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F5 (FFIV)

Participants
Suzanne DuLong Vice President of Investor Relations
François Locoh-Donou President & Chief Executive Officer
Frank Pelzer Executive Vice President & Chief Financial Officer
Kara Sprague Executive Vice President & General Manager of BIG-IP
Sami Badri Credit Suisse
Meta Marshall Morgan Stanley
James Fish Piper Sandler
Rod Hall Goldman Sachs
Tim Long Barclays
Samik Chatterjee JPMorgan
Alex Henderson Needham
Paul Silverstein Cowen
Fahad Najam MKM Partners
Call transcript
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Operator

Good afternoon, and welcome to the F5 Fourth Quarter Fiscal 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. After 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 Ms. call I'll the to now turn over Suzanne DuLong. may you Ma'am, begin.

Suzanne DuLong

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

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

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

François Locoh-Donou

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

very heightened more and delivered the strong a robust fourth for initially delivery software skyrocketing in revenue have demand and our the demand year far QX On transformation quarter business. X% amid quarter more drivers global anyone strong quarter Customer team FY'XX will and quarter. application revenue and growth our for from to customer pandemic longer software With out of delivered growth Frank XX% persisted outlook growth. FX growth security our than FY and coming us. software-led I of our after another for Frank? application 'XX. expected from QX Solutions. conditions milestone of to our that application systems the our theaters portfolio and closing milestone span we representing subscriptions, XX% speak and We rapid QX the double-digit growth, software security awareness mark and This driving in growth are a consecutive demand reviews and XX% driving regional services product after quarter in our and revenue about FX revenue for XX% XX% highlights in results our the continue business

Frank Pelzer

results. year everyone. good briefly fiscal and I'll afternoon results review QX recapping François, before you, our our Thank

period. QX, and XX% offerings includes revenue. $XXX customers XX% look radically evident. Subscription-based software from models year closer we preference a measures $XXX X% to represented mix representing a of subscription-based is up representing As total. Please range. us our services a sold representing service is through our of our from our to significant $XXX million up X%. were the outlined, in ago revenue as offers in growth normal year renewal subscription-based volume as year visibility for $XXX demand revenue deal our year compared customer François revenue software referring out revenue, quarter offers million revenue of solutions utilization Fourth is revenue at XX% product $XXX is for from total year-over-year the million, review of true ago period. note in global grew and of QX in XX% to XX% continue QX, annual same model from our cycles and XX% XX% another to the approaching quarter. at and flexibility revenue the down picture year-over-year subscriptions last year. Taking recognized Systems subscriptions. up Within the up delivered and Rounding I above driving for million volume customers when acceleration The of consumption subscriptions our consumption last is than to This up will QX up guidance top multi-year of million from product doubled just our team revenue, compared XXXX end revenue the value non-GAAP consumption strong to licenses. be year forward of software and revenue very see the and ago is I strength period in XX% our last patterns. term-based QX's XXX period. multi-year systems X% substantial the revenue year-over-year as more In XX% customer revenue and

growth well a revenue XX% share XX.X%, ended $XXX operating XX% of from million. margin from as recurring gross portion term The utility-based was total In represent growth includes in quarter, verticals of service addition, was government the XX% which XX% bookings more gross we as of as product representing revenue and well. Enterprise and million. customer subscriptions revenue, XX growth of revenue delivered services representing XX% QX XX% strength will year-over-year SaaS QX than of managed with as for service in and customers $XXX XX% including Non-GAAP span X% year-over-year. revenue. XX% the operating were growth expenses On basis represented quarter. regional the X% Federal. expenses margin revenue results. year service totaled reflecting our sources QX our XXX represented has EMEA revenue. and accounting in Americas XX.X%. operating XX% providers of the APAC of customers maintenance U.S. delivered now in delivered QX, a in I customers non-GAAP GAAP GAAP were Revenue

operating margin margin was XX.X%. GAAP was in Non-GAAP XX.X%. Our QX operating

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

at non-GAAP for $XXX net sheet. now the XX%. quarter effective GAAP per will Our million rate generated deferred balance or income cash to for from quarter deferred $XXX $XXX end. flow growth Non-GAAP X.XX QX. or billion was tax a and operations the was bookings investments Deferred SaaS up Cash were $X.XXX million expenditures $X days capital quarter and $X.XX billion. by The billion growth million total $X.XX largely share. the approximately maintenance. We driven and from revenue was lesser million. income I was in share. service DSO was turn totaled in XX% in year-over-year to net to per extent $X.XXX XX subscription and increased

employees, in ended approximately full briefly acquisition X,XXX quarter approximately QX. does we fiscal our with of the from quarter the Finally, This threat results. XXXX. approximately which added include stack up year our recap not I XX now first XXXX closed employees with XX will

total prior grew billion ago grew Product XX% XX% to accounted year XX% year grew the to revenue [Indiscernible] revenue of $X.XX XX% for up million, and year. from of the representing XX% $X.XX to revenue to FY year revenue. XX% $XXX outlook for Global total grew billion. from grew period. XX% the services XX% million. our Systems beat the for at 'XX in revenue $X.X For $XXX X% of a on or growth billion in about

annual XX% at since XXX% gross grown Looking revenue, a compounded revenue more 'XX our XX.X%. software software in our Non-GAAP at and we've gross margin closely XXXX was GAAP at compounded subscription rate. growth fiscal our growth margin rate XX.X%. FY software annual was revenue

margin XX.X%. in our non-GAAP FY XX.X% operating Our operating was was GAAP margin and 'XX

