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F5 (FFIV)

Participants
Suzanne DuLong Vice President, Investor Relations
François Locoh-Donou President & Chief Executive Officer
Frank Pelzer Executive Vice President & Chief Financial Officer
Sami Badri Crédit Suisse
Alex Henderson Needham
Tim Long Barclays
Paul Silverstein Cowen
Meta Marshall Morgan Stanley
Rod Hall Goldman Sachs
James fish Piper Sandler
Jason Ader William Blair
Samik Chatterjee JP Morgan
Amit Daryanani Evercore
Call transcript
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Operator

Good afternoon and welcome to the F5 Network's First Quarter Fiscal 2021 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. [Operator Instructions] I'll now turn the call over to Ms. DuLong. Suzanne begin. may you Ma'am,

Suzanne DuLong

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

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

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

François Locoh-Donou

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

revenue showed results representing $XXX million, non-GAAP growth of first our Our QX, a of strong XX%. We revenue in delivered business. momentum quarter

are systems services quarters becoming growth the pandemic, revenue X% of XX% things delivered growth software several into macro the growth, also perspective. We Several X%. on of clearer non-GAAP from and global

business realities increased dependency expectations on applications. First, the pandemic both At significantly. and consumer have have transformation and application consumers' the accelerated on experience time, the of about their customer digital same

As applications investments infrastructure and securely volumes the expectations, needed renting their deliver higher in result higher our customers and their them. to are a of consumer

application In to for current addition, years micro significant incumbency Customers a they they in and strengths, in can a advantage adopted invest count our the operationalized last the is trusted drivers environment. our over several FX our pursuit vision. play know strategy These including on. to want partner of

multi-cloud for and both modern to and Our our footprint and investments environments. first Shape in grow Frank quarter business application are outlook investments financial deliberate and I our speak momentum, our deliberate from for or deployments early results then in will reviews application in our us BIG-IP fibers continued NGINX highlights after security and rapidly more the QX. customer for Frank? some including to enabling quarter

Frank Pelzer

Thank François, and everyone. good you, afternoon,

a results On we announcement basis, QX as $XXX was a in just delivered revenue GAAP strong preliminary our we highlighted, QX. As previewed François million. very and

our $XXX non-GAAP as non-GAAP last will of the review revenue our million end and I Shape. this the we Please guidance quarter year-over-year up of million revenue I as non-GAAP above lap was about referring high note, the be measures. initial we range. quarter First of XX% acquisition be mix, $XXX to will revenue Also, million well to $XXX revenue speak

FY growth and since up we purchase XX% a minimis. write-down of year-over-year have $XXX QX the Going product forward, accounted million XXXX, was product XX% de the QX the decade add-back of delivered total revenue strongest This approximately for of of revenue. accounting nearly ago. is Shape is revenue

system their customers noted, sales. our and in growth software efforts drove accelerating both transformation digital François As

year did ago the Software not Shape. compared contribution revenue from include was $XXX period, million, which to XX% growing

Excluding year-over-year. Shape's XX% software grew in QX contribution of revenue approximately 'XX,

totaled software shift continued again mix from to XX% subscription QX, representing revenue XX% revenue revenue subscriptions includes momentum. and fuel $XXX software recurring of the year-over-year maintenance product of drove quarter. as X% Services QX, quarter. our utility-based volume of of in revenue subscriptions up portion a models continued the of In the from sources, well for and revenue. in services with representing service in Customers' speak as of from record which XX% $XXX the this and XX% previously. million of X% we of with The detail. represented will subscription APAC of XX% million preference ago year-over-year, quarter subscription the flexible our Our revenue year revenue in term grew as ago compared Revenue X% revenue XX% in while subscription strong XX% of growth comes this last XX% up XX% quarter. QX, revenue, is representing revenue period. software largely X% to revenue. This Systems more revenue François in of improvement performance year. basis, grew was the a year revenue. accounted total regional drivers of to momentum delivered mentioned EMEA the strong delivered Americas result growth, up a On in I for XX% representing as

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

GAAP results. gross $XXX were was now Non-GAAP operating million. in XX.X%. XX.X%. was operating QX expenses me margin share gross QX expenses million. $XXX were our GAAP Non-GAAP margin Let operating

