F5 (FFIV) 19 Apr 232023 Q2 Earnings call transcript

Good afternoon. And welcome to the F5, Inc.

Second Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Instructions] [Operator

DuLong. is this anyone turn time. over Ms. conference please any the recorded. to at ma’am. disconnect I Suzanne being today’s has If objections, call Also, you, Thank will now

may You begin.

are call. and FX will Investor François on Frank the be remarks of also Pelzer, making Hello Vice Executive executive Vice CEO; today’s President Relations. I prepared DuLong, Locoh-Donou, am answer FX’s Other welcome. to President the President questions and session. FX’s Q&A FX’s team members and of Suzanne and hand on CFO, during

available A of archived our will be copy on the of will XX, today’s conclusion press our today’s accompanying to of posted slide at release be an viewable site is today’s where The webcast through at is the July on call. XXXX. the fX.com, and audio IR available website version deck discussion

telephonic XXX-XXX-XXXX through and To meeting ID access dial XX, April phone, the The XXX-XXX-XXXX will by XXXX. replay today’s use and Pacific webcast Time, replay be or of XXXXXXXX. midnight available

information or follow-up to s.dulong@fX.com. at additional reach please directly me out questions, For

today and discussion statements implied These contain Our results actual uncertainties words which materially cause these those to by involve may risks our target. and that forward-looking statements. anticipate, believe, differ forward-looking such as or include from will expect statements, expressed

financial announcing have in We in results detail filings. summarized factors that results and our our our press release may the affect in SEC

in note and today’s the that Please reference call. duty during reconciliation full non-GAAP discussion. will earnings today’s to In information update metrics our any no has slide appendix in in see we release presented to Please non-GAAP this addition, FX GAAP of press deck. our

over turn will the I François. to that, With call

everyone. joining Thank Suzanne, you you, for Thank today. and us hello,

persistent per impacting budget quarter second despite software high above both the These uncertainty, and earnings hardware to broader severe of share team of customer which scrutiny, demand. Our more and and results led revenue our at come range. macro has guidance end midpoint range our the delivered our

that secure, We well for simplify scale, spending as conviction to environments. trusted application constrained a and are we multi-cloud that headwind partner temporary have positioned and strong innovative they customers modernize and customers as hybrid their look is a and

speak the dynamics In seeing confident quarter’s in my to why near-term positioning the opportunities spending will we we and longer results, I today, our are and growth remarks term. remain

XX% on delivered revenue as growth system QX result and First, of a QX performance. strong maintenance our in shipments stronger-than-expected renewals. We

grew revenue XX%. systems Our

than it a ahead positive of As efforts as quarter, is a board demand marker. our redesign the of for it plan reflection is more completing is comprehensive this team

that to recall out You possible us fulfill goal wait just order in will components supply. multiple making and last The hardest redesigns customer a board this to and designing we to is we sooner the year, work rather new we successful initiated it for the for than get with than of waiting opening up seen anticipated, chain no supply improve, cancellations process. expected, orders as completion have of

X%, nearly renewal cohorts. by which rates, grew strong revenue improved Services across Global Our all driven continued

top OpEx above our delivered EPS and also within share, Wrapping of we our up guidance $X.XX end results, range. per the QX non-GAAP guidance of

results spending customer they underlying So the strong, quarter’s were patterns. obscure but

be only previously except additional we the for through levels in and seen In spend scrutinizing approved Board to December QX approvals. even These deferring going have pronounced are of the or approvals dynamics C quarter, customers when multiple suite more level projects some Since cases, our urgent budgets anything delayed were downsized. or most saw reaching projects. we

XX% the year-over-year. below This expectations. The QX long-term our impact which spending our this of our for and well is expectations caution software revenue most growth extreme evident year in was declined

size relative subscriptions. software our in reasons from there tend of several to this include seeing derived are software software why term kind impact are the percentage revenue and of projects in our be involved the the believe of revenue. we we We These

software First, seven-figure our to-date come the projects of majority often deals. size, of has type growth from six-figure or transformational

seeing delays, under into in sometimes more larger quarters resulting additions. or downsizing come multiple projects are by incremental scrutiny, smaller, We more

