Suzanne DuLong Vice President of Investor Relations
François Locoh-Donou President and Chief Executive Officer
Frank Pelzer Executive Vice President and Chief Financial Officer
James Fish Piper Sander
Sami Badri Credit Suisse
Amit Daryanani Evercore
Alex Henderson Needham
Rod Hall Goldman Sachs
Meta Marshall Morgan Stanley
Samik Chatterjee JPMorgan
Paul Silverstein Cowen
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.

Good afternoon, and welcome to the F5, Incorporated First Quarter Fiscal 2022 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. If anyone has an objection, please disconnect at this time. call Ms. the turn now over to I’ll Suzanne DuLong. you begin. may Ma’am,

Suzanne DuLong

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

call access or today’s For through dial use XXXX. be Time, will telephonic midnight replay and ID available Pacific XXX-XXX-XXXX January XXX-XXX-XXXX the XXX-XXXX. replay XX, The of by phone, meeting

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

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

François Locoh-Donou

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

grow the growth. growth double-digit fifth QX growth software standout top Customer and X% and Underpinning revenue strong line quarter that services growth to quarter driving and X% drive XX% quarter. customers of businesses. is the revenue portfolio, global consecutive in systems and results demonstrate applications our demand their support robust evolve first XX% in need Our our growth our growth,

fact, in QX, In our software contributing exceeded to outperformance. demand systems both our expectations and

at are digital the transformation We epicenter and security. application of

our to and vision and differentiated deliver the any anywhere. focus, secure expertise technology assets by application and are We

qualifying result, manage seen a components our that preordering we have software industry and since open and [Indiscernible] components, more across alternate the purchasing for As strong fill supply secure portfolio our These we risks. demand have demand sourcing strengthening chain to arise. include progressively supply, steps investing and been in to on XXXX, the aggressive late taking persistent gaps systems. to market

coupled Over supply ongoing year, stronger-than-expected constraints systems systems have growth. demand gated last the with our for chain revenue

result of to strong persistent our backlog As in systems continued system a QX. grow demand,

components year our our result. $XXX The expected to would is chain XXXX. of million information revenue These on we delivery the our the net in constraints. came we are revenue This guidance days, increased million order XX reflects challenges pronounced supply million reduction $XX to our $XX that for we to what and last a have in have to and increases expect in shortfall sudden quarter million us of a ability $XXX likely chain have limitations impact estimate Based have prior today, step to recent systems. significant as for The ability the these customers’ million number to significantly a range meet platforms second critical in supply fiscal continued availability delays to restricting $XX million demand in absent function suppliers of QX in components shipment quantities. and $XX decline revenue our form a versus both range in of ship our strong the Over informed span our QX, that in decommits. of we

working mitigate gating near-term. impact challenges supply aggressively to two are primary of the We

in seeing of are others industry, First, like worsening the we availability specialized chipsets. networking

lead learned the XX pushed or time and components have Within deliveries XX-week we ago quantities that been been at for last a year days, out have have our that expected reduced.

have decommits Second, for components. standard we semiconductor also experienced significant

working replacement are to We component qualify to design resolve standard and these components challenges.

fiscal While impact be in in mitigate year. we to on do of we the we the to to are unlikely mitigate second so can shortfalls QX, able time that expect half production our

to able our ship In be also sales fulfill working customers our cases, alternative teams are qualify In customers with introduce demand addition some that with to continuing to more chain platforms and The business readily our demand suppliers, have would be use offerings. to will ever than across their they drivers to clear. because issues that very work may stronger components be supply with recently less been. main by are they affected available

change our chain solve to security While growth opportunity supply we critical will the near-term longer-term not to revenue have challenges growth swap customers’ challenges, Fundamentally, we made did our trajectory and potential. application delivery significant short-term. our nor a exchange most

to Our gain momentum. software continues transition

expect be our growth software XX% the for In revenue now to to we range closer to year. the XX% fact, of top end

In will our plan strong and in headed longer-term not invest make we our and will continue and any in signals dramatic addition, model short-term. to we business our to systems trajectory, responsibly into strong exceeded the QX, our our operating demand in because confidence changes QX remained demand see of

us continue long-term on mean it best to operating this potential. While and opportunity growth earnings pressure near-term capture margin, our our to will positions

We manufacturing to profile our return to expect previously full forecasted margin operating return as we capacity. to

ahead. to opportunity wins both the offered customer Our great our insights momentum and QX

every protection. needs security why like For demonstrated application basic web LogXj instance, application application clearly threat firewall for

the solution to just advanced addition traditional closer NGINX its DevOps QX, its to is containers both we seeing add interest FX’s vast with and applications. for selected heightened Protect WAF during the result, are protection a in WAF This App As example In deployed a customer to traditional by operated team. modern teams. one SecOps in by

for defense. bot demand also and We growing see fraud

Shape one banks game consumer QX, security friction despite in most America’s security prominent Shape defend the example, providing dramatically broad-based improved our and selected is Shape The solution for digital multiple channels. analytics to customers’ an still across their Central traffic, reducing of automated application the automated successfully with was bank also struggling data reduced As attacks. solutions. visibility. persistent deploying security

user customers’ production are constant experiencing in and Finally, applications moving modern swings into significant and demand.

