F5 (FFIV) 24 Jul 232023 Q3 Earnings call transcript

Good afternoon, and welcome to the F5, Inc.

Third 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 [Technical Difficulty] presentation. [Operator Instructions] Also, conference is being recorded. objections, at any time. has anyone please this disconnect If

to the DuLong. I turn over Ms. will now begin. call Suzanne may Ma'am, you

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

site A an today's available October access fX.com, be through the copy the Time, deck call. release use our by on on at and is XXXX. today's through webcast meeting viewable our slide of webcast of replay today's archived press the available will accompanying midnight website telephonic at is dial posted The of today's will IR XX, XXX-XXX-XXXX available XXX-XXX-XXXX To audio phone, conclusion be where ID XXXX. The of Pacific to or and XX, discussion replay our version will be July XXXXXXXX.

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

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

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

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

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

early environment. hello, I speak spending Thank everyone. good In the will remarks are lingering uncertainty. joining the caution with my emerging macroeconomic you then today, including assets traction. today. customers areas persists, current where sweat wins continuing some to quarter's and will customer seeing and I highlight customer some from the budgets quarter, Thank you, for to results Overall, us notable and we customer Suzanne, tight amidst

tough guidance midpoint signs our earnings executing well perspective, forecast, above of and with quarter well per beginning team our above we the 'XX a of some revenue which and QX still are FY third our from up QX environment, the slightly though at range, seeing the from demand stabilization. played early of demand Despite levels. share quarter out we From this our was range. is year, off QX high-end of delivered

X% including from Our team a maintenance to higher global sweating strong of existing services delivered continuation of strong growth, the the on attach rates deployments. half maintenance first also all price realization. year, With trends see customers and driven assets, we renewals by continue the customer

revenue grew systems Our growing X%, year-over-year. product X% software revenue and with X% revenue declining

revenue substantially constrained. systems benefiting efforts from normalization backlog, supply chain is our While remains demand work down systems and to

Total contrast, positive X% software down In compare. are a software year-over-year, strong demand. revenue XXXX in seeing we signs some against QX was

within of stabilization And half. or expansions and first revenue year-over-year record forwards, software, This subscriptions a our to $XXX well true sequentially. grew However, XX% as as high renewals the new interim subscription growth total strong software grew software our reflects some from term software in million. X% in

from operating revenue our Moving to results.

and discipline driving leverage. We operating are also demonstrating operating

fees. broker and chain from improved well and costs supply slightly basis of reflects more and than This margins chain as Our some price guidance the points of supply QX. ahead easing XXX the expected QX of as realization, of non-GAAP ancillary XX.X% gross combination was like expedite our

inventory as way of working out our their planned. Finally,

from QX non-GAAP points QX XXX from basis of and basis XXX 'XX. In more operating than margins addition, improved points our QX XX.X% FY

as well non-GAAP tax as non-GAAP As some per We growth is expect to those earnings to a deliver expectations APIs now we share the these significantly optimize believe opportunity apps favorability, to deliver and EPS double-digit and for quarter and our overachieved of in improvements secure, FY and APIs. our the fundamentally growth growth XXXX. and linked need of the applications continued result

our capture to Distributed and will As that BIG-IP, continue growth, and each family part highlights advances we call drive of product Services. product from FX FX customer integration families, the I some NGINX efforts across our from out to FX innovation, including quarter. Cloud

in-cloud either continues have applications who take traditional to serves from to which family, on-premises, failed invest or competitors share environments, BIG-IP innovation. Our collocated in

customers QX with systems than with with a is next-generation bookings. our our proposition VELOS platforms perspective, From representing and the rSeries resonating platforms, more hardware value of XX%

ownership On drove a data and lower and and continues quarter, side, to wins major offering airline, including total at performance, BIG-IP's a the major of cost our differentiate multiple capabilities a wins in point software multi-national commercial retail the manufacturer bank. automation and automobile American UK

the and and NGINX applications modern, quarter. based We container-native for also in NGINX APIs. demand serves micro-services strong saw FX

continue enterprises for NGINX their and Kubernetes We workloads. large to cloud see adopt

have We grow demonstrated apps the applications with and We NGINX with those ground-up, built them. from when that repeatedly grow. are

opportunities private a NGINX We quarter, balancing, from is for cashing this their streamlining renewal FX inception. which customer, clouds extraordinary dollar in public collaboration platform subscription an saw as using The in load grew that in a large initial and multi-million telemetry. term-based and XXx deployments single provides both several the including by NGINX growth platform

our Services. for have a called years, SaaS services use Over building cases. the build last we invested cloud portfolio 'XX, several security organically and Cloud and to in Distributed February been inorganically managed of launching multiple both distributed of FX momentum and Since we expanding offerings have

and this as distributed reduce services tuning policy challenge and managing APAC small (ph) and Their a a EMEA team. to to to environments deployments apps and application protection APIs standardize application is security time existing financial win was web API delivery. was its application complex across with A WAP global this of provider with good policies firewall industry that a and or a wanted example in