Second, of subscriptions, recognition. from our revenue which have the upfront majority comes software revenue term-based

was is or see a than software quarters, driven. in in in As more SaaS so last and our result, as we the when our it new be a term-based if few revenue subscriptions decline we much have predominantly evident software ratable it would immediately

is to software. there news some Now in point good to

a base have renewals, We software of growing. is which

QX, term to in multiyear and QX term Our as subscriptions, renewals second expected. renewals software largely primarily our similar performed consist of

In and our software addition, to and growing will revenue our significant contributor it expect a SaaS and is time. we predictable managed become over services more revenue

have patterns I spending demand. were limited not The software to described our

We quarter also work assets their and softer existing demand experienced in delivered customers of as the into systems capacity systems production. the sweat systems, push their deploy to

will year. end at fiscal through persist this We the both expect systems and on least of headwinds these software

we growth the As low-to-mid single-digit for we from forecasted. to growth This down XXXX. a is result, FY previously revenue now XX% expect X%

speak why now we why is challenges. we multi-cloud confident I simplify are to and that third are positioned uniquely their point, temporary hybrid will environment to help my current demand customers

several are are demand that We for confident current levels reasons. temporary

pressures of the telling from not we budgets of commentary that matter are getting approvals, architectural customers. seeing delays Customers are are a us because direct or competitive and shifts. First, the are we

all FX XXX key with FX discussions clear that hybrid environments. our distributed cloud are set and my QX, During expect of and expanding the customers too the roughly rapidly and only that multi-cloud services company I movement. are accelerating capable they was of APIs their and a as from customers be with new applications met of partners. future leaning into architectures Partners will part securing and in It personally delivering

Second, win because of our rates.

broadly theaters win lines, reassuring, the we win share to our involved When we see rates. product FY at half steady we continue of consistently deals also across look the half to of FY XXXX, are we While our customer the fair of the our XXXX commentary confirming analyze direct we in. is first rates win compared first and

closing probability been pipeline, Third, up factored activity accounts increasing reaching level where in we customer seen our conversion higher the This quarters, is from deal are maturity. of the which for encouraging, it’s couple it respective a deals given suggesting pipeline. is and is prudent have last of of believe expected half, too first is remain in on we but of what a to the conservative

assets. maintenance customers of be would the We all sweating renewal delaying by the Fourth, behavior substantial signal this would deployments our rate see purchasing increase expect strong attach you assets decisions the in where sweating are most pronounced. on

substantial revenue trends. year to maintenance is This have periods compared to what a seen and we uncertainty, seeing continuing grow. past consistent are macro in with deferred also APIs prior apps of behavior We with increase during

can customers those long so they only to remain However, want and apps investment secure. if performant postpone APIs and

control, and the focused cost the with things In prepared can we we including we reducing discipline spending operating controlling on our for includes are when customer ensuring base. are meantime, resumes. This

our by our workforce. approximately employees reducing X% or headcount are XXX total of approximately We global

drive expect reducing including discretionary combined reductions, projects We applying these scrutiny footprint actions, facilities consumption, with other and additional operating leverage. ongoing will technology rationalizing our cost to our

in are we the corporate XXXX reducing size In travel. pool substantially and bonus our further reducing addition, of

with and margins in from us FY reductions, approximately the non-GAAP meaningful deliver our result, growth expansion As leverage to positions of operating XXXX. margin non-GAAP non-GAAP Further, to we margin cost XX% earnings XXXX expect anticipated combined these improvement, operating earnings and to of growth non-GAAP a double-digit gross deliver XX%. FY X%

digital long-term creating face velocity customers engaging rely challenges and continue and they on While experiences, connect managing technical were protect addressing will business and growth APIs to critical only ahead, finding significant debt. spending to are environments. and including near ways resource constraints distributed term, applications across Their

growth. across environments, ability deliver we to these are to our and this customers position challenges. applications will secure We With help differentiated our all unique sustainable APIs drive believe with ability and in long-term

addition we we have impact reducing business cost, evaluated and in will investments our believe and As and our drive hybrid mid- in highest intensified for including long-term our customers, also areas software multi-cloud. adjusted the and we have to

