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Test Code : 250-502
Test appellation : Firewall and Integrated Security Appliances Solutions
Vendor appellation : Symantec
: 145 true Questions
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(EDGAR online by way of COMTEX) -- merchandise 2. administration's discussion and analysis of fiscal condition and consequences of Operations
in addition to historical advice, this Quarterly record on form 10-Q carries ahead-searching statements inside the import of section 27A of the Securities Act of 1933, as amended, and share 21E of the Securities and alternate Act of 1934, as amended (the "trade Act"). These statements include, amongst other things, statements regarding their expectations involving:
endured increase and market share positive aspects;
variability in earnings in unavoidable product classes from yr to yr and between quarters;
expected influence of revenue of unavoidable items and services;
the possess an impact on of macro-economic and geopolitical factors on their earnings;the percentage of their salary that carries their product and service income, and the fuse of billings between products and services, and the duration of carrier contracts;
the influence of their product innovation strategy;
the effects of govt law, tariffs and different connected policies;drivers of lengthy-term growth and working leverage, akin to increased sales productiveness, functionality and cost in their standalone and bundled subscription carrier offerings; growing their income to groups, carrier suppliers and executive businesses, the influence of earnings to those businesses on their lengthy-time age growth, growth and working outcomes, and the effectiveness of their inside earnings organization;
trends in earnings, cost of income and unseemly margin;trends in their operating costs, together with income and advertising and marketing fee, research and structure cost, generic and administrative price, and expectations involving these expenses as a percent of total income; risks and expectations involving acquisitions or earnings of property, including integration issues involving product plans and items, including the obtained expertise;
persevered investments in research and construction;
managing their persevered investments in income and advertising, and the influence of those investments;expectations related to unclear tax benefits and their useful domestic and global tax costs, and the possess an impact on of the Tax Cuts and Jobs Act (the "2017 Tax Act");
expectations related to spending involving righteous property and other capital expenditures and to the possess an result on on free cash flows;
competitors in their markets;
statements involving expected results and liabilities in litigation;their intentions regarding share repurchases and the sufficiency of their current cash, money equivalents and investments to meet their money wants for at the least the next 12 months;
other statements concerning their future operations, monetary circumstance and potentialities and commerce suggestions; and
adoption and possess an result on of latest accounting requisites, including these related to accounting for leases.
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These ahead-looking statements are discipline to unavoidable dangers and uncertainties that might occasions their genuine results to vary materially from those reflected in the forward-searching statements. factors that could occasions or contribute to such transformations include, but don't appear to exist restrained to, these discussed in this Quarterly document on kindhearted 10-Q and, in certain, the hazards mentioned under the heading "possibility factors" partially II, merchandise 1A of this Quarterly document on form 10-Q and people mentioned in different documents they file with the Securities and alternate commission (the "SEC"). They undertake no responsibility to revise or publicly unencumber the results of any revision to those forward-looking statements. Given these hazards and uncertainties, readers are cautioned not to vicinity undue reliance on such ahead-searching statements.
Fortinet is a global leader in cybersecurity solutions offered to a wide variety of organizations, akin to organizations, conversation provider suppliers, govt groups and small businesses. Their cybersecurity options are designed to give wide visibility and segmentation of the digital assault floor through their built-in security cloth platform, which facets automatic insurance plan, detection and responses.
The focus of attention areas of their commerce include:
community safety-We derive a majority of product earnings from their FortiGate network security home equipment. Their FortiGate network safety appliances embrace a broad set of constructed-in security and networking features and functionalities, including firewall, software-defined vast-enviornment network, cozy sockets layer information leak prevention, virtual deepest community, swap and instant controller and huge enviornment network part. Their community protection appliances encompass their FortiOS operating gadget, which gives the foundation for FortiGate safety functions, and FortiASIC built-in circuit, which is designed to speed up the processing of safety and networking capabilities. Their consumers may additionally too buy FortiGuard subscription functions to come by hold of possibility intelligence updates. They provide usual technical assist throughout every of their items via their FortiCare aid features. They too present capabilities to end-valued clientele including Technical Account Managers, Resident Engineers and knowledgeable service consultants for implementations, in addition to practising functions to their end-clients and channel companions.
