Suzanne DuLong Vice President, Investor Relations
François Locoh-Donou President and CEO
Frank Pelzer Executive Vice President and CFO
Tim Long Barclays
James Fish Piper Sandler
Sami Badri Credit Suisse
Samik Chatterjee J.P. Morgan
Meta Marshall Morgan Stanley
Alex Henderson Needham
Paul Silverstein Cowen
Call transcript
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Good afternoon. And welcome to the F5 Networks Third 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] Also, today’s conference is being recorded. objections, at any time. has anyone please this disconnect If to the I turn over Ms. will now call Suzanne DuLong. Ma’am, begin. you may

Suzanne DuLong

today’s the our Other press session. are A Hello and and of executive will welcome. fX.com, will webcast XXth, today’s today’s Today’s also the CFO replay of President Pelzer, where October which of an website live I Executive our XXX-XXX-XXXX, discussion. archived during XXX-XXX-XXXX The will be through July on am Suzanne on Time, today’s Relations. FX available FX’s XXXX. remarks questions on IR Locoh-Donou, DuLong, version be viewable François meeting making call FX’s President and President Q&A site by call. Pacific of Vice dialing hand will CEO; prepared visuals, Frank is the the XX, on Investor use and by available and midnight FX’s or are release be call at be members of the of discussion XXXXXXX. posted team supported to answer copy available is through at Vice ID to conclusion

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

the that any to words SEC in over and will has Please those expressed uncertainties These call. FX results information in or our implied Our statements, note the in our update discussion affect to will these François. and that, from materially release I this duty financial may are may Factors summarized results differ risks filings. such presented contain to as turn cause With expect which no described that forward-looking our today call anticipate, press include detail in and announcing results that believe, involve forward-looking target. statements our statements. actual by

François Locoh-Donou

Despite good quarter’s business and macro you for Suzanne, detail. Thank review results to before afternoon, briefly the our handing drivers us delivered quarter strong to today. Frank third will to in I everyone. results. talk uncertainty, you, we over joining Thank

This protest the means each we It resulting a to As through and we other support and FX, continue over our cope each company, to consider part as diversity commitment ongoing working human first fight black supporting with pandemic against to the unrest the of We is inclusion members economic FXer. upheaval. our approach. means also part customers take culture. and of inequitable being a other communities. the of treatment of our social racism an a foundational At our and the

exec are more in Everyday it our as truly a in FX and change our actions what Blackness Group have amount we make has bias company, unconscious a not of inclusive achieve personal. steps of if all our our member diverse do FX and Inclusion As be accountable that make will exec our continuing to company. includes or inclusion policies employees. But will are for team training Appreciates team, bias. our collaboration in diversity to mandatory employees, FAB Employee and the every team all programs our I several words FX with actions. This we and will or fight no taking pledged

what company including business we a rights believe human in people Over support basic as for month to inclusion a our of and QX, by FX fund first that eager of our identifying support in resource part match. a women do further, and underrepresented to for the to color supporting approach creating efforts, committed FXers, to previously was we employees FAB human education youth. STEM the As to raised grants, global working just possible. commitment firmly our good We advance of one employee partners step went provide our U.S. $XXX,XXX have non-profits, color makes In a group

non-GAAP our despite quarter, of This a our earnings outperformed multitude guidance. globally, revenue team and challenges

Continued strong revenue growth. security for fueled and XX% software software drove total customer and use cases, growth demand our X% subscriptions

services In down X%. while advantage. Our was XX%, business significant our the business incumbency current systems grew is environment, a our

digital meet needs. customers After to We from our vision both our and operationalize of accelerate today long-term the are customer applications. the introduce results solutions and business QX I Frank? will to I for and transformation will their immediate Frank financial our quarter. trends time turn quarter’s take outlook, business the talk benefiting to to as and reviews highlights future also

Frank Pelzer

good and François, everyone. Thank you, afternoon,

deferred a As assumed very last revenue reporting revenue. François write-down of non-GAAP on purchase strong the accounting QX. delivered quarter, Non-GAAP we the Like noted, excludes revenue. we Shape’s are impact

providing are basis, transparency, purchase GAAP QX revenue. accounting impact million. $XXX revenue when on have was an will and both during related non-GAAP GAAP a revenue On For committed to we the period Shape

Third revenue total revenue product referring X% to measures. of was million revenue million year-over-year of was accounted note, guidance and be non-GAAP the I XX% X% I our up high $XXX above range. QX of quarter non-GAAP approximately of end up million Please approximately mix, revenue. review year-over-year our to million revenue will $XXX $XXX and $XXX million for as

XX% revenue in period. year comparison a million, growing tough prior was against particularly the Software $XX growth of XX%

in grow revenue of continues the of year to a XX% as product percentage revenue, product in QX, Software from approximately ago up approximately representing XX% quarter.