turn Now the I Frank? Frank. call to will

XX% our everyone. hello, speak QX review QX will before revenue and third impacts I million I grew high price delivered last of a year. maintenance growth the the of on $XXX QX our our Global XXXX strong to We due of the quarter renewals Thank revenue François, and million, X% reflecting color Services results FY of increase $XXX year-over-year. you, outlook provide introduced additional and to expectations. in

year-over-year, between strong reflecting roughly Services Our total XX% shipments revenue split Product year in Global easier against of quarter. with the XX% revenue. Global comparison Services an grew revenue remained ago system and product representing

year-over-year. year. compared revenue enabled of successful our described, $XXX was $XXX growth François representing As XX% redesign At systems million, last revenue to XX% million, QX software of down efforts

SaaS term XX% QX’s comprised subscriptions is which revenue, take closer perpetual offerings in a revenue described, software sales. includes $XXX and QX significantly François the quarter. revenue, as of totaled software look our performed license our and which or million below Subscription-based near-term our at subscription Within utility-based business, revenue. subscription Let’s plan of total subscriptions,

recurring our QX’s million well software of contributed QX’s perform last from portion $XX revenue. license as In revenue. sources quarter, of Perpetual services similar software renewals to as to maintenance our XX% of Revenue line in and continued includes revenue, expectations. contrast, largely subscription-based This revenue. with of represented sales the XX%

revenue. Revenue more and a shipments that these basis, quarter in all grew EMEA of I’d XX% of growth current strong saw XX% note representing X% revenue; representing demand. On the a X%, XX% of representing Americas XX%, APAC from grew year-over-year, of grew across regional than we though are theaters, trends reflective total revenue;

Looking at our major verticals.

service QX, X% XX%, During bookings, Federal. and providers government from U.S. XX% of XX% represented customers product represented enterprise represented customers including

was range. the I operating in share line Non-GAAP GAAP GAAP XX.X% million, $XXX will our margin margin QX guided with million. results. were guidance operating operating Non-GAAP expenses XX.X%. $XXX were for was in with our our gross line expenses now quarter. gross

XX.X%. GAAP was margin Our operating

non-GAAP XX.X%. Our operating was margin

Our quarter the was rate for GAAP effective XX.X%. tax

XX.X%. tax rate Our non-GAAP was effective

$X.XX our per This Our to the strong was as guided quarter. improved range share. $XXX per margins GAAP million discipline, income a net above the share share, rate of of for to reflects end cost as per quarter benefit $X.XX was tax from $XX $X.XX income the Non-GAAP or in top or well million net operating $X.XX share. per our

for flow turn remains generated in quarter which QX. million. Capital now strong. the $XXX and cash expenditures balance flow sheet, to will the $XX cash operations very I million were in from We

for and maintenance strong quarter DSO to and, contract flat the primarily due days, degree, in lesser up quarter was linearity. the a renewals QX levels, from shipping with historical to back-end service XX

our on impacts shares investments previously, the the the analyze at quarter the cost-saving its well market changes we any QX. in outlook. in remained as discussed and the as We did potential demand Cash as We not seeing repurchase and we totaled measures effects end. environment $XXX of out million of we were

billion, increase increased $X.X revenue billion was in sold driven by four-plus our on largely base products XX% ago. substantially Deferred QX. year-over-year renewals to This from up years of installed maintenance $X.XX higher

Finally, ended number with X,XXX announced employees. not This does quarter reflect the the approximately reductions today. we we

will We reductions expect annualized these approximately result savings headcount of $XXX in million.

costs approximately benefits these related in incur and million $XX and severance to other expect charges XXXX. We in FY to actions

now reference share QX. non-GAAP will stated, operating metrics. Unless comments for outlook guidance our I my otherwise

to expect million million, QX $XXX We approximately revenue XX%. of gross of with margins in range the $XXX

our partial our expenses quarter reductions, million per million $X.XX operating and of we non-GAAP estimate impact to is earnings QX $X.XX share. per the target share to With QX cost announced of $XXX $XXX

of expect $XX expense compensation approximately to million We $XX share-based million. QX