demands make As automatically that costs. a result, user up cloud need down save scales to they infrastructure to or

multi-cluster, complexity uniquely and call environments. appeal. Frank? And apps our our QX, and our with multi-trial NGINX building unable challenges investment entail equipped provide mounting Kubernetes to Customers results positioning modern review the the financial are them our within clusters. Stack solution only traditional production. to and the to multi-site into help turn Plus during multi-national American was cloud-ready only provide increasingly customer selected customer’s scaling These for running service instance, capabilities outlook. like scale now application modernize see both bank Kubernetes-based an services existing the For and application. selected app multi-site a build Threat resiliency an challenges help We The sale of we challenges to and and they help customers. and are and solve to and NGINX QX an volume Kubernetes-based and over. to looking delivery modern challenges Frank security as customer escalating application FX the innovator, to FX to integrations our The I’ll are enhance them for Volterra

Frank Pelzer

you, I’ll guidance. afternoon, outlook our good results everyone. QX XXXX QX Thank providing year François, and and fiscal review our before updated

strong outlined, QX. our very delivered another team François As

year ago revenue. as XX% of representing revenue term-based and last revenue. delivered accounting up Systems a offerings is we This On XX%. our X% I compared in now Americas strength million QX XX%, is strength in service QX X% our last mix, period. supply customers million prices, of our GAAP picture, ratably our $XXX a XX% sold includes XX% of gross total above in delivered XX% maintenance compared related XX% revenue revenue is referring was margin XX% top totaled increased represented Enterprise of to XX% and service X% the XX%, Subscription-based verticals government we portion ago revenue. QX in revenue, non-GAAP XX% the our margin of $XXX product growth revenue quarters. up ago will subscription-based period. recurring well. QX from million the up revenue software Federal. which of our Along as quarter to represented representing APAC a our representing as and of quarter. our QX flat total operating software XX% million product sources, review as-a-service product next Non-GAAP the customer QX. period. measures $XXX utility-based for the The of Rounding U.S. revenue with as grew XX% in represented of end look our up XX% chain licenses. First revenue, QX, regional software Revenue Please year-over-year, QX revenue the revenue in XX% revenue a is well with the will gross XX% revenue year-over-year, year-over-year quarter, providers range. revenue and term I note, be revenue solutions global revenue services continued was out customers in continued and revenue, year as the services for year component EMEA as representing I see was from million subscriptions spanned basis, to bookings in XX.X%. represented Taking from up revenue of at recognized of from XX% anticipate of to includes represents share year. of revenue. results. pressures guidance of several $XXX revenue X% and $XXX closer in including to growth, year-over-year, up total XX% our from year

Non-GAAP result related in We million. costs of increased expenses were some expedite operating components. operating these time GAAP will sourcing long million. pressures $XXX were expect and $XXX lead fees expenses to

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

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

$XX.X $XXX share. the amongst GAAP I $X.XX or We receipts factors. is in in $XX cash cash flow million dip see Our billings was now $X.XX operations to other below will income because of of per of QX’s effective tax tend result million rate non-GAAP flow per timing primary turn the a range cash factors. We net million two XX.X%. quarter was our Non-GAAP balance generated and QX income or to cash share. as from flow sheet. net for the QX. recent in was

First, we sales subscription multi-year in the had quarter. strong

generally one-third our a unbilled of three-year on the subscriptions We assets. going As signing remainder are with contracted terms. sold to multi-year the built reminder, only

Cash days. significant components for approximately associated XX manufacturer the builds. Second, contract at and during our end. remained $XXX totaled with the the quarter, investments DSO with we quarter million future also prepayments strong quarter had some for at

Deferred quarter, driven the from total and Capital FX During by a were worth growth an lesser at we of average XXX,XXX deferred expenditures increased billion, year-over-year to shares service million and approximately repurchased quarter largely approximately maintenance. $X.XXX $XX for extent, million. the was revenue $XXX of up shares SaaS $XXX. The or XX% subscription to billion. $X.XXX in bookings deferred price

ended our with and non-GAAP Finally, note in stated, his you remarks. includes which QX guidance employees year in reference with quarter. This QX. full our François the Stack year approximately please and metrics. with I’ll closed acquisition, Threat QX outlook quarter fiscal XXXX employees updated that shared from comments the we otherwise updates the guidance X,XXX my up added XXXX Unless outlook recap XX now. our revenue approximately fiscal

Let with start me QX.

to component revenue production in and result to million the taking increases, related $XXX $XXX we mitigate chain supply costs cost constraints. to Taking a as expect chain QX systems of expect QX approximate margins actions XX% to into the of pressures, supply we continued account range gross are to We related million XX.X%.