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

net share. the GAAP approximately net rate XX share $X.XX in flow per program shares repurchasing was share. billion. Our fiscal quarter in We the end. DSO and the for from in sheet. from over expenditures two via and was $X.XX Non-GAAP $XX with now $XXX XX.X%. revenue $XXX was billion I year for in or and quarter investments the per year-over-year generated employees, or was million tax balance turn share income million make cash Cash our were years, not million $X.X approximately tax will quarter $X quarter effective an the We any effective capital to quarter at non-GAAP GAAP was X,XXX committed XX.X% rate $XXX QX. QX. billion $X operations XX totaled ended for did Deferred the million. remain including We We QX. days, repurchases to up in next repurchase approximately accelerated increased XX% to XXXX. million $X.X income

customers metrics. financials our our that guidance deal and application the share me note our outlook Unless support let recently infrastructures. with expectations. reference quarter. to their addition Volterra expect continue their closed, Near invest to term, Also, otherwise incorporates growth of please our Now to guidance guidance fiscal second for modernization my non-GAAP of comments QX stated, will the application the we

we of an We also year-over-year growth of are midpoint approximately focus With anticipate the on revenue of targeting continued in QX XXXX the this year fiscal at $XXX million million, range in X.X% application mind, our in security. to reflecting investment $XXX range.

about guidance at in do mix, as business. strong for exceptionally remind we prior systems two with software target QX. that to consistent commentary QX not is give be we our variability with being revenue comparison We to potential software our in and year we our XX%. was similar of This rate continue scale to While would on growth XX QX our continued to also near-term revenue growth horizon quarterly software product XX%. strength likely the growth likely do difficult is quarterly growth rates below reflected anticipate This XX% you software QX our

of QX $XXX expect XX% we million. We and gross to margins $XXX million operating XX.X%, estimate XX to expenses of

seasonal see increase generally As a last QX. in quarter, we we discussed expenses in operating

increase to of that be XX%. achieve expect incorporates target of the our margin operating and our We will for the of also our We half outlook QX year QX to XX% to more non-GAAP QX rate our from 'XX the then the addition operating 'XX our Volterra operating in margin in QX anticipate back FY I XX% decline to to will once you into XX%. effective tax model. range remind of

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

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

share XXX With in via As previously, intend repurchase that, back as for repurchase over François? XXXX. call fiscal I turn deployment, mentioned capital François. to shares an I the million accelerated to we will

François Locoh-Donou

into and accelerated dependency quarters has Several the it pandemic, COVID growing transformation that Frank. business applications. on consumer clearer you, and digital both Thank is

ongoing resiliency an enabling with us declines. in are at are a As their investor security; transformation two, Incumbency system our also meeting, strong systems digital our is trends in investments. drivers drive for accelerating and FX-specific moderating our to analyst us for the these Underneath customers advantage are one, software and space demand; momentum; subscription our to growing these growth result, consistent together, And demand drivers application three, November growth. leading revenue and environment. there demand fueling current three macro and discussion

our we to in customer achieve exactly growth goals. horizon go to not drivers growth QX, and multiple to these November, we these lot go will each targets. More demand also growth in turn. drivers. of all across do specifically, multiple right our that I noted three drove revenue paths right to achieve everything have had we As mean we In two speak need a

Editions. up demand we and and of in focus that of we're our to solutions. to as application I with core Big-IP to case it institutions FX. the day, driven environment. customer result to and one Frustrated, additions security our in on delivery we application a environments. benefits first best First, the and large the they environments. example, to cloud continue BIG-IP will application help and efficient This multiple cloud simplify In consumption months during up cloud easier This a capacity for QX, cloud the making to more running struggle have traditional the NGINX refresh efforts Customers for modernize BIG-IP app In software Virtual under investment solutions. use them one financial see get use despite turn provider applications business delivery in BIG-IP, and turn with. in we was subscription highlights a to mission-critical look to working our across cloud a for

time market. to accelerating deliberately in turn new Let invested products, to me the NGINX of acquisition, the we At NGINX. time

FX joint and ported rapidly FX NGINX we Specifically, built a the Controller platform. to security NGINX

delivered largest FX NGINX integrated Controller driven well security ever quarter, as geographies. with This as This through across part was App strength quarter strength its attraction Protect. large NGINX robust by broad-based NGINX in

a long NGINX with government FX Controller, During QX, from time federal Plus also customer. we a and secured BIG-IP win Protect NGINX

is BIG-IP including FPIs to virtual, production. physical in current its support in cases, applications continualization. while NGINX delivering cloud-native upgrading capabilities modern NGINX infrastructure use network balancing, scaling application a infrastructure, Kubernetes out help load to customer way building also of migrating this prepare While for and the from number leading to selected

momentum. distributed, API service no It should are making management we get investments expect applications more deliver for mesh BIG-IP, As security NGINX to and drive we capabilities demand to will application customer the API NGINX as is Plus that come continue also additional surprise controller, gateway, growing.

numbers use created growing With the application landscape ever-increasing channels, enhanced digital help. significantly. of growing consumer in and customers sophistication, for security of application fueling have ongoing investment our Shape are portfolio. addition attacks to With is looking combination organic The both threat and FX based of the FX pandemics the an

our is against If clear solution to address are that application we frequent you most help it set threats, top security and damaging positioned breaches. the map the the most our well incidents customers very

interest protection We applications. application web continue see in modern increased adding to enterprise-grade to FX's firewall

