Fortinet, Inc. (FTNT) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fortinet Q1 2013 Preliminary Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Michelle Spolver. Ma'am, you may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining our conference call today. As you know from the press release issued about 30 minutes ago, today, Fortinet announced preliminary financial information for the first quarter 2013. The purpose of this call is to provide perspective on these results to the extent that we can at this time. Additional details will be provided during our Q1 '13 earnings call scheduled for April 30 at 4:30 p.m. Eastern time. Joining me today are Fortinet's Founder, President and CEO, Ken Xie; and Interim CFO, Nancy Bush. Following prepared remarks by Ken and Nancy, we'll open up the call for questions. Before we begin, let me first read this disclaimer. Please note some of the comments we make today are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Please refer to our SEC filings, in particular the risk factors described in our Forms 10-K and 10-Q, for more information. All forward-looking statements reflect our opinions only as of today, and we undertake no obligation and specifically disclaim any obligation to update forward-looking statements. Please refer to the Investor Relations section of our website for more information, including our preliminary earnings release issued just a few minutes ago. A replay of this call will also be available on our website. I will now turn the call over to Nancy Bush, who will review Fortinet's preliminary earnings results for the first quarter 2013.

Thanks, Michelle. Let me begin with a quick review of the preliminary first quarter financial results that we announced in our press release after the market close today. Specifically, billings are expected to be in the range of $147 million to $149 million compared to our guidance of $158 million to $162 million. Revenue is expected to be in the range of $134 million to $136 million compared to our guidance range of $138 million to $141 million. And non-GAAP EPS is expected to be approximately $0.10 compared to our guidance range of $0.11 to $0.12. As Michelle said, we will provide further details on Q1 financial results, along with our guidance outlook for Q2 and the full year 2013, during our planned earnings call on April 30 at 4:30 p.m. Eastern time. I would also add that results we have shared today are preliminary in nature, subject to change based on a completion of our quarterly review and close process. Now let me turn the call over to Ken, who will provide a bit of perspective on the global security market and factors that have impacted our performance during the quarter.

Thank you, Nancy, and good afternoon, everyone. We come off of our strong Q4 and feel really good about our momentum going into Q1, so our finance results fell short of our expectation. So from a high-level perspective, we believe the service-provider-specific issue and some macroeconomic and the geopolitical issue were the primary reason for the revenue and billing shortfall. So importantly, we feel worst market has drawn about [ph] the strength of our product. We believe our global competitive position remains strong. And of note, our miss was not specifically relate to the last of significant deal to competitors during the quarter. So let me address the primary factor that affect our Q1 performance. At first, we had a few large service provider deals in U.S. did not close as expected. In this case, deals were not lost during the quarter. Our total telco service provider vertical is currently expect to have contribute approximately 25% of total Q1 2013 billing compared to approximately 30% in Q1 2012. So second, additionally, a minority of macroeconomic and the geopolitical issue affect our performance in North America and the EMEA, of which I will discuss -- address further in a minute. And finally, a less extent, the timing of new appliance product releases and inventory shortages also contribute to some of the miss. Bookings is down from a geographic perspective. So I'm very pleased to say, we have a very strong performance in Asia, especially from Japan, even in light of a currency impact there. So we also did well in Southeast Asia and India. In the Americas, our U.S. enterprise sales team also did well and meet sales target. However, we saw a few large deal with service provider that did not close as expected, as customer approached the purchase with more typical hesitance and cautions. So we're also facing in China and Latin American, which was -- come in several million dollars less than expected. The common transaction and also some economic challenge in various country, coupled with the extensive hiring and the ramp up of salespeople across the region, result in Latin America falling short of expectations. Regarding to EMEA, we faced micro issues across the region. Economic instability and uncertainties throughout many part of Europe caused increased cautions among customer and more conservative spending. So we saw more customers, especially within the enterprise sector, buying only what they needed and hold off on very large project. As a result, we closed few larger deals than we expected. So looking ahead, we believe the security industry remains healthy and growing, with the trends such as a high-speed demand works [ph], advanced persistent threat [ph], mobility and the cloud-based meta-security [ph] service delivery continues to drive it -- continue to be the drivers of our industry. We believe we have a technology leadership position that continue to gain market share and are well positioned for the long-term. So now I would like to open the call for Q&A, and -- but please note that it's -- it is after the quarter end and some of the finance information is not finalized and subject to change. And certain information that we cannot provide today will be provided during our April 30 call. So let's start, operator?