we discussed, trajectory model. we ability transitory with compromising do chain the reflect so deliver do adjust revenue are operating believe future our the challenges believe supply We the not As of growth not underlying current because to to growth. risk doing business, our François and intend

tax tax operating see historically, that, is you benefit and to and next operating I’ll likely We year tax That as retirement QX our the full pressure remind of of range $XXX for our in of some will said, the fluctuations result QX in are QX several margins million. rate rate we a quarters. XX%, to including impact we resets. $XXX to estimate seasonal XX% operating fiscal low margin expenses effective result, with be a of XX.X% payroll million As the annual for anticipate quarter-to-quarter. our QX

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

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

outlook. XXXX year fiscal updated our review now me Let

year million end expect from our supplier We guidance. however, we revenue for $XX XXXX million additional X%, of XXXX $XX prior fiscal of The fiscal provides reflecting seen step growth not, reduction higher to another of the It range some of the X.X% assume revenue year decommit to to a in the level recently. does range this decommits. potential have function deterioration of

confident the range year. continue expect our the top We range to revenue to XX% very in of to the be growth and closer for to be of XX% end software

We global expedite of also X% year. fees Like we last the seen component costs anticipate the growth revenue other for to services vendors, X% escalate and year. over have

As appliance effective announced a implementing we we a December, approximately X. to in price our iSeries be result, X% of would increase platform February

fiscal will change begin positively We in impact to year. this our second expect gross margins the of half pricing

fiscal range low in QX margins remain the our QX Rule of revenue committed where in margin margins and total We of regaining growth operating to year, XXXX for QX. for XX non-GAAP improving expect point with and the XX% XX. and operating of operating XX% combination the to benchmark, non-GAAP representing operating are We target the our

We fiscal With during turn shares year. remain committed François? over million the to François. repurchasing will back I call in also $XXX to that,

François Locoh-Donou

very you, you and Threat more note good very offering and our In be Frank. integration, will about that with solution hearing soon. Volterra making our closing, Thank I’ll are we SaaS-based resulting Stack progress

on to chain our for are We supply mitigate our doing focused laser in everything power customers. impacts

and launching our will delivery app Our be by imminently and our future solutions. our and security growth Software-as-a-Service, long-term opportunity driven software

for are solely disappointed are we chain ability that long-term opportunity. in customer we near challenges our gated term, our in and our than demand our strategy to have supply systems confident fulfill the While more ever position,

pipeline we our Our have of and fiscal into QX strong, year. demand back good visibility half the is for

expectations meet applications their at for traditional with any performance to infrastructures. same applications, brings time, solutions our adaptive to gap modern unprecedented while FX the container-based and that our close With and environments. customers serve demand Our to and ability are enable scale ever-increasing faced scaling evolving architectures application their customers’ production anywhere, app the vision between cloud-ready

With to will to my for focus us thanks our and providing their partners on guidance operator, support extend I and heartfelt our and for Q&A. execution. journey entire the team that, the the steadfast and being call Finally, thanks customers with And we open FX our way. along to


James Sander. open. For our [Operator is James, Fish your Piper Instructions] first line question have from we

James Fish

supplies confidence Obviously, after is of now guys. why the lot chain Why still hours, a to is number can specifically you what impacting give peers getting system regarding the supply took last seeing Hey, us and FX? And backlog Or guys careful a this wasn’t decommits. mitigate stuff ensure of that are your done quarter? networking and that side there? really your demand measures it

François Locoh-Donou

supply start I’ll to your the issue. me Hey, question, – back point just first Jim. let the and It’s François, then take last your of I’ll question. come so from I

that demand backlog year, to side, continued last the On our Jim, grow. you know

it’s hardware pretty a specifically year you the been. to at I backlog grow highest was in first much our hardware, you’re was to think level backlog if that revenue QX, our continued In referring ever with fiscal exited flat, that quarter. saw we our but last

In fact, more by XX%. grew it than

and demand see So very, we feel demand QX based very good the demand. in about and of the the saw the we pipeline QX, our we upon in health

to XXX% the be our It And guidance clear a just And very supply done so we’ve revision issue a annual issue. that demand issue. the we’re linked facing is supply absolutely to issue. the is not is to

been now. and we mitigate facing of the issues your Now why about issue what to to part question this doing are we’ve the first

on our about we ship our chain quarters talking much been issue several demand, so worse. been Things number for were from was account supply that last And with the deteriorated that took we this have – not were number to we’ve various at the a our year. why has doing decommits So And the grew when we year, which steadily. the of very for of of year, the were that able our planning we backlog tight during actually and getting is suppliers a year, fiscal already the components. situation beginning getting into

seen a And quarter. XX from And just component ship XX% have To less at sense, even relook you the suppliers. that number that though, days, XXX step we function the the systems the for caused Over have per running of we availability decommits a of to that the the decline state that’s month to Jim, number to give a about than be us view seeing we just for last we’re year. planned see a of in and what’s decommits, the ship we wouldn’t year now even were so ago. over full able