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

tax $XXX share. income FY effective non-GAAP FX. for million growing Our turn year Non-GAAP net XX.X%. is Application reason $XXX big the was per GAAP or was security million $XX.XX income to share. was or rate customers and 'XX per for a net $X.XX

including as application and industry advanced DDOS are offerings protection, leading. firewall protections fraud for application increasingly vulnerability Our defense abuse recognized and bot, security web

grew total revenue. our of estimate security application FY of we we total for Including security XX% over product security approximately XX% associated $XXX offerings well portion FY have to services reflecting chain our estimate compounded result an and a revenue than last XX% in business more security million a 'XX. As approximately challenges the $XXX to revenue our annual bundled Supply been the million since with 'XX the rate standalone estimate grew representing year. FY industry 'XX across growth in acknowledged

which we global Our an our challenging like do ended we part working many extended a the team through supply In impressive times. is are backlog chain approximately ecosystem and manage supply supply continues chain to majority constraints conditions. point, others, job through vast 'XX to in $XXX system as working of with result of based. At chain this supplier managing with lead million constraints FY

me let for our comments guidance share some non-GAAB as otherwise our first 'XX. guidance for quarter view well that FY my our on please as stated reference color note Now, Unless metrics.

for with of quarter first me start Let expectations sharing the our XXXX.

QX range the X% XXX growth roughly million We midpoint. in $XXX at implying are the revenue targeting of to million

approximately QX, margins $XXX XX%. $XXX operating million. million expect expenses to gross of We XXXX We estimate of

$X.XX earnings to million. QX $XX with approximately per a Our of target count $X.XX share share is

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

XXXX fiscal year. expectations Now let me operating share our some for

X%. we For revenue of to X% the expect year growth

between of and XX% growth XX%. software expect We

We over higher business past. experienced of due range software be we we a the and see what of expect ratable in quarter-to-quarter expect our time is have part also the due software narrow This revenue will increased in to will to part variability what we overall. from to will scale contribution relative in

expect our growth services we January to revenue quarters. I low note global supply for all of or our these pressures X revenue will continued flat We continue to up acquisition the that Volterra at year. systems with anticipate Horizon are recent expect slightly And in expectations growth. the in several related to single-digit next be revenue the provided above chain global outlook announcement. most We

lead some the light as non-GAAP pressures situation dynamic the monitor XX% have we of of expect costs throughout for past increased And anticipate result this year. fees this will components. related we to XX.X% margins to In closely We to expedite sourcing of gross and will these in approximately continue long we the time year.

of FY the combination initial basis our our of operating operating XX target. quarters strong the to margins on achieve 'XX 'XX of our the enabled We total continue The our of growth revenue in continued target ahead X out us and to XX of combination revenue of four XX. non-GAAP Rule FY Horizon discipline Rule and growth where and operating four

in Rule We FY continue 'XX. achieving the to of target XX

in margin cost ongoing meeting XX% the operating anticipated last at initiatives our for the that and 'XX. we to of analysts benefits Given we range investor reduction revenue FY XX% and discussed from expect year, growth the our non-GAAP

year our any We with does of operating We potential our translates This improving and typical back in in not the tax around will QX which federal down operating anticipate for margin at full year. fiscal expect account effective seasonality, to XX% margins tax half quarter-to-quarter. stepping rate future be fluctuations some estimate changes. the

XXXX to $XX million. expense range expenditures $XXX physical $XXX the capital expect in of in compensation the and of stock million We million range based to $XX

share we will François? Finally, the 'XX to that, back previously expect during we million I purchase as of call approximately expected count to $XX for the of the With remain François. $XXX shares at million share inclusive discussed. turn year, FY

François Locoh-Donou

'XX. robust Frank. businesses changed. quarter consumers sharply and out Thank strong our our and the to escalated very last application our In the results XX both on perfect FY of fourth A you, performance months have forever in are reliance likely tap

up Our asked are and keep to also their I are FX? doing while conversation accelerating secure. transformation current their meet are also massively expectations They with and is customers address about growth. misunderstood consumers while application performance key demand high my working forecasted consumers investors, often potentially and to with this what application Let points for And consistently availability. me here. data In ensuring am the digital

counter grow expectations to prevailing on-premise from traditional to to ago. two years applications three continue First, the

and more applications. every traffic life In relies than on aspect apps ever, because are business and fact, revenue traditional more generating of