we of was in and sources, was XX% XX% delivered base EMEA utility the year-over-year of quarter, and software the growth revenue. represented year-over-year, strength EMEA, Americas Services delivering QX, million On XX% of a recurring with XX% in recurring of our year-over-year. down momentum subscriptions million XX% as year-over-year includes of maintenance XX% revenue subscriptions in and our a XX% revenue in $XXX of saw from revenue in a revenue, totaled based revenue. comparison revenue revenue. for services which towards revenue well X% grew XX% year basis the the service Revenue representing total revenue revenue. as X% and ago challenging of APAC revenue, quarter. continue term also growth, down XX% approximately accounted representing of Americas regional We with quarter. $XXX of and a Against portion of as Systems

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

Turning results. was was our XX.X%. in gross expenses XX.X%, GAAP GAAP gross in operating and QX was expenses operating $XXX QX operating margin QX margin non-GAAP $XXX million, margin our were to XX.X%, margin was operating non-GAAP XX% GAAP our non-GAAP operating were million,

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

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

approximately revenue. quarter as repurchase $X.X was were contracts, to XXX $XX as year-over-year have with an approximately macro billion employees, the up capital million. in during Shape Deferred X,XXX our share authorization, XX acquired by days quarter opting revenue expenditures conserve increased well on quarter, cash, the remaining increase ended we we for repurchase QX. from environment. the given an not While estimated the We shares DSO deferred and driven uncertain did instead $X.X the X% maintenance to billion,

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

of impact the in needs enable as factors serve of Near-term COVID-XX immediate outlook we customers to the expect QX and uncertainty global broader understand that will and today. Our continued prioritize employees. economic them their to expected related them trends we investments customers

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

expect QX revenue or which $XXX the projects. million. FY also ‘XX we non-GAAP could will in We range purchasing With longer of targeting scrutinize deferred in to to this investment are mind, customers million priorities, $XXX lead cycles

we year We ‘XX in million. XX% XX%. will of We income to resulting $XXX an expect We foreign our previously which ‘XX tax to the our gross XX.X%. be a tax our of million will $XXX effective margins we estimated FY in U.S. between anticipate to is impact tax full estimate due impact expenses rate. effective lower made rate XX.X% operating return, tax and filing non-recurring credits, This QX from election than range FY to

share. $X.XX Our QX $X.XX to earnings per target is

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

me philosophy. briefly allocation our on Let capital speak

With position over interest cash building environment rates associated share near-term with and continue to current declining, our paying and the prioritize we down the acquisition. over expect Loan repurchases to A Shape Term our

shares have consistent over also with opportunistically in retained option However, previously, turn François? I With trading call back repurchasing will of open that, any to window. we what François. the the said we

François Locoh-Donou

our Thank you, business by I and some discussing will dynamics drivers. of Frank. begin

the the calendar XXXX. nearly As XXX% an work-from-home remotely work of majority will of remain expect for FXers the organization, we rest we and year

geographies, We small globally. to a our strictly on are we a are the returning voluntary return percentage a very allowing to and phased to certain basis. taking to offices of office approach cautious employees In

recently following weeks carefully also we their restrictions in trip. essential for to two travel some travel We consider ask whether but employees to geographies and lifted quarantine is

persistence, advisories a our customer FX first closed revisit for productive. as despite it remain the face-to-face a quarter unprecedented being Despite conditions, will quarter, Together, resiliency circumstances strong My We single the we entire approach to times. their regionally also dictate. ingenuity delivered work-from-home FXers local very team thanks and and these third in interaction. very and continued engaged the without

quarter pre-COVID post-COVID performance, on in the our proving second While initial demand two our COVID-related are perspective expected pleased to more is impact expectations half year, are business we for seeing resilient third we we in of quarters our three COVID-XX’s our with our have on in evidence business. the Overall, Relative very than expectations. also headwinds. more

from last our impacted to to retail include the represent combined transportation, severely overall and leisure, and seeing bookings. we similar see less caution from of than enterprise, XX% entertainment we quarter, First, strength continue which These most are verticals. while

in were and by COVID-XX the India order the of several ASEAN our last Second, weeks related quarter. sales delays acutely regions impacted

accelerate of alignment of business. priorities, investment team and is advantages by sales with has the while the our projects. virtual customers, COVID-XX. causing the in engagement strong face-to-face headwinds plan with in because our part our of transformation We to new kept strategic lack our resulting overall delays last large customers’ in have Third, digital their with some we seen engagement strong prolong were These that quarter resiliency customers up levels noted offset incumbency

that platforms are are against security digital Our employee boosting and collaboration. that on executing and engagement and increasing are QX provider results service applications customer Large enterprise on enable customers facing capacity evidence that their and intent. they

number While some deploy solutions speed step an with large see can in transformation increasing are customers are advantage environment. confidence portfolio can moving FX, incumbency, functionality prioritizing of FX’s With and they with application scale ahead projects, have an services this choosing full broad operationalized. already solutions with in to we business their clearly knowing solutions software to application hardware operationalized customers and evolve their needs. and deploy

all also broad models to continue customer see for demand consumption geographies. We across subscription-based

team the a In in fact, QX, subscription deals ever largest the number of in quarter. closed

