Suzanne DuLong VP, IR
François Locoh-Donou President and CEO
Frank Pelzer EVP and CFO
James Fish Piper Sandler
Tim Long Barclays Capital
Sami Badri Credit Suisse
Rod Hall Goldman Sachs
Alex Henderson Needham & Company
Meta Marshall Morgan Stanley
Paul Silverstein Cowen & Company
Amit Daryanani Evercore ISI
Joe Cardoso JPMorgan
Call transcript
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Good afternoon, and welcome to the F5 Networks Second Quarter Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] If you have any objections, please disconnect at this time.

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

Suzanne DuLong

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

available is will on website copy July of available release A Pacific April version today's call press where through FX.com, the XX, of tomorrow, XXX-XXX-XXXX. archived be XX, be our an also replay today's at through will by discussion midnight or XXXX. dialing of The available XXX-XXX-XXXX

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

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

to in our may note and results any press the announcing release in that summarized no in presented results financial Factors in has duty FX SEC information filings. our detail that this our Please call. described are update affect

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

François Locoh-Donou

Thank today. you, you Thank Suzanne, us and good for joining afternoon, everyone.

have day. about that of sadly grows all those that our about everything daily an just personally months. us, go already lives. the altered to disease, For this deepest number has has few been affected extraordinary each COVID-XX enormous My sympathizes by an been

priority and Like employees, in safety all. our of the of families first our culture a our communities. health FX, prioritizes ensuring our At humaneness companies, and us the crisis their is most

and April, has entire most been working of team remotely. For global March our

approach crisis. to Beyond safety, human-first taken though, we this health a and have

For customers however means supporting and can. that our other we each us,

our customers hands lent witnessed communities These need, around weeks, donated have world. through last who supported to I FXer. be have they are colleagues and are creativity crisis, acts to most humanity small helping so make proud the have generosity, They to FXers' large what struggling. perseverance they me have the an of and in Over of acts and

about will our business our speak remarks delivered in today. we Frank on quarter. greater strong a second detail and COVID-XX's Overall, impact I during fiscal very

driven performance Our security. and and X% growth demand total access revenue customer reliable was consistent for application application by

analysis shows a Our neutral had the impact COVID-XX business quarter. on net in

a and activity of customers increasing in workers. half experienced For and cases, deal QX, control months sale access outside access and numbers of Beginning disruption the in minimal We in Asia. our worked solutions. and massively accelerated some with capacity experienced to we first two quickly with we of remote March, too

also strengthen These critical priorities. some were project by saw infrastructures. customers as some push-outs evidence accelerating offset to application solutions We their FX purchases of prioritize of certain customers tailwinds acute COVID-XX

remains for software Even Systems demand subscriptions X%. customer macro XX% engagement business Services very our environment, cases was with security and business use our down while high. software grew the quarter, our growth. our considering Strong XX%, Consistent customer last fueled overall

highlights I Frank? outlook. in our our after detail in the to other reviews will and quarter, and QX financial speak customer Frank results more quarter's COVID-XX-related actions the

Frank Pelzer

you, good and Thank everyone. François, afternoon,

QX. François noted, delivered very a we strong As

assumed of note, non-GAAP purchase the the Non-GAAP will quarter. You excludes this write-down deferred impact we revenue. are reporting Shape's revenue accounting revenue on

the both accounting revenue Shape transparency, on and when GAAP to impact during have period will non-GAAP related providing committed For are we revenue. purchase an

million. $XXX.X basis, GAAP a QX was revenue On

guidance range. of $XXX.X up Second approximately $XXX non-GAAP the at and X% revenue $XXX million million to was year-over-year midpoint our quarter of million

strong our share. $XX.X quarter. This was of as in $X.XX to guidance was was above top well for management per million income operating our expense Non-GAAP our the or income per the disciplined net share. or end as performance $X net $XXX.X revenue range GAAP quarter due the million

Please note, approximately mix, QX a product total revenue will revenue. XX% I was of I revenue measures. for to of year-over-year non-GAAP referring be up review revenue accounted XX% our and as $XXX million

mentioned, grew revenue XX% François As year-over-year. software

XX% from product approximately revenue of in represented quarter. approximately Software year-ago in XX% up QX, the

Excluding quarter partial grew XX% in contribution Shape, software the from QX.

services strong subscription our represented which in see the revenue totaled to approximately grew quarter. continue Recurring XX% revenue, revenue, We of of of subscriptions, software $XXX uptake year-over-year subscriptions. includes as maintenance solutions, sold portion long-term XX% and million of revenue. Services revenue in our and revenue including the X%

accounted product Systems revenue in Systems transition of year-over-year and to quarter. of for the million of $XXX was software-based XX% to revenue XX% down revenue as solutions. continue approximately customers XX% total

On in X% of our for revenue basis, of growth and revenue. Americas global revenue, we APAC accounted a XX% delivered strength XX% EMEA of XX% representing across grew theaters. QX, grew for year-over-year, X% regional X% total accounted saw and while revenue.

providers Looking for product of XX% X% accounted enterprise bookings, at US customers Government bookings represented our by XX% bookings from federal. customers XX%. service product of and represented including vertical,

