FFIV - Earnings call transcript Q2 2022

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Operator

Good afternoon and welcome to the F5, Inc.

Second Quarter Fiscal 2022 Financial Results Conference Call. [Operator Instructions] Also, today’s conference is being recorded. If anyone has any objection, please disconnect at this time. I will now turn the call over to Ms. DuLong. Suzanne begin. may you Ma’am,

Suzanne DuLong

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

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

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

Francois Locoh-Donou

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

fulfill ability that demand business. significant our As quarter with from entered our you all systems second limited some to challenges know, we our

pleased end to delivered the have despite midpoint the revenue above our upper of EPS of are guidance our at challenges. We non-GAAP guidance and those

to revenue software year-over-year Importantly, revenue XX% deliver first supply product quarter, growth majority our for continued flat of we as results with a was on Systems services software the global constraints business year-over-year. represented in of declined chain time. and result XX% strong the the revenue our our

modern reflected in customers another Our focus importance continued scale ongoing and and increased and translates placing This quarter where continued FX application across grow on second strong and demand our to benefits trend applications, an both to their portfolio. rapidly while traditional security.

view our remains clear, While towards chain challenges is strong resolution demand our supply hardware murky. drivers into visibility of

required that we and two standard challenges. related which electronic into I successfully components discussed design resolved alternative to in and first, happy to we Going qualify an supply am to QX, chain primary was report source. the us

second The semiconductor of shortages global challenge to specialty we components. related discussed is

to fulfill While end progress demand included this will of which our fiscal February. appliances, iSeries our our ability of from appliances system we constraints continue rSeries customers supply systems in demand have this year. we efforts made incremental fulfill to to expect our through on issue, next-generation limit launched Part the shifting to some

in solid ramping rSeries and we manufacturing. sales, traction seeing are are We

accelerate now rSeries. of constraints, limit suppliers, to also the from are iSeries semiconductor ship of ability primarily and our handful ramp impacting However, a continued to to our ability

range our X%. delayed growth But growth. for prepared beyond systems year systems This of of to we revenue revenue the to fiscal compares Frank been recovery our expectations delayed later in quarter. X% as outlook X.X% the the now expect had our XXXX has revenue expectations remarks. a recovery, last review result to a prior deliver in detail to result, our As in will we X.X%

structure. however, of we XX% strong, so be sustained operating the we strong growth to remains In to We demand chain our And target the of constraints to our XX% in strength of therefore, equally true our a health view reflecting near an get of with light of end reported to results. for Our and our year. impacted in changes software not can temporary, back urgency sense correspondingly the change sense continue will are and feel are towards expect obviously making the margins underlying supply term. the near deliver of top revenue the and demand to frustration this business strong that resolution we our our

resolve to available possible. path as quickly taking are We the issues as every

in suppliers XXXX. capacity fiscal second of into additional improvement translate should which Our XXXX, our beginning quarter for quarter expect the calendar last during

supply the quarter, chain we than challenges estimated While severe more they are are temporary. last

will demand seeing and and seeing portfolio, to In addition ability Frank for reviews our hardware, continued software from we use quarter’s detail. cases our and the traction good speak to business our bring security to drivers I our in demand are momentum results including a broader portfolio across customers. before solutions outlook to

traditional simplify strategies operating for both. and to unite and FX and are looking modern for their in both architectures customers Our increasingly solutions that

FX’s a as their its NGINX pandemic. and customers example, experienced QX, substantial a in single security application are use This cases. is environment. program vendors delivery new of customer upon to siloed a are Kubernetes-based technologies services, a customer the addition using workloads and differentiates customer’s positioned who automate renewal. app uniquely subscription we to both result. selected during resulted of company multinational multi-cloud to NGINX subscription Customers means the an The big including delivery us the of in service through delivery, from an help challenges. operating and which As and and loyalty American Xx also approach are The and uncovering multiyear content clouds infrastructure-agnostic growth to to during longtime expansion beverage IP NGINX cloud modern challenges multiple have with

