FFIV - Earnings call transcript Q1 2020

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Operator

Good afternoon, and welcome to the F5 Networks First Quarter Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Also today's conference is being recorded. If anyone has any objections, please disconnect at this time.

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

Suzanne DuLong

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

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

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

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

With that, I'll turn the call over to François.

François Locoh-Donou

handing us and Thank before Thank Frank will to I today. joining briefly review afternoon talk in you, our the for detail. good drivers over Suzanne, you quarter's to to business everyone. results

world-class and across wider have meet delivering demands. to we our services better been customer's a our our application investing deployment Today consumption business of We changing are range models. evolve to application

as SSLO towards shift revenue and drove quarter. X% cases, deploying for demand are multi-cloud Strong first FX customers WAF our security security well environments, customer total and ELA mix driving result, performance XX% in traction software a Customer ongoing in fueled growth [ph], including revenue our application as application consistent growth. a in for demand reliable increasingly our software. use As

traction. are We very pleased our software continued with

expect contribution last software to Security, to including continue XX% Friday on which for growth XXXX, week. XX% Shape We from closed

partially by was down customers consume as which growth FX software. XX% our offset systems Solutions software to look Our was increasingly as business,

strong long-term quarter Our business several a to of delivering Overall, from of software-driven is business. the pace quarter, sales. very robust to was over last including growth. strategy in software X% pleased are NGINX-related the the services transition execute benefiting by and revenue sales full second quarters, we against continued our the our well continue our Services

after dynamics more will our business financial Frank? Frank outlook. speak I customer quarter's and results to our wins reviews and the QX

Frank Pelzer

you, François, good and everyone. afternoon Thank

noted, another revenue delivered growth. François we of As strong quarter

X% First million million. of of approximately $XXX quarter and guided near $XXX.X up to revenue year-over-year our $XXX of range million top-end the was

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

total million $XXX flat accounted of of year-over-year revenue QX was and approximately product XX% revenue. for

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

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

as strong solution as our uptake experience sold annual including to continue on We software subscriptions, ELAs.

In fact, ELAs contribution from year-over-year. again increased

identify team revenue product Services quarter. contributors Systems customers $XXX primary secure the revenue. to XX% represented of to in approximately continue revenue of the in tools and year-over-year, quarter. primary X% XX% three There revenue our uses and to were services grew The performance the as to renewals. year-over-year solutions. total was factor is strong XX% of to accounted improvements processes for and down $XXX million of approximately revenue Systems transition million software-based

perpetual as services growing software attached healthy software with consulting we sold In including associated sales, have demand enjoy also sales. NGINX-related we continue in a subscriptions, addition, services seen renewal to step-up or to as in and rates

America On while accounted of XX% a and grew of QX, regional revenue. in APAC X% X% revenue a year-over-year, total revenue, growth for revenue. has basis, EMEA grew of for delivered solid and with X% accounted representing XX% XX% quarter

Looking product at enterprise vertical, customers accounted our for by and represented bookings providers service of XX% bookings XX%.

of U.S. was QX, In Arrow, than which Ingram which of Westcon, accounted XX% including representing for distributors, total greater XX%, business XX%. XX% government bookings, Our accounted strong, which for had accounted Federal. three very product we X% XX% Micro, and for revenue, from

gross reasons, expenses in were Non-GAAP lower-end million. Let's margin the in including several now commissions the XXXX. Non-GAAP levels, expense guidance disciplined QX $XXX down back was of the margin discuss gross operating GAAP at GAAP our were highs was operating million. operating at sales XX%. XX.X%. $XXX and of expenses operating QX with results. Non-GAAP of for line from range second-half historical management, were expenses

expected QX QX. between In timing addition, expenses for some and were there differences

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

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

non-GAAP Our tax XX.X%. was rate effective

rate because called X% the year-over-year for revenue increased our for roughly The $X.X flow several billion Turning out in quarter year-over-year last is quarter lapped were to including accounting end. we $XXX investments from from generated reasons, down in the cash half we the down lower had and restructuring. at consistently expenditures Cash from adoption, and capital we margins, revenue XXX and totaled growth growth commission M&A approximately operating This our DSO deferred million. expenses, over billion. QX balance from operations. last QX, strong XXXX which Deferred days as was is related payments of million sheet, $X.X bookings, XX to $XX levels, year for year.