Fortinet protection textile-The Fortinet security material platform is an architectural approach that protects the entire digital assault surface, together with network core, endpoints, purposes, information facilities and personal and public cloud. at the side of their community of cloth-ready partners, the Fortinet security fabric platform makes it feasible for disparate security gadgets to work together as an built-in, computerized and collaborative solution.
Cloud safety-We support consumers connect securely to and across their cloud environments by using offering protection via their digital firewall and other application products in public and personal cloud environments. Their Cloud safety options, together with their client access security broker solution, FortiCASB, prolong the core capabilities of the Fortinet protection textile platform to provide organizations with the equal degree of cybersecurity and hazard intelligence in cloud environments that they come by hold of on their physical networks. Fortinet cloud protection choices can exist found throughout every primary cloud providers, including Amazon net services, Microsoft Azure, Google Cloud, Oracle Cloud and IBM Cloud.
internet of issues and Operational know-how-The proliferation of web of issues ("IoT") and the digitization of Operational know-how ("OT") gadgets has generated new opportunities for us to grow their enterprise. With both IOT and OT, community-linked instruments are generating information that strikes between contraptions, across locations and in inner most and public cloud environments; these networks and gadgets require cybersecurity to achieve sure their defense and privateness.
We recorded complete earnings of $472.6 million every over the three months ended March 31, 2019, a rise of 18% in comparison to $399.0 million within the selfsame duration closing 12 months. Product earnings become $162.7 million during the three months ended March 31, 2019, an increase of 14% in comparison to $142.8 million within the identical age closing yr. carrier earnings turned into $309.9 million right through the three months ended March 31, 2019, an increase of 21% compared to $256.2 million within the identical duration remaining yr.
We generated operating earnings of $50.6 million every over the three months ended March 31, 2019, an increase of 56% compared to $32.4 million in the equal duration remaining yr.
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cash, cash equivalents and investments were $1.eighty five billion as of March 31, 2019, an increase of $a hundred thirty five.four million, or 8%, from December 31, 2018.
Deferred profits became $1.77 billion as of March 31, 2019, an increase of $79.0 million, or 5%, from December 31, 2018.
We generated money flows from operating actions of $201.3 million every over the three months ended March 31, 2019, a rise of $61.6 million, or forty four%, compared to the identical length ultimate yr.
right through the three months ended March 31, 2019, they repurchased 0.8 million shares of regular inventory under their Share Repurchase software (the "Repurchase program") for an aggregate purchase expense of $56.2 million.
during the three months ended March 31, 2019, their earnings increase turned into pushed by means of each product and service revenue. On a geographic foundation, profits is still assorted globally, which continues to exist a key power of their company. Product earnings grew 14% throughout the three months ended March 31, 2019 in comparison to the selfsame length closing yr. FortiGate unit shipments expanded year-over-yr. earnings of non-FortiGate items, such because the Fortinet security fabric and cloud items, additionally grew in comparison to the equal duration remaining 12 months. service profits increase of 21% during the three months ended March 31, 2019 compared to the identical age final 12 months turned into driven via the strength of their FortiGuard and other safety subscription earnings, which grew 24% in comparison to the equal duration ultimate 12 months, and FortiCare technical aid and other provider salary, which grew 17% in comparison to the equal length ultimate yr.
The percentage of their FortiGate-linked billings from entry-degree products lowered from 36% right through the three months ended March 31, 2018 to 34% every over the three months ended March 31, 2019. The percentage of their FortiGate-linked billings from mid-range items improved from 31% every the way through the three months ended March 31, 2018 to 34% every the way through the three months ended March 31, 2019. The percentage of their FortiGate-linked billings from high-end products lowered from 33% every through the three months ended March 31, 2018 to 32% right through the three months ended March 31, 2019.
all over the three months ended March 31, 2019, working expenses as a percent of earnings diminished by way of three percentage points in comparison to the identical length ultimate 12 months. Headcount expanded by means of 3% to six,015 employees and contractors as of March 31, 2019, up from 5,845 as of December 31, 2018.