QX, a when included selected a web friendly portable, a App container cloud manufacturer needed NGINX independent, firewall. that scalable Protect application solution with During car major they

gives use for SSL ability in while case its FX. to enterprise revenue strategic control traction point We This not security a orchestration. BIG-IP a is growing equipped to and customer is big a be us tends also security for And own, strategic on end-creep driver it seeing it the which differentiator in pull stack, are Shape.

larger SAFE, fraud much customer highlighted BoT fraud. Silverline-managed speak base, we service. Shape cloud with protection making also Silverline to of Shape's anti-fraud particular, to we Last the platform. are or is prevention Shape quarter, a in Defense me Engine advanced solutions traction the services available Shape Shape to and industry-leading through Silverline our a seeing combination. benefit large-scale Let AI-Fraud delivers our prevent

our makes useful Silverline interesting resourced use crisis. enables leading and customers service to sparsely solution, also that combined have to deploy especially capabilities Combining Shape's deploy Silverline in organizations are solutions Shape's and with anti-fraud which industry a two quickly in is cases capabilities. anti-BoT Shape easy when There are emerged. it As SAFE capabilities, Defense true managed

are unprotected teams to can big capabilities. an to QX what sophisticated as of and fraudsters. states affordable benefits. in With Shape used banks credit to defense sales an the new use credit block go data Once threat. Shape emerging ideal is fraud five being cybersecurity as delivered combat of larger for other to online coming solution, target web happening, is The learning banking the easy U.S. services capabilities conducting managed XXXX. First, can about evidenced exposing created the sky-high and offer turnkey, as Silverline of AI being well by Silverline same ideal for unemployment and scale true enabled, them as deploy related state case an domains. present who combination and mobile introduced, the several against attacks is their Credit an fraud Solution, the we are as unions provide and With for also Pressure machine defense. limits capabilities stores sites fraud lack Defense Shape easy demand of Silverline sophisticated by environment unveiling limited ramp sophisticated union fraud unemployment Silverline provides capabilities and and fraud a real transfer Shape and and in identify Shape's defense our attackers. security and wins unions solution security

ever are cases as Shape excited about We use has us. the for opened as

offerings to additional for new Going Shape's engine build application beyond security us analytics to potential to drive go analytics enable leverage enhancements that forward, we revenue see customers. to

Finally, saw we the let QX. systems growth in for about drivers us talk the and

three business broad-based factors industries. note and transformation. systems First, COVID-driving I our that behind digital investment identified primary and is We strong systems strength macro accelerating in our increased application benefiting from systems will QX the geographies mentioned I namely performance. was previously, in across also trends use

growing we have have seen as systems-based we cases. First, for previously, security demand discussed use

several Second, in years, last some on operate the gained and cloud a multi-cloud world over customers to clarity to strategies come. have for now their hybrid time expect

sustainable. digital of As capacity purchase accelerating both willing these a We by believe more needs are support systems result, they to driven to are transformation. drivers

can benefited catch growing for several defer purchases Third, covet capacity demands. Customers quarters suppressed no some from QX who have systems simply also systems off up. put longer

very in of of later. April long-planned their a on of time, had refreshed software act our subset than small systems contributed a For rather desire customers legacy sooner to our not to that long a development milestone one end

different catch-up in for note that runway. expect end in a customers planning as than support. I drove of to sales software the case, systems providing that a see transient For net development demand this million would date clarity, carry has milestone long very end been We driver into software April In of pertains development is QX. this well-publicized estimate years, a we approximately this growth system $XX over We though do it to of QX.

applications and often and that are more and personas span traditional hardware for means bridging Finally, and C-level expanded I growth our also modern form application we considered security strategic our to This has opportunities expanded has out as connect driver, a with it factors. call did customers. in reach our enhanced with also not software role portfolio, our delivery and both while ability position

Volterra field integration. the X.X Volterra customers begun yesterday We paying announce been seeing care NGINX their feedback of team next-generation care and in we to edge priority beginning selected software, an off momentum being we and acquisition are United security to the nonstop deferred has our the that of critical February, In work clear and running FX has of very care as to creation customer our so were project hardware, eliminate investors closed has our for excited and keep one health are for and resources all positive. about combination the BIG-IP of encouraged the NGINX a that are closed for Edge are and As apps States' hard we of the while necessary they very the leading and both providers already providers. the migrate divert after investments emerged by to today's closing, the QX, Customers to value customer to believe methodology Shape Initial alike. fighting about last example, can COVID. organic potential This applications FX's our for customer pleased from platforms. pain signs

Our allow Edge to inclusive providers. edge every clouds. XX on or of run will the X.X for platform platform will open and virtual edge service servers enterprises built It will otherwise be an first be service public that

as team open and will excited the entire have again customers our FX of our well thanking FX going very as are wrap With call We are remarks partners. forward. to prepared to the forward part by as operator, Q&A. today's to I now and sharing the Volterra with team we will you looking our that, progress up