Protect term locked FX cloud was in for This cloud over result capabilities. including Ministry with as clear customer add of selected in for enable our consideration the our a region. important the API multi-cloud by portfolio, our to short were NGINX, into customer we future. software selected WAF, Not architecture environment in single of plan nation create this deal App intentions and the customer. value a a cloud-agnostic true both QX, a and and to cloud-native to We modernizing of in the clouds expand management. a Health advanced spanning including solutions a additional and near our cloud an They had offerings BIG-IP and During hardware being with on-premises single APAC

and Software-as-a-Service are edge-based consistent complexities our legacy, delivery protection, large delivering on-premises and this of is across applications, modern centers networking unified and security, architecture, security are took cloud offerings including are will mobile. Finally, step for workloads mobile as-a-service here platform. a increasingly distributed In require architecture With with technologies platform-agnostic that also FX disparate complexity applications cloud to we challenge Meeting stay. better and Applications here means to managing forward to provide across likely it’s hybrid QX, a performance the towards and on data we visibility and that too environments. environments manage This a multi-cloud remain and platform, services. clear stay that challenge solutions computing is launch and distributed and a multi-cloud customers for that containerized customers. all helping

web and SaaS distributed stack. distributed the in protection security Volterra API first are FX multiple a the and FX integration technologies cloud platform, services Our WAP, FX capabilities provider security for service and This FX offering augments solution cloud reflects software platform of application across early major or available enterprise in and we offering. strong interest. our our is globally step seeing first

security Corporate this Technology to public distributed requirements division and sought mandated center capabilities. SoftBank improve for of for It its SoftBank deployment cloud effectiveness resource private announced services the other The virtualized option micro with on-premises private turn and inefficiencies services. its But future to to one first and FX data bring to wins Information infrastructure. way of distributed quarter. an of containers the low cloud-native a notable of utilization FX cloud its needed cloud

We cloud to product customers’ are by simplifying further with our branding leveraging integrate FX FX distributed meaning. experience

including and umbrella. portfolio, Silverline see distributed services our will FX and and cloud You under services united our SaaS we renamed have Volterra Shape, managed

going lot to a to refer those summary, expect us hear is chain FX. forward from to accordingly In despite forward. to our solutions So look there short-term challenges, supply

and modern grow to services, evolving we application cloud and apps well customers enable apps, multiple NGINX’s and have BIG-IP’s ability and current that traditional serve the to our expand secure well serve needs exciting to application FX aligned rapidly our with estate. We growing future and are pressing to software their customers’ are secure distributed manage placed and and opportunity ability secure to drivers between most

second I call detail. Frank QX and Now results half will in the review Frank? turn to outlook to our our

Frank Pelzer

our Thank We afternoon you, discussing the will everyone. I quarter good second guidance before above Francois X% year-over-year. and our range half $XXX midpoint results our and million, of outlook. delivered revenue a reflecting of decline review second QX

revenue Rounding XX% total Systems for of multiyear and CapEx quarter in in grew where quarter. product agreements but preferred software with some represented last closer This revenue. at revenue. do flat customers the activation of our bit the software $XXX revenue been million. deals in revenue. mix, our of and couple as XX% a of is X% as We where in XX% a revenue declined revenue revenue the software this timing decline see Services as revenue to well out represented a Taking it of subscription-based reflects variability the to quarters, number Global in XX% XX% large is small a revenue million a picture, This product total trend. compared a of contributing it year look XX% delivered $XXX last revenue, of not model. to representing couple revenue Rather, a total product Software of indicative million. $XXX quarter had from larger down year-over-year, delivered subscription the we XX%

In total licenses XX% variability. service the revenue. ratably, year in XX% GAAP results. growth not includes period. Enterprise of the including and XX% business is and I term up we reminder, APAC On a which macro a that some XX.X%. regional this related customers significant operating of in well signs of services Americas utility-based revenue. saw government U.S. revenue will part totaled revenue our XX% recognized EMEA. in and as of to XX% delivered the X%, and quarter, revenue margin Revenue recurring revenue we from quarter-to-quarter bookings representing concerns maintenance gross represented term-based XX% in ago representing global expect XX.X%. share softness believe portion Non-GAAP and was as as region. declined We political as is XX%, representing in represented our such, providers X%, As sources, year-over-year, XX% declined of revenue, quarter. quarter. the margin of Federal. are represented was subscription Service a EMEA gross from the from product our the subscriptions of component customers basis, now X% in the X% QX a of is This some