We to least million least use and remain worth our Finally, annual to shares XX% of towards we free QX. committed $XXX share to our to to of cash during shareholders at flow expect repurchases. returning plan continue at cash repurchase

our speak expectations. FY now to will XXXX I

We expect single-digit in FY XXXX. low-to-mid revenue growth

software half mix growth revenue offering to the new results for the half at time. a XX% second see for path in and FY and first no guidance to are this our projects, software Given XXXX environment longer we XX% not product

Based see than and our recovery, visibility expect QX revenue QX on in systems lower in current QX. and to systems anticipated earlier we than

over continue XXXX. work backlog the half our to substantially down We expect of systems we that FY second will

the growth X% have earnings narrowed the to for We in results, effective of we rate our expect XX% our to XX% XX%. margins operating for Incorporating to tax year-to-date non-GAAP range approximately non-GAAP estimate FY FY our XXXX XX% XXXX year. of and

turn will over call François. I François? the to back now

confident away reason call. believe is simple recover, Thank from and you, temporary you for things current quarter, are the that when grow. environment it the take Frank. cannot predict it that we applications I’d Like while this last APIs We demand will will we to continue ask and three very

we the and take We be challenges will associated on multi-cloud for are levels as them. customers more to with also hybrid confident resume environments, normal of partner a that investment begin differentiated

believe we we investment achieve double-digit most and long-term, customers in multi-cloud. including medium- growth, while to over also and for intensified have reductions to be our strive areas earnings finally, and we And hybrid and implemented have cost the our continue will impactful software

the please to open call Operator, questions.

[Operator Instructions] question Please Suisse. comes the Credit sir. with you, your And Thank first question. Badri from line our proceed Sami of with

I had two you. Thank questions.

XXXX thing, of why that, -- revenue, large after year of think not you into could I and just we systems of the kind for First be as given from going software. reason into really kind just little services for that’s clearly customers make What and looking well? the to year. forecasting the made then this. should things changing product, have growth second guidance you are contribution color that’s have for weren’t how need XQ I second you saying fitting modeling help the the maybe, we I commentary a changed given should I we just is, fiscal software be understand and more fiscal were bit And assuming the year, But Frank, half into growth half a us fairly ask follow-up that of services like And of assets? a growth comment as for then a backing and on now, parameters

Yeah. Sure, Sami.

you the be not update QX, mid-single-digit we services year on in dynamics that Obviously, assets in to look think to we at of particularly sweat did update some as strong assets that we So around to the aged that. of for through course when continue we outperformed going the we continue decisions all is the the services. that customers QX and contribution their did outlook and and highlighted,

will I And that we so, mid-single-digit what and happens. we an is update, don’t well have intact think but see

in to give product, model. will to growth of did we I our the is to year to specific think guidance results the year. will guidance you product the the systems that leave not at looking and that growth and be But of for any software the that growth we mix growth are any balance be giving not what Specifically, services on we what of to for the and balance going mix,

Okay. maybe a Got François. it. question for And

which if you the caused the we to guide customer year I really of thing know kind the were of is, the think majority one to could of think group kind really your put industry for if or impact want to customer of finger XXXX, fiscal on really about caused cohort the vertical you revision that drag which or customer one?

Thanks, Sami.

couple of on a that. indicators For

The pullback all is, in broader our and geographies, I across at all been say spending seen first would and fiscal this affected so have second we geographies frankly, this and has verticals severe, what in protocols are quarter and point. is, all more

where prior half I If I services a of in would deals to second especially March, the number of financial delayed or our couple, services by being delayed say, -- impacted out, SVB, caution that or the see but of saw we quarters. services Financial after pulled that, out expect in the pull in more to had industry the multiple a and the even will downside did persist. collapse we we financial was

I budget, The expected. that a providers, Sami, would and than budgets were had were less customers call timeframe, expectations budgets a QX our in fiscal had February out around calendar of the in where would that we I or number their lot the settled QX other service they the is when vertical say,

service the MSO margin think, highest about that’s the in sector planned the in are cable customers with we mobile our XG. certain or also cases, around sector, perhaps that seeing on reducing certainly customers operators provider I growth on losing and worries driven some And by, spend in their

they verticals -- where that I would have seen and we the were say differential QX that’s So are those they between where strongest perhaps two today. the are been in perhaps have where

you. Thank it. Got

next of with the Please with proceed your question. Securities. And Ray comes the question line McDonough Guggenheim from