[Operator Instructions] Our first question comes from Michael Turits of Raymond James. Michael Turits - Raymond James & Associates, Inc., Research Division: Michael Turits. Questions on the service provider misses. Any more details about exactly what happened there? Whether or not you think they're delayed? If they're likely to close or have closed in the second quarter? And importantly, how are you very sure that these were not competitive losses? And are you, in fact, seeing any increased competition with -- in the telco space from any other providers?

I think we see some behavior changing the service provider in Q1. In the past, in the last couple of years, they yearly kind of -- more offer in a CapEx mode, which they buy some bunch of equipment or even they renew. They have some year or multiyear renewal. Now they try to move towards the OpEx kind of model, try to conserve some cash. And also, we have not seen any competitive issue in the service provider space, because so far, our competitor's not come close to the product we have in the service provider, both on a performance, on a function and also on a reliability and the personal feed [ph] in the service provider space. So I'm not quite sure how long this kind of behavior will be dragged going forward and -- but is still too early to be gainful like a -- forecast a trend. But I do see some kind of cautious in the spending, in the service provider space.

Michael, it's Michelle. I would add, to put a bit more color around sort of the miss in the deals that contributed. There were few deals there. These deals were more than $1 million. So they're large deals. To your question of how do we know that it wasn't lost to a competitor is because the deal hasn't -- it's not closed. So we would know if it was not -- if it has gone to somebody else. Michael Turits - Raymond James & Associates, Inc., Research Division: So were the deals broken up, and they're going to become smaller deals? Or what kind of indications do you get that they're still on the table, just slipped? Or what do you make of them?

I don't think the deal are going to quite breakup. But they just kind of keep on dragging on, and so that's the case. But we do see some behavior in Europe, some other bigger enterprise deal. They're starting breakup a little bit instead of, "Oh, we have a lot of money. We want to spend in end of the quarter." So that's now the behavior.

Our next question comes from Keith Weiss of Morgan Stanley.

To dig into the service provider a little bit. You guys have historically talked about managed security services being a big part of what you're selling into in the service provider space. Can you give us a little color on -- in terms of where the deals that didn't close, was it on that MSSP side of the business? Or the other side of the house, if you will, and in terms of the service providers?

It's more on the MSSP side of business. And like I said, the earnings of our biggest segment is last year Q1, it's about 30% of our business compound, the managed service provider. Now, this quarter, we estimate -- I mean, Q1, we estimate probably about 25%.

Got it. And then in terms of Europe, and I guess, this holds true for the service provider space as well, but in terms of Europe, the macro conditions have been pretty poor in Europe for a while. And a lot of guys have started talking about the idea of people are starting to -- wanting to operate under a uncertain macro environment. So, why now? Why do you think you saw the European macro impact in Q1, in particular, for a problem that's been persisting for, really, the past 3 years?

To Europe, we don't see the number miss much. So it was pretty close to the target, just we see less bigger deal. So that's -- we want to point out. I think, it's the -- if I can quantify, this a little bit, I see the service provider probably missed maybe between $6 million to $9 million. And the Latin America, maybe $4 million to $6 million. And then the product -- the shortage of product transition may be $2 million to $4 million. But this is just more preliminary number. So Europe, I think, is a -- we see some behavior change, but it is -- we also have a very broad product to cover both the big enterprise service provider and also the channel SMB. So we don't see the channel SMB has any -- has about some big enterprise that Europe has kind of behaved a little differently than ever before. But U.S. enterprise, we see still pretty healthy.

Got it. And then one last one for me. Just on the inventory problem. You guys talked a lot over the past year or so about trying to make sure you don't write the inventory problems. A lot of work that you guys did in the making sure you had sufficient inventory. So what happened here? Where did the system go awry and that inventory shortages actually led to a shortfall?

In Q1, there's, I say, that's probably the biggest annual event in the security industry, so we announced a few new product and also somewhat related to the -- using the new chip, the lower end. So that's kind of a result. Some of the customer of some deal they're starting really buying the new product instead of just buying the current product. And also, there's some new product ramp-up quicker than expected, but we don't plan enough inventory. So that's causing like a $2 million to $4 million shortage. I think this more short-term issue, I think we can address this quickly, whether keeping the planning better, get more inventory and also plan the product transition better. I don't think it's related to the -- like we mentioned, we do have the FortiOS announced in Q4 and also the FortiASIC-SoC to announce in Q4. But none of these we sell directly. The impact really comes from the product announcement, so that's the FortiGate and some other product announcement. Because now the product, the FortiOS, just if you buy the support and you got a free upgrade of the new FortiOS and the FortiASIC just gradually build into the new product, so that's the product, sometimes the transition of the product from old version to new version may cause some kind of a customer reconsider with the product they're going to use going forward, because the new product tend to be the same price but has much better performance.

