Exclusive Networks SAS

PAR:EXN

Earnings Call Analysis

Exclusive Networks Q3 Earnings on Track with Strong Growth

Exclusive Networks has maintained its trajectory, expecting to grow from EUR 3.3 billion in 2021 to EUR 5.15 billion in 2023, a compound annual growth rate of 25%. Q3 marked the company's sixth consecutive quarter exceeding EUR 1 billion in gross sales, achieving a 13% increase at constant currency. Customer loyalty remains high, with net vendor and customer retention rates at a robust 122% and 121% respectively. The cloud-based business, a significant growth driver, now comprises one third of total gross sales, buoyed by a 46% increase in number of partners trading on the XO-D platform, with an impressive 82% rise in transactions year-on-year.

Q3 2023: A Robust Performance Amidst Macro Challenges

In the third quarter of 2023, Exclusive Networks sustained robust growth, achieving a 13% growth rate at a constant currency and a 9% reported growth despite significant macroeconomic challenges and a high basis of comparison from the previous year. This growth resulted from a combination of volume increases and new business acquisition, including contributions from the recent acquisition of Ingecom. The EMEA region remains the strongest, contributing significantly to the overall sales, while the Americas saw solid performance and APAC showed signs of improvement after previous declines.

Persistent Macro Uncertainty and Visibility Challenges

The macro environment continues to be a challenge for Exclusive Networks, marked by increased cost of capital and prolonged sales cycles, which has led to a lack of visibility for future quarters. Although there has not been a significant change in the macro environment compared to the previous quarter, the company continues to experience these headwinds. The cybersecurity industry remains a top spending priority, with pipelines still growing and new opportunities arising; however, the company admits there is a 'very significant pipeline' suggesting deals are taking longer to close, thereby reducing visibility for the future.

Guidance and Future Outlook Amidst Uncertainty

Despite the uncertain market conditions, Exclusive Networks is confident in meeting its full-year 2023 guidance, with adjusted EBIT expected to reach the upper end of the range. The company cited the need to grow at 9.3% in H2 to meet guidance, considering the 9% growth reported in Q3. The lack of visibility and an overall uncertain environment persist with no expectation of behavioral changes in vendors or customers in Q4 or the following year.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, and welcome to the Exclusive Network Third Quarter 2023 Update. My name is Caroline, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions]I will now hand over the call to your host, Mr. Hacene Boumendjel, Head of Investor Relations, to begin today's conference. Thank you.

[Hacene Boumendjel, executive]

Thank you. Good morning, everyone, and welcome to Exclusive Networks Third Quarter 2023 Earnings Conference Call, which is broadcasted live and will be available on demand on our website. The presentation slides and press release for this call are also available on our website in the Investor Relations section.First, I would like to draw your attention to the disclaimer on Slide 2 of this deck regarding the information contained within this document, and in particular, the forward-looking statements. I invite all participants to read this.Today's call is scheduled to last about 60 minutes. And I'd like to introduce our key speakers this morning, Jesper Trolle, CEO of Exclusive Networks; and Nathalie Buhnemann, our CFO. The presentation will last about 30 minutes and will be followed by a Q&A session. If we don't have the time to take everyone's questions in this session, I am available and happy to take any of your questions following up to the call.I will now pass it over to Jesper for a few opening remarks and his overview of Q3 2023. Jesper, the floor is yours.

[Jesper Trolle, executive]