APIs Distributed cloud are from with two signs the but networking. our security FX categories, apps delivery reducing their and that Today, are is and emerging in markets, API networking, intercepting multi-cloud services still, to multi-cloud encouraging their early is It to time distributed seeing minutes. Cloud WAP Services specifically months we and protecting days also

Doing they security, all we cloud like of and struggle number many know-how API are, protection secured. with API who offer requires what to they where distributed security those microservices, of the robust API have, is in and containers extent, our On to they are using API composed CISOs is the capabilities applications service. connecting us growth endpoints of modern them exploding. and to tell they APIs discovery so, distributed

a cloud to lose incident, which security provider infrastructure they them superior entire at urgent virtualization us American datacenters, caused North service to serious help. a the beat API experienced both sites features, distributed offering services, turn and deployed, we cyber FX for security. their the Once When worked defense with platform, restoring immediately services. value a started functionality advanced and multiple WAP onboard migrating and customer their to competitive emergency including customer the

a strong multi-cloud Application environments. already for We in any past Securely task March. offerings traction multi-cloud connecting between are of seeing on-premises, in and said our are respondents XXXX Report networking cloud distributed XX% State is managing they tough launched our organization. cited Strategy multi-cloud early environments also at-scale of applications edge just this

Our secure the game. change multi-cloud networking solutions

these been applications is and Our complexity, in and latency forced and leading unique. security. APIs and have secure isolation, manage ability now, weak to of customers network to to layers package networking Until security distribution operational often

clouds, across complexity networking distributed public multi-cloud for make networks Our and reduce applications connect operational to securely possible and and customers locations. centers it on-premises solutions our edge for them data

to multi-cloud ability across cloud of through consistent that clouds while FX are beginning Customers unifies and workloads and maintaining to their all cloud threat networks, the empowers security and and visibility, and can to to with applications security secure without API, between delivered even visibility, constraint them distributed every security and the the edge, be uniquely understand end-to-end control the applications. move end-to-end so provide environment demands. visibility our power This of today's for application control the policy. security

providers the to in world's XXXX, offerings. a offerings protect critical insurance FX's largest our workload. public-cloud independent distributed now with management Early of claims traction deployed secure a customer win includes WAP multi-cloud networking SaaS for global their business one multi-cloud first our of enables February The of cloud networking systems.

early to datacenter the ask just a cloud public use the weeks. forcing to was workloads emergency shift customer that this leave In in cloud They abruptly and and for them 'XX, shift. distributed to two lift FX lift

centers went They fact to to public so their In the data global clouds. project expedite moving opted smoothly.

These standardized the across help clouds multiple Now, protecting multi-cloud and customer needs, QX. on external internal applications tackle some distributed we FX spanning are networking in secure their has just the for and cloud and of challenges APIs. customer

benefit is precision when what normal position While will when we not to FX spending in are to return they levels. more to predict do. a customer patterns well-placed

by are QX encouraged API-focused approach with the We customers. is the with both our and in signs stability early resonance application of having and

are optimize We our hybrid no And or in consistent cloud differentiator what matter environment capability customers datacenter, APIs to applications collocated, secure, possible deployed and public network multi-cloud it they're approach, their deliver this private and world. today's for making with critical a and cloud. is in, a

will turn Frank. the I Now, to call Frank?

growth I delivered Thank quarter QX discuss year-over-year. of $XXX and QX I review We everyone. you, will revenue good before our X% outlook. reflecting fourth our Francois, afternoon, results million,

Global product with as global year. of global representing Our impacts $XXX continued grew of renewals revenue revenue remained price introduced the due revenue. well the strong increases a between roughly services as X%, and services maintenance high split total of to services last XX% million

$XXX X% year-over-year. million, representing of totaled revenue $XXX of Product grew X% Systems million year-over-year. revenue growth