Our next question comes from Brent Thill of UBS.

Just on the North American sales change, there's been a lot of questions among your investors of the impact of that change during the quarter. And I was curious if you can just comment on that change? And perhaps expand upon why you don't think it was an impact for your view about what's happening with Q2 in the North American channel?

Yes. The U.S. trend is more trying to -- more focused on enterprise. So while we have a market performance on enterprise and also we believe, long term, the company also will be -- benefit from the change and also more focus on enterprise. Because the previous leadership is more kind of a channel-focused compound like WatchGuard or SonicWALL experience, which is a large channel focus. But for us, we believe that the product, the technology we have is also -- have the huge market opportunity in enterprise. So that's -- we made a change. It's a very positive change and so far from internal to outside we all feel the change is very positive market for the company and going forward. So that probably -- we don't feel is -- that the change has the impact of the number.

Yes. And, Brent, it's Michelle. I mean, when we talked about -- for the issue that contributed to Americas' negative -- more -- the less than expected results in the Americas. And those really weren't based on failed turnover or anything like that. It was really like we talked about a few service providers deals, which did contribute a pretty good portion of the miss there. And that was on the customers' end. It really didn't make any difference in terms of who we had in a leadership spot on a sales perspective. In Latin America, we talked about it a bit, but there's more macro issues that are unique to Latin America and not necessarily related to our change in sales leadership.

Yes. Also in my script, the enterprise is on target and also channel doing quite well.

Okay. And just a quick follow up to Keith's question on inventory. When do you expect that to be cleaned up? Is that something that's a temporary issue? Or do you feel like it's going to linger into later -- into the second quarter?

We have a couple of products in shortage. One product, the FortiGate 100D, we expect to fulfill with product quickly this quarter. This other product we announced in -- but it's a smaller product, may have some long lead times on some of the component, but we are -- we're still trying to pull in, but is -- right now, there's still some uncertainty, but is -- that's much smaller part of the inventory miss. So the miss is really the FortiGate 100D. I think we can solve that issue this quarter.

Our next question comes from Walter Pritchard of Citigroup.

I'm wondering just on -- maybe to put another way on the carrier side. It sounds like you're used to carriers buying more inventory upfront. And they're now buying sort of more just in time. I'm wondering if you expect that, that situation will persist and if we should think about that channel buying more on that basis going forward?

My sense, that's maybe some of a behavior change going forward. Because in the past, they're more like, "Hey, I look in the budget. I want to spend budget." And now they study more carefully, try to see what's the spending and also how to -- like I said, well, it kind of changes some behavior from a CapEx to OpEx, that's also some -- but it's still too early to say. Maybe give us maybe a few more months. We may know some more details.

And then just one follow-up around you're hiring plans. I'm wondering if your performance this quarter has caused you to change or re-examine any of your plans to invest in the business this year?

We still believe we should invest in the growth, and we're ready to embark in hiring in Q1. During Q1 is a good time for hiring people, especially in sales. So I think we're doing quite well in the hiring in Q1. So we will provide some more detail in April 30, but I think in the long term we believe is we're still gaining market share and, also, we have a market product in position, so we should keep investing in the growth.

Got it. And just one other question, kind of wondering if you could talk about -- if you could quantify your U.S. enterprise growth? It sounds like that was an area of the business you were pretty happy with. Any way you can quantify what kind of growth you saw in U.S. enterprise?

I don't have much data. Maybe in April 30, I'll try to do my best. I think for us, we will do our best to get more visibility, try to be more -- helping you guys. But so far, I don't have much data to share right now. Maybe in 2 weeks we should have more data to share with you.

Our next question comes from Daniel Cummins of B. Riley.

Ken, you may have characterized this already. I apologize if you have, but a similar question around the enterprise verticals and specifically the large deal environment that you saw in the enterprise verticals in the U.S. and globally.