We operating continue costs. component prices, were and sourcing-related operating Non-GAAP were million. expenses other to expenses fees experience $XXX expedite million. $XXX GAAP increased

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

was operating XX.X%. margin non-GAAP Our

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

the $XXX Our was share. or cash turn and XX.X%. income sheet. $X $X.XX quarter QX. balance quarter in $X.XX totaled income GAAP the to per million quarter was at Non-GAAP now $XXX was flow million in will non-GAAP XX quarter I per operations We from rate million tax days. effective for Cash approximately share. investments the million was end. generated expenditures Capital the million. was for DSO $XXX for net net $XX or

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

our details of Francois please from Finally, outlook revenue year we non-GAAP our updated ended stated, the QX. recap XXXX will his up note fiscal for comments the will I remarks. otherwise reference that with XXX Unless in second I approximately fiscal outlook half guidance X,XXX shared you metrics. view now. operating the with quarter XXXX. begin revised employees, my with approximately

to systems X% expect deliver growth to year. Given near-term, the persistent within limiting expectations recovery year chain compares of growth. X% revenue our fiscal our and X.X% to for are of pressures, dynamic range we supply to XXXX prior the This which revenue X.X%

of We continue to growth close to expect XX% top the year. to software to deliver target the for our end revenue XX%

expected lower X% approximately to growth reflecting of to we range believe chain near year, We of the revenue challenges the temporary our current believe Services deliver underlying do not to X.X% are Global do would business, expect doing model for and growth. the system We the Because our we risk sales. growth future operating of adjust ability so reflect not compromising the intend supply term.

next a result, over likely see the are several we As quarters. margin pressure to operating

expect operating XX% FY We to manufacturing of capacity. benchmark range to non-GAAP return XX margin XX% operating regain full would in expect ‘XX. the We of the we Rule to as for

fiscal We to continue will in year the I repurchasing will expectations. move fluctuations of during million to the XX% be to our shares expect our XX% committed now year. quarter-to-quarter. with tax range XXX full effective to in rate quarter We remain some third fiscal

of range million to the $XXX million. $XXX in revenue QX expect We

QX gross taking approximately million. million estimate supply QX margins to component expenses and of costs $XXX pressures, costs expect related Given of are actions we We we chain operating $XXX XX%. to mitigate the to

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

QX $XX will expect $XX to back approximately million With We Francois. that, compensation million. over the turn expense of call share-based Francois? to I

Francois Locoh-Donou

Thank we you, Frank. In supply continue our will power mitigate to everything our chain in for impact doing customers. closing,

overshadowing currently we as will of underlying we through move the to is our chain next several believe strength the abate supply constraints business, quarters. begin While

app Software-as-a-Service will Our our long-term opportunity. software drive and future our and delivery security and solutions growth

the a opportunity. to we that, strategic position, our is well we because with Q&A. ever our open call operator, We and will strategy our than in more of have confident a customers’ our that that, roadmap priorities. are long-term created and With portfolio aligned And

Operator

Sure. and Samik ask Our question. question of thank the Instructions] [Operator sir comes Chatterjee line your from first JPMorgan. Thanks, you. Please from

Joe Cardoso

pricing suppliers? the supply Hi, during highlighted on My facing alleviate the the the of prepared for starting that the taking yes. that all? actions This see you Samik to any first what’s the you higher challenges? see take of supply to just on benefit is that relative from Joe are do constrained Can then done? peers lines And you passing higher pricing Cardoso on time you at pressures the planning Chatterjee. start some there? you’re you Are from when that the guys your time you’re you to challenges on headwinds when improvement to Like question remarks. from or some some the your is being that on you. networking touch underlying for Thank the two to should are from been as other driving space we just product components that some highlighted, in see or start have of around – you the given Have And contents line? offerings to