situation So we – are quite unprecedented. is the

of a number allocations things issues, FX. of to working doing our course, supply with are mitigate on We these and of suppliers, supply to escalations

working We components. recently, starting on platforms of available shifting more introduced and – are we’ve to that our will ship hardware utilize be new to just demand some readily

be So newer but the improve have we’ll tight. of supply working to shift the in demand chain platforms. these some And we the we is of to have absolutely hardware a situation mitigation to place elements number

our in weeks in so part think of and situation has secondary market supply. that. going is through open up I on avenue dried been other get through the supply, we were we suppliers going also that in before last that we to the but days relative have to has The when to we is everybody that where to the same couldn’t thing going XX several really because been not changed the have markets, our the And brokers just get last

the supply have So recently. in those the are that some happened changes of

James Fish

of follow-up, capacity also the are as like decommitments, arrangements chain guys for given at time step François. supply half. a frame you the the much we mean, it about talked mitigation a sounds a how suppliers. color, supply amazing And in now That’s I then fiscal second with addition, new keeping on And the but

So to where these is orders does of for this we or getting Thanks, upside we’re mean should at guys. fiscal XXXX risk to kind there a canceled? expect

François Locoh-Donou

Thanks, Jim.

Let me just make sure.

So any very we demand being risk we is real. The to see orders have canceled. don’t

forward. worse have that to six haven’t five, over Our order increase in we unfortunately, progressively cancellation, don’t change lead last gotten any quarters, going expect we and seen times, the in – any but see

I really here, give In terms Jim, play I two issues. visibility make of there of at to we and want sure issues improvement, the are timing – because to both want into you clarify I

So let me talk year. first about our fiscal

$XX pointing the get the to We reduction $XX to our million with get shipments. chipset. are the we of of now fab to very will the specialized FX, better that So linked have flowing year, end struggle start million be situation into our deliveries fiscal we to which is chipset we our manufacturers that of revenue what’s and of to given suppliers. that start The up have networking will big why new part specialized visibility expect that parts really – driving is come this ramp we’re don’t specialized calendar that and to level reduction million we from decommits when to in able to the $XX is levels XXXX, and million that until capacity networking see chipsets $XX the chip reduction. of the for from full is supplier And expect kind to role lack to don’t to of a

that the situation full the affecting that’s year. is So

a few alternative an components, As and quarter relatively standard quickly have in able we second QX, be have which had electronic those challenge, because shipments that it in and to specifically in is is expect make we more we to only parts qualify last relate significant weeks the to where QX. QX decommit QX, affecting our additional

So issue shorter a frame resolved. to the time be second has much

the see The chipset there. around first take that issue is the specialized will improvement quarters bigger before we issue networking several meaningful


your have line question, Suisse. from next our is Badri open. For we Credit Sami, Sami

Sami Badri

Hi, thank you.

point, of maybe, year? very because it you and result? we help to this the also Could essentially unpack expectations software just strong unpack comp the this First, exactly of kind that’s first you what you you could got that got and Frank, question. So growth well. prior Can a us exceeded just was on François, as you algorithm just how to

what almost question The supply service, is, second describe to it magnitude compel effect change the in and the right, they almost customer the degree what’s chain mind. because degree the so the hear as of constraints, that like sounds it architecture strong I of you of had example, it the that would happening, for

going that hardware? compelling the what – or customers come not problem sticking how to, guys a you, and systemic And essentially, like architectures more saying be what’s when is say, software great. to thank sounds adopt are delays you then, So and on specifically type solutions would

François Locoh-Donou

question, and the to then Thank you, with to of Frank add software go we’ll with I’ll Sami. I’ll start may part second software, then start the it. and

I times to it or it I put of two as world-class lead of weeks that’s seeing want Sami, supply were sort our just are the relates what So and issue, absolutely what lead and less. to chain the customers they’re our pre-XXXX. seeing. times They’re perspective mean Historically, in

As weeks And they times kind would of for in in for the been five five several say, zone. extended I weeks. worse lead last quarters, got to we’ve our four XXXX, that

customers, lead of X is they’re depending the the to going to be that ordering. but orders the platform on by today and customer XX a are product have that extended, times the placed specific range weeks For in

have customers to you’ll and the times cycles those still you find these kind space, we’ve for stand in building. check they’re with they’re vendors zone longer to lease high worse adjusted than the our lead can at don’t course, that than X.X had the around while environment as planning the So ever I times them, X are, out months which of think that else. in being anybody of worse other And of having end, industry our

extended are their as result of lead we customers So a seeing times architectures. rethink start not completely to

moment don’t a the expect even But to challenges we we don’t were at that with months the much that times more, we different become lead see we’re our would that customers. if see having think XX shipping and I to behavior. or

of So that’s question, on the first part Sami. your

question, software strong because have a the drivers as all our did the going growth software are three And plan. in of very strategy, indeed On part essentially it’s of to we software quarter.

start part. the me let with first So,

and what. three environments; It’s driving growth the application in So and second, applications modern multi-cloud franchise; first third, our drivers scaling traditional or software to security.

let three for me So, unpack these drivers you, Sami.