efforts from better X,XXX result quarter the imperatives. ended to a down with QX approximately as We ongoing of strategic employees, XX spend align with approximately

continue a asset We future to as growth. view strategic for cash our

term will priority funding. the paying related near-term A the be acquisition million down Our Shape to $XXX loan

will We to our purposes. balance cash rebuilding look that strategic with for position

trading open during window. repurchase any shares We also may opt to

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

with Shape is XX, closed addition, acquisition the In on Shape. guidance of our Security January inclusive

our software-driven We our and to remain continue will our application model. confident to revenue demand strong the multi-cloud services for to increasing continue business growth. We in position expect drive make progress in a market, transitioning

We solutions. our also continued software for expect strong demand

software reaccelerate QX, In anticipate XX% above we growth growth, QX's any fact, will Shape. in even from before contribution

on better noted four ongoing business will the We provide the a Shape acquisition, write-down. purchase accounting balance. for of As we Shape-related results. model Therefore, provide we impact basis, a revenue software when recognized revenue GAAP will of next excludes announced Shape believe we with significant principally reflection the Purchase subscription our over period, quarters. accounting deferred a the impact revenue revenue that will a which revenue guidance, non-GAAP has non-GAAP

non-GAAP basis this will revenue both timeframe. GAAP and a We on during a report

With this revenue non-GAAP in are range QX we in the $XXX of targeting million. mind, million $XXX 'XX to

in 'XX. expect annual In QX revenue growth more services line of with QX 'XX addition, we

We XX% tax expect QX, operating effective our margins to in remain of gross the to Shape, XX% million and the to will addition scale estimate anticipate have for range $XXX we of in XX% million opportunity XX.X%. business. the the in that We rate $XXX reflecting range. in QX We expenses to of of invest

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

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

François Locoh-Donou

trends NGINX highlighting before to customer a spotlight the I some Frank. broader wins going on today quarter. am with begin and the you, of Thank in

and First, important monitor, NGINX. X.X. NGINX, how and FX manage, for the today NGINX automate enterprises simplifies milestone the analytics orchestration availability for we Controller is announced scale deployments. an It combine of our and Controller solution large

virtual cloud-native acquisition on to an offering Prior featured of the NGINX, was a design. ADC FX application-centric that working

appropriately team. expected with acquisition the only X.X, the design a are cloud-native on markets how third of faster. We the controller can together Controller solution, Immediately after May modern converged our set Controller our NGINX the close team X.X. and XXXX, to development in merged best very combined excited of enterprise the cloud-native the Today, and This new X.X we teams controller FX apps by working as NGINX deliver brings for and named pioneered the would begin adds application-centric a team, the FX-NGINX NGINX benchmark we project quarter solution features NGINX release new to developer FX. we as

develop teams to the approach context we fundamental evolved application the is that operations emphasize way release this manage so bridge customers a organizations faster. shift and embraced our code and team this many application. finished to new that applications divide and between important, the the manage first deploy in and deliver DevOps on DevOps practices was divide, there need to the the why For Originally, applications.

result, embraced and control As NGINX Plus over NGINX their infrastructure. own Source empower with Open to organizations like a developers software

application-centric new is compliance control the X.X The IT. Many centralized reporting worked differentiated. protect developer approach data. designed outside applications and highly teams. improved we for developers application-centric this design from of requirements a application that and combined portal, its IT, it configuration productivity, Although empower outside a and maintains and compliance and solution believe app-centric These security built-in of why enterprise Controller is capabilities created and capabilities. That Shadow to analytics, security API, operations self introduces of these developers security also service and

center relevant SecOps, consistent lifecycle. role multi-cloud availability to enables different for accelerator so app, the of of application a users gravity role. our application and instance application services access DevOps, This business NGINX Controller tasks their the it Controller shifts reasons. the spanning NetOps, the the of for With In X.X the AppDev, summary, infrastructure will across from of expect the to X.X supporting manage itself. based deployment be an of we enables set three

market adjacent addressable service security include the NGINX expands services it and First, mesh; in for to app

capabilities large number Management. introduces to expands noting easier deal deployments base. use that attractive that increases and it Kubernetes API Controller open for third, been of size average new with NGINX commercial customers deployments source X.X the large Ingress Early the making positive to feedback NGINX orchestrate; cases has particularly and and scale are NGINX's by it of second,

the to addition value the all QX had significant its strongest In hitting and its Controller in yet integration release, with team milestones. of delivering NGINX quarter creation X.X

now we're future will confident we look that a be of When more software the before meaningful at NGINX driver. ever than growth FX,

