript below.

Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:

Brian Essex, Security Software Analyst, JPMorgan: Right. Good afternoon, everyone. My name is Brian Essex. I’m JPMorgan’s security software analyst, and thank you for joining us today for Fortinet. With us today, very pleased to have John Whittle, Fortinet’s Chief Operating Officer, and Cristiano Olgaard, their Chief Accounting Officer, soon to be Chief Financial Officer.

And then, I don’t know, is Aaron here somewhere? Do you need to do a safe harbor? No? Okay, we’re good? All right.

Every company is different. So thank you both for joining me. I really appreciate it. And John, I think it’s a unique opportunity to have you with us. So maybe for those that may not be familiar with you, maybe a brief intro.

And I think you’ve been with the company quite a long time.

John Whittle, Chief Operating Officer, Fortinet: Correct.

Brian Essex, Security Software Analyst, JPMorgan: Yes. So maybe your your perspective on, you know, how Fortinet’s sales leadership and culture have evolved and what what your experience has been at the company would be helpful, like background. Sounds

John Whittle, Chief Operating Officer, Fortinet: good. Alright. Thank you, Brian. Thanks for including us. We really appreciate it.

It’s great to be here. Thanks everybody for joining us. So my name is John Whittle. I’m chief operating officer. I’ve been at Fortinet for nineteen years.

I joined in 02/2006, a few years before our IPO. And my main mission throughout my time here has been trying to help support Ken and Michael and the team really grow this business and grow it in a disciplined way and properly disciplined way. And we’ve built up a pretty good track record so far, and we feel really good about the future as well. And in terms of kind of the leadership team, to your question now and the sales leadership team, what we’re seeing in the market is really kind of this confluence of tailwinds. And there are a number of kind of short term tailwinds, the refresh cycle which we might touch on a little bit.

But kind of at a high level, what we’re seeing, we talked about this in some of the one zero one, some of you might have been in some of those. But a real step level increase in the threat that’s out there in terms of pervasiveness, in terms of sophistication, in terms of downside from the threat. And a lot of the demand for our solutions follows the threat. You have AI, you have nation states, you have, you know, organized crime. It’s really just kind of going like gangbusters from a threat standpoint, which opens up opportunity for us.

And the good thing about that is it’s good timing wise in terms of our solution set. So we have a very broad solution set. We’ve kind of followed where we can add value to customers. So we’ve gone from a firewall only company to now we divide our solutions between secure networking. You think of that as firewalls integrated with switches and access points, SASE and SecOps.

And so we have very mature solutions. We’re number one in terms of the deployed firewalls out there. We’re number one in SD WAN. We are number one in terms of OT security. We have line of sight to become number one in SASE.

And so we feel like we have this very broad solution set, platform solution set. Our SecOps platform is one of the broadest in the business. Right when this step function increase in the threat landscape is out there. And we have, you know, in terms of our sales leadership, I think the confidence level is high across the board. We have three sales leaders, Joe Sarno who runs EMEA and APAC, and he’s been with the company for twenty plus years, maybe twenty one years.

He’s driven a lot of that growth in those regions. We’ve done very, very well. We have Pedro who runs Canada and LATAM. He’s been with the company for seventeen years now, I believe. And then Trevor is running US, Trevor Pagliara.

And and he’s been here coming up on two years now. So he’s the newest of the three. Across the board, I see a lot of confidence from each of those sales leaders. And Trevor’s brought new energy in The US. US obviously is a very competitive market.

And Trevor has brought this kind of hard work culture and, you know, I think we historically have relied on the channel a little too much. And so he’s got a certain amount of passion and hard work and aggressiveness that is really really positive. See, I really enjoy working with all three of them to kinda up level that sales approach across the world.

Brian Essex, Security Software Analyst, JPMorgan: Great. That’s super helpful color. And maybe for Christiana, I know in the earnings call, was some commentary around different sales management changes, right? I mean last year we had Patrice Persch retired. And you brought as John mentioned, brought new sales leadership in or maybe elevated some people into new leadership positions.