X% year-ago Software in tough period. down revenue compare totaled $XXX million, a the from

license dollars revenue a both is QX as Our subscriptions software high of base software comprised hit revenue. in of sales. Subscription a in both new perpetual percentage and and revenue

revenue revenue subscription QX's totaled million, total $XXX Francois of software XX% year-over-year. X% and mentioned, or Our grew as

maintenance high includes Recurring million grew year-over-year, grew QX of representing $XX revenue. the XX% representing sources of XX%, a X%, our of and of well revenue. QX's revenue; which from as portion as represented representing XX% the sales revenue services subscription-based of basis, revenue; of declined On revenue. revenue, license a XX% revenue APAC is EMEA as contributed all-time contribution. recurring total XX% Americas result of of Perpetual regional from strong XX% X% Revenue revenue new subscription a software

providers service of bookings, QX, enterprise represented U.S. represented Looking at XX%, X% customers our XX% verticals, government major including XX% federal. and represented customers product from during

overall Our discipline. reductions results our reflecting announced QX were previously operating operating cost strong, and

of gross expenses reductions sequentially. Non-GAAP we XX.X%, margin than margin more were expenses announced quarter was operating guided cost range XX.X%. a improvement basis points $XXX lower non-GAAP million, were benefit gross in XXX slightly million, $XXX partial April. reflecting than our GAAP operating and the an was from GAAP

Our GAAP operating margin was XX.X%.

Our non-GAAP XX.X%, sequential improvement was a representing more than margin XXX points. of operating basis

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

XX.X%. the Our non-GAAP was year, target driven federal our with income the by largely of annual return a effective tax the range rate associated for is This during tax quarter. our filing benefit below non-recurring

the was $X.XX Our GAAP $XX quarter net million, for income per or share.

net range as well of $XXX guided at Well gross non-GAAP as a million the top QX improvements end tax was reflects $X.XX share. benefit. per impact $X.XX above per margin the Our and per our of operating This very share. income to combined or our discipline of strong $X.XX share expense

and down as days, QX supply quarter of linearity historic I to strong. the Capital our from XX which for $XX improved earlier million cash profitability to driven was expenditures flow cash strong very QX, DSO $XXX balance were related shipping We from to XX result the to invoicing also range stabilize. flow and now chain in will million. by sheet, operations collections. our in turn in as and remains improved for cash continued a closer the generated quarter our

the totaled billion, attach million and increased seen Cash to Deferred growth a investments we've driven approximately year of percent by continued high end. our subscription year-over-year rates service as in software mix. throughout quarter and $X.XX revenue the at $XXX X% maintenance

call, to $XXX we on last of worth repurchased As QX. million our committed we in shares

we which X,XXX reductions announced April. we ended with the approximately the employees, headcount reflects Finally, in quarter

I share will for outlook our QX. now

April, $XXX of million. comments to reference with QX approximately metrics in we my quarter expect guidance expenses from estimate range with million non-GAAP reductions cost XX%. million revenue Unless the million benefit stated, operating QX $XXX to gross of operating of We in otherwise the full $XXX announced the margins $XXX

narrowed XX% for year. results, approximately to we have FY effective our Incorporating now tax 'XX estimates rate for the our year-to-date

$X.XX to we As earnings targeting a result, per $X.XX the non-GAAP QX in are of share. range

use shareholders We cash million expect free share to We we flow expense $XX compensation expect of to our flow repurchases. of our share-based least annual returning to used million. have Year-to-date, to QX approximately remain committed to and at continue free XX% towards $XX of cash repurchases. XX% towards cash

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

and applications. FX you, the for Customers optimizing delivering standard securing, Thank Frank. made traditional

compelling being mission and and with applications new apps, cases those and traditional modern architected as for Now, critical into areas portfolio. as across differentiated our APIs solutions well use we are

Our and experiences. and deployment reduces SaaS environments delivers focused across operating found consistency software digital better cost application new risk, holistic and API approach across enables and lowest models, hardware, which

I that things from demonstrable the portfolio in we early to, with leverage are this expect integration XXXX. three, combination are ask and creating And we away innovation call. a of Number solutions FY how one, stabilizing. operating demand are delivering we and Number some In closing, we architectures the committed three differentiated through signs number is are you seeing technology produce and on well-aligned to take application evolving. that organic seeing encouraging additional of are two, and inorganic proof discipline points we

the please open questions. Operator, to call

you. Thank

be We [Operator a conducting Thank you. will Instructions] now session. question-and-answer

Our Ray Please with first Guggenheim question Partners. with is your proceed McDonough from question.