Francois Locoh-Donou

Samik, Francois. question. the for Thank you it’s

start the pricing. me Let on

our being cost the will We know, in quite the you significant – single have was our going And refine that increases we continuously already been to said, pricing we component price and did in else that to we what taken digits. we need about philosophically And from coming customers. first significant the we’re and seeing anything few action That as line sorry, in we’re do that months area. months. cost seen, with of look continue with cautious in increases. a generally But in our kind perspective. increase But high we’ve in have to price models a whether review affect review last at

all Samik, calendar to very of executive them about it’s should conversations based expect our suppliers that And on things these address us strategic to basis, which our quarter. in them second they when capacity XXXX, facing. handful to in their really in be and are which to relates do deep it a get so supply suppliers, chain. of we that conversations calendar based in have improvements revenue year, the And fourth first And broad with on our the of regular on semiconductor challenges the the we we conversations, quarter really have to conversations is improvement including would a fiscal translate quarter of do better, and with executive have. As this really the

consistent But increasing capacity. the around We their to for expectations milestones improvements we’ve sitting expect in improvements. our waiting of capacity. based them upon hands suppliers that just of additional on terms And their from and seen these not we’re what fab make

on also side actions our drive are improvement. driving We to aggressive

So taking excellent value expect demand because to are of is we is actually, perspective field what we are this rSeries, excellent. platform the on front in that terms the performance customers the iSeries is continuing platform seeing, our we shift platform, doing? are rSeries proposition platform, the of constrained platform. platform which the be the we And from just First price of because on traction less to next-generation to than our

aggressively rSeries. we’re So demand shifting to

the actually, of on our qualifying additional make alternative sources course, of so qualifying are shortages. continue supply aggressive we And platforms suppliers redesign these advanced to platforms of We both the velocity supply with increasing to for alleviate and purchases suppliers.

for We that for very of providing into quarters. and continue quarters. them forecast doing lot aggressively that future visibility several do our But have been a we to

these we in first actions, translate our revenue. of as quarter the for fourth quarter into with I calendar better XXXX improvement into would said, our So supply expect that calendar hardware

Joe Cardoso

you. guys. I the appreciate Thank color,

Francois Locoh-Donou

you, Samik. Thank

Operator

question. Sandler. comes the question next ask Fish your of James from Piper from Our line Please

James Fish

And believe afternoon. any than guys. course. got well purchases compare parts, the easier Francois, quarter. much around way cutting I Is XX% a be quantify we question much an cut should how here really, a and future next over to the The second the as for of – getting helpful quarter line giving this we either that. a of a big as is would that question the towards software while hours or software of is against where backlog on CapEx think, the row system two as Hi, there should in after to is we’re period how growth last what over was loaded shift what the delayed that then here, in versus is hardware us strong, of Good quarter hardware really make sense software Kind around aren’t side, quarter on number. two it last us that for And another occurred?

Francois Locoh-Donou

to Jim, the that. let’s then around start, hardware, me and part your after latter go of Let with question software

our very in is into So the Jim, supply supply is constraints very supply chain short-term. is there our reality not – in semiconductor much visibility that today actually so chain into the that the long-term. It’s supply

risk ship for here, to on course, rely tell terms and, of that today. numbers course, from year quarter, conservative And the the of last That’s not another that significant completely deliveries components giving semiconductor yet full did those to you we have based gone in we We down to like you guided these what you best this in quarter today, going full that’s happen the of of we’re we In anticipate is when so dry. forecast what availability the Jim, we’ve just not that to numbers visibility QX. and did zero we year. not we for upon giving that doing year view know there because, last we fact our broker ability later did quarter. the in in another for is full – also looked the have appropriately in the we’re our And the providing deterioration has step anticipate are be the suppliers market why our

our we year conversations full information So we’ve have there have based looked appropriately it suppliers. be and all to upon in some in But we how is, the number. conservative of risk of from course, constructed still the

tens specifically grown backlog On has course, our Jim, But strong. at dollars. by of look pretty the the And quarter don’t you speak backlog, again of if this millions demand of backlog to numbers. our drivers, we multiple they’re Jim,

remained has half we first When the demand, track what year look of strong. demand for the are at with plan So on was we the at our year.