So in seen one, broad-based software we BIG-IP. the strength first enterprise have for for

services Specifically, I this say were would financial providers service and strong quarter.

kind saw customers also pandemic. who said have the they in that resumption of put of have to wanted the first We more a quarters move on to and pause software bit little of

of migration We’re for with moving architectures, their seeing more those customers software-first applications. to traditional even

for And seeing very so term strong second our with multiyear and forwards agreements. renewals that helping subscription true is

So software. that strength in is applications traditional all contributing to in of growth

we applications, support deals over which XXX is We with is a aspect second modern this NGINX. largely NGINX which with quarter, The did record.

lot challenges. traditional complement have networking see and with part applications customers and with We’re of we go really NGINX what And released NGINX. but environment. is Kubernetes the than the that increase, the seeing different to of as are And complexity in of issues additional to a of average because And pretty abstracts that Kubernetes more for are size really deal we are products Kubernetes continuing Kubernetes these networking and address production to security still NetOps with to very seeing associated are deals really is a team this environment in and the Kubernetes Kubernetes this scale. size what – that the also ideal have for they’ve got the security challenges are challenging, complexity in are in developers,

And revenue. And And than of continues deployments. product strength across grow quarter, in strength in portfolio. faster this security BIG-IP. entire security. is third these so security And overall we’re in traction saw lot a driver seeing saw the We our we the to

to awareness to web more it that have didn’t – didn’t the or number that brought LogXj accelerated a firewall. WAF have use of activated customers protect our application That customers their seeing to perimeter. either We’re frankly, adopt and our really vulnerability, has

So place have more in patch customers parts lot and infrastructure. to protect all able that had WAF their were to they a their the then perimeter a of time

API move We’re beyond as firewall seeing and a customers Anti-Bot also add security web bundle. and application

We Security. order. continue growth in to strong then see And had a Shape NGINX

in have. our traction We We now see Shape, new service the provider best have segments part And visible integration to because in the go-to-market of the in this broader-based all also with adoption contribute. into in have new we’re logo internationally also both because that terms to seeing Shape of completed is the continuing acquisition. marketplaces. of in – that providers maturity technology and product probably started quarter are with marketplace, part of We of to we like maturity e-commerce other starting so players the also and platform Salesforce.com, cloud integrations cloud that with

pleased software. had with strong at So, you execution, on are where strong software, we’re really really we momentum and look and across all three we drivers of

Sami Badri

you. it. Got Thank


from Amit For your our have open. Evercore. line next question, we is Daryanani Amit,

Amit Daryanani

for you my as taking Thank two have well. question. I

have, sort challenges I different year talk and hoping your of two off, March March about think the the and fiscal maybe midpoint X.X% you to help high it September. I First full you but a you guide, reconcile that quarter the that in you’ll first guidance. quarter half, I of if take the at I’m me to have just year, so. implies component heard to François, Then in at hitch grow and year back half grow June almost the single-digits you you guide invites

back will September you in quickly folks? why I the I that June, And guess doing am the snap growth this confidence quarter for So, so correctly?

Frank Pelzer

to I Sure. don’t with add. has Amit, see why François start that if then one anything and

articulate standard some the in up some for the I’ll taking to loss in challenges QX having we François, to try year. the and make bit half I of we’re components a So, difference but back that solution, of of the to just those that into able the of think redesign are are time near-term acute of

going And to next coming initially so of expected realize now just come than this it’s get we part much ordered. what we in of quarter more this less when that had acute we until it’s quarter, is that because not and the to timing

not that to so be will for redesign doing "catch part this place QX on we going in that our is up" to impact but in And this QX. it are QX – have with revenue, affect will manufacturers and to time in ability

you us And quarters demand back mark of combination we that for that low that so the QX the we up QX the ordinary that’s that gives for way, of yes, two some take you just but is first demand when see. that the top do the what half in would make normally the said, of half confidence on

Amit Daryanani

And Perfect. I you guess the silly ask the on about this, fair this did then one François, you bit probably difficult questions it. one have. But the seems a growth almost more and compares. XX% the on second side, you hard Got all of given software talked to and

And I full love need after conservative you year. counterintuitive. that will year I’d And would your software there’s seems business? guess get it you talked understand supplies decelerates the have, that why imply to do to compare you but start your guidance being was think little everything be to given XX% decelerate and issues easier. growth last I right a software about as on down That the a

François Locoh-Donou

it good think decelerates. a necessarily it’s Amit, question. Yes, don’t We

year We the our growth. a year the – quarter. gave and very full are first feel range a XX% We to had software XX%. for strong about we early in confident We of very

top the away very what a too now. to software be And we be range. and good we more fact, software, said, to that view we’re for think year. we it’s end at hey it’s what – changing that to you from of think the really it’s take But In early going is our sense going should on be like we

Amit Daryanani

Fair enough and of Thanks the time. luck. for best

François Locoh-Donou

Thank you, Amit.