And there were some questions around the way that you formulate your outlook and the input that your sales management has into that outlook. Maybe explain or help highlight for us how the input that you get from sales has influenced the outlook and what the result of some of those sales management changes have been from an outlook perspective.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So I think the inputs to our guidance setting and outlook of course is always sales input, pipeline, hiring, quality of pipeline, so how many deals have already been committed, what is best case. And then of course market outlook, right. What is the market doing? What the voice that we’re hearing? Because as any tech company I think is obvious, most of the business is done in the third month of the quarter.

So there’s always a little bit of risk there when the market outlook changing. And that’s what we saw this quarter. From a sales perspective, not having one leaders, but having three leaders providing the input is what we had before, but we don’t have one leader who balances the kind of risks or benefits that they see and give us one number. So now it’s up to the organization to finance, and the rest of the leadership, right, I mean it’s a finance decision what we guide to make these statements, or not statements, but to come up with the final numbers what we are comfortable with given the nature of the macro environment. I think what we saw with the Q1 release, our guidance for Q2 was a little bit that there was expectation we would guide up.

But on the other hand, a lot of our customer companies you see they’re uncertain about the macro environment, what is it doing to their business with tariffs, with increase in interest rates, with lowering U. S. Dollar values, lots of different economic changes that we saw happening in April that we took a decision. We are super confident about our execution, about outgrowing the market, but what happens near term within the next couple of months was unclear. So that’s how we ended up with the numbers for Q2.

John Whittle, Chief Operating Officer, Fortinet: I think to summarize it, I mean we see a lot of confidence across the board from the three sales leaders. But we don’t know what we don’t know in the macro, so a little conservatism probably makes a little bit of sense. But in terms of confidence levels from sales, we meet with them regularly, you know, multiple times a week, very high.

Brian Essex, Security Software Analyst, JPMorgan: And and would you say that, you know, relative to what you had, you know, last year with Patrice, is that would you say that’s more conservative than it was before or just it’s a different environment so you’re really hard to It’s

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: a different environment. I think many of you may have been at our Analyst Day, you saw the sales leaders. They know their business, they know their customers. So from their perspective, not so much has changed. But our business is extremely diverse.

We sell into SMB, mid size, and enterprise. We have the best visibility into enterprise customers, of course, because the rest is more channel driven, and we are highly diversified across the globe. So there’s always an element If the macro environment comes in, then it just gives us a little bit more pause.

Brian Essex, Security Software Analyst, JPMorgan: Great. John, from a strategic perspective, think it’s funny I asked one of your peers this question this morning in a different way. But if we go if we look back ten years ago, you had a much different like rank order of the size of the companies. I think Check Point was at the top of the podium and then you guys were number two and Palo Alto number three. That order has dramatically flipped and it’s been really fascinating to follow the strategy of each company.

Obviously, one has been much more acquisitive, another one much more organically focused. I think that’s changing a little bit. How would you frame the way that Fortinet’s looked at the business maybe from a build versus buy versus partner perspective historically? And is that changing as it seems some of these vendors are focused more on faster time to market for new product?

John Whittle, Chief Operating Officer, Fortinet: Yeah. It’s a good question. And in fact, when I got to Fortinet, Juniper was one of our top firewall competitors. And I think they were tough. And Ken is so focused on results and execution.

And in his road show the IPO road show, he said cyber security is a great industry, but you gotta execute. You know, it’s not like it just kind of rising tide lifts all ships. And in fact, we want to rise faster than the rising tide. We want to out execute the market, take market share. That’s our goal.

That’s how we grade ourselves. And we feel like the best way to do that is tilting towards organic. We’ve got a or we’ve got r and d at scale. We’ve got thousands of great engineers. Having that scale advantage is an advantage against some other companies where you have this skill shortage.

And we also have an entrepreneurial culture. We’re founder led. I think that really works to our benefit in a lot of ways. One, we do move fast. The thread is moving fast like we were talking about earlier.

And so we have engineers who can develop fast. So it’s not necessarily a trade off between do you acquire or do you, you know, or do you move slow and you can actually move fast through organic developments. That’s where we will tilt towards for sure. We still do a lot of tech and talent tuck ins for features and whatnot, but we view our common operating system and across platforms, a lot of platforms as a competitive advantage because it just works better. And we’ve had a lot of customer meetings recently and they’ve told us that.