Great. improved, the portion simply to for we're and forward, true strength is is relative like seems the too has, continue that's it capacity, will where it the forward renewals first which think drive quarter for and did How renewals this the at to going bottomed? it last questions. of not performed customers you tipping point or to relative Thanks do Frank. tell need taking add assuming to or whether early which Maybe it

so the much question. Hi, for you Thank Ray.

when forwards in four plan we quarter the strong what That our of and than course having we've said, in number. year, higher renewals included seen it our this true the out true be throughout So at forward expectations set of we beginning the a was that. been the a Would had year.

demand an were Francois right When second though are indicate It's couple early last And large on I stabilization the here. say in quarters. few of a to absolute high grow of our the I which things going saw better for deals. incredibly some as is we've environment, mentioned, was seen the that expansion are in we a and quite bottom from seeing what encouraged from to that we than can now terms,

again, not signs, but ready a trend. So early it call yet to

I That sense. a if, maybe makes And could follow-up Francois. for

from and that I of maybe kind macro obviously there here? broad-based stabilization you vertical of a more? And is than you little seeing vertical between firm how or a a you're the where mentioned others? are of bit more signs Can stabilization unpack from spending product You is seeing give mean, is each takes perspective, a perspective? of stabilize, kind kind

Hi, Ray.

hasn't scrutinize quarter maybe So, first the saw little, is us it's versus think I what of continue this customers to contrast we in the the a saw what this quarters What for two best year. to changed we spend.

Those looking where being We pushed continue some customers across to where deals as verticals, delayed, behavior are spend all first though a as in much assets, their changed. being than deals the lower stronger as possible that. do they out. demand sweating a the even in see quarters to and XXXX year, of QX to demand we continue we see And two have than And levels. first still the not was saw result, our can from a behaviors

in saying they of getting and half number one, changed is, has year. didn't things the I'm first general this quarter worse in did than verticals we see What across the

feel we So, of reached kind stable a have we level.

March -- There sector interest the about U.S. in financial was lot uncertainty, rate uncertainty the services was debt there ceiling in right after of our in specifically. for bank think I a failures. specifically quarter, the still

then. to to a going almost halt it spend financial I'm That now. come services in so, has irrationality call almost out came And

So even there deal scrutiny. getting delays is still they But scrutinized, deals approved. are and though are being

changed. So for think that, specifically has that vertical, I

And sweat forward then, possible, as Service that's they projects. assets the a couple board. of couple their have needed been that of areas financial delayed customers would seeing case are deals behavior the moved other projects. And as in I and a continue much I say working enterprise think were been that still seen these we've providers, to And really these the services would across had implement say, in to we're and with I verticals. in

appreciate the for I Thanks color. it. Great.

Thank you.

Chatterjee J.P. is question next question. Please your Our with from with Morgan. Samik proceed

about my have -- as And more. for you comment of you didn't the Thanks Hi. through declined systems I a Yeah. revenue and comments stabilization sort in significantly, backlog. the taking question. we into of can stabilization if saw Francois, that the sort I back of bit a to mean walked walk quarter when about go the demand dig

we wondering that in you're 'XX you floor million and -- that to the of So fiscal both of to sort at at if software, we we sort number be is $XXX seeing or sort where be related that I'm comment? based looking what $X.X more means when stabilization the least billion annualized where of on remains of and a being just same? normalized you're as way sort track as hardware those macro think the macro comments is the should the this went of interpret the to the Is mix sort interpret that demand interpreting as about a

Samik. Hi,

let that. lot was me There a in unpack so Okay, there.

the quarters were worse of progressively in were talked fact I first But about the that we we of have they when the the the So, they felt them to worsened. we feel when were didn't January, where were September. January at June, further things end than were in and worse back stabilization, look in you March getting things demand year, at if in really it's you than two

That's commentary. origin And by so, my things the have of really stabilized.

throughout because to now largely soft has know, to -- placed have specifically relates needed been year. And and hardware, it's lot not equipment you been demand their made needed soft on orders the -- as of we been a have sweating of Customers been last make. it deployed. macro digest equipment to get customers hardware to have installed customers able assets, that shipments we the environment they and and to it get the have As get also they able and year, the Samik,

that of So all is happening.

you next we from down down saw QX. even be is our has our look of hardware As terms demand that today. QX seeing you're would worked backlog probably hardware, expect at through is result, frankly, even the come have why level it in backlog where I significantly, is when in which and to a quarter, in where were QX, And at you

it us As this for to this you of said relates in XXXX. it's past the to have expect, for nature what to XXXX to four been quarters. six would past means as be that gating in early too cycles , We've the

We we quarters are feel three into it.

the can demand to this infer But next when. is know We XXXX. return don't will demand and year. demand you way, we it be where higher So by do do hardware we across return potentially demand to to than Board that from the expect, in year When return. exactly, expect

to points total I that keep we mind you quarter eight our said based able this be worked backlog, year However, in of of so headwind next six ask growth to we on have on to there would that the year. backlog way would much ship revenue the because we been last

in for keep next about when revenue you're would that year. thinking And I so, mind

is in a AI about about Francois, terms their as the do question inflection And of application how How navigate cases. the same AI expecting from do inflection capabilities. investors think that managing and growth sort they growth to It's application I'm it. investors application at positioned of use getting again lot think you that in well your security and are time? about really more of really you challenges and Got because a growth that