COVID-XX-related Let our results. Non-GAAP $XXX well QX gross operating approximately were million. operating expenses seasonality QX's margin XX%. was $XXX in our QX was operating gross us as expenses XX%. normal GAAP reflect expenses now GAAP million were costs. as discuss operating $X margin million. in Non-GAAP

as $X COVID-XX $X COVID-XX. includes a global for million canceled efforts This of related good a approximately to events relief funding our result to and million increase

was in QX Our margin was XX.X%, GAAP and our non-GAAP operating XX.X%. operating margin

GAAP effective XX.X%. tax our quarter XX.X% for rate non-GAAP rate and Our tax was was effective the

$XXX the from balance generated In quarter million $X flow investments we to Cash in Turning operations. cash and QX, end. approximately at totaled sheet. billion

term in added closed part Shape the which we reminder, of a as As quarter. in million the acquisition, loan debt $XXX

FX million average price of at $XXX.XX. During repurchased XX for an of approximately shares XXX,XXX QX, we shares

on share remaining estimated and the days, have million. authorization. DSO We expenditures $XX $X.X our an XX were quarter billion was repurchase for capital

approximately XXX from X,XXX increased employees to by contracts acquired added with revenue up XXX We in XX% QX, quarter billion, driven well employees, Deferred revenue. including as Shape increase year-over-year the Shape. as maintenance an $X.X from deferred ended approximately associates

for XXXX. stated, note of share my non-GAAP me please otherwise metrics. Unless QX comments let that guidance fiscal reference our Now, guidance

business Over our taken we resiliency financial years, strengthen We the actions business. significantly and meaningful model. our have to FX's into built last believe three have steps

revenue recurring subscription XX% has a latest XXXX FY percent over in FY to of software has in in XXXX. XX% example, increased of quarter. XXXX Likewise, XX% as total of the software from in For percentage XX% as from a revenue increased revenue to QX

understand Our of the date. factors QX to uncertainty global impact in we outlook to as COVID-XX related it expected

we you As the beyond understandably seen we a not bookings supply less Visibility quarter. impact chain. clear on have is to meaningful our or in today, speak current

we XXXX December in of Shape our we when year we outlook result, are As acquisition. fiscal the provided XXXX a withdrawing announced

In social to the their continue near-term, scenarios. and employees we in prolonged to will ability expect consumers distancing their customers evaluate support

We the and partner expect trusted largest being from to the around enterprises operationalized of the benefit world.

We priorities, to deferred also cycles projects. investment lead will purchasing could which longer expect or customers scrutinize

targeting are XXXX we in the result, range to a million As QX revenue of $XXX million. non-GAAP $XXX

expect We XX%. of $XXX full gross to reflecting We operating million around million expenses. a QX, estimate at/or margins quarter in $XXX Shape-related expenses of

We XX% QX anticipate range. rate remain to the in XX% will our for effective tax

to based the $X.XX target of $X.XX earnings $XX $XX QX million expense expect to Our per compensation quarter, million. share. In share approximately we is

Let me speak philosophy. to allocation our briefly capital

Consistent term have declining, of also have $XXX the building and opportunistically shares trading loan environment Shape our associated acquisition. what the ahead we interest said paying with in with down position cash reprioritized any repurchasing A of previously, we rates retain With we current million the the open option window.

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

François Locoh-Donou

our the for COVID-XX response approach employees, to Frank. that our have embraced we customers. I crisis. means mentioned previously speak human-first will a you, communities, Thank terms that our to of and what in I our

First, employees. work-from-home a teams Pac our by mid-March. We January for implemented and Asia our reached state for work-from-home global-wide in

work-related and more canceled stringent progressively the postponed travel implemented or as in-person progress events. also restrictions We large quarter

space flexibility. FXers to also we Our embrace home. with have time emergencies, realities encourage the working simply want that deal new and human-first approach and the that from but We means of to ensure

pledge difficulty, no fiscal to we worry FX we that this be providing may employees layoffs employees for or any want In jobs time will XXXX. their importantly, remove of about to there Most making today, their a and adversity have at our in year our are families.

this enable better customers having their our certainty us needs. to will believe and on focus We

that, that uncertainty weather there half be a of may fiscal uncertainty substantial built macro us the making we allow though second year, around to We to have will without our our are resilient confident changes business that workforce.