Thank you, Hacene, and good morning everyone on the call. Welcome, and very happy for you joining us here for our sales update for the third quarter of 2023. This quarter was a special moment for us because during the quarter, we celebrated Exclusive Networks' anniversary as a listed company over the last 2 years. I'd like to take a step back and look at the progress that we made and then why we have been able to build the momentum that we currently are having.In the 2 years since our IPO, we have managed to meet or exceed our financial guidance, a track record that we are very proud of. With 3 quarters of 2023 behind us, I'm pleased to say that we remain on track to meet our guidance for 2023. This would result in a growth from EUR 3.3 billion in 2021 to EUR 5.15 billion in 2023, or in other words, a compound annual growth rate of 25% over the same period. Such growth is an excellent performance in any context.I see 3 main reasons for the significant progress: first, the long-term structural drivers for cybersecurity remains strong and will continue to remain strong going forward; second, our simple mission to create a safer digital world for all people and organizations; and last but not least, our proven strategy and our strong execution from our teams around the world.Let's take a moment to recap the structural drivers for growth. The first and key driver of market growth is the continued acceleration of breaches due to the accelerating threat landscape. Cyber threats are increasingly complex. And with an interconnected world, these cyber breaches are no longer something that just happens to other companies.In recent months, we've learned about cyberattacks on global leaders like MGM, Johnson Controls and Clorox in the U.S. We've also seen 60,000 e-mails from 10 U.S. state department accounts that were stolen in July, and more recently and closer to where we are, the BBC and British Airways in the U.K. were both compromised through a payroll provider. Large-scale breaches like these are the main reasons why cybersecurity remains the #1 priorities for CIOs around the world.The second driver of demand is adoption of new technologies like generative AI and machine learning. Clearly, as we've said before, it's a double-edged sword. On the one hand, cybersecurity vendors are increasingly leveraging AI within their solutions to help protect customers around the world. On the other hand, however, cyber attackers are using AI to be more effective and even more aggressive.The third driver of demand is greater regulations. During 2023, we've seen an increase in regulation such as the SEC Disclosure Act and the EU Cyber Resilience Act that increases the cybersecurity requirements within the EU. Going forward, we expect to see increasing regulatory scrutiny as governments around the world will try to protect information and critical assets.Clearly, the long-term structural drivers for cybersecurity spending remains intact. However, we continue to operate in a challenging macro environment with persistent inflation and strong labor markets, which forces central banks around the world to keep interest rates high. Such environment causes more deal scrutiny, elongating sales cycles, which in turn means lower visibility for us.Consistent with the second quarter and after a period of strong orders in 2022, areas like backlog, price increases and foreign exchange rates are all returning to more normalized levels. This is the backdrop to our solid performance in the third quarter of 2023, which puts us in an excellent position to end the year strongly and deliver on our guidance.Once again, I would like to thank our people for their persistence, their teamwork and world-class support of our vendors and our partners and just getting things done in the third quarter.With that, let's take a look at the highlights for the quarter. In Q3 2023, our gross sales increased by 13% at constant currency, making this our sixth consecutive quarter of more than EUR 1 billion in gross sales. The performance was mainly driven by our largest region EMEA, which grew 16% at constant currency.Our operating model, combining our cybersecurity specialism with our global scale and local sales, continue to resonate with leading cybersecurity vendors. And during 2023, we have increased our serviceable addressable market by $7 billion to now more than $47 billion. This unique model explains the stickiness of our revenue as reflected in our retention rates. Our net vendor retention rate was 122% and our net customer retention rate was 121%, in line with our standard levels.Through the years, M&A have served Exclusive Networks very well, and it remains an important accelerator of our growth strategy. During Q3, we announced the acquisition of Ingecom in Southern Europe, and we'll talk more about them a little later. All in all, Q3 was another solid quarter with good strategic progress in spite of a challenging macro backdrop.I briefly mentioned how we have grown our addressable market opportunity in 2023. During the third quarter, we signed an expansion