Operator

from question Crédit comes ahead. Sami first Please from Your Suisse. Badri Instructions] [Operator go

Sami Badri

you. And of in drivers some highlighting Great, thank and major the trends quarter your that and these business. solid on congratulations seeing we're

want out started out ago to So François, to -- about all the when pandemic pros year first the a cons to I and go you these back called pandemic. almost called you and

Some being demand old up are of And you in want XXXX year all some essentially fiscal ago deals back pull at XQ out, all pushed catch-up Recapture saw about fiscal coming are a seeing potential you force, XXXX, reaccelerated sorry, deals of least were the that basically catch or deals being demand however put or or the -- forward to back, in XXXX? within funded it. in that to through XQ? you some but

François Locoh-Donou

of absence would Sami, who small question. catch-up COVID what on -- The the and adding subset part the resources say related pushed it, waited uncertainty pandemic, of customers, the answer there if are and starting you back in a them go of capacity, were or those at thanks there that the But out. have because for some it call the are the there beginning I short pushed were -- software or do see customers refresh. come back, are of call the these is we The demand, subset, the transformation the to waited no. of waited doing on now a some in but big we're deals way. to deals, we to that isn't out ability yet were software And deals physically and who not

think I us. So that's of ahead still

Sami Badri

the XQ Got did little systems relatively know where we versus growth. just and systems is a I other XQ then you're X% it. reported what fiscal guiding differently in it. with to do fiscal with Day guiding And had you bit recently, My guide and revenue. Got today question Analyst to

Day some highlighted and drivers have Now the some industry guide customers gear a that year does fiscal of does we're XXXX that looking away? of the growth for systems the Analyst boost as like of different FX or kind go security underlying overall X, a gear you and negative of based measures, little now your trajectory? in that identified Horizon on bit for in Now go-to at

François Locoh-Donou

our of Sami, Well, go the back and at got we've I drivers business. hardware think look to

of solutions if there's the I And benefiting as benefit I of of a where allows kind from being seen for So strategic plans. applications there we and and think to think -- that. spending more strategic have things of benefits the that that's two is positioned the customers Generally, Sami, and all positioned And at Company There's long that cloud of you business, at on the our effect. including look And in strategically are have. hardware Company have future-proof and infrastructure partner systems more macro term effect ourselves all also our general. security the we're today, conversations of better software and that are a to because business. combination us that our with we solutions

transient the more two and look our there long-term a think are one is to I drivers business, drivers driver. that you of that If at specifically systems are

overall Analyst that if we in that long security so at growth our and So specifically business. Day And business. look -- this helping again saw the security helps on talked term, mix demand. of our The was than systems we stronger had quarter, the systems in grown, you the about that

basically business, two comfortable to essentially the have part I that in environments And we as ago, talked going kind going now all-in have their maturity systems strategy that is customers cloud think The cloud. with customers hybrid-cloud about reconsider time moving to deployments. for operate architecture. said their some to they knowing second years if hardware business that their to in seeing they're either have and of recall, architecture They have systems of our three the the -- a we were generally, on a around you long-term come. -- who or factor cloud owns who public And that for customers graduated a lot forward were were they have very from long clear around they're pausing

more or customers back all to so now adding that not buy And hardware capacity any seeing some coming that have to we're decided at their refreshing systems. are and

I longer We customers so in are on is because to had think think of software QX one development. is We short-term really a carries a driver, that that it million There those And the really was $XX of that's quarter. that which our transient aspects Sami. end demand. subset kind about but refresh think term, two is in of a make

horizon Horizon we when had that it's take saw X think into guidance. do that we all hardware our I do the that than guidance in at what than IM. will is mean, business So we're for our to in what better 'XX, account, better to likely our FY not yes, X Horizon you certainly but there We changing of possibility overall

Operator

Needham. ahead. go from Your Henderson comes next Please from question Alex

Alex Henderson

software, I acceleration could demand. the was from extent your about systems, have tack. bit solar cloud capabilities seeing little an the your a impact wind hoping to your might And you think you talk in what are been what

CFOs, result translate Board extent and CEO, their what FX on think are whether it or companies increasing or spend CTO, to contacts, security a demand? specifically from will that your If contacts of you've heard any CIO, to you even as

François Locoh-Donou

what? spend increasing they're if cloud a asking result you're and Alex, on security of as