I'd we're, areas. to looking companies, that to focused So, of over through to which And got leverage areas, deliver confident are we Samik, other I capabilities we is for we will to a now productivity. drive us tools double-digit focused new are this -- earnings earnings to know, And means -- more productivity think like would one enhance of we we've say continuing you year. which that, drive in generics help said are time. in other in We that these companies AI, that us course three the on to our growth, growth. lot we certain as if But we want we want

in forward. a rationale AI specific application The That the and areas traffic expertise Part using to really other one, the AI our in we're products. granular have problems. has you which bring at to incredible two especially I models our Shape solve capability. where to think company. an very and particular, are business, we that is Security in us been capabilities the also enhance Samik, AI see expect to security, capabilities was acquisition more in security, take profile that for powerful us security is new already, allowed level, of would will security And more And is in with move which to going will these to going we AI-enabled it machine-learning what increasingly

a have world's XX% of data lot the being we in front websites. And of of

over data We We access sorry application. have is these website feel of fuel XX% of -- can world's a million machine-learning models. that and lot web have the to being we XXX borrowing

in opportunities some see also will terms of workloads. new We

and is lot Samik short-term, of the what have but early days new workloads harder happening be that probably still interesting is for in we that So we FX. to the attributes two AI-related define think will a see,

kind connections with a need workloads are APIs. first lot modern accelerate Those and connected opportunity. to will APIs next-generation of and create and Number will API orchestrated levered two, multi-cloud and these accelerate calls API they of that to and the workloads explosion access one is approach, be or data And secured, API of is have an API adoption these API distributed, which this also multi-cloud and built quite and are we opportunity. we security. to levered that are In to architectures, number which more

play well FX to for workloads those the two think so, road. And down the of will attributes opportunity AI-related we

Thanks Got my questions. for taking it. Thank you. Great.

Thank you.

James. next Please Leopold Raymond from question. with with Simon question your proceed Our is

was where Gilbert, Thanks the that in how for Clearly, help had idea of Could has for at taking the sort guess that think should be normal we sort the you systems since changed. been and $XXX I would the if revenue question. think quarter. you timing maybe I million puts us late-XXXX. to run a And rate of lot sense million really $XXX the a wondering better even pandemic. get about looking revenue of be sort to about a might know of to takes sort don't the the hardware? what of a and rate base run prior

run Yeah. for we or Simon, don't what think I this. what should direct I we're to of kind you is you be But can -- base is with we hardware. think share the can rate

is that, less a perspective more could should And of the Our in be number it but the could terms percentage. have trajectory digit in of that little the that mid-single little we that of a in than than be hardware it units the zone. out that, there be declining it's

that's when look of there trend kind see you'd seeing. -- sort and that the deployed, longer at you units And look in and years, that at we number obligation, have the trend of units of of trend of are the couple out you we're last normalized of overall the the the number hardware a under

The a mid-single if the one. chain of disruption, about But macro the you just been there, number there's units last The you been should has trend disruptions. pandemic you positive a of substantial the the of look negative a one. ignore think one. short-term declining a has it long-term been then you of look been Over has couple years, The as you a revenue, of supply at just kind negative course, at have hardware in digits. if out

have the that add hardware, Now model think now as model SaaS. by in we supported the of I value because in in their and something a have strength customers FX the of Software and are other we though, applications applications we're not hardware environment, in important they software the maybe centers seeing Service. data same FX would or ability And is in funded software to really that they all private and that what an to is want the that by deploy flexibility part Simon, applications

inside value these single and seeing models. deployment large two three we're these is consumption a policies models come policies And delivery across customers the security enterprise through. consistency of And or of what of

offer its And going core to to and we're the to continue business. flexibility how drive growth we in so to intend this to earnings continue

you the in terms And maybe just for of kind would helpful. just of That's what of sort trajectory, we in things and follow-up, as of you analysts? suggest macro? signals terms look sort a of from normal better sort might things on software back advice to apart of give the getting the What getting

Simon, to in terms of specific metrics, more come.

that to mix for approach. give we do we and is better the make again, not In away themselves. customers to terms think specify to flexibility of of a to is we reasons we to the one have the trying guide delivery gotten approach one specifically that which customer that describing, from leave the Francois was try decision why because, We

see what’s will hardware. software and fluctuation between and we some volatility what so And

the that particularly when few will over next Cloud, years actually ratable think business, the of us see volatility fashion. I much SaaS a more that we to Distributed more in come become more around decrease will and as to substantial, business continue

where so expectation you give -- business points continues around that to be that. for forward us can looking points data software looking that That will some as revenue and more that And come. to more will metrics grow,

very you much. Thank

you. Thank

question. Our next question with Fish James with from is proceed your Piper Sandler. Please

Hey, guys.

meaning understand what between here have But of are security? of customers stabilization products questions both your demand side versus few we're as penetration you really the are on the using from percentage wise or asked demand to you already. guys what also, what opportunity the up Following actually asking on a ADC trying product And seeing side, left?