contract with 4 of our existing vendors, taking Thales to APAC, Mimecast to France, Proofpoint to Africa and RUCKUS to the U.K. As you may remember, we already announced the addition of Thales in EMEA during the first quarter, in North America during the second quarter, and this move now completes the geographical coverage with the APAC region as the last one. We are proud to be partnering with these strong and long-standing vendors and we are very grateful for the trust they are placing in us.We also welcomed 2 new innovative vendors to our portfolio in the third quarter. Arqit, a leader in quantum safe encryption and Sandvine, who focus on application and network intelligence. Pick the example of Arqit, its symmetric key agreement platform enables end customers to simplify and strengthen their encryption and move from a complex public key infrastructure and the need to trust third parties to a platform designed for the cloud and a world of connected devices. We are thrilled to partner with Arqit in North America and complete our offer with their groundbreaking technology within our trusted high-performance technology ecosystem.The acquisition of Ingecom is expanding existing vendor contracts into Southern Europe with examples such as Forcepoint, Cymulate and Varonis. And in addition, it's bringing us new exciting vendors such as Delinea and Bitdefender into our portfolio.With that, let's move on to our cloud business. This remains a key growth driver for us as cloud security and cloud delivery models continue to accelerate as preferred routes to market. You've heard from me before that we look at our cloud business through 3 distinct lenses. The first is the Cloud Security Technology segment. The second is cloud as a route to market through dedicated MSPs or hyperscaler platforms. And the third is the way that organizations consume cybersecurity, and more broadly, IT.Our cloud-based business continues to outgrow the rest of our business, and in Q3, the cloud-based portion of our business made up 1/3 of our total gross sales. The rapid transition of workloads to the cloud is an ongoing trend for organizations globally. In simple terms, this creates more openings for cyber attacks. This is driving strong adoption of cloud-based security solutions, where we have key relationships with leading vendors such as Palo Alto Networks, Fortinet and Netscope.Cloud consumption models are driving an increase in our recurring revenues and creates opportunities for our solution design services as well as last-mile post-sale services such as implementation, support and training. We also continue to see good momentum within our on-demand consumption platform, XO-D.During the third quarter, the number of partners trading on XO-D grew by 46% year-on-year. And in addition, we see each partner continuing to do more business with us, as detailed on the right side of this chart, with an 82% increase in number of transactions on the platform year-on-year.When you compare our performance to the broader cybersecurity market, Exclusive Networks continue to outperform the market due to the strength and breadth of our market-leading portfolio. Today, we partner with market leaders, innovators and disruptors, who cover every major segment of the cybersecurity market. This chart shows the main cybersecurity segments and underline our momentum in almost every segment, with growth rates well ahead of market growth rates.This performance is a testament to our model, our specialist partner ecosystem and the significant end user installed base that we have built over the last 20 years. As our vendors continue to innovate and building out their platform capabilities, either organically or through M&A, it gives us and our partners a unique opportunity to go back into their customer base and expand the conversation across new use cases and adjacent cybersecurity areas.I mentioned earlier on Ingecom in the introduction. M&A, as I said, remains an important part of our strategy. It underpins and accelerates our growth. We do have a healthy pipeline of M&A opportunities that we can pursue thanks to our robust balance sheet, the low leverage that we have obtained and the strong cash generation that we have within our business.As I mentioned, we announced the acquisition of Ingecom during the third quarter. Ingecom is a Spanish headquartered value-added distributor focusing on emerging and disruptive cyber technologies with gross sales of EUR 38 million in 2022. Ingecom operates in Iberia and Italy, where it's highly skilled team of around 50 people will help expand Ignition and their capabilities into Southern Europe.This acquisition is a good example of our laser focus on strengthening our portfolio of emerging cybersecurity innovators so we can remain the reference go-to-market engine for emerging vendor technologies. Ingecom's management team will remain with the business and continue the strategic development of the company under the leadership of Ignition.With that, I would like to pass it over to Natalie Brunerman for our financial update.