Turning to our response. community

in believe we last As a communities two I a my has annual have play. role stronger we recently because shared in to letters, stance taken have FX our shareholder

As our COVID-XX a globally. help our communities actions includes response to result,

good campaigns in program, donation matching for employees time-off global and charitable volunteer employees includes and participate for paid XXXX, opportunities well philanthropic localized as impact as community to grants. to in Our established

by we funding and good global our response, first, allocated $X.X total targeting increased we needs, million, related ways: COVID-XX live to to million a response the be supporting In dedicating communities where three $X localized work. of

employee including Second, response through giving Tech directed good grants. for Good employment COVID-XX

We organizations. our to on us any help stay work. to to can safe all during so support and taking healthcare, organizations we nonprofit are global educational them their doing also this keep These and security want they essential focused resources leveraging heroic challenges steps are with and crisis, technology

website first program exponentially instance, organizations For Francisco, the the announced designed same-day XX, shelter help in on place to in increased United States a we March as demands. launched was San handle traffic

where Plus year one providing are needed. We NGINX free

of advantage services assistance. XX remote education Today, then other educational as additional this including made non-profits, for we non-profits hours. and service free taking and Since to as security are solutions available well more healthcare, X,XXX free have assist healthcare, than and access

our very it and and the continuing has often employees extreme Our team takes circumstances. under of their what FX to to way the to human-first serve customers also their am I ensure customers. approach new doing concurred impossible can includes confronted protect challenges, proud foresee while

COVID-XX-related priority. most our For quickly customers, access became remote application of a

there remote In capabilities, Customers XXX% were in quickly fiber that were by securely increase and support access-related we to and a scale needed experiencing to fact, help. is access mid-March, calls.

and United services thousands in States This to to ensured scale XXX,XXX home, from users. largest With XXX,XXX world. customers around investment the VPN enabled the suddenly of the of secure we institutions from remote to banking one access financial uninterrupted its employees working

and also centers system continue both six providing care traffic solutions patients. a management health at upgraded can the We XX major the in hospitals specialty multi-hospital to exceptional U.S.

so day, XXX,XXX capacity one mass work U.S. another media In from in could we multinational example, network employees a home additional and that London. increased conglomerate, within the helped

their moved our insurance claims, the mountains in Understanding to And are a to QX. in Healthcare XXX, Retail and added just under the supporting continue health of handful its remote need and XX challenges, work-related Fortune hours. customers workers Corporation teams XXX for remote consumers these to urgent access XX with solve a prescriptions network

from to and security demand We key NGINX. strong subscriptions, continue including see areas, coming growth

adoption customer continued Our growth XX% and points security. and solid delivery our for software BIG-IP to software of execution sales application

rapid for During offerings, of we three-year subscription-based saw QX, acceptance terms. continued our both one and

models investment. to automation advantage As full take to of their the our customers look subscription enables efforts, accelerate of them FX flexibility

A built-in and analytics features X.X. its capabilities. NGINX we into a promising are quarter Controller's appeal current application self-service well wins API, model, reporting to customers launch, Controller NGINX for configuration incorporates application-centric design NGINX also customers as new looking early scale. seeing These as and security to

real with see NGINX to better FX beginning traction are together vision. and our We

we an existing critical main customer company the across leading NGINX companies been East. applications gas consolidate to an center. Middle a security FX all its quarter win with its fact, into In The in in data operating its oil secured the working at has and FX customers,

with customer the WAF applications, deploy to of industry for a of was massive Security biggest the and attacks. the was They hundreds also and opted concern, literally management. facing FX's increased for of given risk NGINX key one was API challenges, management advanced With security. API API the

in we the since you three our As the is very and closed acquisition, hit roughly customers. late Shape contributing well. having acquisition with we running. is has competitions It and the are Integration Shape already teams know, have been closed expanding going January. ground the months

of engineers FX As products. we accelerate did Shape's delivery with cybersecurity NGINX, efforts with engineering the to we next-generation Shape immediately augmented

capabilities reduce Shape's our FX the civil to we line leveraging friction managed to solutions. of Shape Near-term, are customers presence BIG-IP implementing services demonstrate and and

was dozens on already web FX FX's in customer FX account began Shape The identified of existing takeover first large and application. an sellers banking joint win experiencing including attacks customer with have accounts, securing their opportunities BIG-IP a our Canadian customer.

the turned With a mode that Shape in to mitigation block and permission, total attack of amounted major on full XX% we their customer's traffic.

expand application opportunity for we significant world. and with Longer also services. within believe there customers' solutions of is and multi-cloud accounts our learning Shape, protect ability We With and increasingly next-generation complex in FX's Shape's current and term, logos. and extend new AI-powered portfolio Shape's machine will an will FX broad optimize capabilities scale applications to

application COVID-XX checks, their home information on this for through personal or bad concern application about with work The shift devices the offers access combined curiosity. customers actors. expect of COVID-XX use will increased we security. opportunities for from prey to we Attackers crisis, desire As stimulus and ample

we accelerate customers user MSP-based Post-crisis their and solutions look expect to cloud-based for will security cost experience, and toward increasingly look lower as transformations. they better digital better

that us to well FX are have investments positioned made the we confident shift We for evolve the have ahead.

are creating transformations delivered platform an application application way services that and We accelerate the are customers and digital fundamentally help services change will secured. their

manual inefficient managed that multiple today, process silos makes enterprises operational services many a and is experience often For an different vendors often with user application It live managing in task. by teams. complex

can that long on micro new siloed much and infrequent to approach transformation static were manual application too services. creates efforts. approach is survive, The Today's delivery applications based real When become passed. but dynamic world this with and has updates, security era and applications hindrances changes friction with digital