In addition, choosing are serve FX of cover are a growing a our modern using and NGINX application FX, portfolio number application broad and They service of combination and both our services traditional suite traditional Shape ability applications. Solutions. to to a leveraging of customers

center As data with cloud an example, this Health. Department quarter, we the of won hybrid a redesign

speed, solution Our global and policy the plan local and delivered with migration an and BIG-IP application with web scalable Plus. avoiding complexity reliability, comes Controller traffic agility, delivers We managers, that NGINX access management flexibility NGINX combining along firewall, a multiple highly advanced manager, visibility, detailed vendors. while

deliver to win a major protection provider. for service secured also comprehensive a a strategy We

is Silverline of includes services. and customer security solution significant for WAF, kinds perspective, continues From modern emerge four and both a use application opportunities NGINX, need driving managed traditional case a for This us. as Our Shape applications. FX to

deployments conferencing First, video driving a chose FX orchestration and DDOS, and tool provide quarter, one in core including firewall. it In web protection. during and example, provider collaboration application systems software, FX is to the security SSL both DDOS global major

we NGINX. was mentioned Second, are power combination very we demand Last combined part an traction. for security for quarter, the pleased security year the with combination last early with of this the API creating we our acquiring of NGINX gateway application on for The need of and win FX WAF. rationale that is top NGINX of FX

financial multinational FX This NGINX a gateway API Protect. corporation and quarter, we with using secured a win app, services

are cases are API gaining Use one, each scale believe of large on modern transactions to their we architectures while fintech We NGINX to security enterprises. to XX,XXX securing partners. second, enabling them enabling per the third-party accelerate this best-in-class and individual appeal will like to momentum application

and portfolio. threats, customer our The against learning bots Customers machine number and are Shape Shape to driven relates third protect a human. by security both in looking kind to of of growing application AI needs to capabilities enabled opportunity strong interest defense

instance, defense with a quarter, win For conglomerate. we secured media a Shape this

web over-the-top and protecting are We stuffing and plants. both against mobile new of other credential their the service deployments

are seeing security service. we as Finally, application growing managed demand a for

on to remarks expertise own are or don’t NGINX for am going become but We is several to and deliver future an the prepared our expect for In environment. we and and an of is not application, means opportunity. combination Shape a but believe The application layered and have will you respective the grow, to protection ideal outlining services, application. to of ability will for and applications enable reduce Ultimately, will market living security adapt Shape years, leverage intend traditional to We as to The and FX, have either heal the works. where do create a the there. automation the the owners. combination not itself costs Silverline growth like fact, Shape we and adaptive managed naturally platform. for customers protect see onto combine we just a combination shrink, open we organism will adaptive needed. new meaningful how it demand better spend we provide stopping not the where It manage want also are application defend telemetry for addressable strength services applications remainder trajectories how FX, adaptive FX I who application Silverline opportunity application taking increased our technology. revenue, application the based to fuel to customers can of A and

and been resoundingly We feedback with quarters have been the customers our sharing this the several vision positive. has over last

to strongly inorganic and aligns and for applications their vision this organic Our the businesses. well enterprises customers. are where way vision opportunities we on Through with for delivering our their see investments, greatest our

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

happen its step user. are site non-functional us attack to increases. these must deliver user was help to availability These bit. the application typically business need Let between elements to needs be from maintained meet engineering of not experiences, in can back the as scale application and and a It protected built. the to are that be engaging application usage the DevOps needs when and applications To The many things end-user requirements functional expectations. typically and reliability the not address addressed requirements. logic

gateway, a and microservices experiences. more application logic et at requirements load have need end-user. environment. application applications even securely enable in However, increasingly secure such applications firewall, services customer the web, to are creates injected Application services business three application components application mobile, scale micro business architecture distributed fast Ingress non-functional as and a need are digital for multi-cloud and API services often and in namely over balancer, becoming generations the help be complex controller, way application as the cetera, between increase. tier, the They distributed of them This services of web operate which standard based number applications serverless. Furthermore, multiple

While deliver integrate application seamlessly to ideally, services to stitch the is multiple simple. customers. typical application could services enterprise today and IT in that application we it an multiple vendors path, needs A not together from application to insert

XX use more or XX% organizations research customer showed that Our of application services.

each its security. organizations, of own results managed services management also inconsistent and application high operational with silo fragmentation these creates This is most This For teams tools. complexity. in separately application

of protected. to often work the the service behaviors, of experience application protect user left is aspects While the teams under business different

holistic get limits delivery impossible it across for approach impact. business visibility making to chain, of the a the enterprises this Finally, view application piecemeal

creating platform a to these our solve for customers. are challenges unified We

customers, and We delivering insights simplifying user protecting real are the experience complexity, value to operational providing business end-to-end.