Hey, Jim.

give me of terms in of we're let terms So you a seeing by demand. sense what in product

the delay in Where has space, as has -- they the attached are hardware can really So ADC. that the affected security to assets. in ADC been looking -- in is sweat said, more has Security resilient is where I been way demand security course, been the orders and ADC, soft. of their is softest it to purchase customers than we're same stand-alone where are. the ADCs But that

also for application on as for NGINX. existing from seen We for as demand a strong had opportunities. quarter expansion demand NGINX strong well modern have renewal and quite largely We deployments,

multi-cloud think, a across so is offering of in various security, levels. a portfolio, is increasingly securing see very security, we but way. we areas are the where how market; growing when a where networking, secure on us, nascent a deployed opportunities application growing is different kind more seeing in small trend applications this and applications doing That, overall in rapidly security as but base of look course, is These of and API seeing seeing And a exciting front we're is the so is at but a also are our service; demand really small in and which connecting opportunity, from growth, cloud for lot cloud which strong -- and a also I in demand. base, distributed but this you of

Frank, And sense. maybe Makes for you.

to recurring things, by sources, but growth how revenue or the half of particularly them, more be give around less recurring the on opportunities Thanks, as expansion and being retention you're transition net constrained guys. keep giving collect recurring what And pretty trying it is revenue time of saw much to side not of expansion some understand versus know rates, qualitatively You year the being SaaS piece? quantitatively can the first you of you you color rates upfront. also I software strong. kind just with over mentioning guys the but us

Sure.

dynamic, I'm the So business. to that the part frankly, to the I where is -- see, will which was base closer been, in has is It of revenue. revenue, much terms -- of rates, retention software plan than On our the still quarter. we it but excited renewal strong overtaken net in of be yet new part of yes, have is of business. -- seen not subscription That the our side piece that Jim, that, majority has term-based SaaS

beginning expected New what in was to business had the in activity of what quarter year better much the in but we do first than to the half the we seen challenged the of year. at relation

in renewal base are the largely the we revised what slightly were revenue has last and so line, that to recurring relation expected expectations that again, they of beginning the seen growing and in But strong. still that are quarter. the base have do in in our year. we better the challenged opportunities revenue at net ones those the see, totality, the been of of But we set than to we business And retention new that

Thanks, Frank.

you. Thank

Our Morgan from next question is Meta Marshall Please your question. with Stanley. with proceed

mix you Thanks. asking first difference because up guess the ended seems systems number little in quarter was seeing any a Great. expectation? I was in have But there the I'm exhausted. expected. backlog bit just that Maybe maybe been lighter versus the yes, question, to than the

back I move they hybrid second you for about now then of on more talking about So editions of a as customers share virtual point a gain just the kind made question opportunities. of -- towards just thinking kind have And cloud? are opting

customers? what point sales Just targeted has identify the those some best entry of of after to or and go kind Thanks. been program

Thank this you. they and of of it SaaS. two built questions software way, hardware, offering comes your down model And we've are related because in -- flexibility a to the

your So the that were a a I did through question, part expecting there have any to mix, the bigger while and we expectation we were Look, couple to come see relative for actually the to delayed. deals think first been our of of in not hardware/software. that pleased terms software was of

quarter And customers. helped performance speaks in think overall also of we the to that and stabilization terms for the the so software

to, course, the of through these new customers absolutely are not ones returning with to big 'XX projects terms level Still in new of software for at least and transmission necessary projects, them. but move starting especially that

software So that's on the things. side of

pleased hardware, shipping that lead to we normal I the to that and do we're able we our times. returning had things backlog that. are think on to -- we're expected pleased We're year, be throughout

times and really which important once digested two their demand projects implemented will that are think a levels these they've almost to at lead for customers weeks, catalyst equipment because normal for future be Our them. at we get is our

ADC the in because terms of traditional -- the share we we software the of model gaining In flexibility that of next-generation specifically, platforms are market -- and next-generation share, Meta, investments have the we we've in largely so ADC gains, delivering. believe made we and are