is from For we have our Alex Henderson open. next line Alex, your Needham. question,

Alex Henderson


general So, given I approach, of wanted to pressure behavior the supply hardware. around enterprise’s ask a broad about constraints intense question and purchasing the pricing

extent wanting to get a think, to C-suite-type Kubernetes mean workload increasingly we’re of System would As up transformations I change that. A I in to resulted it you’re talked month. kicked CIO, price the away to in their prices your commitments hardware. acceleration forcing CTO, subscription would again people, And up think, strength, from people space. seeing the an think, people, you’ve I in strong this a that switching those into player and double-digit where behavior we’re play digital that are around just such workspace into has lot in prices, would

you hearing address you’re those fashion? about can the tidy in C-suite behavior thoughts more changing from on their So, what a

François Locoh-Donou

some But Hi some some long-term, we In who benefits. in know Alex, seeing advantage taking the some short-term we it [indiscernible] prices. relates value along in you’re the – chain may that case, detrimental that believe, supply. So, I say, of our – behaviors. are I that, of different Everybody semiconductor through seeing are relationships. extraordinary as that to extent a is would and Alex, an the going feeling type situation would to space approach you have to we is are suppliers it’s And first,

with it great be our have if evolve way our they And our going long-term be and as architectures. with and customers at happy relationships customers to to so we we shareholders continue their look them the continue is are to

so how price we balance about cost And increases. pressures we do as with the think

it also looking longer term. the of customers strong relationships the at lens maintaining for with are We through our

So how approach that what we always, in perspective, we’re balance always to have things. going from our

In to terms not I conversations, of their seeing possible. of FX, are as seeing case our the – are In before, we’re course, customers they as of fast cancellations. things in them said not our order the – as get we way seeing want products

you unique, other from solutions is them lead also to are We’re what them that vendors. getting keep they’re FX than like-for-like else. far, not have managed replace our we seeing so And frankly, much better times because something double solutions can’t because for ordering and

of seeing getting from to through them try to customers we towards supply dramatic pressure, what course, and in their last FX not faster. we’re saw from But So, a we increasing year. are change behavior

Alex Henderson

business XX% the down could And revenue question. up coming The historically service quarter. in It’s to if been persistently on has I separate a been follow every of provider XX% range.

Can alternative space quite higher-growth about – seems your clear you It that quarter. your areas? with to shifting from shifting shifted what to software this XX% talk them. extent that you’ve shift in security about from of and talking away favor you’re resources you’re away that intentionally away away think I from

François Locoh-Donou

the strong through are say strong away from have Alex, I We the had provider been the very intentionally broad-based. that shifting five, a enterprise in we service demand six very that not would has space. last quarters, we

a you the as provider look down. come so And overall when service at mix mix has

has growing business provider been several quarters, service including the our actually itself However, last very healthily over last this quarter.

good what few to service software come opportunities And transition, to XG strong so over with potentially providers with important seeing the see both some XG deals and hardware in quarters. we’re in with also and the we next coming –

provider so we actually is the and no, for into existing a of both potentially very platforms also are strong our And interest that providers. Volterra with platform our space, service investing

oftentimes with to scale more in served starting the tens millions space deals more providers, to of are see which for requiring that We and devices, hardware. scale of service is to IoT

invest the rest that line I the our XX% to has growing prospects perspective last at strong segment. how So, service we drew to but provider from the the in Service it in provider come. very with of understand been for mix. is continue you business quarters, with only few

Frank Pelzer

just as XX% of revenue reminder, Alex, total revenue. bookings, is of certainly And that not not a a and

proxy, you relation it’s relation So that’s think revenue, but go in product what the to can a in you to. it about as

Alex Henderson


Frank Pelzer

Alex. Thank you,


For our Sachs. Rod open. we next line Goldman question, from your Rod, have is Hall

Rod Hall

by thanks for question. guys, Hi, backlog to I number. wanted the start clarifying the

$XXX of think you I called you out just guys over it XX%. said million had think, I last François, grew quarter. backlog And

$XXX is this So is right backlog quarter? ballpark of the million in think to that, that it a

Frank Pelzer

the in piece we which, the K of of want was that I the as ballpark the referencing to it’s million, was just the in said backlog, Rod, system the net our but make understand systems you for vast inflations… François What $XXX sure side. was majority

Rod Hall

$XXX shave ballpark. Okay. million little in XX puts Could you that off something the the just a and up plus, and by us

I Frank, kind just a thanks bigger And ask helpful. that’s wanted question. picture of to then Okay,

down back being in. were couldn’t were kind of This test systems software year talking here. comes be locked thinking they people and last guys You stronger about because to what might people

maybe $XX So, more now by systems your you’ve get midpoint bit by million, $XX $XX or – the like systems than me can’t million supply your guide want. it because don’t $XX a why people situation to software looks million raised in you you’re where of to then from million to But guide $XX to your million million $XX that. you’re so a your quite $XX cutting I million

– starting seems So this favor unwind accelerating in trade that is should really towards last just dynamic year. you’re not that like year it your get an to software you if getting

up software don’t is to still going the for I why understand hardware the more fully not compensate So, weakness?