U.S., we see they were still healthy and is on target. And also last year, we grew 55% of U.S. enterprise. We still see it's a great market growth opportunity. And we feel we have the right product, we have the right team to keep it doing well. But is -- globally, as the APAC also -- I just made a trip to APAC last week, so far we saw a pretty strong growth in APAC. Europe, the feedback we got is really some big enterprise starting to behave more kind of cautiously, kind of -- there's a behavior experience maybe in like 2009, something like that, so we kind of will be careful. I think once we have some more data to share in April 30, we'll try to see how many bigger deal, all these kinds of things we probably can know better. Right now, we just see, maybe -- in Europe, has a less bigger deal than we expected.

Our next question comes from Sterling Auty of JPMorgan. Sterling P. Auty - JP Morgan Chase & Co, Research Division: What I was wondering is on the MSSP business, is there a sense whether those carriers are seeing a slowdown on their end market? Small business index, obviously, that's suffering. Or is it just the buying model?

Right now, I just see the buying model. I don't have much information about whether they see some slowdown or not. We began keeping -- kind of find out more maybe in 2 weeks. But my sense, I think, it's really maybe they also test -- maybe pressure. So that's -- but I don't have much information right now. I probably try to find out more in the April 30 call. Sterling P. Auty - JP Morgan Chase & Co, Research Division: Okay. And then my one follow-up. Sorry if you said it, but I kind of missed it. In terms of the appliance shortages, is it a certain set of components or how is the yield production on the new chip?

The shortage is more on the product. I think -- is right now, because we don't sell in the chip, we only use the good chip, and so the chip will have no impact on the shortage. So we -- so one of the product, like I said, is really -- they sell faster than we expected, and we don't have enough inventory, so we end up acquiring some backlog on the product.

Our next question comes from Shaul Eyal of Oppenheimer.

This is Jake Shelman [ph] instead of Shaul. In Europe, you said there were was some weakness. Could you kind of give us a sense of breakdown in geography?

Yes. It was pretty much across Europe. There could be a geography that was stronger than the others, but we did see challenges throughout Europe. That's the EMEA region, so Europe, Africa and the Middle East.

Yes.

Our next question comes from Daniel Ives of FBR. Daniel H. Ives - FBR Capital Markets & Co., Research Division: Ken, obviously, 2 of the last 3 quarters now, you've had some soft quarters. Could you continue to saying that, that's more macro, as what's happening with your customer base? Or obviously, there's some executions, some internal issues that you think are contributing to this, that obviously changed our customer-buying behavior or some big deals pushing? I'm just curious if you said that. Just comment on that, given 2 of the last 3 quarters?

I think the 3 we mentioned, the first 2 is more micro related, like the service provider space, their buying behavior changed and also the Latin Americans, some common transition, some geopolitical issues. So that's probably more micro related. And I'm not sure, they may last a little bit longer. I'm not quite sure about that. It's out of our control. The #3 about the product shortage and the changing from some new generation product, that's the part we can control, we can fix.

Our next question comes from Rohit Chopra of Wedbush.

A couple of questions, Ken. One, I just -- I know you talked about the fact that you didn't lose anything to competition and that you feel that you haven't, but there are some misses here. Do you think that maybe there are just increased competition causing carriers to maybe eval more products? Or is the beg-off process taking longer? Is that maybe a cause? And the other one, since we have you on the line, just thought maybe we'd get an update on CFO?

Okay. On the part of -- from competitor in the service provider space, so far, I have not heard any feedback, it's because of competitor. So we talked to quite some service provider, because of -- they still believe we have the best product, and the competitor not come close to what we have on the platform, on the performance, on the multi-function we offer. On the CFO search, we are -- we're actively doing the search. And we meet a -- quite a few very good candidate. But also, this is a very important role, try to help the company grow in the next 5 to 10 years. We also kind of want to select the best. But we are very, very active, while we're searching right now.

Our next question comes from Kim Evers of Robert Baird. Kimberly Evers - Robert W. Baird & Co. Incorporated, Research Division: Ken, not to beat a dead horse, but on the service provider, is there any chance some of that miss there is due to a pause in front of the new high-end ASIC? Or do you think it's all spending model related?

I don't -- so far, I do not know any of because the new ASICs. The new ASIC we announced, the substitute is more towards the lower end part of it. The service provider, they're using the 5,000, the ATCA platform, so that's not relate to the new ASIC. Kimberly Evers - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then separately, in Latin America, I think you mentioned it's really a matter of quick hiring and people not becoming productive as quickly as possible. Is there anything else contributing to the miss there in terms of the type of demand for products?