is this so supply and a demand not issue a really And issue.

that. is software and to Frank to going go take Let’s

Frank Pelzer

we the in a number, November half XX% first guide back of software in about – going in well, on time second software of the XX% and to lot ended back and XX% guidance And variability ever we had of had Yes. In the up you the any volatility year XX% and to we go at to you Analyst the we there quarter, about that number. on quarter, to Jim, XX%. mix the And XXXX we if in if of was so we beginning XX%. around the after quarter. We sort do range, a question able to for year. And less XX% first at talked to this it talked not obviously, be range. given of that that was make that second be there Day marks – and go would

I think XX%. last quarter, it was

dynamic it was any growth terms But to certainly in quarter, think of, easier basis. But mix This this speak not a a was other quarterly It we of comp. shift XX%. no or of an about basis factor. there’s do on annual number an

second where expect of happy XX% half are in we’ve end continue near to perform half quite ended the XX% and to range. the our top We with the in first be to

James Fish

Thanks, will back. it I yield guys.

Francois Locoh-Donou

Thanks, Jim.

Operator

comes Our line Daryanani next Evercore. Amit Please from your question question. ask from the of

Amit Daryanani

my margin question structure. have question. and on operating I the clarification, taking quick hopefully. for The is I I have a really guess question Thanks

XXX points year-over-year full you’re if year even year-over-year, margin, some which guide, about though down kind look of growth So is the basis. at talking in like the revenue XX% there I on is XX%, operating a basis model

year out I to of front you the need alternatively, happened or Is the operating aggressive think you XX%, just forward? why half? do there there range back on something out quarterly would of love sort my rate optimizing I’d XX% what in there think of to more So that’s the margin to you run is revenue get you year, half helpful? versus macro in the basis. renewals And cost of what do And I’m would how need terms see structure. wondering anything need as get just like understand anything basis to from then of go in the to just perhaps there you call to just a back you a say, decelerate software would to be in fiscal you OpEx is call implied kind

Frank Pelzer

Sure.

don’t over is So said for operating it start changed, turn margin think that and and I on past absolutely to our the I true. why then quarters expense that plan the two we has So, Francois? side, I’ll is what not largely,

If you sort the we margin take had look for at full where operating a would growth expectations, also we to that where year. that to in the that of had relation expectation point just X% operating rates original we gross expected X% of to expenses lead in of the model have and expenses the our for what

expenses that the hinder number to to the XX% is and temporary, we trajectory the XX% And for potentially supply need. because we But about growth talked would so a of in shortfall business. the what of at year longer-term hardware we of think we What chain the run-rate operating what it’s the change is our seen beginning have right exactly because don’t constraints. the they are to

the model. so why And we not have changed that’s operating

Francois Locoh-Donou

growth? question second And your your part then about of was software

Amit Daryanani

Yes. right? growth, XX% of call You I in for started year. the half guess, I year, full the when at at your the low guide it, first fiscal Francois, look

half decelerating talking of the And so mathematically, back things your you’re year. about fiscal in just

decel a back software more is but the just bit wondering that just that happened pragmatic, renewals something implied driving half? has in I’m what’s in there half. the with on Or been the So first this

Francois Locoh-Donou

to growth, basis XXXX. in when – Frank And the fact, guided end on near growth on what this track annual not to delivered basis, quarter-to-quarter talking ago, does to an this would that. include that say going weren’t get it that term part back year bit, We’ve this because business is said, to XX% to was at at that’s for SaaS think on And software top of always track we’re quarter-to-quarter a a would that. also a we’re variability deliver said a year. than of our achieve would XX% just growth that we I quarter-to-quarter. in guided in we look we the did more And No, our looking range. be therefore, fiscal Amit back ratable we but X you to we first Horizon XX% XXXX. We some that to Yes. in and we less against We we again to And did year, XX% subscriptions. XX% on last top variability there that model this moment all, end, see

that So a in the dynamic, The if past. true you different the what in than will, on as business referred on the renewals you just the the that seen there renewals software agreements trends isn’t as and have these we expansions the are encouraging to, very signed well of we the terms in very, forward past.

are So we seeing. drivers generally very pleased software we’re with the

Amit Daryanani

much. very you Thank Perfect.