François Locoh-Donou

Rod, great it’s question. a

in entire software first of there Rod, to an I So, to you drivers is the really will. Hardware that are want for you, opportunity the our platform. where software remind the big IT growth But is across – substitute, portfolio. if

So first to remember. thing got the you that’s

say, the when you hardware is IP substitution not why of weak. a it’s in the Second, not but "Hey, there hardware for is more is reason demand first because software,

application security enterprise drive So that systems, to even behavior demand in very the relates be and be applications generally, application the demand therefore, of demand growth growth, The security FX hardware traditional support our saw it – expand hardware broad-based demand systems as to the and hardware customers security use to continue continues footprints on those hasn’t strong. continues We hardware our existing in changed. customers we hardware. to to cases And continues, their see security strong.

is the a So – there hasn’t perspective issue we issue. the demand have been a change supply from

a the reason substitution second effect. big that’s So not you’re seeing

that to could demand causing we element will going we’re marginal customers okay, you times slight which to more effect software, of the a change us the to software? in ask, much "Hey, because customers the to their of but rental from of think that, And margins, but is think to when to get the hardware part to top we on a well, what’s top our to closer go be software-first worse, if encourage of the say, that’s a Now may "Hey, there say, – maybe look I’m range, environment. but lead

six decision. FX other well beyond lead that they months would and all, software. just drive that consideration only First And I of have. to have factor times our architectural extend customers that second, of are change is at lead their part a think cause environment, vendors to our to that time look for not really There the really are

of go all teams is challenges a having, said, with the the with that we’re way Now, with or need customers, that if supply on one margin our we to customer when working the being other. and

of look to factor get software consumption can don’t that’s much from course, of of think, they But dollars multiple to to millions as other. to because I going move one there a that faster. tens the thing we’ll we shift encourage to them

Rod Hall


I you. Thank François. Okay, really appreciate color. the all

François Locoh-Donou

Thank you, Rod.


Meta we Marshall question, next Stanley. have open. your Meta, line Our is Morgan from

Meta Marshall

get components. and I you’re sense you. on two-pronged, Thank a both are noted the Great. shortages wanted – chips of just to standardized the you seeing the kind more specialized

one a, the And Does of build inventory course We’ve the pretty of networking a get the quarter? kind sense significantly the one wanted year. kind or severe what me. you those? top, saw of just pretty bottom of last seen build than And a second to Just other to just of other for achieve in then kind deterioration maybe the question over have in range? of inventories of improve the guidance the or implies kind was more more the significantly to the peers attempt to

sort of of Just as going going – out forward, on this your Thanks. kind of stocking this on change forward. inventory getting thoughts

François Locoh-Donou

start – just question. Meta let Yes, of couple part of the last a me with your

been So lead with we have components long times. buying extraordinarily

ordered than XX Some committed components for calendar year of the this were us very – we had the that components the more ago. beginning at of weeks that were that

time. two have that than XXX several more have lead years We today components

expected. back cases, weeks for going timing are XX quantities of been the anticipation ahead when strong happen advanced deliveries have XX the the months coming you in buys getting you from us making that, very not in of to we some it’s issues and are suppliers after in expected due or the So and last getting waiting commitments saying, of

that function days. XX so been that through last we’ve we’ve quarters, to and in even And – last seen on manage able deterioration the but a that just the several step

the than two more are we issue your terms question one severe of seeing. in is other to issues around the Now

are there think Meta. dynamics I really two

wafer what kind of more going better. is first several And need take we to is from from the And have have XX online we in potential at yet we issue for step take which there levels have assumed to to specialized the networking have that specialized us going is we’re at of more another very our but we capacity decommits seen ultimately. to – The deterioration get coming that chipset chip not – large assumed that products function range while the the to and we than manufacturers, to be today. issue, that It capacity have assumed that’s XX a in about clear get – which to date the the for quarters. to

actively to that’s the million some newer would to we $XX of in those platforms, successful get working range. million and programs. So have the our on million, $XX be we’re shifting And already demands to $XX kind towards to of closer the

really to of for long of ship that for it really on couple standard the unfortunate had issue such – decommit we specific able this in-quarter makes for to the we As be in a we very relates time that of timing qualify it parts specifically the decommit parts. That it other order quarter. the and to around parts is the time. that, can’t, a that And the design and components, that QX, of do with it’s is

qualify available We in will, market. there alternatives the are we

get to that starting our So able able parts we’ll be be QX. our will and in we to recover

that’s issue. more So a shorter-term of

Meta Marshall

Thanks. it. Got

François Locoh-Donou

you, Thank Meta.


from Our Samik your Samik, next question, we line have JPMorgan. is Chatterjee open.