This continue application and consumption serve new in container evidence NGINX expanding that footprint is to services see We includes our us allowing applications. enabling overall environments. native to

new up the sites customer, win a mining a million process large result Plus an in where example, an at failure was a business Australian mine NGINX in during a modernize losses. could company, legacy As we customer $X looking its Controller single QX, to to NGINX secured with and productivity

applications, using and for deliver NGINX now able over they in their different are metrics. XX the and By Kubernetes to API collect

and Solutions able We're uptick also ELAs and a inclusion destinations. basis. materials their speedy in As they're concert ensure with to reliable the FX in seeing a to better NGINX result, on raw of an delivery for standalone both

During QX, NGINX we closed services our large with ELA streaming a XXX% provider. first

NGINX capacity construct is Plus as able The is without seamless disrupting was producing subscribers the Plus because in enabling offering case, increases meaningful ELA critical customer and instances deploy this NGINX additional increase. to applications. revenue service

ELA number the forecasts flexibility with In demand. fact, out of services subscribers provided actual immediately gate, when the the scale with customer the surpassed of to the

Beyond growth use NGINX, the across drivers in deployments service consistently we security have environments. multi-cloud to cases, provider other across continue we gain ELA's traction software cases and including use highlighted,

I in QX. examples of these each customer of will highlight

provided capabilities. The large In from with its FX FX the fact, based need the based future hardware demonstrate analytics case, aligned to design end-of-life. the best-in-class virtualized business competitor software rethink hardware U.K. refresh highlights security build environment a customer was and nearing this touting able with Despite an flexible to and win infrastructure flexibility, a needs. was transitioning In to ADC provider to on based to example ADC telecommunications a customers software. opportunity and commercial the first ELA the

our In the reporting customers' competition costs. and the addition, outperformed and reduced operational analytics

customers' win to at QX, providing that and Looking in combined able provider with standards. secure and a we systems consolidated Application companies access secured win and we platform health meet Security security that note, hospitals the System FX including quarter, a during company, Advanced patient a case doctors, use a stringent highly security scalable were a Of software secure the requirements allows German to delivering WAF is of to met Health only Solutions insurance infrastructure the records. government

secured of U.K's a example with U.K. Solutions large environments, win trusted In brands, most we an provider. multi-cloud mortgage deployed of based one FX the financial in a

center. additions across virtual application As clouds. they security of banking of data enabled transformation and their across to IP to part growth the consistent program, and support ever chose cloud the digital capability an big increasing This public two number customers services deploy provided and online

Shape Q&A, is mission comprehensive from world-class to changes briefly, large with of FX Security. Application critical move with let To protection, of we combination we Shape to the the most we a believe and are our begin Together me leader in FX Shape say colleagues will Before in work security. the recap how abuse application solving FX's enthusiastic anti-fraud very application Security for and our and the game integration deliver available. portfolio portfolio services, problem enterprises. Shape

Beyond addressable security more doubling AI than our services. market, FX's capabilities portfolio and extend accelerating machine our growth also and will and momentum of learning scale Shape's powered broad application

optimize With in we an multi-cloud protect and Shape, applications to increasingly world. expand will our customers' ability complex

the This and Chief executed the the the lessons successful Officer, led NGINX already With same Tom Shape learned the confident the NGINX teams Shape very will Strategy our members creation is integration under program. the with last they have begun we're during week, team team of process. transaction same of closing Fountain's leveraging that process our integration by value do

Smith, the We're planet. the part will to competitive that team for stakes closing, digital changed of In pleased the business very as Derek continue on CEO Shape's transformation has every nearly FX. lead

reliable do more a them that and move and faster. partners user experience, compelling, delivering need solutions customers to Beyond allow

entire set our scheduled can March At to driving make support, of a to minutes, another my deploy services; our is and Day existing the remind quarter, our in forward for envision on you future FX many every our not York. great Xrd New We're FX FX, secure partners, Analyst journey. for application any also reality our make joining for a sincere vision team our to across businesses a transforming that there. grade we shareholders to thanks to to customers applications, seeing in us enterprise with all where for and environment and applications We that new you customers my days. Investor thanks look I'll changes enable, of consistent or