We services our the and efforts application to have of acquisition our delivery we of have the modern our expanded to and application breadth of eliminate address Through built services the silos. customers needs to organic traditional of both enable the portfolio NGINX, applications. broadest

we our DDOS, services of work WAF, have through protection. of Shape, portfolio, the anti-bot security, powerful and teams security acquisition application the into API and Likewise, our including consolidated

the move most infrastructure because cover experience, it. services. customers about software of trend And we Our as not the that to to accelerating deployed they suite underpins about choose application, increasingly us see application increasingly that user the a care we services,

noted, has Frank QX as uncertainty. closing, outlook, brought our In when discussed of he COVID-XX a with degree

emerge resilient the are able pandemic priorities, short-term customers' the not a that may withstand can we uncertainty we FX have duration built we confident that be control stronger. While and short-term our to of or investment

Over transformed years, several the have last we FX.

have built base a We strong revenues. of recurring

in financial technology. our position We verticals key government, globally, including have strengthened services and

a We model. strong sheet exceptionally balance operating have and great

We have leadership environments and establish investments in to in future-proofed inorganic modern FX with and organic position our application security. our

we storm. world. What enterprises confident and of this, are critical are will operationalized of largest the infrastructures is all Because the in more, around of trusted we the the we weather

We are the that have position and well. we us investments term, have visibility good near-term made confident longer

and In secure short, we app remain anywhere. to committed every mission to our enable multi-cloud

customer both are our and vision, near and confident We our investments are our innovation well-aligned with term longer demand.

partners tested thanks a this the challenge for continue quarter whatever to will next. FX may confident I entire has crisis, can-do the very come attitude sincere we proven for obsessed. to and perseverance their our to My and of team and rise been resourceful and great driving and the customer Through despite adversity. feel team

the With that, open operator, call now will to we Q&A.


Instructions] [Operator

Your first question James from Sandler. with comes Piper Fish

open. is line Your

James Fish

congrats your Hey, well I on François with and and off, is market Frank, just given an the quarter first team. incredible FX hope families the everything conditions and also

the few to you be pull-in you a out. I it large the one guess, was And do you do demand of quarter it software off makes infrastructure Frank, what to confident feel likely guide guys even just demand QX? fiscal the -- of why not need a into and companies start look specifically with so? I'll to

Frank Pelzer

the yet end our And gives François we the George, a thanks your and family. We so seen not -- for prepared you wish for takes much happened and quarter. I in what the impact and of any looking for that well so of wishes. actually meaningful stated, on the have much We was the the for at same balance your obviously thanks question, remarks it way. and in demand

-- our a was the this So, that give to we it at best your and at investors guidance time, view view on please is what the best took SEC and prudent felt time.

we would revenue our I the is account what investors. thought for and this Now, think range the note we times into but do uncertainty, that that thing prudent three the we to normally takes do, that was

François Locoh-Donou

COVID-XX the the actually following get why on our out that, to confident, of some to able at assess we are We add question numbers. part quarter. to pull. at happened, your see when what on And we not looked pushed and just deal impact the of a look close we quarter, did it's we just James, were try what's this And we to into second on carefully

But number in or shifted just by these because see of And closed immediate were things a April. priorities. did that deals because out some Now pulled done now physically saw of customers. other in to pushed some get result deals couldn't a get we deals the have some COVID-XX, we also either conversely, they as people

where things out, we balance expected actually And we those land. you landed so when to

you second COVID-XX real that and feel essentially you when had we if so takes. the quarter, puts our And impact the look at no balance

James Fish

it. about the my dive into a should within Got That follow-up. makes I the sense, guys. that want exposures to enterprise just vertical of How as understanding? ton think I vertical

Usually, But or retail areas understand it's financial large board, troubled like some just exposure. across in travel a especially hospitality-related? the and wanting energy, services to

François Locoh-Donou

Jim, largest for large FX telco, you are services, government, as and So, a the to extent. technology know, vertical the financial

verticals to business. And at at -- we've we enterprise the moment, are verticals. our so seen that least moved immediate And effect in at these the one from the least relative other crisis of step

crisis, less entertainment, retail, transportation, least that look than which represent be most verticals our business. at taken ones impacted, at would verticals of enterprise date, impacted you XX% are Those industries. mentioned, to most travel you the by hospitality the If directly and the so altogether

our exposure there is So, limited.

James Fish

again, congrats And guys Thanks. it. Got wishes. best and

François Locoh-Donou

Jim. lot, a Thanks


Long from with Barclays. next Your comes question Tim

is line open. Your

Tim Long

quick Two could. Thank if you. ones, I

of really that little be to market? accelerated color business or give follow-on of you represent more kind First, more the Is view type about piece Could real access in that the of security, how the the control kind a the on you there of sustainability that? just a that think could will share half of second the you business pieces some March. when us within of where it bubble a this of some of market

And how comfortable the up? can larger hyperscales vertical sense then, talk how you. maybe you cloud secondly, or you on is cloud of about and about bit us Thank little a give If vertical, can did business with some that that? talking shaping a you're the you however,