They’ve said that we go in and the slides look great from some of your competitors but then you try to implement these solutions. I actually happened at Juniper when they bought NetScreen, they had separate operating systems and couldn’t get it to work together. And so that was a lesson learned by us early. And so we’re very focused on these solutions that work really well together. They’re built from the ground up to work together.

And we’ve done we’ve still done, you know, three or four we do three or four tech and talent tuck ins a year. But they’re relatively low risk. We’re gonna keep our options open. Obviously, have a lot of resources at this point. And so we could do something significant.

But I would think we’ll probably stick to our knitting and focus more on organic development. But with little supplements here and there by M and A.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: And then I would add, you made a point that acquisitions allow you to be faster to market. I think that’s true for certain aspects, right? But for other aspects, I think we are actually pretty much upfront and innovative. If you think about quantum, right, about cyber risks that exists, and that we know are going to be exploited in a couple of years, we build this into our solutions right now to protect us, right. So quantum is one.

We’ve always, we’ve spent a lot of efforts on AI in the past where initially it benefited us internally for analyzing our threat intelligence. Now with Gen AI coming up, we use it in our products, but we also use it internally in support to get more efficient. So I don’t think that you need to necessarily buy to be fast to market. There are other areas where we may not have been as fast like SSE, but we believe that we can capture the market pretty quickly now because it’s a great expansion sale.

Brian Essex, Security Software Analyst, JPMorgan: Got it. That’s super helpful. And then maybe Christiana, from your perspective, still relatively new to the company. I’m sure it’s been a very much a drinking from the fire hose event for you. But anything you can share, first impressions of that you’ve had from your introduction to Fortinet?

And then how you might manage things differently than Keith as CFO once you take that role?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: I’ve known Keith for a long time and while I rejoined Fortinet a year ago, I’ve worked for Fortinet for a longer period since 2016. So I know the business. Keith and I were both data driven, and that serves us well. So I think we are making data driven decisions. We are of course to make data driven decisions we constantly try to improve our own internal data that we use internally and that we provide to the organization.

What is going to change? I don’t think too much from how we manage. Internally I think I would like to get more insights into certain aspects that we are building out. One is the infrastructure. Better visibility into how is our cost benefit as we build out infrastructure for our SaaS solutions as well as SASE and what’s to come.

And then I think the successes that we have internally with AI for support and managing support cases, I would like to see how we can use AI in finance for our own internal efficiencies. But from a strategy perspective, don’t think much will change. Okay.

John Whittle, Chief Operating Officer, Fortinet: And just from my standpoint, Keith will be sorely missed. But one of the traits of a great exec is he’s left us in good hands. And so I mean, we’ve worked with Christiane for what, seven years with the boomerang. But and she’s she’s been a great teammate all along, and we’re in really good hands. So thank you, Keith.

And Chris John is going to be great for the company for sure.

Brian Essex, Security Software Analyst, JPMorgan: Great. And maybe on your point of leaning into AI a little bit. Are there any observations that you’ve had from based on your usage of AI internally within your operations that you can share? And then where you think you might have the biggest opportunities for productivity improvement leveraging AI?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So from an internal use perspective, I think especially Gen AI has been deployed in support to manage all the L1 support cases that come in versus taking them over the phone. And that has actually helped us reduce the need for additional headcount and support, right? So we can be more efficient and customer success, close rates and customer’s CSAT ratings have been the same. So it’s a great use case how AI can be very efficient for organizations. And in addition we’ve used AI in the past for machine learning and so on to manage our threat intelligence and deliver FortiGuard solutions, which is our security content that we provide to customers faster because we were able to analyze our data faster, our telemetry that we get from the firewalls.

These are great use cases on how AI makes us more efficient. I actually personally have great hopes that technology can make us more efficient in finance, and so that’s what I want to

Brian Essex, Security Software Analyst, JPMorgan: evaluate. Great. I wanted touch the Q1 results briefly, maybe recap those a little bit, particularly with regard to it seems like results were relatively strong. And product related revenue in particular seemed as though it was pretty strong. How much do you think the strength there was due to industry wide demand versus product cycle versus refresh cycle?