Our sales approach is in accordance with a two-tier distribution model. They promote to distributors that sell to networking safety and commercial enterprise-focused resellers and repair suppliers, who in turn sell to their conclusion-purchasers. In unavoidable instances, they promote at once to massive provider suppliers and fundamental methods integrators. They additionally present their items across essential cloud suppliers, and possess diagnosed on-demand salary from Amazon net features, Microsoft Azure and IBM Cloud from shoppers who installation their products at a cloud features issuer in a convey-your-personal-license ("BYOL") such as from Amazon web features, Microsoft Azure, Google Cloud and Oracle Cloud. In a BYOL association, a consumer purchases a perpetual license from us via their channel partners and deploys the utility in a cloud provider's ambiance. in a similar way, consumers may additionally purchase this kindhearted of license from us and installation in their private cloud. whereas the revenue from such sales is still fantastically insignificant, it has extended compared to the selfsame age ultimate 12 months on a percentage foundation.
typically, their consumers purchase their hardware products and software licenses, as well as their FortiGuard security subscription and FortiCare technical assist features. They commonly bill on the time of their sale for the replete cost of the products and security and technical sheperd features. The invoice is typically payable within 30 to forty five days. They additionally bill unavoidable features on a monthly groundwork.
Our safety Processing Unit ("SPU") hardware structure is a crucial share of their way to network security. The SPU comprises three strains of proprietary software-selected built-in Circuits ("ASICs"): the content material Processor, the network Processor and the equipment-on-a-Chip. The ASICs are designed for highly efficient execution of computationally intensive projects, together with coverage enforcement, possibility detection and encryption. As such, ASIC-based solutions can hasten many security applications concurrently without a major reduction in performance.
We pomp screen a yoke of key metrics, including the key economic metrics set forth beneath, in order to assist us evaluate boom trends, set up budgets, measure the effectiveness of their sales and advertising efforts, and examine operational efficiencies. right here desk summarizes revenue, deferred earnings, billings (non-GAAP), internet cash provided by means of operating
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actions, and free cash movement (non-GAAP). They focus on earnings under under "outcomes of Operations," and they debate internet cash provided by working actions beneath under "-Liquidity and Capital elements." Deferred earnings, billings (non-GAAP), and free money circulate (non-GAAP) are mentioned instantly under here table:Three Months Ended Or As Of March 31, 2019 March 31, 2018 (in millions) income $ 472.6 $ 399.0 Deferred profits $ 1,765.eight $ 1,396.four Billings (non-GAAP) $ 551.6 $ 463.2 web cash supplied by operating activities $ 201.3 $ 139.7 Free money circulate (non-GAAP) $ 191.1 $ 128.1
Deferred revenue. Their deferred income carries amounts that possess been invoiced but that haven't yet been identified as profits. the vast majority of their deferred income equipoise includes the unrecognized component of carrier income from FortiGuard security subscription and FortiCare technical aid service contracts, which is recognized as earnings ratably over the contractual service length. They computer screen their deferred earnings steadiness, boom and the mixture of brief-term and lengthy-term deferred profits since it represents a significant portion of free money stream and of profits to exist diagnosed in future periods. Deferred earnings was $1.77 billion as of March 31, 2019, a rise of $79.0 million, or 5%, from December 31, 2018.
Billings (non-GAAP). They profile billings as income identified based on frequently permitted accounting principles in the u.s. ("GAAP") plus the trade in deferred revenue from the nascence to the conclusion of the duration and adjustments to the deferred profits equipoise due to adoption of the brand new revenue attention general much less any deferred revenue balances acquired from enterprise mixture(s) every over the length. They accept as righteous with billings to exist a constructive metric for administration and traders as a result of billings obligate present and future salary, which is a crucial indicator of the fitness and viability of their company. There are a few barriers involving the utilize of billings as a substitute of GAAP income. First, billings encompass quantities that possess not yet been identified as salary and are impacted by the time age of security and aid agreements. second, they may additionally cipher billings in a mode that's distinctive from peer groups that record equivalent economic measures. administration bills for these barriers via providing particular suggestions related to GAAP salary and evaluating billings along side GAAP earnings. total billings had been $551.6 million for the three months ended March 31, 2019, an increase of 19% compared to $463.2 million within the selfsame length remaining yr.