Two Great. Thanks. could. I if

if the spend of one, those the from is declines from I have How customers you the cloud pricing expectations year based performed those business from expected come part I in towards of from somewhat maybe Frank, contracts? how with can is versus a comment believe. customers came in new And the or you forwards last to also comment first beginning they accelerated year even true and François, renewals on consume believe true The forwards. optimizing the per can or that, move you that what for, impacting given all at quarter, on

can. certainly, and start, wants he to pick François, will I Ray, up

business saw sales in when Did we as in Probably expectation, both a our take as I number. well a necessarily QX? accelerate new slightly but QX. the in versus look raw it think you challenge at QX, not

one I’d that for So you. answer that’s how

your I second think in question terms spend. around of

forwards were expectation true We level. those do keep in the slightly the On that that bucket. we renewal saw, below our

And when until expectation, not said critical and year. that a where think did their going up more planned consumption being one that this and to not being was closer we are piece that’s we to performed our had to not they we our what experienced that what perform around people to the and largely it so consume bit over expectation much that

the sense. you. Okay. follow-up, maybe supply You can the go? That that you at think chain least. us Can where margins cash a somewhat you year Frank, and And have subsiding direction flow challenges makes of on for then for benefit of help this

putting in you and have the cost initial benefit you will place. year hitting are of are the cohort of lapping the or some of You reductions benefit renewals license the have term that now this

would that target a from is in some this preclude is that mid-XX% hitting you there achievable flow sort of the noise or or year is think still margin So that it range? cash model to reasonable

we are Yeah. and experiencing. Ray, specifically flow to so mentioned the I ones the we that that the you similar don’t cash are think guide to ones dynamics

have way hits we out relation of to component unusual we are costs other their and our cash year work going do anticipate QX. challenges some did in that supply model So chain to last by to

in You because guide you that saw specific guide But in flow. don’t some of QX. cash of QX the happen a margin we more percentage, to that don’t we will see to timeframe, happen

questions. for Thanks taking the Okay. it. Appreciate

Sure.

with proceed Barclays. And the Tim next of Long comes from line question the Please question. your with

two I as Thank have you. on well software.

First, give times could helpful expected. could be color what can if you came the expecting your product renewals us the said down would the talk you few us on for expecting give any were you in second, a renewals expectations what but question, on them were then to about of little be kind were to business? if up? So as you It solution And weakness guys more you a a color similar there, and the kind of about previous you lens. or

So do virtual is on the how software how is this how much of ADCs. virtually in fully other you is much able offerings core much maybe not top NGINX, of bundle to of this see, this not really of monetizing

what’s you. So anything and you can what at business, the supposed to for missing was of back the what’s when software give acquisitions not us happening? that, do Thank look kind on it you

the of your Frank Thank you, second start Tim. will come will back question question. to and renewables the I part with

on are me impacted both both in software. mean have ADC, impact and by ADC traditional in Where And really and So then seen area with we we hardware what systems -- is piece. product start if an is, so let could software. -- the we that I the

now, some of renewals higher and customers measure that it is clear avoiding have see and are some would to even can later. service the of gone that are rates. they their evidence strong very these assets is spending able purchases our sweating seeing it, utilization or our customers customer this right than where typically they delaying the go are in platforms are we where that can making cases, seeing and attach it we conversations, we avoid In we the from And

it the also of In is and pretty have an business reduce in their part security we seeing impact that and a provider they part service to our vertical in are bigger attached have tried ADC business we quickly. to of seen security, security, CapEx affected, the impact is whether and

last and business Our business more rate to managed year, grow. SaaS and grow, security continues actually our but at software security continues albeit is a services resilient, to lower than

out, parse course, those say, of So if areas, see are it you would continued NGINX, to the there. and we growth I have

but Of growth course, we the see there. growth impacted, rate to also is continue

from portfolio step the this you overall and When you and back then acquisitions. mentioned

private the is we clear is to and hybrid the are going more public that consumption cloud our one in essentially have can it’s feedback the application and We cloud, so any every increasingly factors, edge software in that customers at industry from the deliver multi-cloud only world these any and and form portfolio that the assembled more absolutely secure portfolio the hardware, and SaaS. cloud, and in of environments,