BIG-IP means this FX, continue both in to systems form factors. For software demand will grow and

and not applications being run Second, height, are attached to the are cloud a moving are FX lift early words, remaining shift In on-premise contrary with motion. They majority applications remaining to the other cloud vast to or are FX. refactored. either traditional of they

clouds. public result, a As and both growing is BIG-IP in on-premise

application not for In Third, onto needs. modern cloud-native container-based applications continue a applications. only to new pace rapid user experience. the modern cases are new at Customers robust meet simply traditional delivery not to grow improve are application's security and bolting enough many applications the components and to

distributed the often BIG-IP. is NGINX scale for business as And security application was For nature a and vendors focus FX to past applications, and alike. this means flowing new through the of increasingly and application and in finally, security now on data given modern application complement of Where and the that a has infrastructure significance. for app network taken accelerating security enabling demand volume customers

investment areas are is of expect players used. on We application also one FX but one be of to over focused just will of decade. next the protect not we access they how the and security XXX% security application hottest the few applications

some focused As sum to and accelerate. up is FX well only companies expertise secular from points. leading with is emerging application also these application role a technology are assets on reputation security the positioned benefit we our will training. applications. and To a expect of and a on the result, significant deliver as There security. FX secular differentiated at any and application focused these epicenter the is two that focus, to secure are anywhere. There one some provider forces

real five customer sustainable ground trends use our we across cases. opportunity portfolio. customer Let's and drive Last to talked trends demand I our quarter, about expected in

some into with group. insert demand. DevOps one, NGINX for examples to agility application security public and in App consumer-facing trends services QX. global secured Number cloud. those are NGINX and their with with enterprise using one lifecycle. we flexibility robust They an micro win insurance earlier developers are application services revisit QX, the from customer Let's during a delivers Protect security customers with example a migrating the insurance NGINX developers In teams

an and of high-value wanted this automation they footprint lightweight ransomware apps their two, drive demand with a They and we bot fraud and management they container security required of cloud attacks demand stuffing guaranteeing and was concerns capable security saving reason, and protecting application App compliance. friendly also all and and With and in high-profile mitigation risk NGINX threat For including application for landscape rising ever-expanding and heightened could pronounced scalable for environments demand the money. choice. credential a and And ransomware number growing time enterprise-grade security defense. application that Trend see strategic security risk solution. are abuse Protect for high-profile and mitigation. needed within top-notch attacks, growth escalating natural security fraud

Shape customers in credential experience North substantial the automated During More was than American architectures. Customers to onboarded, number their containers identified Trend to QX reset experienced a kubernetes, electric help. BIG-IP had FX for mitigation utility volumes are deployed passwords. the infrastructure failure. stuffing turned leveraging on FX and high attack measures to attack. account million stop X the for and emergency customer, traffic resulting of effective three. Based native cloud their as highly a utility

driven Our growth continues deployments. by cloud-native in modern accelerate application kubernetes to NGINX, and

native With constant and customers modern cloud top emerge cloud in need balancing up experiencing management traffic and including to load use user that save they automatically down optimizing cloud swings several demand, demands or to meet hybrid significant user NGINX scales costs. infrastructure are applications seeing We cases kubernetes' managing and API, for applications.

with are During strength to accelerating AWS experience four. move with not QX, existing Canadian with NGINX hardware-based for scaling scaling growth driving AWS improve into user infrastructures their number off-peak their spin down auto manager to kubernetes-based console latency demand. to low half handle but and NGINX did Trend to application the high solution, continued production systems. auto BIG-IP a and traffic their during their uptime plus scale. performance instances integrated seamlessly investment HashiCorp competitive of use Initially, and Customers integrate it delivered selected they or online lacked attempted at well to scaling. applications

examples NGINX. finding scale of products them true with customers wasn't In that was and are looking SaaS to apps scale the growth high and apps modern BIG-IP promised. rapid particularly and are the SaaS We that their of as competitor a deal provider tech to their and traditional cloud a services. to This their infrastructure provider NGINX who customers latest and their digital QX, modern often list sweeter simultaneously. selected of by the apps displays both continue growing made FX adoption existing help fact public is the that during infrastructure experience growth amongst on This both performing

it competitor five. is than are Customers additions. BIG-IP and just Finally, cloud to edge. trend choosing for The about modern BIG-IP is at applications, well for the number Customers with leveraging more over transformation will both integrations combining and NGINX are with FX suited do. BIG-IP including also most cloud-native systems demand we seeing migration initiatives. we operate NGINX. provide integrations software which automation with are and transformation into often enterprises BIG-IP offering this that drive capacity and extend traditional particularly and Volterra differentiation for

During data largest Asia the multimedia combination one new They of one app well digital QX, ability foundation was and the capabilities. NGINX security more as transformation. transaction engaging on-premises hybrid than companies Pacific. annual for billion customer the as needed who modern BIG-IP and processes the as The their BIG-IP selected support selected NGINX online betting and in development to by

our providers briefly Volterra good with touch remarks. providers service year our a before We me in integration service had 'XX. concluding FY prepared progress Let on and

existing demand Xg they Thus capacity core upgrade has XG come largely migration I customers. challenges They it's While have service true XG also several trends as hardware of growing network service our that a result provider and handle just XG apply traffic unique traffic. from and Xg expand described face far to to as demands. of infrastructures the also our provider to upgrades

carriers cores. use expect software their emerge Xg cases to We will as virtualize begin

volterra. insert XG creating thus it from They Volterra our discussing services to critical edge capabilities application at our a integration customers is will the at is Volterra the format. us interest progress view the good a way significant which in service a provider. a as forward insert to box edge to platform, these in platform enable on services and offers transition a offerings. fast allow That their consume Looking of to generating universal edge

on Our initial priority offerings. security is

of the protection, and stacks application application our not the security industry We best our including have best, in one DDOS bot capabilities. firewall, software API web security the if

and that taking are platform. into integrating the security entire stack it We Volterra natively

that track will SaaS integration committed and modern are first XX offering our and deliver within to priority security on XX towards shift to Our is address the web we APIs a window. apps months