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

Operator

[Operator first Instructions] Long with question from comes Tim Our Barclays.

line Your open. is

Tim Long

could. Thank you. I if questions, Two

there but you. under some the for are revenues, will First, Frank, there, the were quarters the tick just term like And little an hits bit cloud-related businesses, services time give still talk and you I ELA portion think then you system just see some the model? how total you sounds were secondly, strength, should of little as update last meaningful longer the of a could the software it phase out line back a revenue could impacts impacts? year-over-year and on us talked cloud declines to sequential the next did about growth not, growth you, in looking you other early which Thank did quarter, next bit more become or vertical that the rate a pressure the weight several or year, if start

François Locoh-Donou

theyrepresented of portion last Frank our total without will Hey, Tim, services to it's revenues, [technical Tim, that question said the and revenues, continues difficulty] we François. first and grow then cloud software the meaningful cloud. a On question. comment I'll take on portion

even have by growing of One with in cloud a all faster business, and large overall easier is, our integrations much public the essentially providers. core things. couple driven made is cloud with than deploy solutions business to software Our we environments our that's

on I in for basis. think of a CICD past. cloud large their added third, than to then have our solutions available our customers just in automation orchestration to where our significant are And that in see some also development providers, we're in environment, and capabilities easier public We much solutions utility growth marketplaces the include automation the and to enable continuing the purchase pipelines,

the using any look they've or the that in technology models So, and the clouds. we've enabled reduced with at significantly models associated that by enabled, eliminated commercial friction we've when both consumption you public FX

cloud agreement ELAs or licenses one any are for other public of to to public back cloud including and to example where years, deploy a and good then from licenses on-prem. public that, an in port the they Our buy can three in environment, customers one clouds

last So, QX in think software business cloud XX% or a XXXX continues very six to in I had growth trend. in strong that, software quarter for the business months and we on than it that our the even a to all cloud growth QX, which said of leads when in faster that revenue, we and our of growth grown our be had of

Frank Pelzer

time what when during XXXX, the And the really timeframe. One Tim, to Horizon last in about we to talked back X% the were pleased about we That year-over-year components, in mid-to-low relation at talked which services was obviously obviously, growth guided all revenue, AIM above with [ph] the we was of we the service way revenue having growth QX. had

is great performance this to So, see.

longer XXXX, What to attach mix really really down the what looks rates where we side side, from gets through period even the revenue not above that across of over but recognized, those the of almost our terms sale. the more growth also thought probably but period cohorts software recognized an decrease actually we and age in any coming services anything time, than a more see and services where rates, not so, a continue decline issue all that that we services to seeing a the mix product increase of perspective, come in over revenue, of in as all services March revenues strong that's see impacting is like in we that systems versus about thought we're a and contracts, in it's it this with when growth a so, do a of do business, hardware of longer things subscription and the time, in of lot in of the is gets more the subscription, SaaS that actually revenue subscription, of revenue is a

Tim Long

you. Okay, thank

Operator

comes Sandler. Fish question James next with Your from Piper

Your open. line is

James Fish

Hey, the that this for going squeeze what's you I on yet in is not question guys, is well, specifically resiliency? enterprise can X% guess guys know, here. industry the just everyone still of into If showing about as go enterprise seeing thanks I strength. Thanks. kind into quarter, can grew you that that

François Locoh-Donou

Hi, James, that haven't going from spending we healthy as spending we but patterns we [technical they see patterns saw to healthy the were difficulty] -- in thanks them call enterprise, that continue are for in overall the change question. XXXX, relatively a on we Generally in seen are the to XXXX.

we So, as today, in variations trend. we the you the several and overall, but test U.K. patterns that the we were in and more some to are continue There in geography, look, seeing the on continue other that more, data tied of know, centers. soft healthy. seem When of pointed context spending by DACH of to center with to are to and is or by tied changes not that times Europe we that your and we're the What see particular, I se. us you and in think it's data providers applications, infrastructure applications is seeing per James growth infrastructure way, spending perhaps and is

and So, more of projects. see patterns spending difference, I see customers is application with perhaps the but more what you'll our that over time, we to relate