And how do you what are your expectations for the rest of the year there?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So I think there are multiple trends that we see and tailwinds, right? One is our own end of support cohort which forces customers to upgrade and replace their existing firewalls because they go end of support at the end of twenty twenty six. And that’s a forcing function that we’ve started to talk about last year at our Analyst Day, and since then we’ve created go to market motions that allows us to capitalize on that and sell more services. Then you have another more market wide trend which is what I would call the COVID cohort of buying. That’s going to be three to four years old by the end of twenty five, twenty six.

And many customers do replace their technology after it has been depreciated. So I think in two to three years we will see more of that being refreshed. But there’s not a forcing function to refresh the firewall because it’s still under support. And we’ll see that across all the firewall providers. And then naturally there’s always expansion with more use cases going on.

And we see a lot of expansion in segmentation, but also in OT. And so in this quarter OT was a very strong use case for us.

Brian Essex, Security Software Analyst, JPMorgan: Got it. Maybe, Jon, to the extent that you have visibility into it, how should we think about the different puts and takes from a refresh perspective? From the point of you have some I mean, you’re kind of like a unique end market, right, where you have a third, a third, a third small, mid and large business. So you may have some at the smaller end, which may go out of business, may be more sensitive to macro than the large enterprise. But when you’re faced with an end of service deadline and we’re also looking at evaluating the macro impact we might see this year, what do you think the customer’s outlook is going to be on the timing of refresh they may have?

If they’re coming up with an end of service date kind of in the second half of twenty twenty six, who might be more inclined to wait until the last minute or what are the implications and then who might spend this year anyway regardless of that event?

John Whittle, Chief Operating Officer, Fortinet: Yes. I think I mean our hunch is that the smaller companies in general may wait a little bit versus the larger companies who will typically get ahead of this. But you know, it’ll be a mix. I think some of the smaller companies will get ahead of it as well. And I think a lot of the these companies, they have been sweating the assets for so long that it definitely makes sense for them to upgrade regardless of the EOF and the support period.

So I think it’ll and I think some of it can be driven a little bit by our channel as well at the low end because they can kind of push those discussions earlier so that smaller companies can get ahead of it as well because it can behoove them to be prepared as opposed to wait till the last minute too.

Brian Essex, Security Software Analyst, JPMorgan: Got it. And then, Christiana, I think one of the points of question or pushback I’ve gotten after the earnings earnings call was on the initial or I guess the outlook for the rest of the year, relative to your like midterm outlook that you gave during the Analyst Day. So I think we’re looking at a 12% CAGR, but your guidance for this year would imply about a 12% bookings billings number. So how would you reconcile those two given that there should be kind of like some refresh benefit this year? So shouldn’t it be higher than that like midterm CAGR that you gave at the Analyst Day?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So how did we come up with our midterm CAGR at the Analyst Day? It’s really a function of the overall market growth and our ability to outgrow the market. I think we’re our current year fiscal year twenty twenty five outlook is prudent based on where the economy is and the ability that customers still have the choice to renew for a year. Do we believe they will all go to the end of next year until they upgrade? No.

But it was too early to change the guidance. We are confident that we are capturing the market and that we are capturing the opportunity. We don’t see any discussions where competitors come in. Firewall is our strongest product. Are up there in the Magic Quadrant.

The new firewalls that are being refreshed probably don’t have SD WAN functionality. So there is a lot that speaks for us to use the same technology. So we are not afraid to have those discussions. We believe we have great customer journeys to upsell from the firewall to SD WAN to SSE. Have the technology now to make it really simple and it’s going to come.

John Whittle, Chief Operating Officer, Fortinet: Yeah, think it goes back a little bit to the earlier comments about macro conservatism. And we did have a good Q1 where there was some uncertainty, good start to Q2 as well. But you just don’t know what you don’t know, what’s coming down the pike. And so I think we see a lot of confidence, like I said earlier, across the board with our sales team. But we want to be a little bit careful.

Brian Essex, Security Software Analyst, JPMorgan: Right. And on that, any change that you’ve seen since the April in terms of macro pressure on maybe sales cycles, close rates, customer buying patterns that across platform of the business?