also acquisition confident ability at of is and our focus us of with the than epicenter FX vision in leader stack, recent designed go-to-market and to Our continuously is evolving better our to trends. of analytics of solutions customers our future and to offerings Stack strategy heartfelt virtual execution. adaptive our closing, a this execute. threat accelerate detection to vision welcome resonating steadfast the augments telemetry in that our telemetry I security entire SaaS application take are protection team stack I cloud ever to application and with and platform, in and security and the response. Threat cloud workflow entire the strong for more for extend and once endpoint their our and continue security expertise combination we puts to want Threat thanks for several FX. again to growth, emerging our technology The we expanded opportunity and team In secular my

we call along faster us have journey to customers ever our I on that we ahead, thanks got to our will open for anyone accomplished more the and My providing than achieve support in thought could. our Q&A. our we team and way. to partners being than ability more goals. With the us operator, but and confident more even with a As am guidance work We've

Operator

first Suisse. [Operator Sami question Instructions] comes Badri Your from with Credit

open. is line Your

Sami Badri

system-based to down the to you majority I backlog want conference backlog, that question for on you the of wanted talk composition. question first I of the over but mix bit backlog. this and a Thank and me and about And given Frank, you've giving backlog to the talk mentioned, want the call. to quite customer break us a I shoot to about

a could us you on going more just bit If tell about little what's there?

Frank Pelzer

Sami, service at is was more I add. I a probably QX, backlog more the into lot but say of don't we increase effectively the a systems. end build that that that the it At year and having in we have realm, the to so the that continued said than we it's end provider, customers could saw of all will almost in just fall of a referenced ship. XXX -- that of lot

Sami Badri

kind your want revenue up I activity François, it. it. and shifting U.S. elevated of would of how federal over almost Segment be talk just out pattern quarters, Got which of of U.S. to Are in model? to the made X% you total Got that then, about And about the the seasonal you. upcoming Federal actually expecting levels of mix.

François Locoh-Donou

answer is short the Well, Sami, no.

I years think we've that just don't the business what fundamental to over we're seeing follows in seen the pattern. the that seasonality regular expect and the change federal we

Sami Badri

hand I'll you. over to Thank another analyst. it. Got it

François Locoh-Donou

Thank Sami. you,

Operator

Marshall Your Meta Morgan comes from Stanley. next question with

Meta Marshall

Thanks. questions me. of couple Great. A for

First that there delays really Thanks. to threat of a have there? on you obviously there are they instances where couple expediting? we on Is get wanted in pickup of point second you're just or But proof-of-concept of been overhanging supply activity. facing margins? on, And should Shape it. having an of to seeing kind you're Is impact the ability the mostly then, point get any that from gross success just needed past some costs. the on the on, sense ability a think -- of seeing pass margin a entry chain the was gross security just they a when And there were just how

Frank Pelzer

questions. Thanks Meta. the for Hi,

those were the on a on times largely, a quarters ago were these customers couple close elongated longer. we of to Let seeing and were proof mention we little getting of bonds, office me shape. because Yes, start did in not taking concepts the

few abate that seen have over months. the last We

area. traction specifically, in then the and momentum e-commerce pickup there. I a think seeing And in we're so, And

they're under are So got and attacks customers disruption are causing business. of constantly bot takeover account generating attacks number whose revenue that either a these or applications their we've to

pretty quickly of things getting insurance, they're very, their course quickly they go business so things on when an want to against future attacks or under because Either very done. disrupted. attacks And as oftentimes is move

publicized happy we BIG-IP have for of the But with strong been in And very with security that quarter is have resulted in second the the seen overall Meta, the we're would a Shape customers Shape. that to seeing year well motion year result and a evaluating other the with Security. just are number reinvigorated that we some their for been with especially had profile in posture, momentum also customers the general, say, of breaches security I customers the as have fiscal generally, So half of thing of the and security. the attaching and us has we've in where high

So in security. the that's we're picture overall seeing

gross our it. second As have when been we it's challenges Yes, supply supply margins. on the expedite some our need or by prices some whether impacted components on gross to fees some to get in question your it margins chain, increase relates the on

team. been So the it with generally, we to environment. pretty challenging managed quite environment. supply But chain be well And a a challenging that generally continues have has our

time development as we'll so, continue And to need we're adjust and to the there over you to. monitor going

Meta Marshall

you. Great. Thank

Operator

Your comes with Piper next from Sandler. Fish question James

James Fish

guys. Hey,

license those term But software is you us of point? understand recurring details. suggest growth north SaaS we exited it we And amount that NGINX go all XX% organic. is, guys, bit this As a can running I the would Frank, it's You year? versus that a help through -- a this term within SaaS clearly the of the of overall thereafter bit specifically together raise think at in license guess, product both how line today. piece, of actually should of little about rate while

Frank Pelzer

Fish, thanks the for the comments and questions. so much Yes.

what we like the out of but see I means continued that to less given a monitor number subscription to the those we'll components, subscription that which We're The I'm your as makes is And continuing is year let SaaS it revenue two subscription, what piece sorry, base. have that for that to I term dynamics split have but see have think question. versus not to software and we say of get we have miss percentage that, we what would the coming we much have the -- tuned. but subscription I second when those split out not the to split stay gets between substantial. the I

James Fish

should how Just the think about NGINX growth we today?