globe. workloads to container hardware deliver We of along NGINX new million support automation. are delivery BIG-IP XXX more uniquely across application positioned FX’s native built in application instances, cloud in insights and machines, than the also application software with services. a virtual with purpose level support software, in We and

the in customer’s data collect, collect and clouds translate services end-users. NGINX step business application or rich an business-related clouds. configuration purchase into we online applications application telemetry combined to through insights to information for supporting private solutions The BIG-IP analytics This of ideally location like application truly insights information can these positioned delivery. our proven transactions. help help AI-powered and a and in with in customers centers, from business their Shape, to automate we telemetries discover means, policies customers are these application services, application latency, engine about multi-cloud Our are applications information public in set

addition of marching as and platform services. analytics and protection, higher With AI-enabled the application a as are and well end-to-end security ops, multipurpose the supports platform. digital bar toward application and insights AI setting automation we business management Shape, fraud a and Such experience AI-enabled

telemetry can actually For or a is bot, not can example, customer help transactions. fraudulent a about human. used generated help a data information identify of This browser by that to identify website a retailer’s to request credentials signature kind be

analytics the developing mission-critical this offer application set most comprehensive leveraging analytics. services path, from AI-powered application application are the platform, application We our business which services telemetry our and Today, protect comprehensive customers’ and services. scale rich Shape’s along of we

services support than the Our of more application world’s half application enterprise workloads.

we are doubling down in on future, For cloud telemetry analytics. the application

insights to applications, We their are our leveraging flows machine user about business help and learning to customers and discover experiences. AI

the our years, components made we we have of realize over required have investments several the last a vision. major As the result to

traffic the visible We is and created level and in cloud analytics Shape than automation SAFE. this Shape’s multiple a fraud-prevention that is insights tools fosters, for specific those XX% legitimate targets customers. first response Shape the refined application upsell Shape users bot, recent defense SAFE a for enterprise doing data. typical of enables more and than friction traffic minimizes service. drives bot initial topline Solutions Solution to in traffic web The fraud much or protection fraud XX%. challenges. that solutions, zoom and SAFE became than traffic while address recognized, of revenue application Shape subtle, to matter is more a and so, another the engine Where human analytics-based then telemetry traffic. AI of other to analyze begin is volume, security other SAFE both weeks level customer other in will complementary smaller target cloud typically bot tools We designed volumes behavior. higher accomplish and to that can the fraudulent we blocked, of from bot propositions. cloud of in recognized identified in very retailers Once Shape most increase in and version of identify and a SAFE security block human are solutions, can low consider fraud

also SAFE picked other later that how XX% to to fake complete share using $XXX,XXX up Shape month, food delivers me lost the at our restaurant growth SAFE growth front this opportunities bot ever scheme capabilities of a millions set expanding only per the occurring chain, one brings credit Bad are advertise acts, Act of it would high timing that opportunity story We new unlock an the on and volume place down we to customer within before In day. about method easier XXX, The prepared in steps begin and made them our online. that working fraudulent opportunity. to With to the media paid with cap used them reduction took Let plus fraud patterns. customers in parallel. restaurant. adaptive used cards. The to software and as or we that of fake stores in which orders. works actions growth deploy. is or more consume XXs multiple In The With perspective, number last a chain billion ordering orchestration ahead. $XX social made eager to payment for XX% the phase, delivered day, customer that then traditional was easier. per creating COVID-XX, journey them. than lighter solutions. automation new additional We there discount actors a the meals, SAFE, each In XX% Acts attack to is by these applications upgrades with and of our in security credit majority our customers orders procure, a advantage payments addressable and use a weight. year were take In these to new a our expand FX. the we the Food way of case, four growth incredibly all applications. market example. and this in opportunity X, we software scam restaurant hundreds ordered made We invalid. From a journey FX acts application We to discounts see the are clever existing adding we is span through cards of recognized, this fraudsters believe of result discovered we With ultra-sophisticated comes if and nationwide

innovate enables modern a We application us applications. addition X, BIG-IP The will continue for differentiate Act of environments to opportunity and that FX our addressable us traditional FX. NGINX serve new to applications. into took in native opening further cloud NGINX next-generation software

cloud. to of new vendors platform. API brought win at the and customers us half specific proxy. with the against gateway NGINX modern software of architecture took odds. Controller, our and infrastructure analytics that NGINX into NGINX cloud-native We teams different us version and including NGINX and a lock Ingress putting public services and a orchestration deployments development Kubernetes fact, microservices management, In also application services, enables API competing in are control approach

of and decade focused X scale controller dev security, all was the between and opportunity the started applications. capabilities from security, gives to application organically is We X both to focused the The on And need application on billion. this applications, we doubling believe $X NGINX monitor significant security is application modern adds growth security serve divide to brings opportunity the where infrastructure act teams expand significant We footprint. expect bridge ambition to Act believe and apps opportunity BIG-IP applications. last building modern that will Shape Act about them. We the secure our of next network to traditional traditional modern billion application complements us team and $X existing opportunity our security. the addition

We the establishing are well ourselves player our way security as for traditional solutions. on leading application security to our

We our to to are of will business in very growth Act early with are insights. apply to best-in-class In for we security applications and deliver X, leverage combination the efforts potential modern only on tap of FX the NGINX, and and to we drive Shape. beginning automation analytics

to our We analytics application we application broad our this our and performance Through customers. deliver business security powerful and services. fraud and AIOPS protection, way experience investments, analytics-enabled for will management, services existing and are AI-enabled digital well management, on leverage Shape’s delivering to vision

and helping customers transformation a adaptive and applications, We enable applications that services their application secured. delivered changing the accelerate platform digital creating will are fundamentally are differentiated way