A reconciliation of revenue, probably the most directly related fiscal measure calculated and offered based on GAAP, to billings is supplied beneath:Three Months Ended March 31, 2019 March 31, 2018 (in hundreds of thousands) Billings: income $ 472.6 $ 399.0 Add: trade in deferred revenue seventy nine.0 60.1 Add: Deferred revenue adjustment as a result of adoption of the new revenue cognizance usual - 4.1 complete billings (non-GAAP) $ 551.6 $ 463.2
Free cash circulation (non-GAAP). They define free money circulation as net cash offered by way of working actions minus capital bills comparable to purchases of actual property and different property and equipment. They account free cash stream to exist a liquidity measure that offers positive guidance to management and buyers concerning the amount of cash generated through the company that, after capital costs, may too exist used for strategic alternatives, together with repurchasing mind-blowing typical inventory, investing in their enterprise, making strategic acquisitions and strengthening the equipoise sheet. A challenge of using free money movement is that free money stream does not signify the replete boost or reduce in the cash and cash equivalents equipoise for the age because it excludes cash flows from investing actions aside from capital fees and cash flows from financing activities. management money owed for this hassle by way of proposing counsel about their capital costs and other investing and financing actions on the physiognomy of the cash circulate commentary and under "-Liquidity and Capital supplies" and by means of featuring
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cash flows from investing and financing actions in their reconciliation of free money flows. furthermore, it's crucial to celebrate that different corporations, including agencies in their trade, may not utilize free cash stream, may additionally cipher free money movement in a unique way than they carry out or might too utilize different economic measures to evaluate their efficiency, every of which might prick back the usefulness of free money hobble as a comparative measure.
A reconciliation of net cash supplied by using working activities, probably the most directly related economic measure calculated and introduced in accordance with GAAP, to free money movement is provided below:Three Months Ended March 31, 2019 March 31, 2018 (in millions) Free money movement: internet money supplied through working activities $ 201.3 $ 139.7 less: Purchases of property and gadget (10.2 ) (eleven.6 ) Free cash rush (non-GAAP) $ 191.1 $ 128.1 internet money used in investing actions $ (39.0 ) $ (25.5 ) web cash utilized in financing activities $ (57.8 ) $ (89.6 )
important Accounting guidelines and Estimates
Our dialogue and evaluation of their financial circumstance and consequences of operations are based upon their fiscal statements, which possess been organized according to GAAP. These concepts require us to achieve estimates and judgments that possess an result on the said quantities of property, liabilities, revenue, pervade of earnings and fees, and linked disclosures. They groundwork their estimates on ancient journey and on various different assumptions that they believe to exist most economical under the circumstances. To the extent that there are cloth differences between these estimates and their exact results, their future financial statements should exist affected.
there possess been no fabric alterations to their Important accounting guidelines and estimates as of and for the three months ended March 31, 2019, as compared to the essential accounting guidelines and estimates described in their Annual report on kindhearted 10-okay filed with the SEC on February 27, 2019 (the "kind 10-k").
recent Accounting Pronouncements
See exist alert 1 of the notes to condensed consolidated economic statements covered in share I, merchandise 1 of this Quarterly report on form 10-Q for assistance involving fresh accounting pronouncements.
desk of Contentsoutcomes of Operations Three Months Ended March 31, 2019 and March 31, 2018 income Three Months Ended March 31, March 31, 2019 2018 % of % of amount revenue volume earnings trade % trade (in hundreds of thousands, apart from percentages) profits: Product $ 162.7 34 % $ 142.eight 36 % $ 19.9 14 % provider 309.9 sixty six 256.2 64 fifty three.7 21 total salary $ 472.6 one hundred % $ 399.0 a hundred % $ seventy three.6 18 % salary by way of geography: Americas $ 200.5 42 % $ one hundred seventy five.eight forty four % $ 24.7 14 % Europe, focus East and Africa ("EMEA") 177.2 38 144.5 36 32.7 23 Asia Pacific ("APAC") ninety four.9 20 seventy eight.7 20 16.2 21 total revenue $ 472.6 100 % $ 399.0 100 % $ seventy three.6 18 %
complete revenue multiplied by $seventy three.6 million, or 18%, during the three months ended March 31, 2019 in comparison to the identical age final year. They persisted to journey diversification of revenue globally. profits from every regions grew, with EMEA and APAC contributing the biggest component of their salary boom on a percent groundwork.