Alex Henderson

tack. wind solar The

François Locoh-Donou

heightened CSO Not -- and security generally is, by There directly, there necessarily course, it organizations. Alex. of of a Okay. awareness is

relate cloud, and more trends quarters. aspects us to, Same the The move use security security pretty the to with is software. several they of we what software started, then more public to when public strong to have Our the since have accelerated that digital that in frankly, have A, for Shape, still attract been last the they we're more attaching more security as And to today customers as and more cloud over move attaching pandemic seeing moving what happening businesses more addition seen, fraud. more environment. security also the go cases channels

our of to I and offers so that And well for positioned companies, mentioned but more my we're remarks, protect across anti-fraud Board, fraud, are there a seeing against demand. prepared is that. very and strong the in very small cases couple use large online is

Alex Henderson

clearly, sales. follow could your your software are an appliance If and guys I up, correlation increased between seeing so sales you

for that's launch of cloud, in enterprise hybrid with Beacon expand cloud product the center NGINX it integration your spending tie and integration has possible result? and to from the both a Is IT cloud hybrid together quite a appliances, and accelerate as the and also suggesting place of for You're but while. been ability the into back that the pulling the campus data therefore

François Locoh-Donou

that traditional about of what's effect typically happening, is and lot the kind halo are will they silos. modern participation for is, but is a it -- And they large modern Alex, is, to seeing do is it still early reality by applications application, they typically there definitely for That BIG-IP. that element NGINX application new we But they in the application FX. components portfolio, significant application. Alex, these NGINX, here overall of we ideally suited stronger And demand modernization. is enterprises these of the of modern is But is traditional support creating modern component, yes, to re-factor in that we're is components. think lot a have as there certainly, Beacon add a factor. with And don't of application, modern a modernize times, days. they separate micro-services, an supported our

both BIG-IP BIG-IP full these modernization of gives it's combination a these we're the have that together. and solution customers And seeing and for pulling that set so, NGINX initiatives and modernization, NGINX

an there's of and driving definitely and coming the together So the growth. portfolio effect synergies

Operator

Please from comes question ahead. next Tim Long of Our Barclays. go from line the

Tim Long

quick Two ones, I if could.

going a your second, I around tougher Day through somewhere the normalize then some think And as we number get to expect compares? of $XXX First, understanding at there, But guys a about Analyst at about the could just higher little how or talked around you a little million cloud line how the deferred grow maybe a a it us pretty just revenue the qualitative that around is something future? little it's being give software quarter, tough revenue talk Are compare. bit we've lumpy, bit specific the about as you Could organic revenue strongly? Frank, whether particularly little number. seen line, really, quantitative in look growth we software the for cloud you in less see to really we bit So or that color talk businesses should did you FX?

Frank Pelzer

Yes. Tim, it's Frank.

and for start the me I'll part, first over with to it the second. François then Let turn

the our of based quarter, that's scale a Horizon XX% of the changing scale XX% to comp In as add range second XX% in we that to And about and about for we all tough But we've the not we this on want model. growth build you in business XXXX. in in discussed more that anything you normalization we more side? we now, revenue, up terms almost of likely than coming to time we we talked given and François, off X, Horizon to from gosh, at do when that being the from at subscriptions, compounded talked continues talked organic the necessarily up as the do the it of continue have XX% recurring XX%. outlook the rate in XX%. annual three to that cloud And as it we that beginning the But as are swings. lumpy said not software overall, same get about lower some QX years for ago see to growth will expect of quarter, we X be

François Locoh-Donou

Yes.

solutions demand a that for drivers growth a subscription side, we very has number in ever, to On really Tim, you And case had software the still strong. software subscription And And we're generally, organic overall from stronger high The of in multiple number some really NGINX -- been than we these quarter very public the and but high will include the A saw. modern the last seeing lot the cloud. actually agreements strong for all-time deploy variability, Tim, best to growth as software of just point are the very of demand see including agreements was had quarters. the applications, cloud FX, had to a software, cloud fast. that the the yes, quarter. demand so We customers in rate these I'll NGINX. NGINX growing multiyear couple. start of

still, can the in that in deals have. those also investments the addressable as know, app security, NGINX, of And bring you of we the controller We ago made we to some year table. terms the effect and and the growing that deals we're in seeing a size of

our use have true some new cloud, the cases agreements, And we new catalysts Shape number played that coming. subscription the around NGINX haven't that forwards so, in catalysts when are you of factor out for subscriptions, that some yet, and some

our about So Horizon. software good very we feel for

Operator

Your comes from from next go Please Cowen. question Paul Silverstein ahead.

Paul Silverstein

it. Appreciate

math clarify and about roughly software? the -- issues. the does comment your was right two total Before given quarter, I I Shape my Frank, Frank hoping I is organic questions, ask that pedestrian to in for $XX One, ask could my million math growth just did

Frank Pelzer

it bud. actually, than Paul, higher was that,

growth There So, exact but in what it's that. we experienced number, didn't the higher was slight it's we QX. -- get over some than

Paul Silverstein

question, the to All NGINX in I you're means the specific had next answer multiple willing made was. ask. the quarter, know answer revenue hope I what number know François, the Is we'll statement with times is best suspect clearly a you that the you record yes. share the you which us? I to that NGINX right.