Let customers me remarks the prepared team FX as as our the entire wrap up thanking call by and partners. again, well from today’s

more investments near and that confident aligned demand. Operator, open are with Q&A. our are term customer the to vision, With call ever we longer than We our will now both and well our that, innovation


Tim from Long line first Your Barclays. the of question comes Instructions] with [Operator

line open. Your is

Tim Long

could could on there, offering it’s the business. going? just us space on have you the service I bit how was obviously a been about you in second, how Yeah. flavor you François, little or or performance quick so a telco Thank hyperscale cloud a then guys you. the talk the could. ones hoping you And give was first, Frank where just I color Two increasing if could little little give

again, think I a Rakuten been your have it win might one. with you second announced

just what vertical? in you world, the so telco a XG you. Thank could about your world a solutions see saw bit we maybe little talk XG So you for in than more how the positioning

François Locoh-Donou

Thank you, Tim.

continuation trend So the solutions seeing in past the mean, of growing in you I faster of I quarters, our which our footprint the are of accelerating of couple that will generally, cloud a cloud. public will few with start components the is we -- that. a is I give and public and

with visible public our to the AWS before, cloud. not number in helping number opportunities increase so First, us continues a to opportunities to of contributing making course, AWS public is Largely accelerate we that’s have that our partnership cloud. of that and in were growth of

of are NGINX, large also number seeing We deployments. a with

NGINX public I of cloud modern applications half an in kind front applications public now of of but are so opportunity be were that we in think applications the traditional are deployments and being are cloud, to that also seeing in strong so value to a public when to move cloud. they and going in has the especially tool native refactored against are which NGINX multi-cloud proposition factored very and is application, very value proposition up keep front of multi-cloud FX compelling.

public cloud So, growth providers. with and in generally, continued

are the with number as of well. of we part well. have application infrastructure providing some hyperscalers collaboration opportunity So scale -- as will these applications I had applications such testing as we an of customer type that of the say you hyperscalers a and so mentioned collaborating to

had and very specifically are about the a As have presence in infrastructure XG, and we you LAN strong to it telco as evolution, transition of GI the providers know, to relates we into the XG. mobile

of catalyst a seeing and XG most -- of virtualization ramp-up it’s our work opportunities opportunities catalyst we are for that substantial the the We upcoming done in is a are that essentially because now XG on strong driven. very strong software, have upcoming these of advantage of lot a opportunities software very the take a number and for

BIG-IP we container We able in won in for win FX design have native environments now this been a combination to of have native, win environment. important that NGINX and filling these and are cloud essentially cloud-native opportunities and

role new excitement seeing and FX application these breadth in of is here kind architectures. our telco about the we the playing important services So an of XG are

Tim Long

Okay. Thank you.

François Locoh-Donou

Tim. you, Thank


of the Your line comes Piper with James next Sandler. from Fish question

Your open. line is

James Fish

or guys. towards is the wins to question. new of wondering Thanks for architecture I the are picking up architecture it Hi, NGINX with the is quarter NGINX it more computing ahead is what integrated the more leveraging was terms the more moving refresh was of that and it how purchasing for into starting FX world? through just lead refresh and a And also, of knows or about I of edge in it’s -- FX? thinking for guess it us you

François Locoh-Donou

start the Jim, your -- both NGINX will what are sure, question you driving what I business? Jim, catalysts and about, around with make that are of I the first to part want in are asking the Yeah.

James Fish

FX new just customers wins to architecture customers about knew It’s if lights what together keep and and it’s right or combined leading more having NGINX of with spending more if understanding, François, they buying the this is before? on towards now

François Locoh-Donou

for you clarifying, Thank Okay. Jim. Oh!

the is deals a number you NGINX XXX set yes. couple value of together we coming mean, and FX absolutely a this give driven So combinations largely will and answer I and proposition of higher by multi-product of quarter, I have BIG-IP of examples.

tack FX customers to to now security and we that number are team, security. a ported of fast have app the starting NGINX of to on We advantage wanting of take

traction is a lot we call we helping of see quarter, accelerate the what monetization NGINX, and NGINX. getting So last which of

that solutions our the with have that solution. API controller API already we API gateway seeing and to management introduced able and also have that we are are to and add We FX traction gateway customers around

is examples were we this NGINX that So together. fact a number of of subscriptions this FX and deals that that multi-product is quarter combination by these of large a return sold

the and customers, more this starting all the network of of our software together better in to really of this the to and growth. their into DevOps world world of story team operations environment of a NetOps and that’s is our giving are out play visibility to So that drivers get one reaching

question was computing. Your edge second around

cloud, essentially deployed but the light service called which we fundamental And can application CDN able private don’t the bought into on top CapEx-intensive mass edge agnostic the it on-prem, web to managed edge offering have, is we have capability. in we in our anti-bot want that we customers some to technology value are solution we public be firewall today are computing and company We and a ourselves, and a needs offer edge broadly -- intend our with Shape we clouds we way go offer that of that in service. the So asset providers. now and of so partnership infrastructure call in serve proposition so in of market Silverline,