James Fish

and unattached were any and expect for that, Got pause ahead software to orders mean, on products Plus you a the FX slight of there on accelerate what we why was just a I all next it, it quarter? miss were NGINX Controller, do combined quarter, the in follow-up expecting on

François Locoh-Donou

on the the QX, a better that. America with the Jim, it and realignment is, QX, to in in sales new the product QX; evolve the SaaS part that there think we'll think caused large expected. we on could revenue of for of deals in, short-term was and teams, portfolio a revenue that our verticals, on Product also better, alignment than saw been we growth. in of the have I going the some benefits was momentum. and did evolution our separate certain see in were factors will also realignment rest What better prepare focus important one Shape coming organization, bit the flat, to I some little on a first coming with we to year. growth questions. a that's pause two It's indeed a in, of relatively I in lumpiness couple and of that's In for North that solution, our really NGINX one there start of given also

revenue think product the were two I on those of specifically factors So, growth.

apply question software Your in large robust we'll QX also software QX. we strong in strong software large we're into pretty why of very so, see and have a pipeline for expect deals deal of QX, and we about think specifically, growth does that issue going second confident this I growth revenue very deals, to a lumpiness

James Fish

guys. Thanks,

François Locoh-Donou

Thank you, Jim.

Operator

from comes Your Suisse. next Sami Badri Credit with question

Your open. line is

Sami Badri

I more you. more Hi, use the legacy to thank or on up security business, enterprise wanted tied to product say of you of guess touch more that percentage cases I the sales. ADC wins are would like versus

trying would the So, to the understand cases? shifted big has it's been or over has was trying their points terms in a decision-making, or security forward to just year to the of comparable shift your security even to there of understand, Just of it customers how for so? use very last you forefront further say

François Locoh-Donou

Sami. Even we out don't break specifically. our though revenues Hi, -- don't security today we

I before, our growth in the said strong rest continue our see business, the and growth of portfolio. security security more We we in see to than business

would is, lot also answer driven deals And continue the services your pull business, to increasingly our we In actually question pulls delivery portion these our use deal the so, other security application deals to of and services, that a more by of together. is as more case cases, meaningful use application the in you classify security but more of that a see yes, cases.

we of that trend, portfolio solutions our seeing accelerates rate to that seeing we business that we seeing with and our synergies attach more, expect Shape, given are are environments, so, security kind our by becoming that we drive expect is the the an and business, if are and and the increase between the the terms that that that to you multi-cloud see is all double that FX will, on-prem, The deployment, in in Shape of we more second multi-cloud factor of and to accelerate of the portfolio. way, security

Sami Badri

Got quarter, looking then, you you was back rate model. people is obviously for that most your growth kind identified tools. And three what's just them you. the X% to at it, thank in factors one saw a driving new onto surprise of of want And I touch services the for that, positive

So, even single-digit this this to forward the on out we like factors similar the continue should in we or of given the that a to the business expect just in growth, played growth same quarter, continue three or ballpark more the expect for rate? as rest high and these growth of year moderation services and should drive drive renewals, services

Frank Pelzer

I rate probably to QX. that to, that growth slightly we very specific terms a the particular, healthy where you gave QX still is gets for was getting down think some fairly for in guidance printed number from which of QX, Jamie, in Tim but we

pure higher guidance this we it's think probably to the services over is start I look that thought year, modulate of and the particularly traction the growth type more some get as As may more overall when revenue of the out about of say down the Horizon about at services we talked our end to discussed, than going One to we rate safe rate models course XXXX. we SaaS in that growth but with March we that what be of

Sami Badri

Thank Got it. you.