Operator

of are next, You Needham. Henderson Alex

is line open. Your

Alex Henderson

little And was such extremely the made to and there U.S. decline that wanted comment the your EMEA results? dealing the Thank with, a bit and Can feather go economy. as that you you contrast that obviously, mentioned there strong APAC outstripping why much. to a the and you international results a you revenues into of in I in bit, the to U.S. picture about talk you’re you slowdown the between a about versus the when little slowing back conditions overall a very specifically, and Europe demand the Can demand growth in splay please? supply. in result you Great. demand EMEA with talked the

Francois Locoh-Donou

Yes.

last of our saw kind of we was it Europe. business a there. start is though the month little attributed very would macroeconomic let kind say of the second into is small. really course, beyond, Russia bit it’s our is Ukraine-Russia in a accelerated I We in of demand and March. there, me think starting think What quarter fiscal – So the which and in war, even slowdown in We to conditions, of in and quarter, February

to So delay that we in there some Europe orders slowing But potentially in would be potentially a to around the is no really that customers the spend terms and and whole more to direct scrutinize impact has more little think economy inflation some down, a cautious, little make. of they territorially. sentiment caused otherwise

In we’re tens here. effectively enough of the should that, talking was things, a of it in point It’s that scheme big Now we dollars in millions felt trends we about but noticeable our of not multiple it effect that smaller quarters the than what this yet whether out. and continuance or to the will this Europe out in conflict we because inflation, part know play of coming – more with continue how in whether and will – don’t and extent.

demand in a service had Americas, enterprise as for space as also the providers strong the well in very We overall.

that little a Europe. So contrast with bit

Frank Pelzer

to I add Alex, is demand clearest have or where versus in in you bookings to constraints start you have revenue terms picture of the we of see the hardware. may not because see recognized just do this that And of

so more. systems more take of normally, where associated before, be recognition activity revenue some got would link. the backlog tight to look little with which we of quarter out this the the when in there that is bigger in number a was of was quarters But happening, that going the in a And a it skew at shipped Americas bit

Alex Henderson

that chain the any Is And and biased change Europe I’ll part that to more then cede suggest Thanks. And in Europe in in it? of floor. supply and – April is your systems in continued software? that’s the your pipeline in to less there there? – Is erosion conditions would

Frank Pelzer

Yes.

a activity. mean than other in Europe and higher bookings whole, first businesses no your there’s hardware hardware towards as to I weighted APAC slightly no, some probably answer the not the dramatic. is but it’s is towards question So of slightly specific

shipped will until more of will backlog by first numbers these things you of geo out aging of see what That’s get will and get is the constraints. of backlog. and on that fully supply caught some think overall skew these the just where that revenue up got some I we’ve the hardware and chain we number some

point month X, when the And customer-centric equation, very in bookings the supply And about a we limited just to this take really saw that with get last you numbers the is out so that’s wanted to a out demand because EMEA the saw. geopolitical little in going what had meeting are We to skew quarter, delays We demand of concerns talked as towards trying got. some these of we of that side creep that point we did view on we too. up, the bit. particularly that much a of we’ve

Francois Locoh-Donou

April, Alex, macro what your EMEA in just actually QX. for environment in looks because than we are QX about I the directly. the for of better cautious question pipeline think And saw Europe we But

Alex Henderson

Great. you clarity. very the much Thank for

Francois Locoh-Donou

Absolutely.