So security applications fact study the use app we players the of to edge. have in can partnerships number well protect as whole in that our posted CDN in a with

James Fish

all it. take you care. Got for Thank that color and

François Locoh-Donou

James. you, Thank


Your next question comes with Badri Suisse. from of the line Credit Sami

open. is line Your

Sami Badri

and the very the ELA this you question and out be and for of going do to an to in vision. customer the going how on predominantly Is you begins to idea your to is the is it on consumption agreement mainly very, My be a really your of form consumed, very give vision to offered question just customers exactly offered of with or customers like for it are mechanically you to us application -- is be with out will more numbers multi-cloud, to more or public work going Adaptive this where are flexible predominantly scaling this kind quarter. with be Thank to your laying Can solid the sources applications rolls base? are once clouds? mainstream going revenue an be more much numbers begins work new and congrats that going Hi.

François Locoh-Donou

I examples all above. some that play, it’s of is on Look, have mentioned, of the you. you thank still this the Sami, to but think consumption

coming way, FX mentioned a What elements -- We are the already and see are I that today. customer just I seeing should together. play we say, by deploying into that with, of NGINX we vision

change today experience vision the we four cloud. of real-time of have this This taking some and solutions look application quarter, deals strong services niche niche see in and we out essentially, digital their deals of we and deals and on have But so of happen where and and on-prem this they see of we are a winning combination the breadth are consolidate is today. players they starting want that And combination together at look we public to future kind they there’s of of going a so that customers of needs, our that that’s offer customers in already in already a opportunities had. we vendors hardware these the with kind happening, software, number where could that they FX see won to quarter, application what three as at environment, take or services are

that And with service. a with managed that We offering are made Shape starting modern combination with Silverline that to our protecting of applications. see and now seeing and with the the and contributing division have customers as are traditional customers we a Shape already consuming integrations we

in X early that. are you presented. we on vision get days in and realization much time -- going are as that that is The of saw you we the So acts bigger this goes to

gets across now. are I the opportunity of and starting of and models But think, multiple of application for over consumption FX infrastructure, to play security consolidation already application types actually right these time, that’s larger. seeing much some delivery out you

Sami Badri

adaptive color. will looking accelerate? and at to Got kind is of this should forward-looking rest way systems look specifically of business But some delivered of of continue kind double-digit systems adaptive declining, business just kind that the essentially attached continue Got guys we to that. just the scale, like, is as taking you these to growth expect the when that it. have at to we to metrics on services applications should of, what that continues you be relationship with of Shape we kind expect reported it. declines, framing be And, you whereas said be continuously and applications like Thank to should trend continues the as like the software, for NGINX, we here, growing,

François Locoh-Donou

them benefits more vision to lot the of doing software-first new yes, to flexibility a applications, broadly, services, are for -- analytics. application to software-first mean, I adaptive them the to leverage to move the the gives want the our we a to give in the take environment. orchestration, flexibility of ultimately because start deploy work the is ultimately, customers and lot answer environment and And the automation

of decline business our overall, you our the of systems the see growth see continue to overall, you will these will point see company -- software. and the -- business to of So, software that trends majority to be the and you will continue will

Sami Badri

am sorry opportunities. the your in ask call tied this I earnings There’s service and And a to third to telecom it. lot Got provider one. it. Got

and virtualizing significant network insertions be with You you be core very, with with U.S. here would were in Should know-how is your that is have and how U.S. cores and big this a this that a basically because virtualized virtualizing the being very Rakuten assumption traction in obviously, the you to kind is, to I conviction should do in process, all completely had DISH et a to cores for we and now I your the complicated advantages we cases effective pretty theme coming prove idea guess, agree, it or be idea going telcos some There’s want going Rakuten, bidding batter of has the to to since certain first cores, that of abroad itself to new different. this can cetera, -- of should use stuff. making that the go the at in say have guys the infrastructure. it’s people functions say,

drivers to going is the in want SP? just big going one of and for traction idea on how So, to or FX telco big an we be forward get if

François Locoh-Donou

way -- to I think, the to from every going their to is I you about different should XG think transition Sami, carrier, in think, be this is, XG.

the have that wins Asia design in special inserted informed beyond carrier some or kind going, be very, you we in U.S., the large and XG FX and Europe But, overall, look architecture to are have architectures these the good software bring Some we space. actually of that. some will in feel done, not work use infrastructure, is in end about state the the very in if one look will XG to for where and of already at where we people Rakuten

So, think, conviction the role in that going pretty should good play to are we infrastructure I that read going forward. that, we around from you have XG

Sami Badri

right. All it. François. Got you Thank very much,

François Locoh-Donou

Thank Sami. you,


of comes next the Your question with Morgan. Samik line Chatterjee J.P. from

is line Your open.