Operator

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

open. is Your line

Samik Chatterjee

growth start with the company Hi, you've organic been the more organic to if I longer I kind question. and as mean, aligning of you just term making off can the over taking François, since took been thanks areas. have in investments both well question, as for

can help to transformation, of as about indicate think innings terms Frank's you're about that given heavy you're Now, down lifting you envisioned? us commented the with the of the in that transformation most which pay you kind to of in, seem of debt kind done think you prioritizing

François Locoh-Donou

you, me start Thank Well, driving Samik. transformation. with let this what's

look traffic other application very a NGINX, have million of strategic in that for applications. number between so significantly, at, reach and acquisition and players the you very a not line And we So, in versus the of I think we if we with very, we're have flow industry, very hundred us for are extended position, of belief, large the users a the part our of real applications. and we

would say, seen digital we to but an Our exponentially innings, the a scenarios early this selective we in that in within future actually translation, we is very where simply increase innings that belief and from early the of number the because the accelerate is are, we the increase going you've whole opportunity time, an when do customers. fact where everybody in it as we of are and and the to complexities think are strategic transformations, transformation this in result, driven to our application what instances to more really organically, for transformation, to we applications, we are and window also I for and have to two of that with see been our doing Where and have position applications, more we services unification, this given that. by opportunity the more we have applications, that's intensify these in decided extend do of inorganically, applications a priorities that of

that I multi-cloud is So, and environment this opportunity as very expect of the unifying FX in us, well ahead services for we growth significant is application for these succeed new

Samik Chatterjee

so, you should Got beyond it. quickly I that $XXX, think Frank XQ's to how $XXX And OpEx on how we trajectory for the should be about can Frank, if think trajectory? level? for thinking about the we beyond said follow-up I

Frank Pelzer

we terms QX. up Yes. QX always cycle, OpEx intend of point Samik, our we just acquisition, and go QX low back is and to in Shape what pre I the seasonal in the to said, tick in

I XX year, point operating comfortable of for QX will the we're up the we for from put still back low with guidance and and to expansion, think terms margin out QX. QX directionally, feel there the the of to year in so, then In XX that be we very and going

Samik Chatterjee

for Thanks you. thank Okay, clarifying.

Operator

with comes question Your Cowen. from next Silverstein Paul

open. Paul is line open. Your Silverstein is your line

Sachs. Goldman with Hall Rod from comes question next Your

is open. line Your

Rod Hall

Shape guys. I ask couple things Hi, the a Yes. wanted just on to acquisition.

to to back that. guys out I'm come call these I wanted not revenue, non-GAAP those adjustments to and I fully understand -- You just sure

kind of detail back just and what So, this or million to just as on rough said but think on revenue to IRR It the was what guidance if like idea but $XX I little it's maybe seems maybe and contribution, is get the of than said in guys more to contribution, you trying earlier, get Thanks. bit $X And into that, there what Shape? I exactly then some -- you maybe what's guidance? ask of of on also growing the to maybe math at the a some XX%, I have could was go more, I that, -- -- maybe contribution you that an if I'm wanted is? Shape, from less Shape do million

Frank Pelzer

Sure, Rod.

with So, it, NGINX, time. guided Shape for the recognized we guidance breaking actually when at the out it had was reason we closed on to, did then that and NGINX reported we're that why so, specific breaking because out NGINX, what Shape. have but with relationship and with revenue our versus of guidance, be we to are not and specifically tried The we is NGINX we actually after what we we've not contribution got from this given

a of models, the acquire large deferred revenue companies where with balance, about quite the frequently, revenue see that with In you Shape with what SaaS way business a talked revenue purchase said comes acquisition based where announced into we model, very non-GAAP revenue, software, land write-down accounting. SaaS terms of in François given in and those there's this part as significant SaaS the a what companies -- actually and and we when

try to a is the so, we're of going to better in sense for reporting compatibility to rate a going as be to long-term the both to revenue And give financial what statements our better non-GAAP years growth give users muted be come. to and opposed to GAAP revenue,

Rod Hall

quarter, so product at like it at I about one to services including correct out that? grow like me guess the clarify, thing looks just drops rate, in guys Shape said to is And, Frank, $XXX million mean that and about revenue way guided to that would you of a that other look I X%, the same

Frank Pelzer

but so That exactly it's to is what me, number isn't I off. not far think familiar

for the probably time think X X.X. rate was we I think had I to last QX

Rod Hall

X.X. Yes,

Frank Pelzer

speakers]… [Multiple Yes

Rod Hall

thinking that you're exactly growth So, rate? almost

Frank Pelzer

Yes.

Rod Hall

Okay.

Frank Pelzer

There Shape. is for no services revenue

Rod Hall

Thanks. Frank. too. Right, thank you, helpful okay, yeah, That's

Frank Pelzer

Yes.