[Nathalie Buhnemann, executive]

Thank you, Jesper, and good morning, everyone. I'm very glad to report that Exclusive Networks has maintained a strong performance during Q3 2023 with 13% growth at constant rate and 9% reported. It was an impressive achievement given the current challenging macro environment.Let's now start with a quick overview of the performance in Q3 2023 before I go into more detail. So first, let's detail the drivers of the growth in Q3 2023 on Slide 11. We have managed to keep a solid momentum of plus 13% at constant currency and 9% reported despite a very high basis of comparison last year. For the record, we grew at 38% at constant rate and 42% reported over the same period last year. The difference between reported and constant currency figures results mainly from U.S. dollar and Turkish lira fluctuations.The 9% reported growth can be split as follows: 11.2% growth were relating to volume growth, 0.8% were driven by positive price increase, and minus 3% were driven by negative U.S. dollar fluctuations. As a reminder, in Q2 2023, the 12% growth reported was mainly driven by volumes as U.S. dollar negative impact was offset by positive price increase. Consequently, it implies that growth in volumes in Q3 is similar to growth in volumes in Q2.Coming back to the 9% growth in Q3 2023; 5% came from our existing vendors in the geographies we already operate; 3% came from our vendor expansion, either from new geographies or new vendor relationships; and the remaining part came from M&A, reflecting the contribution of the recent acquisition of Ingecom.Let's now move to Slide 12, which presents our regional sales. Starting with our largest region, EMEA, we continue to enjoy a robust momentum in this region, reaching EUR 973 million of gross sales in Q3 2023 compared to EUR 857 million of gross sales in Q3 2022, keeping double-digit growth with 14% reported or 16% at constant currency. This strong performance was achieved on the back of a solid execution of local teams in our historical region even in the context of uncertain macro environment.It's important to highlight the strong performance achieved over the 3 years in EMEA with plus 63% of growth in our more mature markets. This is a strong accomplishment and testifies the relevance of our positioning in this region.Moving now to the Americas. In Q3, the region showed a solid performance at constant currency of 9% and remained on a positive trend of plus 1% reporting, reaching EUR 157 million of gross sales. For the record, the region faced a high basis of comparison with a reported growth of 66% in Q3 2022.As Jesper said in the introduction, large deals take more time to be completed and Americas suffered in Q3 2023 from large deals that slipped out of Q3. These deals are now expected to be closed in Q4.Finally, coming to APAC. Gross sales went down 5% at constant currency and 14% reported. You can, however, notice the sequential improvement quarter-over-quarter as for the record, Q2 2023 was down 21% reported. We expect this trend to continue to improve thanks to the vendor expansion recently signed. Finally, the recent appointment of Andrew Assad as SVP APAC has reinvigorated local management and should contribute to strengthen the business in the midterm perspective.Turning now to the breakdown of our revenue by geography and deal size on Slide 13. The geographical breakdown remains similar to the trend perceived in Q2, with EMEA remaining the largest region for the group at 79% of total gross sales in Q3 2023. Americas' weight has been impacted by the U.S. dollar fluctuation. On the breakdown by deal size, our large deals have shown a slight decrease in absolute value, but the number of deals above EUR 1 million is still continuously growing.Now moving to Slide 14 to present our year-to-date regional sales. Over the first 9 months, we managed to post an impressive 19% growth at constant currency, 16% reported, reaching more than EUR 3.5 billion. This performance was achieved on the back of a record performance last year at plus 34% at constant currency and 37% reported.With this slide, we would like to highlight your attention on 2 key factors: first, the impressive growth rate over the last 2 years even with 2023 suffering from high basis of comparison in 2022; and second, the confirmation of our full year guidance. Despite normalization of demand and uncertainty in our economic macro environment, the growth in sales is consistent with our expectations and the guidance provided to the market.This leads us to the last slide, Slide 15, to conclude this presentation with our outlook. On the back of the solid performance realized year-to-date and aligned with our expectations, we are confident in meeting our full year 2023 guidance with our adjusted EBIT expected to reach the upper end of the range.Thank you for your attention. And I now hand it over to Jesper to conclude with some key takeaways.

[Jesper Trolle, executive]

Thank you, Nathalie. So, this was a solid third quarter with a particularly strong performance in EMEA, as Nathalie just have gone through. It is to the credit of our teams and our enduring growth drivers that we still remain on track for our guidance in 2023, in spite of the macro backdrop we find ourselves in. As we saw this quarter, we will continue to take advantage of the M&A opportunities we have to accelerate our growth strategy.Stepping back, I'd like to recap on 3 key themes before we open up to questions. First, cybersecurity remains the top spending priority for CIOs across the world and we expect that this trend will only continue. Second, our unique model and the value that we offer to our vendors and partners means we are able to keep growing our market opportunities. This is particularly important in a fast-moving complex cybersecurity landscape. And third, we continue to have multiple growth levers that are all based on long-term structural drivers.This was another solid performance in the third quarter of '23, a very good result that puts us in an excellent position to close out the year strongly. I remain very excited about the future ahead of us and the opportunities that this represents for Exclusive Networks, our employees, our vendors, our customers and our shareholders.With that, I want to thank you all for your time today. And I will now pass it over to Hacene to open up for questions. Thank you, everyone.

[Hacene Boumendjel, executive]

Thank you, Jesper. Thank you, everyone, for your attention. And this now leads to the Q&A session. Please, operator, can you remind everyone how to ask a question.

[Operator]

[Operator Instructions] We will take the first question from line of Hugo Paternoster from Kepler Cheuvreux.