François Locoh-Donou

software. both the directly -- play saw is that to Yes. the just clarify first role, the on strength Thank portfolio hardware of in you, and linked business. Tim. let part and well, that enablement we what in access results Tim, our drove work-from-home portion, me QX specifically and so a The an increase did

it a results. wasn't overall part small a material business it is But of part the and our to so really

So, lot really which modern done BIG-IP our results, in usual work is with and to into automating strategy it's us at you a drove software, transformation, NGINX. and our if we've orchestration of with on get is the these both software automation of the allows -- the look what it drivers specifically application environments, that increasingly and new

It's models of form the and adoption the of very seeing commercial on our new subscriptions the as consumption. we're by customers work rapidly we've done

XX% that our was You saw, about software of Tim revenue this subscriptions. quarter

you further the a attach strong on rates huge and there. in even acceleration cloud. So, on-prem both And security its continued see software,

the certainly, factors, look the that's of at growth And the if so those software you business. -- what's in the really combination driving

we've the also AWS rate and partnership work business providers, could to by strong on-prem, our see signs cloud, that with software growth by people early in end in see we're public and with the of from it the cloud continue driven major to security our to business. at the been our taking front attach stronger them cloud As into with implementing doing starting drive very the than relates we it specifically the good

quarter. portfolio unlike contributed who want the a I wasn't that, a it is of would perhaps those related all to others so the work-from-home a portfolio, the for So, small growth. the to But do for have one-time us, seen driver real of part bump of this bump, part of huge to our stress kind

Tim Long

helpful. Thank Okay. Very you.


next question Credit Suisse. Badri with Your from Sami comes

line Your is open.

Sami Badri

Thank Got it. you.

revenue times. I quarter, decline and saw First, even the and into of a again to software in during noticeable revenue you just performance double-click quarter XX% challenging want the impressive without this uptick systems Shape? obviously

moving systems backdrop of this to you I given the we and implications dynamics the way, seeing, work-from-home direction at than permanent more these software think do Just in a in customers health are the where we're and consume see times. all faster more care, just they're economic going dealing different the with given

and no as, this typical would the more see forward? And seeing new more or would you're That'd to start great. swing going kind more be of, from often you everything pendulum going Do back deal move the contract-type to ever systems to systems virtualizing here?

François Locoh-Donou

think Sami, the short, is, answer hi. in yes. I Look,

including that seeing that who are both. -- think have continue to and to need applications the and going have we collaboration more customers in applications, see support that center, -- hardware and so that. we're say, large customers to infrastructure We I I work-from-home, data we're should those support some support applications, actually these

that have That I to a the this as to accelerate. being of there continue think to more are go software to impossibly drivers people said, going moved crisis, be result

You've their before build implementations that to think are cloud. more their out public heard mature me into cloud being infrastructure our able in private in of customers a I say

more software-first more environment, a we policy of of in a them seen say, and all these software-first the application policy. have And customer's, adopt also, I our matures, and would a months approach. for XX the and building cases, last modern this are ecosystem more over in as And cloud-first some driving things more

accelerate. we're see them I going to think both of

agreements subscription The that technologies for model, is subscription want model more consumption shift will our an of customers move accelerate is more basis. think these subscription of three-year a on our this And seeing to agreement we're other one-year OpEx-based that to and that them. the and I in thing that to

year, and customers to rely Sami, more from just create our are the going think hardware to But you applications pull way I an is, that, and on acceleration. you'll see back value. what's deliver shift happen, going around, beyond I all software, more So, think, if to

call perhaps most that is our possess of the about we us can their capital belief of what talk they most have application applications. era assets You and actually the valuable for heard is that customers, the

And even this in truer crisis. that's been

And continue application and that accelerate, acquisition will applications so even see to transacted our is And more going and the led system means a of and that NGINX to year which and I Shape was think of like security application delivery of the applications things value will you're accelerate the created part growth frankly, from become to believe that important. ago.

Sami Badri

Got service it. software contributing Thank any the you. launch And to their software public want already did was of answered regarding any recently, just then Rakuten, just I see partnership. and just you But the segment, Japan? performance to because and on sales know and kind very do you've sell-through AWS actual specifically your from they there clouds your software some if in questions quarter, actual

François Locoh-Donou

launch Sami, on and this so are as it it ago of you did know a we part They with are announced you're the Rakuten, was quarter agreement customer, a I we three think right, subscription infrastructure. us. quarters a

So, expand them. as there'll and a wouldn't launch their services, comment I the in specifically -- be for to us the given with quarter. But expand numbers opportunities they on on

Sami Badri

question. then Got have you one last On And Services, quarter I grew last it. X%.

thinking there be because we're just your about growth kind on some of you today that for segment has X% question are how been throughout you like Services quarter and this, us should the maybe seeing you a variance in this maybe growing just should is about be bit guidance This a quite dynamics Frank of could how on rate? thinking you give

Frank Pelzer

QX, was what either growth Yes. services did an some projects, would that would is quarter we it in terms be for a and million said $X million. implied $XXX I next a have in in We of for push we we what quarter close to could on very strong of saw bit I the closer QX we that or of would We obviously Sami, we dollar did but a million expect where some it little ended understand, $X QX noted rate basis, up little why absolute and have in a X% in last which around something fluctuations of direction. to that professional a quarter. something saw