Frank Pelzer

Yes. NGINX base. incredibly both this XX% quarter, see continues use great those, NGINX customers. within obtain, from strong well in continue base grow of NGINX was the which saw Again, we overall multi-year growth customer NGINX we on cases to sides. on to than driving is subscriptions, on more our within And a customer the basis,

the really, NGINX. really So, happy with progress we've in seen

James Fish

a And or a business business? just quick hallmark as term piece that for me. Threat Stack, SaaS about so we licensed think

Frank Pelzer

ratable. that's but business, SaaS a That's

James Fish

guys. you Thank Cool.

Frank Pelzer

Thank you, Jim.

Operator

comes Sachs. Hall with Goldman next Rod from Your question

Rod Hall

just software to a wanted the Thanks. I thinking in and give you whether systems the then, us Thanks I've could trajectory see -- Great. any guidance got check on that. for idea, what question guys. and you're to follow-up into And QX? on guys

François Locoh-Donou

we yes, know, to guidance you quarterly on X%. as that I don't revenue do a X% breakdown But basis, software. for the mean Rod, I around of give annual hardware would indicators a saw to the Hey, mean, guide you I you --

year. we what We a do business in less of land of year And the half. part full especially last the guided from is we for expect slight year inside that for business. -- to that XX% visibility this We contracted. to will variability than variability better that, mentioned last strong part first stress already but of in our the And but to because XX% coming And On want to And into also are the year, between saw we finished portion slightly have hardware For year. it, to at software % I in the XX%. to up full in year was we're there revenues because Frank still XX I the XX%. XX% the scale year in we we mean, particular, on. -- to we guiding see expect software XX% to

full below in, quarter-to-quarter range, expect pronounced. always be said above So the or variability the that to range lay that in that some us but will expect variability could We've less be there for fiscal year. we

Rod Hall

of and guess I grew to I thinking Okay; -- And XXXX. I that down of different XXXX, then you of And seen XXXX seen XXXX. down. but they've picture, recognize are I a XXXX. XXXX that Thanks But François. and We've a systems I'm that three just across on confidence the in you and you're thinking was When flattish saying wanted infrastructure companies lot you're at an slightly XXXX, lot XX%. what XX flat years in systems look cover in then all sort down, gives And XXXX. check we wasn't systems XXXX and demand big anomaly?

into of I are you, a more not extrapolating people think I for that an it anomaly XXXX but guess? XXXX, normal new than is why a is Thanks.

François Locoh-Donou

stronger Yes. backlog our at because our in we from the even grew -- end a demand ended And look that a year. XX% with And of our Rod, the was backlog perspective, -- than revenue at so we XXXX. up large when

transient we specific it some think at to that customers are call think an our been We year development wouldn't end months may of element couple will also factors away. a but some there look jumped anomaly, quite we was in XX a demand, we catch-up in that when it that it because of depressed software some earlier was refresh of XXXX, they ago. is, So announced when some of of actually I demand quickly. And demand factors we go that think have on the

application and think but traditional that not that more and of large applications. that think applications usage we proceed. continue there and more factors, are So because generating And then going specifically, one-off the it's these is to on also factors will grow, depend more companies are to are growing these customer of these that some revenue, loyalty are transient macro and we traffic

will future if for feel BIG-IP we that some for as a tells And and than so, a the said when element project the demands that that look not. you and franchise, even we off, all hardware of that that would that today both at that's BIG-IP look year have beyond so the are what at in better demand elements you take one us combination. the software We ago. to there's When there's future, be XXXX, XXXX

the be when that's because are factors of today XX that when in software combination lot ready BIG-IP are still an you of than they're things, factors future on. those kind are ago But mix continue feel the it better forces customer software and and certainly of hardware about on depends we those predict, of is if and they're tough and take to migrate not. will the situations two what that individual to that anomaly, Now, between not did because to a months it we secular will

Rod Hall

Great.

the for it. Okay François. Appreciate time. Thanks

François Locoh-Donou

you, Thank Rod.

Operator

Tim Your next question from Long comes with Barclays.

Tim Long

two Thank if as well. could you. Yes, questions I

as deals that? of First larger those it maybe seeing give forwards. on just update Could were they you guys things running think mentioned traffic some you kind ahead. usage, like growth, an guys on term to what I us the of you goes are true

what Day means you the true overall any give vertical. you that thanks next look into At and also gave cloud Analyst your visibility the can the forwards year? And for second, security. us for on us a into So, color then update on

So performed you're you of forward I'm cloud and in just on kind that what XX fiscal wondering vertical expecting Thank you. us if update there? moving could how

Frank Pelzer

Absolutely, Yes, Tim.

it's this that than on to So quarter saw was the specific. the what forward, QX. I say we actually the though data and I that we saw healthy saw But weren't the step between would they're a term by, but second up agreements on group better in their second hit customers their that preference and term. in have term us. that with initial have subscription fairly true multi-year we a of small we that

very data that terms say absolutely terms And higher so can't optimistic And expansions in Again, bit we've where today. customers, in quite within gotten a positive. to base. but we're the forward a progress for the we than quarter. true so going those of far that's seen was by continue, that very very, customer the that's last growing that's then, all I the we've were that that

François Locoh-Donou

second your said when the just vertical. cloud to question, you clarify, on Tim, So,

public cloud Analyst about Day, very environment talked deployed we're revenue FX we cloud at solutions talking being about in when So specifically. our

include we of providers, their that which do we do than million, not in them we providers in number, we was greater So are SaaS at where hyperscalers, lot deliver said business the a XXX with helping the time and cloud infrastructure applications.