Samik Chatterjee

guess for taking with Thanks if here. yes. I non-supply question. start my the question I Hi,

the but a some the that share aggressively change weakness more back about there’s your is here, do What’s operating the here, the going on term, to seeing some bit you’re business buyback not issue, given the the inclination you you the of business on term temporary for drive of longer longer about you’re no $XXX think or price? given the changing changed, what’s reiterated this the outlook François, obviously, hasn’t to appetite setback, maybe model stock. you mentioned think, buying temporary how I in million

Frank Pelzer

Samik. Sure,

the associated with maybe that. year. We’ve million established of let repurchase that repurchase, start So with course throughout one. auto-mandatory me We $XXX the more ratably about programs the share talked of

the we And into still that make. but ins not that so stock level the strategic we to TBD changed moving see of balance that plays execution triggers we When I’m of It’s $XXX not reasons, that commitment outs going million is anticipate get how the in but up the balanced kind to and haven’t stay exactly we – first the a on want do out. place. of program the entered as But because of we from $XXX why it program, into that intend million. we to – that

Samik Chatterjee

Got follow-up Okay. on a just And software. it.

more true You’ve those year. general, deal the talked risk at Are the particularly those? think towards the growth guide. software we in of I terms of as look should think weighted about last or a benefit we will your back about trajectory forwards in win of the this year will that terms you half? kind in How be of from

on think true which more earlier certain But year? weighted I of in being it there an I waiting just think for to the does half question, is some impact moderation there an growth, more for execution. forwards is you imply the

François Locoh-Donou

recognition the term, cycle of weighted So play, of resets the the second true which whole to forwards with them. the second the and new there is those back in talked the half. into term with – were What multiyear really subscription there’s seasonality we some – about agreements the coming revenue

Samik Chatterjee

Thank you. great. Okay,

François Locoh-Donou

you, Thank Samik.


Paul, Due your open. constraint, is line question Cowen. last from from Paul will time to Silverstein we our take

Paul Silverstein

supply squeezing questions response in appreciate all some in the and I appreciate me for chains. to

apologize just $XX that will understanding when that – sure changed million shortfall but just supply hasn’t to when your another perhaps yet million correctly – period. new want what you that I’ve come – your understand your I to I the I to I the over new trust and million fabs those make million to I view, of XX-day online to saying. relative $XX you’re If clear got already, So $XX be $XX understand if

your or Is correct? to now current what the that chipsets. core available you changed expect with earlier decommits suppliers, from didn’t You benefit specialized online what from than, expect the the those coming

Frank Pelzer

Both assertions Paul. Yes. are correct,

Paul Silverstein

that a is losing, will that ultimate shifting shifting if to aren’t you’re given sort whatever if competitors, your by of expectation. ago the if million, is your customers your François, right. increase basic $XX relative isn’t your customers $XX shortfall a million it? backlog it That’s to not given XX-day hardware, math, All it the to the they’re to not purchasing are software,

François Locoh-Donou

back we tens Pretty but yes, year, probably backlog increase to this its But much. our for quarter, ship of not multiple millions starting is of in we exactly by because going of I will our backlog even that. to increase cannot dollars log mean we’re the do expect demand. yes, – QX, the course, full forecasting

Paul Silverstein

a a the in supply just that in months such the for squeeze – more. I to that it. you it’s got advanced month previously for started – clear, to range? had visibility expected, additional sparse the for full ship as whatever And given accounts going almost term? again, dramatic you’re Is you’ve in into to range way doing has quarter. been once two build little near could dramatic of only the If left up not else put against it’s and mean, I to ordering but to apologize What as I’m order a be guidance in like in why quarter, the significant everybody why confidence to assume had decommit’s, a I I you the range the just quarter? it like better terms

François Locoh-Donou

and have two able to that challenges some related we’re a sort to that of re-qualify a to and working chain with do going have, all seen to And don’t this is both significant of parts that be component, all able and – alternative reasons, before we that’s yet solve kind to look, we end and range that able but if the standard are so find of to twice of you they’re this that’s in March be to the of quarter sorry, – decommit be range sort $XX would these is that our first before that for ship the and teams products get XX/X to know that the Paul, that supply and reason, absent probably – great of work design Well, the these of closer the manufacturing question. would twice to be end customers. March parts million

So then platforms, demand shift there’s are And that with an of there is uncertainty to the part associated of are some looking we from available quarter, also that some also second that. added uncertainty ramp uncertainty platforms how the and newer more those is in can to comes fast that. we readily the that

be supply supply. waiting It’s are are about one XX/X the because want we times you that way Star working could as Both are the them, not more of a customers North to for little satisfy those the we this. to to and the two our related that clear. to customers. And some the possible do course, want the for fast range. on that our that to of is growing. that able add as They’re lead I demand demand we why are ultimately, or have their and we understand be to and this to the for go very are So applications extended products see this other would call, reason – that uncertainty elements to getting related But worries is are

upstart, our that’s explains fall. range but that So the

Paul Silverstein

Thank the you. appreciate I responses.

François Locoh-Donou

Paul. you, Thank


today’s this call. gentlemen, and concludes Ladies

now may You disconnect.