François Locoh-Donou

is of essentially, -- that but size. accelerating, we at NGINX it's No, continuing of Day and or the shared broken the saw Paul deal trend And doubling out Investor you Analyst haven't should growth we in I lately, around our revenue and NGINX this numbers, say. the

Paul Silverstein

sure. Yes. I'm okay. it. But No, I not get --

to but You for on. the don't but it, want want credit give move details, I'll us you

Does real been you assume it's drive that leverage this very beyond. the simple year grow slower than that's there's revenue, the lead 'XX me your in planning year, up guys variance which you to are lead? going does 'XX, question OpEx planning you've In leverage, which leads? fiscal the you to OpEx or is, control. outlook, it's or a are as Horizon Or ask down to and really But clear Let questions. OpEx to as accordingly? you growth will operating your math. relative Operating revenue adjust I X you're within obviously, -- next revenue

Frank Pelzer

Yes, Paul.

and to talked to XX% the investment are we targeting. that so as drive gave for we to that's FY Having we we XX%. we those the is X long-term what to that continue what the business. managing And and the revenue that's to XX% growth, are we model, 'XX about make well we are that So you investments. overall as XX% the committed opportunities way find in Horizonal outlook If said will that,

those we the of XX We at up both range, implied and XX, midpoint this growth next see this quarter our ended XX% the are and quarter into obviously Horizon X.X% are excited the the the X above of to quarter. guidance that very and factors go outlook for the in rule

really business. And Star we with to strive continued progress. happy so the that is of But that rule for the North we're that continue XX within

Paul Silverstein

comment and comments your just ask a Or from is remained days me today question. periods? trust it it it it open days is improved? But I let visibility is ago. Has to visibility previous And XXX -- is solid? What XX was than you today right. versus that better ago, All François

Frank Pelzer

you assuming opportunities factor in mean I'm sales primary And visibility the here. and pipeline the is

Paul Silverstein

Forward looking metrics, correct.

Frank Pelzer

visibility to and us, strong you. for that and we're we've Yes, about outlook the be given continues grow excited Paul,

Operator

of next line Marshall, comes question Meta you're from Stanley. go Morgan from Please the Your line is ahead. Marshall open. Meta

Meta Marshall

kind they continue of if questions some virtual, couple that asked. noted that physical additions, were COVID people down before, additions around Apologies. were might a buying had the be and and it's to if were circling buying physical they quarters they of buy But of that ago other continued. were they heads Those you

just guess a heads customers of of a about the to some understanding ran well provider in and framework the under hybrid just of traditional just is spoke of tracking of with just more of a of systems trying of to contingent revenue helpful. little but sense were But bit I takes trying there that service of, the maybe their You architectures what and get architectures, of on maybe be And having current kind percentage I'm of still revenue people puts kind a that some kind their is for lumpiness just like. a look who the would and and down bit address problems just be lithium kind could that project-based, little revenue then now.

François Locoh-Donou

me let service start Meta, with the provider.

demand X XG. And solution. our capacity in We're provider the in see start so XG in think kind has some generally, service we demand But in the related we business bookings strong were XX Our seeing demand of service probably is stable. trend But of continued to continue XG kind up to of to year-on-year. our provider months away. bigger in increases

a seeing, is As projects? that ways, or that than enterprise are business the things, we'll software majority in whether incumbency does with hardware number still still What it customers Yes, and of advantage business. case. number customers more operationalizing hardware fact way still that the still back lot to in of in forward come we're a is a customers in a transformational see significant do we and because them because of with in that later. to favor continue of customers, of operationalized, hardware is not the some moving our is a we're we're our business to bigger a our Meta yes, some our some actually relates software And incremental whether and projects

Operator

Goldman Your comes Rod from next ahead. of go line Sachs. from Please question Hall

Rod Hall

you QX? services in for what growth I of you're thinking us give that. on a wanted some follow-up to indication could see guys if And then have I

Frank Pelzer

didn't we Rod. specifically, it split Yes, out

I'm My be digits. to to it's single that be in mid-single not I saw expecting the X% think is those but it it's than the in quarter, low you digits. guess this higher going

frank, or X%, So like that? something like X%

Frank Pelzer

Yes, similar.