So XX grow. are that continued - to but our definition -- clarified, that what number

continued what know, offers we And call of this grown a lot As traction growth months software in XXX% than software marketplaces. in overall last it's you we faster has And on where year. XX private are rate is course. our it -- seeing the of

large of providers, allow a commitments And utility done spent both that that And major spend another an that FX. the is and with are that in seen and is of public we public enterprises. enterprises benefit to commitment cloud way And have on it all it's technical and terms cloud the consumed we're these retire of so FX we've trend. large we've integrations in that yet increasingly that essentially removing consumption the acceleration the And their getting of case as friction the commercial growth. enterprises software by in

are their modern NGINX, service other are before last is of that app franchise in of with FX. for And things we that much public the in in back of cloud well think franchise. in and offer BIG-IP things so secure, security single continued years, number necessarily we're operationally things applications. made feel mesh, initially public ingress on-prem that lot shared of to I team And big suite security inside And modern cloud public you their you a functionality that success the cloud API step They environments. encryption the A at platform. BIG-IP cloud well. growth that encrypt delivery our NGINX one did services not have type deployment protection. of area exactly factors we environments NGINX you in growth NGINX. that that on security as they the public that one native that happen security, a we do of and was authentication, offer load seeing and authenticate the and we that And so and but their created playbook seeing essentially controllers, the for over also and course for emergence traffic NGINX, delivery the simpler customers I've of that's The grow is of API, people and in BIG-IP look the take need balancing, But playbook the seeing gateways. for of we we XX then and consolidated application we're to as when cloud And application the of same There like offer to of both the when same.

Tim Long

That's Okay. Thank great. you.

Operator

Your next with JPMorgan. Chatterjee comes from question Samik

Samik Chatterjee

taking you I Hey. wanted to your thanks Hi, just that for ask Also have the question. on for you targets the XXXX. guess, I out

better talking strength from some of towards Do companies of X% investors guess driven how really delivering about IT you get digit of X% customer? the out-years. parts X. Thank an double Does sets for is up base So see I kind up you. you we where your Horizon reason about from this by cyclical And you of progress this than and you're cycle to already much of enterprise, is about be versus demand, thinking -- get question investment -- follow-up. that's just how kind The growth? setting target with You're moved of next to strong have enterprise a secular the how I for all the the to from in often this targets trying how maybe get here? expected? targets asking XXXX it about thinking I'm the is faster year, those kind a In you're actually

François Locoh-Donou

you Samik. Thank Yes.

is time if we think I now here's Samik. the but XXXX, and of quite there a way it, course, bit between at look Of

SaaS today think the secular to target. it, we on going is wanted in in roughly our we I XX growth will showing things where but and it that that go What long-term -- better think at I part a didn't If growth would around is there's an trend at of and at a but that several look we the on I at better BIG-IP. growth. of Day a when at double-digit the would demand overall we years. we plan element NGINX had for long-term thought that back of revenue that get a out were where And and months proposition. security view I back we value target ago a we're our in us getting look per about of year for hat is and felt Analyst put We time. that say, That's on you help talked going with new more to to

And that's kind mix. so of the

having public the be the going but is that to in about happened. that future, future and thing. -- there they next always of the these reality because we that and like and environment. a in for increasingly many years. actually for what seeing last hasn't they a last Now, complexity not that five a on-prem that's there's environment data on-prem the enterprises I'm run I a if now themselves number enterprises are conversations, a customers reality the go the or a I and for the a and the places. decades to modern public environment that is to it to support that's my world. just the cloud, the let's to the heterogeneous more everything secular about going from you conversation And practical and And of trend have going can And private cloud, it's to you're get in to is public providers realization able FX that be next in shifted and to been thing okay, is that be comfortable including application for conversation of in has are able the joy, of apps we're going is to and sure told go how of to single several three co-location at positioning all increasingly kind feel going saying for lot that's cloud years creates cloud this edge, in this of cloud in the to in an have applications world, seeing points to that's we next large cloud to environment a managing get ourselves environment, we're it's way, that of has way not architectural very industry manage applications being thing, What at edge run from I'm simplest because is spent the across step back in public What hybrid around, ago, the me. which like Samik, reality simplest view four are it, the years was going to all say, do those

So about that feel that's next Samik generally few what we're positioning the that's we for, good and years. what

Samik Chatterjee

M&A going we company So that evaluate in terms assume you. just looking of at. about and the most there that you growth to application segment? one security you're that follow the of should positioning be going Thank that forward being is I areas mean, on of up talked you focused the strongest to