Operator

Your Cowen. the Fahad next question with from Najam comes

line Your open. is

Fahad Najam

transfer. Thank I'm question. to understand software the for taking trying revenue you also my

In terms is ELA? how much of us your software revenue, can understand of recurring it you how is help and much

Frank Pelzer

So, have in really we past. that split the to out

Fahad Najam

revenue is terms majority from it assume still -- is of ELAs? reasonable your In that of software coming to

Frank Pelzer

saw a about was think we it's take pure plus, ago, of we of revenue not. exactly QX. few total look, talked we When think revenue No, we continue and our percentage quarters that's in a recurring what XX% build, the I I to and

Fahad Najam

assume of may then security to out if And I more we your Shape Shape Shape Security, Okay. ask closed? one is if revenue would that a on regarding be standalone almost security revenue, as now question all is Security breaking you that

Frank Pelzer

about talking time, for at what this in Fahad, KPI several different there. decide on AIM that don't and we're March anticipate TBD we but We doing metrics

Fahad Najam

All right, for you questions. my thank

Frank Pelzer

Thanks, Fahad. Sure.

Operator

Daryanani from with Your question Evercore. next comes Amit

open. is line Your

Lexi Curnin

is for This Hi, on question. taking thank for the Lexi Amit. you

much or So, that is to looking contributors organic I we're two guess growth? XX% what how moving wondering three about forward, to what And the software the top when are on organic versus is then M&A-driven? side, growth in XX% of we're that at the

François Locoh-Donou

of you start you NGINX, business give XX% Last Well, grew to year, know, the let as we're software versus me prior some the year We and to One software about in in to but not which XXXX, guided me our breaking includes NGINX a XX%. after growth Shape Shape that acquisition FX out the contribution the There growth. the XX% that and very with, was of second-half indicators. NGINX year-on-year. let FX Horizon NGINX in was to small

As XX% you XX% were that. second-half, We XX% and see, we're at quarter. for in can full-year year, last above the well we're the at this

in traditional you from FX in -- that driven software was work a are even sort significant, seeing to things. our done, we've by gives to and we've by and in automated provider in in providers demand and contribution driven consumption very it by change done as infrastructure, move our primary NGINX NGINX putting virtualizing or FX is to sense It's work I easier service that's few customers, postures to that's that the just more and models, done from all more customers exceed am and And and but their our coming world to it's environments XX% new a in -- driver software from postures we've to When first look FX. and this start So, making public growth to at move a enabling that the strong drivers the software environment. prior a the ELA, expect it's software in hardware clouds XXXX, Shape to enterprise as is on the also both work we the Shape achieve call guidance. in in going from from software et consume by very done cetera XX% private strong utilities, and our do customer's driven to you clouds, our driven that consumption of of service but first there our desire subscriptions,

Frank Pelzer

thing is the without did growth Lexi, be software we even to remarks during level experienced the above add the that expect only prepared we QX. that in QX I'd did we that XX% Shape, say

Lexi Curnin

much. very you thank Great,

Frank Pelzer

Thank you.

Operator

Your comes Alex Needham. from next with question Henderson

open. is line Your

Alex Henderson

that new about thank relative Great, products hoping selling I if the introducing process here. could acquisition you very the you a and much. NGINX the little was talk to bit you're

as DevOps selling that's predominantly value had understand because controller the that of and have people project little to the is and application coders NGINX in specific generally selling success on it, focused So the I an DevOps stuff administration. into FX NetOps community, and community. NetOps footprint access generally didn't coding and been the IT good to have predominantly IT sold your Conversely, back to you but really has selling that historical application

and the people As NGINX community, about the controls Can through bit you've the Big that dynamic? Controller IP manage does from they've centrally and bring the to introduced that distribution who are talk been are people to power NetOps way you back past? the in the now in a of little back through DevOps/Coder the full-value the that are FX have then into you going the losing a architecture, to then the DevOps, in that X.X this Beacon integrate that bringing