Operator

ask comes question Silverstein again, line of question. Silverstein, the next your of your Paul Cowen. from Paul open. Your is Please Once line

line, Paul? you no mute, from please If seems to your are response of line There unmute be Paul. the on

the will you now We to Sami next of coming line question proceeding Suisse. question. Credit Please ask be from the of Badri

Unidentified Analyst

for Sami. question. taking for the This on Ryan is Thanks

parts first question basically, all So past seeing they a into whether software the the follow-up. for given were customers our is I have the system, for historically we’re want who quarter? constraints And

Francois Locoh-Donou

I’ll start. Yes.

that environment, business. is So the speaking, they And from just not move customers have we reason broadly substitution customers for to for to FX – providers just done software we not And other in have that in move considerations virtualized to they to generally, when – hardware architectural have still software, a providers the seen to a to also to environment. their if other these have on elongated lead some They of customers number also haven’t work done generally, hardware. times. which have a but are have

time of change our lead ready – not larger seen software. the are is alone move states for software. factor And moving them to to a have have reasons, in not they who is we that those lead customers to the on is the times what So, majority hardware,

those for will that working have to marginal very lead margins make to seen. be in software – seen move, Whether be to-date. our that a that are the that any a make But can meaningful to be we to we phenomenon But happen. change the elongated them marginal who seen is aggressively on with substitution to-date. yet hardware have to if future, not we continue times Now,

Unidentified Analyst

that. on appreciate Got color it. I the

so that reduction extent late given this imply database? much is does be the is in is, of the a or could follow-up that of the guidance bigger essentially demand my revenue So, year, XXXX

Francois Locoh-Donou

think No, away. we going demand don’t is

me Let that. clear about be

very strong – have seeing demand. are We we

form. in We order haven’t cancellations any in seen any any trend

be, despite of any times competitors all vendors to haven’t that And loss challenges generally, also other we because the across seen business lead other of are with We continue times. kind to from our but the they worse we strong are the used of in And demand our customers have with lead to having, folks challenges are they than mix there. see the board.

are lead will. if demand think destruction, in challenges and right causing our you don’t we shipping So, our times now that hardware

be even same. is are our is back this be We what would into But shipping how see may to QX the think we to with to-date. the to it’s start we low to of full XXXX. can we we point in visibility from demand. fiscal that right fiscal more expectation going of quarter to – fast be supply now, guiding is to the going our to a XXXX. next our availability about we yet effectively, not to half have back second of that will year, fiscal shipping Going And course, XXXX. And we in our we for improvement see be It back in of think demand get

Unidentified Analyst

Got it. Thanks color. the much. I so appreciate

Francois Locoh-Donou

Thank you.

Operator

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

open. line Your is

Meta Marshall

sense iSeries down is who wanted of get Thanks. kind start of the understood Great. quickly thought? kind what of to or on versus more rSeries and – of as calendar the maybe breaking general QX. between getting evaluation iSeries kind the for the timeline kind just it resolution then Are those iSeries. Thanks. had of the transition issues the to some from specialized in in of chips as the rSeries, is chain that process we whether a I timing similar supply rSeries, component is more you of some going And of customer terms both just of

Francois Locoh-Donou

on Let cycles well several serving me of because was and software today, in it’s quarters what rSeries last start the to have rSeries make iSeries Yes, it’s with would is it yes. us compatible We prior part. relative made to that and that cycles. our decision iSeries ago the with runs the been qualification a answer the shortly the

and these qualification proposition and strong, by of well next in we value also platforms. rSeries generation this get so customers platform the plays to terms for very This the the customers’ with demand traditional is ability our served modern having applications And and both platform. of

In terms always it’s of like make said transition have we full timeline, transition. takes the roughly to six that quarters

run XXXX, near customers is ramp expectation expect going to XXX% our fiscal to quarters, our be to rSeries. the six the with of our demand so of time almost will next And the serving we And exit rSeries. by continue primarily we through quarters. that we And are that five

question was second Your about constraints. rSeries iSeries and

because be have are are semiconductor So, parts we right of rSeries iSeries. that shifting to now, But we by the are constrained constrained because a there new into the newer going less platform expect on demand to components. they than more less constraints both on rSeries year, effectively these rSeries it’s because

in a So, aggressively that quarters shifting of to But reasons. be that’s customers rSeries. doing of on able the to iSeries meet number on next be why some demand are few also demand to really to continue we the platform need we work, for for are course, that to