The other part I mentioned is really there's some geopolitical Obaman transaction -- transition there like Venezuela and also like election in Mexico that's only happened a few years per time. So some of them, difficult to forecast. And also, there are some other like the Argentina, there's some currency rebalancing. So all these kind of impact a total of few million dollars. But I think that the good part really, we have a new team on board. And we believe will be starting to contribute going forward. But some may take some ramp-up time. But the team really working right now, so in a position to help with future growth.

Our next question comes from Robert Breza of RBC Capital Markets.

I guess, step back here, you guys have been able to execute pretty, pretty strongly from the new IPO in -- over the last couple of quarters, we've seen some missteps from the distribution perspective in Europe and Asia. And I guess I'm just wondering when you look at the exits from the sales force here and the leadership side, do you feel like you have the management team in place here? Or do you need to make some structural changes from a leadership perspective?

I think we have a very, very strong leadership in the south team and they can't keep in growing, gaining market share in the space. I think, I agree, in the last few years of IPO, we kind of -- this is a miss we don't want to see happen. Like there's a somehow, there's 3 things that all happened at the same time: the service provider space, the Latin American, also the product shortage. So we should do better to award all these. But it's a -- I think the team is very good. And also long term, we do believe the company will keep in growing and keep in gaining market share and also do better than our competitors.

Our next question comes from Keith Weiss of Morgan Stanley.

Just a quick follow-up guys. Just wanted to make sure I was clear on the messaging, on the service provider slipped deals. I'm not quite sure if you're trying to tell us that those deals slipped, and they're still active, and they could potentially close? Or are those deals going to come in to you guys in a different way on a go-forward basis? Has purchasing changed fundamentally that what was a $2 million deal potential in Q1 is no longer going to be a $2 million deal in Q2?

We -- all the deals still there, so we don't lost any deal. And also, did not lost any competitors. There's some purchase behavior change, which may impact some of the size of deal to break up into small piece of it, so that...

So, Keith, it's both.

Yes.

And I think it's maybe helpful for you to get a little bit more color around the deals. But it was a bit of both. So again, even though we're talking about a couple of deals, they're big deals. So in one case, it was a change in buying behavior, where instead of buying everything upfront, they want to sort of move throughout the year. So that's not ideal loss, it's change in the amount of revenue we are expecting to come in to the quarter. And the other case, it was a service provider that's taken longer to evaluate. And not ready necessarily to sign the PO, but they're not opening that to other competitors at this time and it's still on the table. So they are deals that slipped, but we're not prepared at this time to say when they're going to close or guarantee that they will close.

Our next question comes from Rob Owens of Pacific Crest.

Given the weakness in billings appeared more pronounced than revenue, is that a function of attach rate of services to license some of these large service provider contracts? Or was the magnitude should have been expected? Or there was some -- was there some weakness in renewals?

No. What you see is you kind of come into the quarter, right, is a little of north of 50% of our revenue will come off the balance sheet, right? So even when you have a slight downtick in billings as we did, it doesn't have kind of the same effect in translation into the revenue stream.

Yes, also like Michelle mentioned, one of the service provider, the change in the buying behavior will not impact the revenue, it will be more impact on the billing, because instead of buy like a trunk of -- in the beginning, they may kind of split into a few pieces every quarter. So that probably would not change. And the impact in the revenues. It's more impact on the billings.

Our next question comes from Rick Sherlund of Nomura.

On the Europe and Middle East, I think that's probably enterprise business you're referring to that was softer. Could you give us a little more color on what you were hearing there? Is it just pushing out ideals? Or is it all enterprise related? Maybe you can give us a little more color that.

Yes, I think, internationally, and also, Europe, is pretty much on target. Just we see some behavior in the big enterprise, which is kind of like more cautious on the spending side.

And as far as the proportion of the miss, if it's about a $12 million shortfall in billings, how would you think about that? I think you said the inventory shortage issue was to a lesser degree. The service provider, Latin America, Europe were they all 3 about equal?

No. I think some number, normally, I say the shortage -- the product transition is a total $4 million; the Latin America, $4 million to $6 million; and the service provider, $6 million to $9 million. But we still need some more detailed analysis. So that's probably in 2 weeks, we can -- we hope we can provide some more details.

Sorry, I missed it, the Europe, Middle East, how much was that impact?