where in so And will portfolio it’s forward, we are a we customers and we resume have short-term, that seeing of where the expect sweat little order. ADCs, we longer, can assets actually drive short good severe very the customers the in more going architectures feel think but positioned how slowdown the in perhaps for is demand the we to our about

separate going the have strong, are maintenance quite your the the renewals, obviously -- on the Tim, and the expectations? services side the on renewal and also to are renewals, saying, question, which which been strong am what I software out And maintenance your

levels the in any they for they comes in three. have seen the growth STPs quarter. up given we of been ended that way and in cases, amount about about and expectations, Those our year growing business of talked performed our many When software when what the think that the were have majority largely businesses, have [ph] renewal have predominant that’s from to you we

very previous true some forward that to years has years been to year of expectations has at on and taken we for. the where that a people what very year this agreement from have as look been trying critical modeled up amount There where we three not close have that of consume contracted two had agreement, are we the level they to of the

and are we we overages seeing are we so of that cloud way that that’s indicative before, think probably And not their have the consumption. seeing same same the providers

base, full STP the say we first when substantially is when take of the a renewal look up as this year base back So the comparison. three ago renewal sales expected year last we as is a as years

Okay. Thank you.

And the line from comes next with question the Please your Chatterjee proceed Samik question. of with JPMorgan.

Thank taking and Yeah. questions. about think, fiscal double-digit comment just I guess my about XXXX hi. for the for earnings made you clarify, to Thanks a you first one, I I think, growth. talking François,

of see thinking bit underpinning expectation? a know to that thinking about underpinning I wanted more color how margin operating about maybe Just the Thanks. are as gross improvement, well you sort us topline of margin, sort are but how talked give about of you follow-up. as about a I And topline sort you have that guide?

about fiscal but part question, of XXXX? in topline Samik, it is I the missed

Yes.

a double-digit made you think earnings I about comment growth.

are the thinking So being you you just the sort curious of as expansion key topline there? driver about how margin about talked

Yeah.

the quarter, by or of But end XXXX, the where in fiscal So XXXX, today the are fourth QX of of can topline ability It pointers with by course, end the just clear quarter QX backlog either at fiscal look, really ship at when position or to visibility fiscal end we the the from I few sorry, -- at a by or for we third you the fiscal majority we to the are the from Samik, to our of end of not give we that of guide look have a will is the XXXX, our end here. vast sorry, in XXXX. XXXX. the of ship

at X look to growth to you order normalized given clearly, that when points in XXXX of to the a dynamic. on going X growth that’s points in XXXX, in level that a of So headwind backlog represent revenue

can sweat hand, On our we the and assume pick is that up. that view only And is is of long. and to a some would that demand also an projects delayed is we we point their the seeing that demand that assets other for some customers happen of going lot some that, reasonable but of XXXX. are that -- uncertainty, at being are up see point, to pent going bit in is a to it’s at When see so

So and an we in control, of on base ability growth us can’t operating and I for you growth but expansion fiscal to can revenue we secure a XXXX our adjustment course, see made cost double-digit of in that deliver cost earnings that meaningful our our position XXXX, to will give is have you give margins XXXX. what base

you. Thank Okay.

to a follow-up, sort much historically. you sort so I taking than was on operate will is are And of at you mean, as percent for you my mean, much cost at have upside to you the it level just revenue actions out, a can is how the structural how of operating and I and level rules expense a the with a like, at of are more that of some you looking structure, obviously, around operate more you trying a cost think structure? the sustainable taking macro -- margins of of conservative are lower function multiyear it, lower of for operating can there how more be about of that versus a you at you how period in and

our operating the and at year. leverage and from we XX% for operating margin one think today at be there, is, of we where has drive the business continue been objective are Well, Number the a in couple Samik. to to things

be zone, a the in to at our and see XX%, leverage topline growth. that second look getting to in driving with going that is when XX% being at intent well in to you going and the it at as drive And year half combination to first year, meaningfully of second further from was of of the there as operating efficient our continuing XXXX we opportunity XX% and drive beyond. more to is do If business in it’s half the the the be half higher look year than the -- full you the productivity,

invest the We XXXX we said of and driving at some were to our costs Analyst going out efficiencies that business. in Day in

that. down doing going Today, investments we some also we to are doubling changes been drive on but we leverage base, have forward. We whilst operating in to are are announcing will doing cost us allow that that, our automation

as So leverage, see -- but continue operating the fiscal ongoing will which year, journey we in you of we in that XXXX. of will this of benefits driving half the to see start that second that will an