Rod Hall

to And you I Can what is I guess, to software. just in Okay. said question then the direct you on and be wanted any Paul what QX. give idea on back more would clarify that? response Maybe, in us the the come organic guys Volterra contribution

Frank Pelzer

minimis. full than discuss the the acquisition. It's we less talked million the less -- $XX announced year for than de We when about

minis going not we're be de it's so out. It's split to a number And that to out. going

Rod Hall

or Frank but million Okay. that that about And guys another wasn't then I us? And look QX? it it in you -- said than then I clarification, but some number just number think clear finally, talked QX, into are François, million Or this for $XX $XX you like said that, assume in carries less can clarify saying QX you again roughly should in would QX. you what

Frank Pelzer

side. for QX X Yes, Rod, systems revenue stream between to it's something points that. similar a on product be may QX declining it it the the was and quarter. obviously bps about in And There's

it's is hard say than but dramatically XX. And less less so, exactly, it's to XX%, than a but it I wouldn't little probably say

Rod Hall

to QX right? falls And after just QX, So it's think? QX, then you a Frank, phenomenon, that zero

Frank Pelzer

any give out don't 'XX, years was bud, guidance three that, the two we ago. had given beyond or April I that date but

two This There old And are it so could is a generation or product. stretch generation customers. some beyond three that.

when guess going go upgrade people cycle, through quarter. by is And that next done so I our don't are it's to know mostly but exactly

Operator

James next from Piper from question ahead. comes Please go Sandler. Your fish

James Fish

So, and the results little on a bit the here. guide

ago it it talked increased that deferral here out app project pipe from versus, investment wasn't increased and into quarters of project break versus product app activity investment. about You you, few said infrastructure I weeks gains? flush quarter way, share was kind and budget frankly, in any coming of infrastructure the could a and deferral guess, how around much

François Locoh-Donou

here more all of increased investments think application transformation companies, and I look, by an digital additions. infrastructure channels around digital floating James, the Driven infrastructure. capacity in to are is major and acceleration that drivers for application

of one. I number I think factor say, that's, is kind would

tried with that and we're hardware see we're improved in factors. is The a with that for that don't that single-threaded for the purchase we to as have to major would hardware wait forward say the do you think I horse, they I out, for their deployments, their public a also hardware. also if will, just to also their and if those partner, that modern applications catch-up you providing also opportunity just for software customers will, they strategic is comfortable more partner that's for even some opportunities forward pandemic our refresh. the FX knowing customers position an with a move partner now just two that cloud FX fact are are are partner some

of them moving but less I are of forward, first factor would Some the two. say than that's a

James Fish

Last question on my a more? of path reminded or making be a there XX about of we just one François. could should are be next is, going should fiscal that it QX was sure Rod's helpful, That's XX months we to really And it for years that are announced similar over couple other systems off for of? ago, XX think question. the me, million and Obviously,

François Locoh-Donou

Yes.

-- exactly combined. be than as XX James, then think less it or $XX the we be it point similar QX, And were quarter, other situation, said, so fiscal same was there what of your then any there systems where effect should as you it isn't less this months. think will may For but the to million around that in Frank next

Operator

ahead. Jason Your comes from Blair. next Please go Ader question from William

Jason Ader

an you possible your for growth Guys, I would inflection it's actually point? the that curious, just hit outlook ADC is business say was

François Locoh-Donou

we as think are for Horizon of Well, overall not we yes, of to whilst overall discussed an view I growth X%. our changing mean, I earlier, X% X

a trend we we're it's better to see in possible X look than our our anticipated If at going what trends, that the business, guidance. recent you systems on Horizon

guidance when driving will laid FX, to we Horizon you X% three our that that the X are drivers remind there of substantial for I out and X% drivers. growth, were the growth Now

we're quarter. going are XX% posted growth to -- working software for is the that subscriptions And The continue we well subscriptions, year-on-year see motion of very a one continued and X.X for in motion our us is continuing customers. and put now as flywheel strong first this ago growth years in I really software we because to software mean, we've momentum in and

And to driver demand is the the double-digit being of strong talked about. single-digit it said had that at boosted very Shape we're a second driver systems the The security, from for we and high time, that I've in addition moderate moderation would the third declines. cases by application was also mid our then seeing use and And decline. to

to have when guidance all perfectly had go three to put the things we these the not -- together us to X% for achieve Now, X%. go that felt to of we

well. And there. have And multiple now, quarter, right much so three essentially, first getting paths going of all very we in this are there pretty

And hope So continues, now, better are a thought. we in the we what I trends if possibility hardware, pretty right than that specifically there's do strong.

Jason Ader

would grow were you you telling Can Horizon organic us growth kind of on What three acquisitions? remind what the us, X? what was the that excluding in

François Locoh-Donou

Shape, X which component was just quarter just for quarter was one was for quarter. that we was was in to of organic, XX% of course, and organic. had first growth the else Everything XX% The Horizon software the only pre-Voltera, the that all of

Jason Ader

Okay.

to what So more was be something going be that I flat slightly forward? could outlook single-digit kind the the non-NGINX like of mid- growth I to for the mean, is kind guess of was asking I that up? business, ADC going

François Locoh-Donou

earlier, modern percentage in need applications scale. increasingly, Frankly, it subscription that have to faster are of don't customers BIG-IP grow wasn't It We The we traditional software don't that. break much that growth showed answer I out. to agreements no, used as the that specifically the same solutions was versus out to going flat. is than and Yes. to be NGINX. those But actually break going support

Big-IP, we Shape increasingly as and that security And But of kind including synergistic of so, part they have NGINX, number become one for portfolio. the growth another. shared growth our software driving

Operator

question next go JP Samik Your from Chatterjee from Please Morgan. comes ahead.