John Whittle, Chief Operating Officer, Fortinet: No, I haven’t seen any indications of risk since then.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: April was good. 50% of our business is always the last month of the quarter. So you don’t know what you don’t know. And we I mean, I think yesterday we got great news, right, that the China tariffs are going to be reduced. You don’t know what news you get over the next four or five So we just playing the conservative game One

Brian Essex, Security Software Analyst, JPMorgan: more and then I’ll open it up for questions. But there’s been a lot of focus on opportunity there. I mean I think if I go back a year, there was a lot of excitement over your SD WAN installed base and your ability to convert those customers. And I think since then, we’ve seen you sign an agreement with GCP to shift your network to give you more network availability. Things have kind of progressed from an overall industry perspective, but very competitive space.

So if we think about and I think SASE billings were relatively strong this quarter. So how much of that is SD WAN conversion? How much of that is new customer kind of go to market traction in that SASE space and potentially some share shift from some of your peers?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So for my, I think buying behavior, it’s mostly upsell from SD WAN to SASE. And this is also where I think our strength lies. We get into more RFPs now natively, right, where we are considered. But John can probably also talk to how the product, the SASE product has matured. And we were late to the market.

But I think we’ve taken a little bit of a different approach and used SASE as an extension to the network. So you have common security policies, you have ZTNA policies that apply across. And then on top we’ve started building out our own infrastructure which actually has allowed us to now come out with sovereign SASE, which very interesting to telcos and also for regulators that want to have data in countries. So it’s gonna give us another growth angle to our SASE story.

John Whittle, Chief Operating Officer, Fortinet: Yeah. We see a lot of kind of a sales process going from firewall to SD WAN to SASE. There’s a huge portion of our SASE customers that follow that approach. Number one in deployed firewalls, number one in SD WAN like I said. And we see line of sight being number one in SASE as well.

Partly because we’re just kind of scratching the surface on that expand sale to our SD WAN customers. I think we’re like 11% penetrated or something like that in our SD WAN customer base.

Brian Essex, Security Software Analyst, JPMorgan: Yep.

John Whittle, Chief Operating Officer, Fortinet: And then we’re also seeing at the high end, we’ve been working with Fortune 100 companies to roll out our SASE and it’s getting adopted more and more. And we’re getting good feedback from there. So we’re learning. And so we feel like we have a very mature solution. We were just voted vendor of the year by a very large retail organization that displaced one of our big competitors.

It was not kind of that approach where you go from SD WAN to SASE. We displaced a SASE competitor at a very large enterprise. And so we’re seeing real and if it’s good enough for this enterprise, it’s kind of good enough all the way down the stack. And so we feel really good about it. And that’s a big focus of ours.

You’re going to see not only is it good enough and mature right now, but we’re going to add to it with more advanced DLP, next generation CASB. To start to see us continue to add to an already mature solution.

Brian Essex, Security Software Analyst, JPMorgan: Got it. With that, I’m going pause and see if there are any questions from the audience. Okay. I’ll check back again in case there isn’t any additional ones. But that, sticking with the SASE theme, I think a while back you decided that instead of building out your own data centers and relying just on that, you’d partner with GCP to kind of broaden out the network.

How have you seen buying patterns change since you made that announcement? I mean, was it where was the it seemed as though there was a secure service edge or access network headwind because you didn’t have as many POPs as some of the peers did. How has that changed things since you made that announcement?

John Whittle, Chief Operating Officer, Fortinet: It’s really opened it up. I mean we went with speed and really partnered closely with Google and we partnered with other colos as well. And so it’s really opened up the demand. And we see other demand popping up in different geos and so we partnered with Google to really spark up the pop really quickly. We also balance that with our own infrastructure.

We’re buying data centers as well and we think that’ll be a competitive advantage too because the cost of Google and these colos is so high. And if you go with a hybrid approach where you have your own data centers, you can bring your cost down a bit, pass through some pricing benefits to customers, maybe have some margin benefit for Fortinet as well.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: And I think if you look at it from a customer perspective, they want a vendor that has multiple POPs right because they have typically employees located in different locations. And so I think it has given us the ability to compete more. And now that the customers see that there’s a price differential between going through Google pub or going through Fortinet infrastructure, a lot of the customers decide that it’s actually beneficial for them to go through our infrastructure and get those price benefits on their SASE solution.