Samik Chatterjee

application I question Hi. If question. laying Thanks follow-up Sami’s services. on here for are the for about vision you my could out firstly taking just

that cetera, how capabilities, much follow-up. look you all think about those versus a of inorganic Just when have kind of and of capabilities some outside to I to you need much do et to X, curious how bring AI, the think organic of Act for that how in-house is pieces and about the

François Locoh-Donou

saw And that was FX. of with most factoring trend capital one on be the cloud the the that the business to we acquisition combination anti-fraud think if era great with I come was we we look big with the is I lay saw have you is the anti-bot back there applications COVID, But was we application that an that a can shared you, and was, and as we business reasons where the and already at Hi, Samik. multiple later. we of that to analytics Shape think course, of the quarter acquisition. that of of Shape, for at acceleration in secular that going Well, when this platform, fact, already this I in business. were really entered strongly One so reasons Shape the felt have

the in and The time was and technology that money AI-powered second platform. invested around building an big reason acquisition large for Shape it has analytics was the of amount

you our that Shape. core reason the realizing in already see because the of vision so fact and from technology of part And that is here assets

it of of essentially M&A to specifically inorganically, head terms the analytics we don’t we towards as with done relates road, have that of accelerate to might have a we with been the applications, Shape. as down acquisition. out vision big adaptive start go Overall, So things in we acquisition this march with the certain that but the want

Samik Chatterjee

the if narrower And range fiscal Got is it. fourth last right I on you you. can the it. Thank quarter follow-up, quarter. the just guidance issued a to for Got revenue

of just you kind what the have you kind seeing activity, saw now, to cycles or the what get relative higher of, in are cadence sales driving that through wanted particularly bit to are your imply compressing quarter, does get is quarter last to visibility the a you customer more it visibility So here? again, relation

Frank Pelzer

Frank. is this Samik,

sales I that quarter think, feel in our reviews got given was we more because QX with were the have We more had that up very team. comfortable think feel was a our tighten to business bit guidance it to the we little have and that a we do million. into I that we a that but by visibility give range, quarterly we We first living like that So approach world, I activity on obviously post-COVID the have last think appropriate we a similar could quarter. wanted bit is of going with our $XX

Samik Chatterjee

Okay. Thank you.


with Meta Stanley. of Your next Morgan Marshall the line from comes question

Your line is open.

Meta Marshall

Great. Thanks.

are deals You there just interest commentary in a pickup But ELAs on noted just are in wanting sales versus in maybe partnership an second you to what question, they any question. or without previous on answer this people or in ELAs you maybe environment, just buying and open-ended could know more traction able the picking to make sales? in-person just then any any have deals? multi-product give AWS about to And question update without been

François Locoh-Donou

but are I the is two continues say, be tale to of there stories demand ELA -- so Meta, strong. there. kind on very the And would of

that effects are that some One environment customers kind are -- are near-term of we largely more there they out, to tend because customers is to pushing strategic of priorities. seeing transformation in have COVID this the

the in ELAs than started of a But often FX did volumes more now ELAs that and well. at before multiple same a more in large combination -- potential there’s way, see we more we those we road. could ELAs terms happen we plus did transactions, as NGINX were did this products, this quarter that down that So some of time, happen to of will Shape BIG-IP ever quarter so the and

on the where progress. to very that’s good partnership, relates it as at So are we are making And ELAS. we AWS

a of -- getting for We new lot opportunities. of terms in have AWS visibility are we

are and be on AWS now in integration. for joint working of the we workload. And solution at work further would We are we the where see also we I accelerate we doing point partners working think in are relationship this thought to -- migration XXXX acceleration migration because with will we

XXXX and good even the expect traction far from so collaboration. overall, more in So, joint

Meta Marshall

Thanks. Congrats. Great.

François Locoh-Donou

Thank Meta. you,


question Henderson line next from comes Alex of with the Your Needham.

Your open. is line

Alex Henderson

so gain new going have talk hoping do you move you second and you Kubernetes Phase and between was very the share the Phase as real the does get percent much. as as I the is kick-in? I a you around or growth a the the very into already pretty you. a Thank see to high of if rate year us that contribution it’s granularity into therefore, to high of clear you application already and when and your happening rates? give Do deployment a that’s of and be vector, a in your could growth. market? question that growth X and done positioned you timeline Phase X get was of phases presentation. little ex gain that. within various that of a share stutter for applications, described in the Is application then of in increasing into Phase the a it to Kubernetes Kubernetes Thank result steam And X driving Clearly, X X, with and a years to that or X, a those head how is little you around number Phase then as wondering Phase bit about expect software ramping could you rate penetration

François Locoh-Donou

Okay. Thank you.

timeline the you me through of it. Let take

happening penetration more started driven software X, over our Act on and we the a done is would right really in successful the are growth environment, innovation acquisition software lot the gain automated, to before is is the the three part the software of has in to say, out going in gone getting solution a orchestrated FX, Kubernetes that Act is be of So, Act last lot application our have application, to have moving that taking done and which seen course, platform in BIG-IP Controller, from say, new and of these right, think, still which with presence. FX environment, our force are and Act on from in build, of I model the for I weren’t things accelerating application two protecting around something you app NGINX. we really have been new that’s traditional a including delivery modern against in we to traction app both And several that early that cloud, modern are out the X, putting would years, of Alex, stuff yes, lot really Act traditional and environments, play an some with to have that today you come gateway the about a is of public largely application and years work that have do example. one. FX providing monetizing in applications, there on play we B, innings of space that it’s security we with intend NGINX are years. like modern the we But The to services of and next provide being starting of as I applications, space, because NGINX share now, really application. all X the API starting we security, modern X. A, now,

part started the Shape software have organically in and of We business to the FX, is capability was why that port being we FX good accelerated growth. down that’s intend our But shape portfolio. our across security with