[Hugo Paternoster, analyst]

Can you hear me well?Yes. Morning, Hugo.

[Hugo Paternoster, analyst]

Congrats on those good results. I would have 3 questions, if I may. The first one is mainly on the macro side. Would it be possible for you to dig a little on the outlook maybe to have some insight around what are the discussion with your client at the moment in terms of environment also going into 2024 discussion around the budget have started to be the first question.The second question would be on the situation in APAC. It would be great to have some insight on the situation there, particularly with the arrival of a new manager. What kind of fix do you intend to put in place and in terms also recruiting new vendor? Any color would be useful on that.And the last one would be generally speaking on your pipeline. You mentioned consistent solid pipeline with no project cancellation. Is it possible to have also some color if the pipeline is growing, also around the size of the new order? And would it be possible on your hand to quantify the amount of the project, which under normal circumstances would have been taken now, let's say, or stated differently, if the environment improve as you run some analysis on what could be taken rapidly in terms of catch-up investment? That would be it for me.

[Jesper Trolle, executive]

Thank you, Hugo. So it sounds like these all for me. So let's start with the macro side. So clearly, as we stated in our prepared remarks, the macro environment has not really changed substantially to what we saw in last quarter or in Q2, I should say. We continue to find ourselves in an environment where our cost of capital have gone up that leads clients to reconsider investment priorities, it leads clients to have more approval layers. That means deals take longer to close. Sometimes, that means deals can get smaller because you look at necessities, meaning maybe 1 year as opposed to a 2- or 3- or 5-year deal.And so all in all, it means that the sales cycles are extending and that is creating this lack of visibility as we call it. I don't have a lot of view on budget '24 discussions. What I would say is that cybersecurity continues to remain the #1 spending priority. In fact, now it's followed by AI, and thirdly, by cloud. And I believe that everyone expects that cybersecurity will continue to grow faster than the overall IT spend and therefore, make up proportionally a larger and larger part of the IT [Audio Gap].I think that links nicely into your third question around pipeline. So, we are seeing pipeline is still building, we are seeing new opportunities coming in -- I should say, pipeline of opportunities. You kind of talked about new orders, but I'm talking about pipeline of opportunities. We see new project opportunities coming into our pipeline. We see a lot of the existing projects that has taken longer to close, and that is creating this sort of very significant pipeline where I would say we need more coverage because it takes longer to close it.So, when we talk about no project cancellations, what we really are meaning is we don't see projects that has been in flight for a long time that suddenly just disappears. The more normal trend is that some of these projects might end up smaller or they might get pushed into another month or another quarter, but we don't really see projects disappearing out of our pipe. And that's why we keep talking about having a very strong pipeline.And then lastly, to your point on APAC, it is true that we have a new leader, Andrew Assad joining us who is a multiyear veteran in the field of cybersecurity distribution. I'm very excited to see him join Exclusive Networks, and I know that he will do great in the region. He will continue the work that Brad Gray had done over the past 4 years. And we are seeing that the model we have here is also resonating with vendors. We talked about the addition of Thales. And there is also a lot of ongoing other conversations with vendors that allows us to continue to grow and scale in that region and come back to growth. Thank you.

[Operator]

We will take the next question from [ Lanju George ] from JPMorgan.

[Unknown Analyst]

I've got 2 questions for you, both of which are on longer term in nature. And so firstly, on the cloud business, it seems like progress here is really strong. I just have a question on the cloud consumption model. So the distribution via NSE or hyperscale platforms. Can you just remind us, please, of the business model here, just generally how the unit economic work? And do you think this model is pretty finalized? Or is it still dynamic, still changing?And then my second question would just be on GenAI and what sort of impact do you think GenAI could have on your own operations and particularly just given your high percentage of technical staff as a proportion of your employees? Do you think this could have a -- what sort of impact do you think this could have on productivity and ultimately, costs?