François Locoh-Donou

this is you yes. of you, Yes, short bit let context. me a thank give Alex. The But to answer all

model gotten the plane, the If manage as the implementations that's at their new traction had where how so in a technology. makes one, and monetized NGINX The community to of because support plane had Controller planes hold you the current terms in plane well to of as number look DevOps it in scale their large it NGINX data and NGINX data source the data that, deploy to across a revenue offering in open additional far dimension is and number really above easier applications. of offering features really data capabilities lot

you and at sophisticated have able integrate on who manage if folks DevOps have deployments so, look who own. the very are And to-date expertise been folks them and and use the NGINX, to it's people really these to skills their

that perhaps use much button Controller, use it large an larger a on people a the to easy technology group the sophistication now And essentially and don't that offers allows scale. technology of NGINX with that so, same have

also at what targeted kind large that's the Super-NetOps first more of really users we driver, which of design call enterprise including enterprises. So is application centric integrates users the in Controller the

on to model faster a of their it make it DevOps the applications what have the deploy applications the changes so and self people in to does service And for still for their have to does, visibility people applications NetOps gives very infrastructure and quickly. goes under an ability

that the to the will and the really these Big and and DevOps of in needs and we're environments, for bridge other that at the to offer speed acquisitions, a visibility Beacon, IP, holds indeed NetOps the bridges the it's visibility integrate the for between the time that strategy, going Controller truly DevOps divide, This really FX first two and markets all people. work environments. the the needs which Controller serving FX technological and the across divide communities from serving in NGINX, analytics in concert allow we will NetOps of compliance together we give NGINX So said and and and of manifestation

NGINX tier of as a easier the for use makes the deal convergence. the We capabilities Controller does products because may large business source and the is because and and commercial new So deployments to that's it offer divide, size users technology. it it addition number the a scale open a exciting very capabilities this in NGINX to that also increase launch a want think for important for up DevOps bridging and around our move

Alex Henderson

clear. thank That's Great, pretty much. you very

Operator

with Raymond James. next Leopold Your Simon from question comes

Your line is open.

Victor Chiu

in of on shift Telcos Simon update regarding the stand Victor just give this the and implementations there? outlook where us Hi, ADC you an is kind to for Chiu the Leopold. of Can software

François Locoh-Donou

to be keeping kind to in kind reduce place move We're that of to What driven service an overall and of XG is able service now this large more their is large readiness for and their seeing to acceleration when service in software continuing by Simon. the able of with virtualization. providers see be a we're infrastructure essentially virtualization. and for move in Hi, to desire providers saw quarter for couple Telcos this and also for We hardware starting faster make their implementations Greenfield again to to they deals need providers costs. infrastructure to changes starting based space

will long for time, I for we separate is with, the the but those service two we these Over think that see providers now Overall in as being. see these time accelerating. the the work converge, we trend environments

Victor Chiu

It's you. helpful, thank

Operator

comes Jeff Your final from question with Kvaal Instinet.

Kvaal, open. your is Jeff open. is line line Your

Morgan Your Meta with comes final Marshall Stanley. from question

is open. Your line

Meta Marshall

there have on of margin expectations AWS breakeven any I there; kind you single-digit but operating changed? that dilution target And the get to for from then mid and XX% XX any of That's Quick at target, just the on give? just it. because you update XX% Security, Jeff. to I assume on the Look revalidated those partnership, high could question Shape Thanks. benefit months

Frank Pelzer

about clear XX% Meta, I be to we to operating XX% when just talked margin… want

Meta Marshall

Sorry, XX% to XX%, yes, yes.

Frank Pelzer

make about Just want talk that like clear the ahead, if to want to go on numbers, AWS? you we're sure François,

François Locoh-Donou

Yes, Meta.

agreement. collaboration the our strategic with progress of on So, on made AWS roadmap execution we've good

part new teams surface said access recall opportunities. working that and have we a opportunities expected you number very highest been in what part we're sort seeing have that's QX, of the prioritizing didn't We now are to impact because I we the Both field, in of if well started that before, solutions in architects going every not on Solutions, bring agreement and AWS have to exactly FX FX, and have opportunities to we day be to would face to of customers we who of back that was what this trained seen see. expected before, them perhaps number that's were but we

us So, accomplish so about result it's in of I second-half it the said we're seeing we bullish we give AWS. really we the that early expected what from together far, but we're XXXX, what think meaningful and partnership, pretty to a days in can with

Meta Marshall

Great, thanks.

François Locoh-Donou

Thank you, Meta.

Operator

Thank you concludes the call. This for joining call. today's

disconnect. now may You

F5 (FFIV) 27 Jan 202020 Q1 Earnings call transcript