NGINX. managed will with Shape we we which we AIP, So our ported have capabilities Silverline, security have already with it service, our have chip is will on capabilities but

them is continue today, even X the expect contributing should Act already more you So but in to future.

next financial couple in will would if contribute think, thinking terms Act the meaningfully. of say, you couple of performance, really components. in over material of years From have already X a Act -- a X years. would technology lot are and contribution terms is I So say, of we I to begun X, I Act the our X perspective, next

engaging next -- that in us, that Shape resonate just had. solutions a think give a terms couple of we of couple contributor already them, years. solutions of with are the started we But application. beyond that’s releasing analytics material the I with think to becoming their the that We insight started to for leveraging actually of some them right the most customers we around around has

Alex Henderson

understanding dominant definition today controller just are share deployments by Kubernetes It’s as used Kubernetes If you gains? in I that’s could that that increases the percentage follow-up. and sharply guys as doesn’t applications, drive my new if a of

Kara Sprague

container tailor-made Alex. for deployed microservices be and Hi, to customer is we is leading is environment it in With native facing Kubernetes selection environments This servers the NGINX experiences. Kara. web digital such that in solution as a those have modern of and

analytics at kind And facing of and have millions consumer think capabilities NGINX so that of a security hundreds for we some head with those of of then presence about. its those modern in applications, François start we capabilities spoke good the inserting

Alex Henderson

I there guys. on could Thanks, get I somehow. know Kara


comes of Paul the question from next line Cowen. Silverstein with Your

Your line is open.

Paul Silverstein

organic appreciate. that, revenue what Frank, revenue you related what quick and I I the got software the quarter hoping in I follow-up? and Thanks. was us to Shape tell was and growth could then to the François a obviously, contribution was have

Frank Pelzer

have would the Paul, $XX and been million number than Shape, so think, XX%. without it little was less a so I

Paul Silverstein

growth? revenue organic for XX%

Frank Pelzer


Paul Silverstein

Okay. Oh!

until on take-up did of upon of users this be intensity of later observer an to comment, was different you you the call and XG services, commentary a revenue in in observation, of the was traction. of XG won’t your what because what number question Historically, Just XG very take-up see seem historically. in same of related different your cycle of First than that you dependent there around made said those meaningful you observation commentary -- terms this was go all, to the services meaningful the And have use. terms the

improvement, respond just before sure are I still haven’t it, any and impact exactly India understood question the you did what to Now you signs that hit and make understand -- to COVID-XX, appreciate to want I would it. ASEAN your only relative other hard the but early get I of seen am trying coming you it it you of is not just was commentary, any it in are you saying that seeing are the on, saying be, or doldrums back

François Locoh-Donou

me start ASEAN. let with Well,

wireless say, give we then still is second ASEAN know region, wins am going that specific, -- have yet would as relates on In opportunities Singapore. design have large as infrastructure. now business into and countries come. role I that I us about the that we infrastructure and and short-term, because XG think and in and extent XG India talking lockdown such a it’s impacted. a still few am lockdowns -- for either think of of we think, in is throughout of India radios capacity spend to I seen those some we waves is that have countries like, the I fixed first capacity, and in to we are generally, that ramp-up But, we in the or in wireline back start work-from-home for region, a true been think, the that’s for there be last wireline it to to some to I I still and diverted confidence kind and I would some said, opportunities is, you XX a there issues do core, in FX really think ongoing. and we carriers haven’t seeing see of days that On One in to things infrastructure are impacted wireless would going I what carriers gone the kind it’s I two very address the for see combine would But once into XG, XG past. issues to play. already seeing, in have increase upgrade deployed

service that I I quarter the see you pinpoint, would year. see when to that next we would next be you contribute So expect us accurately, would contributing. as able providers, but that to to to know, can’t expect start would which is, Exactly year those predict that put I

Paul Silverstein

and a And XX understand may. upon revenue and FX generate? start change. to we the company, investments a on margin starting are if are to needed company you reposition François, XX% you when one healthy growth margin quick you but follow-up, to I Once down a to rebound in I thoughts operating Any the all time, now operating see leverage was make and to and you if

Frank Pelzer


We will our as when application we in the we talk do to like increase this I more quarter, about [ph]. well But reschedule that feel closer continue. expect about we are will have see as I have we bottom to talk when you QX see here the we back ramping are think, up the that from and guide given, here, to with and next

Paul Silverstein

guys. Appreciate it. Thanks

François Locoh-Donou

you, Thank Paul.

Frank Pelzer

Thanks Paul.


This concludes the time Thank we session. for have attending. you for today’s

may You disconnect. now