Okay. questions. Thank taking you. the Thanks for

line of next the question Simon with your proceed And you. with questions. from the comes Thank Please James. Leopold Raymond

for the question. much very taking you Thank

can’t and First, potential situation it there’s the really bit handholding from, cuts you does detail, be a make if it in the staff there? are but a understand temporary, that’s to of maybe sort feel conflict but this help maybe cutting decision. get of and to handholding just would of tone taking of like the seem sort the conflict describing where I little help little action a potential it’s as to you helpful about I appreciate the duration give the cutting the I how see risk. all of the us I thinking have coming the I led how expense sort you about implies you levels are duration just Maybe bit on guess the And would -- you more -- have a the of everything what cuts heard expenses, because something of said,

the for thank you Simon, question.

quite spent seeing signals first the at our demand saying, time -- let start of looking at we a we with fiscal year that from bit when of the were in So half looked our customers. we our me

the largely a top, we at supply second this And year if the was it have staffing was And want we of did issues our that supply. last our revenue reduce on said, the a Simon, we you of to recall, driven challenges levels, not in were issue, because by year, demand half not issue.

said relook are if that’s also We and that and base staffing potentially we us that we the softening time at demand, did cause would see at our cost address exactly doing. in our levels that a to what

driving our quite earnings this are being is we of by that but that, and This temporary, about whilst macro in that a also appreciate environment demand year, are performance, ensuring and is also environment. softening we driven we it seeing disciplined

as the as we to positioned staffing can that’s and and with levels are lean that these levels. operating normalize levels and our customers demand driven capture opportunity are our reducing to be drive are and when spend. as staffing We be well feel approach to do should what’s growth our as lean we we We ready

and have In I looked just In some increasing terms of driving Simon, have size cuts? the where three organization of in the being giving roughly Board. if pointers, the you able made park some we couple cuts. to a for at these But across of G&A, we categories. it It’s G&A are rationalize efficiencies productivity and the we on post company

or are we territories consolidating looked a have in In sales, motion will drive in we the some at to returns our go-to-market are the roles having the some leaner we on medium-term. go-to-market the realigning and -- best focus near- have configuring territories of and to that

and term speculative underway longer drive have are we and leaner the returns top made all at will that projects, being we product on And us amount really more projects have best perhaps that projects have organizations, And R&D on is then we cuts all of our really and demand will are when have returns. normalize. priority on or and those where positioned focusing really to for those the that focusing ones the looked

from where whilst doubling customers that we doing multiple going, are to are securing we and portfolio, add and architecture in where seeing software, we not we a are in down which going, the ideally conversations hybrid make network private being and we their these our all edge challenges for investment that we the investments. would positioned on from environments and continuing are but are are together security clouds, about infrastructure growing multi-cloud because apps so that, are our I public applications really across I able delivering in these environment, in clouds in position a to single unique that, is are think evidence

helpful. very That’s

of of where just end follow-up, And quarter? I you either you in -- the the quarter, the quarter you can that. So Can have backlog we one thank know or certainly, fourth backlog fiscal at for March at quantify would the was thought you mentioned quick you end XXXX. third that normalized

quantifying end particular the the through did are quantify shippable didn’t highlight -- tried it at one by we were backlog the normal QX about are be most our you. to our we update of where that backlog quarter. to fiscal I whether We that’s Yeah. not where the we we and any Simon, But QX this at tell are not in we year. end end to not of of of course QX. end We year, people the the of or particular is the can’t talk in we QX, during to call at expect

Thank Thank you the questions. taking for you.

Yeah.