The -- I think the problem with the miss is less. I don't think we mentioned that on one of the 3 reason for the result. But we do see some behavior changing. So we probably close a nice bigger deal in Europe. So that's the current feedback. We probably need a couple more weeks to see some other concern on that.

And your sense is that inventory shortage will change next quarter. Latin America, you got a new team there. That may change next quarter, but we're not entirely sure on the service provider and Europe business, right?

Yes, yes. That's pretty much the case.

[Operator Instructions] Our next question comes from Walter Pritchard of Citigroup.

Just one follow-up. And I know we're not getting into the full P&L here and talking about all the numbers. But it's the only way I can get to EPS on your revenue number, if I assume that gross numbers were below 60% on the product side, or I guess, gross margins overall were low, which I'm thinking product probably is a source of variability. I'm wondering if you can just talk generally on gross margins in the quarter?

Walter, that's a great question, but we'll give you more color the 30th. As you can appreciate, we have still have a ways to go with our numbers.

Okay. Fair enough.

Yes, I think, probably, the gross margin -- yes, maybe we will find some more details.

Our next question comes from Michael Turits of Raymond James. Michael Turits - Raymond James & Associates, Inc., Research Division: Just, again, a clarification on the buying behavior chain. So on that telco deal, did you take some of it this quarter? And do you expect to get the rest of it in chunks over the year, or [indiscernible]?

The one deal that we spoke about specifically about changing the buying behavior, yes, we did take some of it this quarter.

Yes.

Not what we expected.

Yes, if you move someone into an OpEx model, right, that comes over across the course of the year, right? So the particular customer moved more into an OpEx model with us, particular pieces of the business, not all of it. We took some of this quarter and some will come in the future. Michael Turits - Raymond James & Associates, Inc., Research Division: Yes, but it still sounds like a smaller total deal, so I'd expect it in the next 12 months, right?

No. Same size but split over multiple quarters ongoing. The service providers -- I guess, I would characterize what I saw if I were just put on the CFO hat. I believe these businesses are expanding for them, and it comes to the CFOs' attention. They're talking about, "Okay, show me the metrics on the business." And some of them are like, "Okay, I have to think a little bit more about when I put something in service, how I'm generating revenue, how I'm generating cash." All these people who buy us, they pay out dividends to their shareholders. So I think it's a good sign. It means it's a healthy, growing business for them, but it also means that it attracts a little more attention around the assets of the company. Michael Turits - Raymond James & Associates, Inc., Research Division: I know this is a big picture question that you probably can answer later, but what are your general thoughts right now in terms of the health of the market? For the full year, you've been guiding to upper teens growth. Does it still feel like mid-teens or greater growth business for you?

We don't -- we kind of haven't gotten a full view of it yet. Both the macro -- kind of if you take LATAM and Europe and then some of the behavior we saw with the service provider, we haven't fully fleshed out what our thoughts on that are yet. I think security, overall, and Ken can comment more on kind of the market space and the demand drivers we see long term, are very, very healthy. But how we translate what we see this quarter into the rest of the year, we're not there yet on that.

We try to get more detailed color in the April 30 call for the quarter, for Q1 and for the rest of the year. So right now, we try to talk to the client and try to catch more information.

Our next question comes from Fatima Boolani of Jefferies. Fatima Boolani - Jefferies & Company, Inc., Research Division: This is Fatima on the behalf of Aaron. I just had a follow-up on the China business. You had spoken to Asia-Pac being very strong in the quarter. So just wanted to see if you could provide an update on the China business front and how sort of that's progressing?

The China part is back on track, and it's not quite fully up to speed yet. But it's -- also, China is a very small part of the overall company being that's also a small part of APAC, so we don't see that has much impact. Fatima Boolani - Jefferies & Company, Inc., Research Division: Okay. And then perhaps just a quick follow-up. Within Japan, are there any particular verticals that standout or just broad-based strength?

They are quite broad in strength. And out of that, I think the -- you see the currency devaluation has some impact. But I have to say, the demand you also put is strong. So we also have very good team to -- and also very good partner to keeping in doing well.

[Operator Instructions] And at this time, I'm not showing any further questions. I'd like to turn the call back to management for any further remarks.

And then we would like to just thank everybody for joining, for bearing with us. We have as much information -- providing as much information that we can right now. And, obviously, invite everybody to join us on our call on April 30. I'll actually be sending -- we'll put out a press release in the next couple of days with the dial-in information.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's presentation. You may all disconnect. Everyone, have a great day.