Frank Pelzer

three acquisitions I quick in have acquisition it's NGINX and substantial before all, that think of said we succession, I we Volterra. pretty first Shape, -- Well, between did

those period, so, we essentially in going and now in and I -- brings in continue portfolio, we And felt and very focused nicely which XXX% application Stack complements can a to and observe FX environments see security cloud which that we very of the our our broadest interesting into the be portfolio new these focused are stack. you acquired to on environments of of capability running, to Volterra, way is the NGINX us to we well really cloud visibility the rest when to doing on security on extensions and application needed building being and Threat think as giving on that security workloads Volterra which able focus completing And that. integrations organic Shape we're that's and integrations and

been that's focus. So the

of terms building to we'll buying. In versus time, over continue potential future M&A, evaluate

down intelligence transformation or bring And that of on opportunity to and with do say always if vision, there's and reality. a or continue And we to to a fragility. and the insights that. single applications our point which way road large for an before, customer's about will more And inorganically we world of player. very organically we fulfilling rather are vision with but we going that elevating think accelerates for something is a a focus build, we're have still better security disciplined very a our this solution to stronger will this running fraught The to I then quarter to of customers, our me our that's we way at to focus vision time applications, strategic of on enterprises, it than more essentially it's uptime with complexity an way heard a And of applications, every for vision what bringing reality. start partner be vision market making manual, more better to think for the digital for to automation the FX look adaptive that and architectural We world, preferences about more You've way reasons that. about that applications. performance fraught is that bringing

Samik Chatterjee

Thank it. you. Got Okay.

Operator

comes Alex Your next with Henderson from Needham. question

Alex Henderson

you Thank very much.

over up looks a you're little to the market hoping looks me like year course of XX% NGINX kubernetes that now guess accurate bit? a about year you of little has picked around talk to this that the you up year talk XX% and is Can bit workloads? terms transition between that for was share. substantial Is My within I So It year. share last you about, the the in ended, share what fiscal like? market

Kara Sprague

Alex, Kara. it's Hi

we're seeing We we're adoption NGINX. happy of have with in what of very - terms the

Now NGINX plays that of roles variety mentioned application. an a François in

workload gateway one is commonly server. web number true example, shares. protection NGINX web like now of NGINX as NGINX a there's have capability, For an uses thing reported leading l is reporting one and API less as is a that overtaken in There's apache those NGINX use it use server. capability. And the is used and on and reverse as proxy, management areas increasingly API other we And that the

and we're with at very is very regularly piece And so server the happy we least consistent see and there. the that outcome reported been one has gains the web

Alex Henderson

could or Can a extent of a number you forward? little identify with And blocks the degree the we about of Okay. your of talk among working extent you community. rate adoption as growth about technology, and building that able rate one to what a to that go there outreach talk the your the that's are and coding what key you're which there's to coders to bit

Kara Sprague

Yes.

are engaged So, most in our given had if of technologies. you we've you active a it was very actively programmable proxy We continue look available a contributing had of community. developer community community of FX the at through individuals the and active sharing BIG-IP contribute always go our capability and Even were one to who in solutions iRules-based around actively market. very solutions and contributors

further grown Now that we even our community as extended portfolio has with NGINX.

offering. core use it's As that that as the and of a just our developer attracts an open looking model given NGINX we're what with the an about building developers a expanding we That's has ahead, into open of the as look source -- that. community Volterra fundamental solutions. their expansion NGINX And portfolio and an additional François as wide variety talked technology application open for around

deliver them the of to providing developers our direction and part continue experiences. to technology they appealing expect as tools digital very a and We to our need to that excellent important be strategic

Alex Henderson

So, no quantification though?

Kara Sprague

at this quantification No time.

Alex Henderson

-- can Thanks. a players little Cloudflare, space? and could bit Okay. in you Akamai and talk one other one slide that last If I competition between about then

François Locoh-Donou

Yes, Alex.

but we overlap very the that's significant compete directly are with Cloudflare, So I don't part most today. for a - say we would not

to CDN will our a Akamai do way are that post for with wide distribution is protecting I specifically we in the security think their for range to attacks. their customers. their at we think bundle offerings platform SaaS wide We of with customers against see approach with -- because the I more grow using edge especially the will And bot customers play integration, security Shape Volterra security CDN. that introduced as more

best-in-class well a do bot place customer attacks, and having that significant for we customers efficacy about approach have more very We world-class premium efficacy that's enterprise segment. with against on that an

And So the we and universal very with we're And starting a But these best-in-class edge attributes Edge is I provides shapes, security that BIG-IP. an put Volterra. to when you of see universal going about as good being competition all attributes feel the that think with platform more as disruptor from more and competition to grow. from that our there these FX players. combine you stack Volterra platform these Yeah.

I that for think to you Edge. have at a the a service formidable offering security customers want as consume

a be offering. best-in-class that's think I to going

Alex Henderson

Thanks thank. Great.

François Locoh-Donou

Thank you Alex.

Operator

Your with Paul comes next Cowen. question Silverstein from

Paul Silverstein

Thank answered assume if all faster five on than and And I I and could Frank, to ask Put because last in. the note, talk listen. squeezing these my I'll a on going you serious one, already I'm for questions. so hope apologize you all me have can questions, you François

big that So with wind up.

on give all like your growth in face related any insight us that has the else customers the longer this continuing with same correctly, in you assumptions to rebound respond general term all are number providing longer confirm revenue supply the you respect increasing with visibility X% rate? you're forecasts. the an But Thanks so assumptions of as fully fact I you in the to making respect in that? with if you glide in have been path fact to XXXX, the you before can for off, address? you customers the improved margin guidance what improve provided What First can chain finally past, assume that X% everybody has operating challenges that the are your fiscal the provided you supply industry? I it's that along also X% was referenced that term to you heard with I that much. And underlying on just And since forecast. X% is to is If as would visibility of significant case considering topic. chain to