Please And question proceed with question. comes Stanley. of line the the your with next Morgan Meta from Marshall

to mentioned kind customers their at Great. utilization higher couple you equipment. of maybe networks that Thanks. A the me, start FX running of with, for are

is of seen Just running matching networks pullbacks seen wondered versus in that you they previous kind are any previously macro question? if that there’s where way their on just we sense levels contextualize kind are we of prior maybe as to how you of that could that of have if kind hot have first of give a a kind peaks or

red in expand but of, capacity. I just to to point, But to would call I ability see times points normally customers we of it front have are gone that -- some so that or we they really a to customers is on to were they line, that it, say of getting number and normal close have want have can size we maximum kind sample those where will that, understand the we us the that limited. at that Yeah. see for where the would exceeding and a

we have customers six assets quarter with in tended seen macro And And their we this what this way, in sweat have seen quarters. customers slowdowns way. actually their this seen happen in sweat it when to prior assets where to have four for is have consistent the we past,

in we it what but out, that’s different micro plays different in shape past. in Now slowdown how every is and have seen the in

platforms -- typical this up, seeing the go these also the prior behavior we again, kind What for old years four our a attach older to that on that are we seen beyond, especially the is rate that, and platforms is little and of made micro platform have maintenance see that services of rate we in is are slowdowns. customers on longer this attach we a -- attach seeing are very assets the also consistent sweating attachment rate these which platforms, on the evidence with what

the us change that are of around change thinking a points customers really a competitive that’s behavior is So sweating assets. of That or that in to all they their that in not architecture position. our

for of hunkering customer’s us of kind with seeing a time. down are We period

of a tied Got cloud helpful. software would higher then terms across that a certain versus -- kind getting of projects this more with of attached software of question. virtual the little revenue getting are postponed, largely is get a secure are of are being lot security your helpful projects. are projects Obviously, as transformation of ahead. cloud projects, are Board follow-up the But it. being which optimization to are I kind projects Anything going security is way That’s that certain maybe sense approved is what -- projects just in bit to trying And a prioritization. that or that be there but kind or not? to a now are that there am are delayed ADC

Yeah.

for software our to that, overall, lines managed more still part that say, is is we small but we and affected, security I business resilient. -- product software has affected, our so part business, of services Software-as-a-Service are a And of business but seeing our our which grow. continues but been resilient. are business think, has security seeing all would been I more all

Meta, dollar, and it our and the enormous include have security, project typically that ADC in ADC multiyear these impact, Where large projects but these is solution be we seeing biggest scrutiny. are could multimillion attached

this where We and all as dollars. for with that to have these not with are a dollar or deals doesn’t say, normal And course, the of way but much of multimillion only hundreds couple the they to projects, of happens happen Board doing it up few thousands a the or seen CEO are COO them project. the of we approved are come that CIO

saw quarter, -- just -- this deals a In in the that significantly was relative software software multiyear multimillion I up fact, speak the number we number affected on the of subscription year you did to of our terms impact volume, if our when because were it dollar But the look those ago. in projects that at terms large were you dollars, postponed, revenue. most of or

deals multimillion not we So those essentially scrutiny in are the from are that’s down back we going see from that the terms smaller And they road. getting or multiple of by on deals. feedback are one the away, difference -- getting big the the seeing quarters. do the dollar delayed versus customers deals But are demand we coming

color. Thank you. Great. Helpful

Due Fish Piper with last proceed Thank time take line of your question to you. question. constraints, Sandler. James with our Please from we will the

comment that of to out Most the guys. capital but to you Is don’t just point? level should QX fiscal François, going Frank, was by I fiscal like kind itself of to asked, it’s sounds some follow but we itself to working to Hey, made been you exit want that it stuff up. at and out work the maybe have of kind to the actually the you it by talk if expect QX mine now. way wanted some -- at the think of expect a it about of year backlog backlog work this specifically, more right that kind about normal know

is it. that Jim, about think way to Yes. the right

more lastly, basis. being called that it’s And resilient Okay. and SaaS year-to-year on you still growing out know I a just

overall resilient like recurring grew of software total to that, that’s point and become part it a part if the now this Just percentage more Any color seems and of the it a what now sequentially? is business. as should actually at be it given business further material

Yeah. out currently splitting are not we Jim, and that out we that now. have split not

of that growth we have out split In just year-over-year, terms yes, but not yet.

guys. Thanks, Understood. Okay.

Thank call. attending. you today’s concludes This for

You now may your disconnect lines.