Sami Badri

Got you much. it. very Thank

Frank Pelzer

Thank Sami. you,


Your with next from Sachs. Hall Goldman comes question Rod

is open. line Your

Rod Hall

if I to the Hi, was? the have to question. I in maybe a on couple that. guys, then help normal that Thanks understand you follow-ups quarter just see wanted how linearity could of for us And to comment

François Locoh-Donou

well, expected Europe. linearity in was say the would trending what I more basically things week basically Rod, would March. normal normally in and until have severe started know, quarter. the then, we as We U.S. just a get of to up you And were first

also saw customers. accelerated And we frankly get didn't some had we rest of to But a but a March. see a things is happen the what get expect we period saw his marks know few some time by we things where -- in couple what of of for started to pushed out,

So would would thought it end, we in the quarter. be being ended of what up at the have beginning linearity the

Rod Hall

I on of the back just work have And for together could Frank. would it on did comment wasn't understand going us, that you home. but stuff, I we it Okay sounds What accelerate quarter? at so happened what the two things to that to -- just question could wanted you work-from-home those end see, thought material or Tim's there? from kind like of was put

François Locoh-Donou

that things applications that remote from portfolio pushed addressed access end couple at the of part to compensated of we for or directly of home got that quarter end our the work was One had out. users. accelerated things from and a the Well, the

a accelerated of And some the part orders chain was on customers second supply couple who projects. of -- anticipation potential issues, in

things other and So, for accelerated that the those out. were compensated two were factors got that pushed

Rod Hall


Appreciate Thank Okay. you. it.


Henderson next with Needham. Your from question Alex comes

is line Your open.

Alex Henderson

Great. very much. Thank you

pretty center So, that of the applications the business pretty it's and from been in that process in to impact data clear the spend given you the center growth gravity quarter. of guys of moving a your have application away spend had pronounced

and the NGINX. talk the environment in wondering I ADCs Kubernetes if the fact understand XX% -- deployed you as a little are was bit penetration in in it, Kubernetes of I about could plus

in And pulling to context security in tied the which terms sector. well traditional in products as pulling deployed extent is the historically FX FX as additional represented well that particularly and of not into space been what together in that that WAF, has both products which have often

if extent it, companies Thanks. the position that that you're address direction. process to into moving finally, could, help your And in CI/CD just of are what pull you that or seeing

Frank Pelzer

Alex, thank your to the back last I'll you. with come and Actually, part beginning. of the start question

being of our now of starting terms templates in well BIG-IP the create in to lot fit environments. factors work us to part basically two So, allowed software a years CI/CD enhance of very we've and those automation done ago environment, that Alex, form on

of specifically, one the transformation and as now getting our deploying environments, mature kinds that's digital trying have us factors automated are and in more right in are driving BIG-IP ability the these that more customers to to growth we get is fit And velocity more that into those part software environments. of the of

an also to NGINX be to question, have Ingress Kubernetes as NGINX as controller, use controller we fit as part capabilities with relates In a you cases is an deployed in And the to of as is your widely environment. so our Ingress which these has of capability environments. Kubernetes, BIG-IP both is, deployed know, other it to deployed today. lot

is kind as to application FX acceleration -- DevOps more about engineers are talked we're we of was say, starting capability NGINX, seeing look do where security some And quarter, better great fit, what an see this a at what and that modern we NGINX they saw I of would between where these is important actually more. and of element of together environments, in we've an this

couple a able gateway was been to FX as used, NGNIX security an WAF security brought of solution. top in And for create example, deals was win an and where API overall we've on API to

And in so we're see the we of we with those more think deals and that types controller January. to of going more announced

the button rapidly scale lot allows of multiple complexity. So, of and the instances a of customers lot to modules easy -- controller deploy that and without with fairly is our NGNIX really a

example that we've under with also FX together the enables -- on that controller the putting to use we're add And us NGNIX original for cases the WAF bring controller.

know, and together, modern is, two see all together. traditional worlds fitting both So, these of what in and FX those you it bringing environments we

Alex Henderson

in extent what along applications XX% from it. goes today growth the to to with of XX% that pull something So of that excess your Kubernetes should

Frank Pelzer

should that, initiatives our -- as because talk a inside role We of we'll for role new which clusters, yes, product also accelerated in of that. our are about we some of have both we front and growth Kubernetes result Kubernetes clusters, see more of eventually

Alex Henderson

you Thank much. Great. very


Meta from with comes question Stanley. next Your Marshall Morgan

Your line is open.