So we quarter. rolled Meta, we have -- out Vellos rSeries and this platforms

that over platform. made hardware in of I XX% think rSeries shipments the were we the new on

fastest on-prem capabilities software to phenomenal. it of benefits the cloud-like and a seen platform think that speaks new that in like the we've adoption brings ever. been hardware the these We of has transition new And it's to that So the platforms environment. adoption

the so ADC taking in away subscription offer and is we've the to we these the CapEx to we've share, offer, that made really are the some And because made. FX and powerful. our taking competitors of space, investments of cases, investments to model, perpetual coming the relative OpEx And models, and model specifically continuing customers in we combination

market. Firewall, and the We DDoS in a a attacking very are also the is new with a customers are going market, is aggressively are entrant strongly we Application rapidly API market, distributed WAF bot where the but This protection that security, incumbents Meta, gaining after service. Web we and cloud, as

in are quite secure networking We a defense between has Cloud in and opportunity MCN strong offering. new bot where very in applications and market the particular differentiated Distributed security being also emerging cloud, API a and

feel hopefully, quarters gaining gain we in we come. to areas and where are are these to we’ll So continue share share,

Thank Great. you.

Thank you.

Henderson Alex is proceed Needham question. Our with & from with Company. next question Please your

Great. Thanks.

So your in pretty you last had business. systems decline a steep year,

you're headwind a that chain, up been has doesn't imply and go supply digits you're strong X% low-single really forward X%. and resolved, to particularly your the already now we as of suggesting cited that You backlog

of So top to growth X% meaningful reconcile line that why there that can headwind you strong in business? really X% you haven't be given would produced

forward. And to conversely, X% headwind you're citing X% going then a

side September the declines the over with comps comps gotten in have software quite extremely year. easy pretty year next up were are over setting last on now difficult but the Your for the quarter last easy and year

a at XXXX? think to see produce it's we're So the meaningful product to possible growth side shift and reasonable on if to going as software still revenue growth, side to I software it, now it of therefore, is that into we look go the

you know given you guidance to don't headwind. but X% give have want I guidance, on to X%

should comps? easy thinking what we so that in about be software And as the offset these to

Yeah, to is Francois specifically the start Alex. of FY that and level that's I'll systems see had the X% backlog the It's wants to add to X% related anything. the Frank. more short, But and specific business, if long to we into going and 'XX.

'XX. And been been recognized demand where has a so revenue to our boost for it's obviously, the to FY in relation

have been at in we But lower than the But largely saw a much going FY we've 'XX, with both. -- the that in ahead at that's in it FY to stabilized than referenced, been business. equation of Obviously, is in the The -- were side it's better demand year. -- 'XX. QX half of X% where challenged the first associated X% the which lower looking what level hardware has we

terms we been see headwind the that much we larger be point not FY do recognition do in see 'XX know expect hesitant saw systems have there revenue where But a in demand. there intersection in to a to to will 'XX that that 'XX, we'll that we change systems we the expect And to X% we're in as 'XX piece total X% between in than that's change in so what where in of there. change that exactly be and specifically

new recognize equation, revenue, our far. On traction. come we so 'XX the will SaaS likely side we the which what mentioned, the we in great That environment are challenging FY in we've a seeing also that the have rate have as But change. in form the of change same Obviously, seen renewals term-based of we software likely as agreements. in seen in necessarily more we'll not seen

And comments will call, right exactly talk We'll made. in and but all way play to so it's we -- the reconcile to the the on out. about that early now early next to have indication the the that some too tell that's how of that next more

we to it's about, Thank recognized so it's in next higher it impacting be X add absolutely you, that's point When shipment in is demand not headwind Frank. the Alex, than expect just talk demand X year We year. this hardware revenue. to I we would But headwind. a headwind, that clear. -- fact,

to wanted about that. be So clear

And on that's the less well. giving headwind than flat outlook your like that for the is revenues? product thinking like just your as on Are sounds don't to So should revenue it to down you're equation. be hardware expect or implication the you commentary to enough clarify, it of software sounds hardware. offset on recover we headwind the Because demand even these the fairly the the side us to expectations relative

that the headwind simply quarter. that not ready one we say, that XXXX. different it to -- the total math Well, last we no than that said make X- but look, is shipping XXXX, -- from on in guide Alex, of point want where that backlog, demand for for We're sure We're about knows more clear And we've had X not we're to to what look, -- X for said X to than year, revenue is hardware. growth it's given we revenue guide that, going our is of we're to of all points the equivalent X next would for the shipping be headwind revenue we're X-point challenge to year. we've to ready this

of That we march. want also clear, and said, want growth, on been I be remain being march to on double-digit a we earnings to have that

expected XXXX. started challenges model these growth. had said we chain to half with earnings number in the actions this supply the double-digit confident and saw achieve we'll took when You of in year, challenges we're We and that the earnings start of through that back from to XXXX work we improvements growth a our we drive showing

they price improvement as year. out this started also the year. price and been margins leverage to And have last that expect And seeing point a to this sequentially. saw -- you're increases that made drove step basis XXX we operating operating next we jump margin you we we components, And with expensive a realization work quarter around disciplined gross quite these through made continue

drive to growth. continuing on plan earnings our -- the is this So

Okay. Thanks.