Brian Essex, Security Software Analyst, JPMorgan: Got it. And then the other area of focus, obviously SecOps. Where are you seeing the demand within your customer base, given the composition that we have visibility into of what the customers look like? Is this just a large enterprise solution and are smaller customers more, I guess, best served by service providers? Or can you kind of like sell SecOps across the whole customer base that you have?

John Whittle, Chief Operating Officer, Fortinet: We sell across the whole customer base. So we have EDR, SIEM, SOAR, NDR. Some of those are well suited for the larger customers. And then we’ve developed a lot of SecOps functionality into our Fortinet Analyzer product. And we also have other SecOps solutions like SOC as a service.

So if smaller customers want to expand their SOC capabilities like we talked about earlier there’s this huge cyber security skills gap. And so they can have this kind of extensible SOC service leveraging Fortinet. And so we have different services that are more helpful and add more value to different customer segments, but it’s kind of across the board. Got it.

Brian Essex, Security Software Analyst, JPMorgan: I want to hit on OT really quick. Certainly rising as a priority and we’re seeing some emerging vendors really kind of like zero in on that as well. Can you walk us through specifically like what OT security products you have that are contributing to growth in that segment? Any metrics you can provide in terms of revenue growth adoption that you’re seeing on the OT side?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So a lot of the OT solutions that we have are rugged devices, right, that you can deploy in environments that are not as cooled like a data center or that are out there in the weather, right. The OT I think growth that we see is definitely larger than the rest of the business. So these use cases are important because this is still where companies need to invest. In the past they had their operation environment often air gapped and not as many security risks. Now more and more this comes together, and so you have pure OT use cases, you have what we call OTIT converged use cases, and because from your operational environment you want to get the data fed into your network, into your applications, and this is where the security threats are coming in.

And what we saw from our FortiGuard labs report is that scanning the networks and scanning the APIs and so on is one of the biggest threats. And this is where threat actors get in and then crawl through the network. That’s where some of our products can help significantly.

Brian Essex, Security Software Analyst, JPMorgan: Any underlying themes that you can point to on the OT side? Is it things that have historically not been connected to the network now being connected to the network that’s the issue? Or is there also a sense of anticipation that there’s more kind of like compute at the edge and that may drive more kind of like OT demand?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: I think it’s the connectivity to the network and that’s one of the big drivers and related segmentation.

Brian Essex, Security Software Analyst, JPMorgan: Got it, got it. And then I wanted to talk about if I circle back to the earnings, one of the other points of push back was on the maintenance revenue side. And you can split that up into maintenance and services. But in terms of the subscription side of the business, think a little bit softer than some expected. How much of that was lace work related?

And is there any way to think about how we might set expectations around kind of maintenance revenue for the rest of the year?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So I think there are a number of factors that play a role here. One is I think what was called out by analysts is that there was a quarter over quarter decline, right? First of all we had out of period recognition of about $5,000,000 in Q4 that played a role. We had two less days in Q1 compared to Q4 that played a role. And then the fact that last year we only grew 2% also impacts our overall services growth.

The part that was not anticipated as much and was more churn in the business from lacework expected. We knew Wizz was after our lacework customers when we purchased, not a surprise. We had expected that by the end of Q4 this kind of tapers off and that customers who have decided to move on and not stay with lace work would be pretty much done. And then there was more churn in Q1 than we had expected. I think it’s almost done.

We get good reviews for the product. The fact that Google has purchased with is probably pausing some decision makers, right? What’s the right strategy? Is

Brian Essex, Security Software Analyst, JPMorgan: that changing your outlook at all?

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: So I don’t want to call it done, but I think the risks have decreased.

Brian Essex, Security Software Analyst, JPMorgan: Great, great. With that I think we’re out of time. So John, Christiana, thank you very much for joining us. Appreciate it.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: Thank you.

Brian Essex, Security Software Analyst, JPMorgan: Thank you all as well.

John Whittle, Chief Operating Officer, Fortinet: Thank you.

Cristiano Olgaard, Chief Accounting Officer, soon to be Chief Financial Officer, Fortinet: Thank you.

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