Meta Marshall

flow markets, that What generating, were environment, you you. with how of on the disruption your does structure of and cash flexibility the evolution change and is but strength comments just Thank the guys M&A? thoughts your the the from in private around wonder security capital acquisitions, just Great. your or the

what's recognized services now? much just bit a ability nitty, professional revenue, question, maybe more actually right recognize to be and as second to or that to services of then And a little revenue, that should but just ability consider how inability Thanks. we professional them services trouble portion

Frank Pelzer

question, with Meta, it's I'll Frank, M&A address François it I'll and question. to turn the start then second

we capability the providing for professional remotely our services of have So, the those customers. on large majority the services, of

permission if we are gotten we've be and the There exception but where in person, to federal as allowing the and by comfortable, to actually we feel rule. that, it's opposed are some the that far employees do need

services in a provide have been type maintenance small a our services of of to It's relation professional with bucket, But able we whole to services very are services those as services a revenue total most of lot our associated percentage relationships. remotely. our

François Locoh-Donou

would And said security before, our we customers in which pull and is, the of and across back by we billion the months, traditional we modern would XX the were driven in in spent aggregate the of your think become Shape applications application issue the to last belief even share decade. over acquisition to next and up to how And M&A. Meta delivery grow. perspective, here, my assets that I continue want more valuable security $X.X as question that application environments believe, about to NGINX, the around I

feel now we when position FX, we very the assets strategic very, that the about and NGINX so you And good Shape. from have combine

from done. on from think we've NGINX and creation we we've done come what there's future, when and is to what value come operating our to of Shape. look at so focus from growth lot And there really near We a leverage the

creating model. a value is operating rebuild on and on focus also our position maintaining that, with strong to continuing Our cash very

the where And in focused we're so that's not being. further M&A for short-term data on and the time

Meta Marshall

Got It. Thanks guys.


Silverstein question Paul next comes from Cowen. Your with

open. is line Your

Paul Silverstein

to I I Guys, want Serious ask going question, to the break good now. only was trend. evening. but one

something X the I revenue around of so was X.X%, shape assuming million, did its points growth if First software was that all of would about right, math off, been the the growth? have on of $XX order Shape organic and is percentage Frank,

Frank Pelzer

was ballpark. Paul, Yes, over about that but million, high. just $X.X It million $XX you're in

Paul Silverstein

And that's software? on obviously

Frank Pelzer

software. Yes,

François Locoh-Donou

growth software was XX%. you Shape, overall around XX%. And it have been Paul, would if exclude But

Paul Silverstein

Understood. All right.

accelerated meaningful Secondly, did this, that With understand. I want to I going sure but to were the to make purchases, apologize to overall back say I respect François, you not just the fully those equation?

present a the And present four road should in the future? the meaningful I it from so stealing mean issue in it next of down two, will not terms -- quarters not three,

François Locoh-Donou

that Yes, is correct.

Paul Silverstein

right. All

you generating the that? Third, if any revenue -- believe you for in funded revenue but AWS, you nicely the the with early generating you speaking us think you about linear don't give meant to to the relationship. down you revenue, trust I on you be you Which meaningful, that, color us talking AWS, any when quarter, but that, know were the it's And can the don't loosely, early sense say I fact, it? can are too said give I drivers you if going is if specifically know road. were actions I meant mentioned is it's I said and or

François Locoh-Donou

It's it's early Paul, latter. be to meaningful. the too

is the from road. is One are lot progress now down areas AWS. solutions. leads revenue joint considerable combined a more of it's is progress. So, quite two of development on great we What seeing And are we of getting two today

cases, meet know in the not of the we was reason leverage because a recall would of. you if like AWS. that did customers a past, But a our part we conversations is in AWS would we agreement to this So lot in of at lot FX of the customer is front. Part

conversations as -- a but in visibility to us result of now leading And FX have this that didn't revenue road. is great of down and to indicators, is the providing AWS we are pulling these leads into further before. a agreement, lot pulling But those

Paul Silverstein

One might, basis, quarter regional the at quarter. larger. this on last a little question, both in I and I December past If in the looked numbers but it's bit a correctly, if

growth, periods For while, first in three or to the looked growing the single-digit other. consistent the seen each with it time over all in in declining we'd like roughly major a regions, the place all mid-single-digit numbers high growth in prior regions same were different that not

telecom that and there on crisis the us lumpy but narrowly well continue question due be even a revenue, is Thank on can not a -- this of telecom you're I as provide pandemic any course, what's I areas, should insight the what well bucket pick you regions then resilient, And you any that from more know your very down on and saying. not the is in standpoint, to of and defined all but was a -- services the as vertical recognize I of can all with ongoing perhaps about is that up it's as arises given thought resilient insight the you. basis, with always on quarterly think business been the one telecom going

François Locoh-Donou

-- you're three of mid-single-digit think growth. being same zone I in the all the correct regions, Paul, about

it spend wireline is to to space the the relates Paul, telco really wireless has where the exposure equation. really FX there, create from that upside telecoms, potentially I the to would to of what area, home is As you expect the side more work situation would point you in to in

And is telco the come at have XG, so to spend the wireline spending less should in the early, so the a performance FX. we early XG upgrades see that And driven telco benefit have correlation on XG capacity we'll more we and these lot to of spend. we're wins. But by what our as in from see as, accelerates

Paul Silverstein

world? same And with all converging seeing are any region? to the regional you from perspective? same differences there François, the the fact Are in the throughout it's meaningful you're from region regional, rates, that what growth a seeing The trends