you. Thank

Our Goldman with proceed Ng is your next Please Michael Sachs. question with question. from

Hey. two questions. Good I afternoon. just have

you had The and software. true-forwards. first trended strength this is in clear on It's renewals

some was think I quarter, deals. grow the then last wondering quarter? improvements just there there if have I follow-up. you can and were And quick in September software weakness think a whether just you some was I seeing new revenue in

Sure, question. ago. year an see we from down business Michael. the still were was the a did activity, Thanks it Yes, we new for where though improvement in

the so the deal irrationality And some ago, levels Francois we to sign than getting but of year out approval approved. as a come seen was it deals mentioned have more actually of are would earlier, Still positive what behavior. again, a see, buying many the

guiding see that a versus lot we're a hardware happy to come Obviously, mix last faith quarter the we a obviously of not we're challenging to was in really And But software through. software quarter. So on do have sequentially. business.

quarter. This quarter more back closer expectations about have actual that to we'll the talk the came outcome next And we for business. the

earnings double-digit wanted growth back of circle to on just I And Great. some commentary. the

Is have you points that recognizing case? do past, as margin top the you still you on least in basis uncertainty next And said I cuts, you. for cost double-digit expect at think expect 'XX XXX expansion on year? Thank of the fiscal so the the guys still well, more growth earnings line.

Absolutely.

of those going X% Michael, to happy that. really we're for now yeah, We're FY about So higher XX%. on be obviously, when to had outlook an EPS where in comments, we had 'XX. made We're we

tax of benefit. is the from that Some coming

And certainly 'XX, double-digit. to into those just and FY we our pretax to too come particularly so be it's FY we play, How we that price and seeing, the happy income at when that things on as we're operating FY aspiration it's take repurchases stock margins. our give more share any really made, to repurchase margins our like going what and a come specific happen, that share gross really, tax look the the with for on we're than early 'XX. in leverage exactly But and further progress thought It's was guidance 'XX. to

still to operating that, part go and the And XX%. intend we there margins look, of in is operating that we on second margins, the expected that. we said drive XXXX I question be feel around to If we around to opportunity

Frank. Thanks, Thanks, Francois.

Naji from with William is proceed Blair. question your last our question. constraints, Sebastien time to Due with Please

enter Hi. maybe maybe you And in, talk the Thanks API squeezing new of competition how some little as points for markets then differentiation of of few expand for key like long take little here. guys. particularly you these comments has about networking? a some bit as just a bit security, changed, FX multi-cloud a Can me on share to

the you of beginning part Can the Yes. repeat -- just the first question?

Yeah.

Just markets maybe competition could API around these as about how new of you security, a cetera? some talk changed little entered you bit multi-cloud has networking, et

you. Yeah. Thank

patterns nascent it's what but So are like are lot threat of security, with in so attackers. is requires being big that in detecting the a market. have haystack -- API are a few couple is sophisticated mix, API -- able needle a a a dealing API a things really One to security. of API and calls, There companies -- you lot sometimes it find start-ups with a in a because data of problem about

really attacks. security, And win API have mitigate well ML as have capacity to these to you so the really AI capabilities to in as and

have our the in players we're the to of is that attacks differentiated have patterns ability both don't API to protect that don't position. capabilities and kind is and potential to APIs FX API discover seeing where do And competitive all mitigate And attacks. then and against the both same

market And quickly the cloud. So distributed API landscape with that's where security. well is as in we're now in progressing the

clouds. across state portion grow the -- our applications to market, now they most are customers of we but In to customers state our rapidly of we that And clouds. of it's seeing to are think an application now of going increasingly, or security XX% connect space, strategy our using found these multiple it's applications multiple need networking because latest close we're applications multi-cloud In using again report, clouds. emerging of

do security Layer need But X, landscape that go has that to the one to what networking, and of we maybe but networking Layer to X Layer really the X Layer Layer there with we're there to at a players applications really are these securely seeing at just are the couple X increasingly layers, Layer competitive seeing X, capabilities And have in also is connect not other. enterprise X.

these And acquisitions, Distributed our out this APIs application FX and environment from applications in the essentially, going across we're that organic and environment we've where now and on made and integrations is from player any going APIs that our Treadstack our we and any think market taking cloud, Volterra across thinking all secure securely. and play is can of capabilities Shape that, essentially innovation from is from the forward. today and to BIG-IP, Cloud, with only And across cloud connect some

about excited in we're So the pretty opportunity space. our

helpful. Great. you. That's Thank very

you. call. today's This concludes Thank

You may now disconnect.