[Jesper Trolle, executive]

So, on the cloud business, the way it's defined is basically with the same lens as applied by our vendors. So anything SaaS-delivered, SaaS models. The way this business is being delivered is through a number of different means. Some is done on some of our vendors' own platform. We're also partnering with hyperscalers like AWS where we help to take deals down over their marketplace. And then thirdly, we also, as we've mentioned, have X-OD, which is our own consumption-based platform where customers, predominantly MSPs and MSSPs, can acquire the solution and the technologies.In terms of your sort of sub questions, do I believe that the hyperscaler model is finalized. I think this is still work in progress. I'd like to say that we add value in 3 parts along a transaction. We add value in the presales part where we help sort of originate the solution, defining what's needed depending on the customer situation, alongside with our partners. Then there is the transactional services. And the third is what I call the sort of last-mile post-sale services such as implementation, support and training, technical trainings that we talked a lot about in last quarters.When we -- when I think about companies like AWS or even Asure, it's true that they can do the middle part of these services, which is a transactional part. We still can stay in the mix with that. But the big opportunity for us is really on the forefront and on the last mile where we still can leverage all of the technical skill sets that we have in our business to help solution, drive solution design and the ideation phase with the customers. And then finally, as they have procured these solutions, help them implement and support and train them on these technologies. These 2 parts of our business is very much intact.In terms of generative AI and how do I think about it, I think generative AI offers us a number of opportunities as a business. On one hand, as you laid out, we have a lot of technical staff. They can be complemented with GenAI. Customer service is really what we do. We serve thousands of customers every day on thousands of transactions. And obviously, with GenAI, there is an opportunity for us to do that in an even more efficient manner. And we are having projects across our business where we are looking at how to adopt that and drive this with also maybe not GenAI, but things like robotization and a large degree of automation and integration between systems and different parts of our ecosystem. Thank you.

[Unknown Analyst]

Perfect.

[Operator]

[Operator Instructions] We will take the next question from the line of Balajee Tirupati from Citi.

[Balajee Tirupati, analyst]

Balajee Tirupti from Citi. Two questions from my side, if I may. Firstly, on growth in North America and appreciating the base comp impact, would you also say the level of spend conservatism is higher in the U.S. when compared to Europe? And have you seen any change in customer behavior over the past few months between U.S. and Europe?And the second question is on the growth in the quarter, which was still double digit and in line with midterm targets, and this is in an uncertain environment and over a tough base comp. Would it be fair to say that while visibility is lower at present, the business growth rate has not been impacted by the delayed decision making by customers? Or do you see when inflection comes in terms of demand and an improvement in customer sentiment, growth could accelerate from where it is at present?

[Jesper Trolle, executive]

Thank you for the question. So, on North America, I would say it's really a factor of a very high base compare. I think Nathalie did a nice job at laying out the growth we had last year, which was 66% in North America. So, the baseline was very high. And obviously, the constant currency growth is close to double digits. So, we did have a couple of opportunities. We see the same behaviors, by the way, just to answer directly. There is no different behavior in North America versus EMEA. Customers are going through the same scrutiny on deals and opportunities. They take longer to think through what they need and if they really need it. And if so, how much. And as we noted, we had a couple of significant opportunities that moved across the line and that we are working hard on and expecting to close this quarter.So, I would say the main reason for North America is really the fact that the growth on the back of last year was quite significant. So, on growth in quarter, I will let maybe Nathalie give you a point of view and I can follow up as needed.

[Nathalie Buhnemann, executive]

Thank you, Jesper. If your question is to ask if there is any inflection or change in the behavior of our vendors or our customers in Q3 and what we expect for Q4, I would say that there is no change. So meaning that we are still in an uncertain macro environment and we are still missing visibility. So, there is a clear lack of visibility for Q4 and the year to come. And if you just stated that we have made double growth digits, so maybe we could do better in Q4, et cetera, I cannot say anything except confirming the guidance. There is a big lack of visibility and uncertainty in the environment. So, we cannot say that there has been any change in that regard.If you make your math properly, you will see that we need to go at 9.3% in H2 to make the guidance considering that we have grown at 9% reported in Q3. We are comfortable that we will meet our guidance, and this is what we have stated in this presentation.

[Balajee Tirupati, analyst]

If I may just have a follow-up on that. The question I had was more around dynamics, around the growth that you have still delivered in this uncertain environment. In third quarter, the growth in constant currency was still 13%, which is more in line with midterm targets of the business. So I was -- the question was, are you -- is this growth impacted by the uncertain environment? And if not for the environment, would it be fair to say that the growth going forward, not necessarily in the fourth quarter, but when the environment improves, would it be fair to think that the growth rate should improve from the 13% rate it was at in the third quarter this year?