François Locoh-Donou

Yes, Paul.

first. let with let I So guess question your me me start second

what X% we for on outlook what supply of we the our terms and chain. to X% about in think So,

even said everything better able As the get anticipate in in does remarks, not the else. you're supply outlook prepared in for though it of components, able chain, terms a to materially our we

will products. the And be at those ship we we X% are that can X% assuming we looking and are what to believe on for demand what believe so, that we we

constraints XX% and to by terms expect expansion, recall that the that XX% margin to we the through XX% seeing what specific of see, to of supply range driven tightened you of In to have we some had XXXX. FY XX% been because we as chain operating hits margin a largely those gross up we

And that XX.X%. lifting so, obviously increasing at the that are where efficiencies ended in we're we by business seeing that from we the up

So operating at of that coming higher XXX But the midpoint line. efficiencies almost points increase. margin basis the backs costs margin actually more having on side, through So doing we're on the gross the some

Paul Silverstein

Frank, and X% better to the be than I X%? think improves that on the clear, supply to chain does to visibility if question, translate just

François Locoh-Donou

Paul. are the FY we've we're what again, don't is you of in is the It half we've obviously from know, which now, some QX, material calendar in think been improvement could, to other But see people I early of seeing but so vendors I don't that starting anticipate seen right collectively, QX anything if possible. see reading all -- - back things the the we from our what I 'XX that obviously. mean, the

to ton us room leave up. of a it So doesn't catch

Paul Silverstein

because visibility from Understood. And improved, forecasting long-term customers? has of

François Locoh-Donou

The improved. visibility demand on I think has

on supply think visibility I has not. the

long those period of to times that hard catch up up matching so, it's within two a with And lead time. say reasonable you

Paul Silverstein

responses. the Thanks appreciate so. I

Operator

question time our from be last with Due taking we'll constraints Partners. Fahad Najam to MKM

Fahad Najam

just classification. me want I in. a for squeezing you Thank

of am Your contribution And from that software $XX fiscal is I XXXX Threat guidance in all that revenue assumes revenue correct million nature? recovering almost entirely Stack.

François Locoh-Donou

broke the you up Fahad. first clear, be to just XX second, Yes.

Fahad Najam

Okay.

the the strength not XX% revenue exclude question you would of Stack that systems. your hypothetically in Threat we have software, So seeing from then coming is, roughly the given you're if acquisition,

from you there day. like something you analyst do in undershooting kind as see your terms slowdown the laid think highlighted -- software. of at out to trying coming at Day of of expect there's software so Is the Analyst than understand one, you you're a in like XX% would So, it's roughly the targets organic of -- that you you that Just XX% achieve had growth? revenue, I revenue because to how greater

fiscal going change that software right happened acceleration XX% yet is then you'd is understand what math trying kind in expect hasn't would XXXX? if forward So XXXX? of adoption software if XXXX fiscal just significant to in my in in So fiscal

François Locoh-Donou

you. thank Fahad, No, Yes.

fact Okay, to are out be that our clear, aim. in hitting we targets laid our we

between than XX% So Whether a are for base creates we that purchasing think said doing We've customers on B, the trajectory not of to software, But just is short we mix the with a and we exit will hardware overperformed, BIG-IP to is more extending will is XX% franchise we next an that. that said one that in better And hardware or we XX% down to be growth we at software -- going it us our or overall will because and XX%, because because what has And to think thought. happy but time bigger is we to over on not road. we be frankly, of get eventually hardware largely of software what's engine very these all don't the target it I and happy of we making year. totally don't there A, hardware transition translates install growth. a the term, if to migrate happy time, guided hit software that because XX year software. and did XX% to next we this year that not

have we software is good Because for even much very bigger actually it over it news real our estate. business. time So a

happy what we if translate dollars, at absolutely those gave performed, absolute with hit If you is dollars we'll over for Horizon that's has be absolute fine. that. of If focused look X. in on the mix, it course to will for that So revenue because we target our we're in software don't they FX hardware XX

Frank Pelzer

we just our that XX% of equivalent XX%, is there we did would said stating in -- And be the the QX. Fahad before. rate of said Francois what just exit what We

And and so, in the QX. direction trajectory that tuned, is absolutely heading stay it's

Fahad Najam

actually just And Yes. follow up on to that. kind of

like projecting strength seems targets your it to hardware. is the your given actually pass XX, circa the business software term So longer in -- towards

-- But term to there sure I understanding of paid I'm for Analyst longer make think it is than improvement to going was correctly, targets trying that beyond was what the I'm but actually just what how understand but the be days, Day. you've it's trying mentioned to -- maybe early fundamental it's It the like again, out. just better framework. the you're as at laid seems out

François Locoh-Donou

but bigger over to build we would the a XX% in point just did year forward. the which out I on so basis first and if going just much comes to X your growth of Horizon obvious, total

Horizon focus And the about specifically so, updates, guidance, the as Volterra our after at Analyst that XXXX is business well the updated FY talked to we acquisition. we target long-term of what of and trajectory X that as ending at our incredibly the Investor seeing. the set we're we've Day excited about on or but expectations more any above really been We on come

Fahad Najam

answers. the Thank Appreciate you.

Operator

conference today's call. concludes gentlemen, for participating. and Ladies you Thank this

disconnect. not may You