Samik Chatterjee

Horizon Hi, you squeezing systems need and related this hear, I does didn't of if you seeing exceed way. really what here. to fire comments here, the you would cylinders. from things François, me the continue target like where today all are services X% thanks on my to your given sound X year more kind kind revenue question But first what of this half, X% I for growth you're in guess, taking to and it in is, software,

And of And so X% year higher I seeing to and can into you I growth just X% that if then to that's have confirm you're you're think that in business? momentum than rate implying, wanted the kind help me about a what sustainability the of given follow-up. next

François Locoh-Donou

X Samik, FY we're possibility to first X%. I here That exceed for well that trends remains guidance And of X% the frankly, If specifically think for as continue, we just guidance our look could a clearly about X% is half, midpoint we 'XX, of there's now you the not basis exceed you first the clear, will our Horizon that for for were to But expectation, of to right speaking at we're FY be if X% QX X. 'XX. half. we're FY 'XX. not the just we're to guiding seeing on Samik, the view in changing if on Horizon look our if the

the in hybrid-cloud that I FX transient that that are not. customers I've talked drivers about And and for drivers actually sustainable. are a in some I software see asking that growth, the of in a now, position we're environment. in the the There is hardware, are there plans think I we think applications the that approaching both couple sustainable. we're you're are change their and and that of very things very we're this is security sustainable. seeing occupy how strategic drivers deployment the There If that strong underlying I And for in traditional they're go-forward business seeing of place are are seeing to think giving

really so how in terms that now. early will of And and much it's FY play 'XX say beyond, out to of too that

Samik Chatterjee

from Volterra? from Frank. XQ $XX Okay, about that much Can increase here is Frank, and you clarify I'm a to XQ. -- how calculating of for quick you OpEx a million follow-up can

Frank Pelzer

Yes. of the sort it's We're not splitting it out specifically, but millions. in single-digit I would say

more expect would minimis we're forward. to total I going of not accurate, be say, that out something just sort but too split would probably in mid de the terms of to So, going millions It's single-digit that's number.

Operator

Okay. We'll from last Amit our take today Evercore. from question Daryanani

Amit Daryanani

the the about that well. talked held a accelerates last but discussed perhaps all I in could are what maybe guess, I side, I yet, year back caveats been talked if stuff imagine bit, actually you've statement? everything year? not Could hasn't systems just of given somewhat the and is half the that where that powerful a is that know it's narrative guess, scenario would we And which on been about, was be I So up the that gain the see business of not, share systems as back

François Locoh-Donou

question. your didn't I the Amit, catch part of last

The What could is -- first part? was systems we second the accelerate? the business part

Amit Daryanani

back have go you share, if up funnel, Yes. was think systems a bit last in imagine would as stuff year up that I all business through plus held little I come guess, we still to terms I 'XX. that that gain into accelerate about the the of just picking more has fiscal share the potential would could

the And from the caveats so would reservations that be what dynamic? curious, I'm

François Locoh-Donou

I this good way would Well, is. a about question. Look, think mean, Amit, it's I the

by and trends acquisition to the term, growth in That's long-term of term. kind the software driven where business in be we're grow expect long the to and into at We the for be long our have now, the hardware subscription going double-digit future. to we for said business a don't Volterra look going you FX If the as be long-term, SaaS. expect software, going to and we company of with a

that's three of change would the our long that last of things. fundamentally view us nothing has there's that And months that view the So happened in make term.

in not in that customers That's dynamics seeing with roll given second term, to we're today. going will -- we're Now unlikely, short out given accelerate the of our half the seeing the XXXX? beyond we're it what we're it but what

Amit Daryanani

reflection the modest Or very March clarify that the modest driving Got it. your is there of in compares you'd December, that this, deceleration business And again? if decel talking March else I quarter? the that's something out is difficult could about that or call in the in are just versus you're just a software

Frank Pelzer

No, that's what our that's and out, in we called it's QX. comp and that much feeling, had we a just harder

François Locoh-Donou

think growth or And comp XX% Amit, because Yes. I was last we had the harder as QX, -- a rate our it's XX% reminder year-on-year. --

comp. So we're agreements subscription software you drivers strong the dynamics and have demand and security. for But a across there general the very harder underlying Shape, seeing NGINX, momentum are and

So that, going to up. it's to pick that continue very we are confident

Operator

That concludes call you. for joining. Thank our today. you Thank

You may now disconnect.