François Locoh-Donou

we us also There that in couple in in and softness of also Korea, sort -- for areas and is are -- China, there. some North softness particular, Asia, saw so of China a of,

had the the of in would I also We saw say, world softness some strength, Latin The America. rest across board.

quarter. we've differences this kind that that's of the seen So

Paul Silverstein

I on. appreciate it you. it. pass Thank I'll


next comes Your with Daryanani Evercore. Amit question from

open. is Your line

Amit Daryanani

taking for for Thanks I two questions. guess my me.

much on point software it's impressive. think fairly basis, obviously XX% you the as going sustainable this XX% I I'm big is investors to how is off the it's go for at organic growth forward. be sticking First sure understand to an a side, versus of on not

think the on So, regard this with and much software we go one to as should how the of June how any should quarter insights segment? be about sustainable forward

François Locoh-Donou

because do some these Amit, I in very COVID-XX. believe any trends don't think to with pull -- want -- related I clear, of I of So, all, has one-time be kind theme And of to the to just it's I first a here. recurring

business net of as basically saw on Because I neutral. what in COVID the we said was before, our impact

got out some pulled pushed at. things we're Some things that's got where in, and

that basically been modern including fundamental growth the orchestration, environments. into that So, in environments, our around led I've app to things the the these about software are that in drivers talking getting the Kubernetes -- business automation,

use The continued cases. of growth security

acceleration to cloud, subscription drivers. of NGINX business, those our are be quarter They're Our these the all continue there into the are after quarter. to -- contribution, going long-term things

year, Last in next if so say, XX% look quarters. each quarters. you'll growth at two in those software QX of had of would Now, the and we QX year we I this --

growth was And it QX you -- if the -ear compare year-on-year or is comparison. so, in much than tougher will in you the if year-on QX,

-- also software given that if and being could the drivers to because be number growth said, to drivers yet I any the continue we there, recall, in said a in but think you that But very not quarter there was large going be are lumpy.

software. XXXX, did, did in of QX I think we XX% in so, growth we And

did goes were than see software that QX. our And have and QX think we in in we said decelerating, in no, the should software that a growth time I into stronger growth we QX. have worry we There stronger was you'll did at

of at to growth trying how a full our look just you quarter-on-quarter. that's a So to picture software give

Amit Daryanani

Really appreciate you. guys that. that as today about of is recurring? XX% the of good And businesses Thank about talking it a then a really follow-up, how for about profits as rule other I this much think maintenance think reoccurring well that are sales is subscription you as just number, as when of things? versus that's versus is XX% thumb this And to your

Frank Pelzer

two of revenue, we've think break the you of down, still but that chunk of healthy also talked about over subscription components that revenue a into piece I to taking out that's being So, of recurring as total a we XX% software get our XX% but percentage of over being recurring. and most those -- factors all of the probably services you to enough account, quarter given in

area. then just very not what obviously margins the do portfolio. gross terms is conjunction the across portfolio, with operating we've In strong that any one entirety got in the And expenses with of of beyond the profitability, really the we is, particular

services gross are quite as our you our high see. revenue, in can so margins And

of in gross well, margins. managed bit where then take quite as our a still we well as of XX% some it's software the little in overall, of hardware. to high revenue, services, lump in a close some But And the as


Samik last Your with question JPMorgan. from Chatterjee comes

is line open. Your

Joe Cardoso

for you. Cardoso me guys. on Thanks Thank Samik This Joe Chatterjee. for is Hi, fitting in.

see Just that pushed in out? there guys is, curious correlation two was to and the in deals One here. and you relative push questions or pushed was highlighted that were quick brought out, just any I if to

days of if a the guys pressure to relative wondering in low came understand ago gave was towards you your saw little the when original margin, then guys Thank to And end incremental guide. that nitpicky, your there just might guide. I XX there be was this I and any but you. gross relative you

François Locoh-Donou

Yes. the of on on just Can you the and -- could in are pushed -- by what you deals What said expand on first part just that question mean you -- your on the out. you that? correlation

Joe Cardoso

sure. Yes,

some see COVID. quarter, impact the you highlighted So, you you on that pushed saw some relative guys didn't during much an deals out and deals COVID-XX guys be the to net-net, the in brought

if wondering the I between saw any them, you So, deals pushed out there's the then how was that was get just quarter, correlation guys hardware any like get deals pushed different see e.g., to into correlation there you out? relative brought if did and

François Locoh-Donou

up enabling I Okay. their that think remote really that work supply pulled No, put or related the factors shore access in, -- answer and is ones some were were some to to customers two infrastructure no. the The about wanted worried to and very from chain home. things critical quickly

they these On terms deals. to It that other not a who project able work of by in the deals priorities correlation that -- because to killed just -- there was Or home, were segment. customers more were even areas. attend pushed out, by from software, the physically of have it they was the there to process go a a case in immediate case-by-case either customer. or hardware, wasn't to had customers and wasn't pandemic But frankly, of postponed or other

Frank Pelzer

question, gross the of we on else. terms Shape in anything than end of more the low And because are margin

Joe Cardoso

guys. you, Okay. Thank

François Locoh-Donou

you. Thank


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