Product profits elevated by $19.9 million, or 14%, right through the three months ended March 31, 2019 in comparison to the selfsame duration final 12 months. They skilled salary growth throughout a few of their hardware and software products, together with FortiGate home equipment, for which unit shipments elevated year-over-year. carrier income extended by way of $53.7 million, or 21%, every over the three months ended March 31, 2019 in comparison to the equal age ultimate yr. The enhance in carrier revenue changed into essentially as a result of the awareness of revenue from their transforming into deferred earnings stability such as FortiGuard protection subscription and FortiCare technical aid and other contracts offered to a larger customer base, as neatly as the renewals of equivalent contracts offered in the quarter and previous periods.
cost of profits and unseemly marginThree Months Ended March 31, March 31, 2019 2018 change % trade (in millions, apart from percentages) cost of profits: Product $ 70.2 $ 58.2 $ 12.0 21 % provider 42.8 39.0 3.8 10 total cost of revenue $ 113.0 $ 97.2 $ 15.8 sixteen % unseemly margin (%): Product fifty six.9 % 59.2 % service 86.2 84.eight complete unseemly margin 76.1 % 75.6 %
total unseemly margin elevated by means of 0.5 percent features every the way through the three months ended March 31, 2019 compared to the equal duration closing year, pushed with the aid of bigger carrier revenue, which has an improved margin than product profits. provider unseemly margin extended by way of 1.4 percent features every over the three months ended March 31, 2019 compared to the identical age final yr, as our
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FortiGuard safety subscription and FortiCare technical aid and other provider earnings grew 24% and 17%, respectively, during the three months ended March 31, 2019 in comparison to the identical age remaining yr, which outpaced the increase in the related personnel prices and headcount increase, leading to an improved margin. pervade of service earnings become comprised primarily of personnel costs. Product unseemly margin lowered via 2.3 percentage features right through the three months ended March 31, 2019 compared to the identical age remaining yr. total can pervade of product earnings became comprised basically of direct and oblique cost of items offered, inventory reserves and different charges.
working chargesThree Months Ended March 31, March 31, 2019 2018 % of % of amount salary amount profits change % alternate (in thousands and thousands, apart from percentages) working prices: analysis and construction $ 68.6 14% $ 59.1 15 % $ 9.5 16 % earnings and advertising 215.9 46 185.3 forty six 30.6 17 everyday and administrative 24.5 5 25.0 6 (0.5 ) (2 ) complete working prices $ 309.0 65% $ 269.four 68 % $ 39.6 15 %
research and building
research and construction expense increased by means of $9.5 million, or 16%, every the way through the three months ended March 31, 2019 compared to the selfsame age closing 12 months, primarily because of a rise of $7.1 million in personnel-connected costs on account of accelerated headcount to sheperd the development of new items and continued enhancements of their present items. They intend to proceed to build money into their research and structure company, and hope analysis and structure fee to increase in absolute dollars throughout the the repose of 2019.
sales and advertising
income and advertising rate improved with the aid of $30.6 million, or 17%, during the three months ended March 31, 2019 in comparison to the identical duration final 12 months, primarily because of a rise of $22.1 million in personnel-connected expenses, including better stock-primarily based compensation cost of $4.5 million, as earnings and advertising headcount elevated with a purpose to pressure market share features globally. They intend to proceed to achieve investments in their revenue resources and infrastructure and advertising method, which can exist vital to sheperd increase, and are expecting revenue and marketing cost to raise in absolute greenbacks every through the the repose of 2019.
universal and administrative
normal and administrative fee decreased by means of $0.5 million, or 2%, throughout the three months ended March 31, 2019 compared to the identical age remaining 12 months, primarily as a result of a lessen of $2.6 million in expert services charge. The . . .
may too 08, 2019
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