[Jesper Trolle, executive]

Yeah, I think here's how I would maybe answer it a little bit differently. So if you go back to what I said in the beginning, cybersecurity and the structural growth drivers around cybersecurity are as intact today as they were last year and as they will be next year. We are all adopting more and more technology, we are more and more reliant on IT and access to that data, we do cloud adoptions. There's more regulatory scrutiny, more regulatory legislations coming out. And so clearly, the long-term drivers are still strong.The fact that we could show this level of growth in Q3 for me in constant currency is a testament to all our teams around the world and the way they execute in what I would characterize as a challenging market.Could we grow faster with better macro environment? Yes, I think there is definitely an opportunity with that. The long-term growth drivers are intact. We have a great portfolio of vendors and partners, probably the stronger one of any player out there. So I think we have all of the ingredients. Now we just need the macro environment to clear up a little bit. And hopefully, we'll start to see some of that probably not this quarter, but in subsequent quarters. But I think I'm not a macro environment expert, so it's a little bit challenging for me to say how it's going to develop. But hopefully, that answers your question.

[Balajee Tirupati, analyst]

That was helpful. Appreciate it.

[Operator]

[Operator Instructions] We will take the next question from line of Derric Marcon from Societe Generale.

[Derric Marcon, analyst]

I've got 3, if I may. The first one is on your relationship with Fortinet. To what extent have you been impacted this quarter by the persisting ongoing difficulties of Fortinet in the hardware part of the business, particularly that happens to be one of your key vendor? Second question, can you quantify the large deals you mentioned that slipped in Q3 to Q4 in North America? So the total size of the revenue considered here? And the third question, the traditional question for you, Jester, your bookings -- are your bookings growing faster than your revenue in Q3 as it was the case in H1?

[Jesper Trolle, executive]

Thank you, Derric, and we'll always give you 3 questions -- or 3 answers. So on Fortinet, I'm not here to talk about Fortinet. I'm here to talk about Exclusive. Obviously, everyone have read their earnings. We are a significant part of Fortinet's business, and we are a very long-term partner of them and will continue to be a very trusted and long-term partner of Fortinet. Clearly, when they are reporting some challenges, it would be safe to assume that it also has an impact on our business.But I also want to remind you, and you know this, Derric, that like when there is growth and like when there is less growth, we are not the only proxy for the growth of our vendors. We don't work with our vendors in all of the territories. We are not the only route to market for them. And in all the territories where we do work with the vendors, we are not the only -- in most cases -- not the only distributor in market. So, we are not 100% mirror of the individual performance of each of the vendors that we are working with.I still feel very confident and very good about our Fortinet business. I think we have a major opportunity of leveraging 20 years of installed base that we have built to now drive the discussion with the customers and our partners into areas like SecOps and SASE that is one of the newer areas for Fortinet. And so I feel very good about adding more value through our installed base and enrich the conversations with the customers we have.In terms of large deals, I can be as concrete as say these were larger deals. I can't give you a number of the size of those, but obviously, they fall in the category of what we characterize as large deals. And then thirdly, to your point on bookings, I can't give you an exact number, but what I can say is that our bookings continue to grow year-on-year, which is a good sign of the demand that we are seeing. Thank you.

[Operator]

Thank you. This concludes today's question-and-answer session. I'll hand it back over to your host, Jesper, for closing remarks.

[Jesper Trolle, executive]

Okay. So, thank you, everyone, for the questions. Clearly, we talked about in the introduction around a challenging macro environment and judging by the questions, this is also where all of the questions are. I'm very proud of the work of our teams and the execution of the field across the globe. I think we have delivered a very strong quarter in what can only be characterized as a challenging environment, and we look forward to deliver on our guidance and conclude what can only be described as a challenging year from a macro environment perspective.But all in all for Exclusive, this is set to be another record year, and we look forward to conclude that and report back to you in the beginning of 2024. Thank you, everyone, for your questions and your time today.

[Operator]

Thank you for joining today's conference. You may now disconnect.