Meta Marshall

Got it.

kind calendar resolution rSeries more not iSeries So, when is QX? rSeries, this QX, of you – for ongoing that’s of calendar say

Francois Locoh-Donou

some calendar QX. we Yes. supply rSeries in see also calendar improvements get is the should in we of iSeries, there. terms QX

new However, continuing we calendar year, will to into going the be rSeries. shift to

and demand of progressively both and – majority the will rSeries revenue shipments. the become So, the the

Meta Marshall

Thank Great. you.

Operator

Simon Raymond Please question. ask Leopold The your next question of James. is from

Victor Chiu

you more cloud guys. that that from constraint Are the for workloads adoption trends that the of public supply? see anticipate any cloud shift the prematurely don’t public This observing Is impacting the moving uptake deployments, you customers in Hi and to accelerating any Leopold. systems in something away in customers Simon on Chiu FX the them given we could in the virtual into encourage you can Victor cloud that deployments know move to subscription guys but of direction? workloads, is

Francois Locoh-Donou

these I environment think will customers we rebalancing to see Victor, over to long-term continue their environments. the multi-cloud

in lot center be cases, fundamentally a challenges which environment. future believe the that be that cases, best on And belief of system, I years has current our hardware supply that – be is will In the a to that think the public a traditional and continue environment that in will don’t application. of a been, private for cloud. that, the alter distribution I last frankly, the land infrastructure will some of that in for think will with chain private And destination cases, ultimately, lot several data will applications. cloud. future applications I

today. and we we the also – see it so customer seeing behavior are And can from that

will, can’t is for way of get of think virtual best B, to – and customers do for to I hardware, machine. applications really to capacity you plan the that for need FX’s need customers best if move their course, on that that, But software the public is to also those a architectural time. a also of but kind have the it different cloud, – servers elongated It And entirely available. lead in takes consideration. quite And takes an bit moving a number times to planning. have of cloud, a cases. And

generally, chain of all of And cloud. think a customers the environments. – them to environments. customers is destination And supply designed intend multi-cloud have we for public But our think already accelerating are our move in that to challenges are for serve our so portfolio particularly Most we the we we don’t the these to multi-cloud. and multi-cloud

Victor Chiu

sense. lot What on process the envision that this you here? their cloud? move already makes not the That are something customers public between and a about straggling for the encourage or the of to on-premise of one going or Is way in them workloads that fence other? to Is

Francois Locoh-Donou

a workloads in-house where would a environment, maybe today, for use of virtualized faster. cloud, have who be available want could they greenfield that which that either situations of could are minority FX do thousands Victor, if public maybe not the they servers the think say that’s get customers I they they deploying or environment to – – our a for greenfield of software do customers a way possibility new where to sort I and just it’s But customers building in are be environments. That’s today. customers that to would

Victor Chiu

you. Thank helpful. That’s

Operator

ask Please of line comes your Citigroup. question Jim question. the Suva next from of Our

Jim Suva

you. the comments. prepared each of steps? the of several we little operating kind as of Could in of timing as magnitude how steps? But give and should about on You and you those talked timing the a the color those steps trajectory the of in Thank you. think bit us Thank margin your kind of them about far

Frank Pelzer

Jim, then Yes. got Francois start all don’t has why if means, do. and by add, I please anything to

we from where coming the it, But quarters. on quarters, as And operating had where as in couple to lot of back that step-down XX. or Rule we to are well a our margin the the shipment that in XX% going Francois of hardware going So, business that business. of set. the we certainly, that that couple next XX% to mark gross be questions in to largely the our XX% quarters to – immediacy we ago of of – to of systems below to the see the impacting margins three get of is up the is less are call due back revenue our of quarters five side it along laid next, to over the sort the out hardware ramp we And a with that largely four think over

we And we plan work through Rule supply when combinations constraints. on putting the are expect of in operating way to so margin some the do but these of chain pressure to operating get near-term, back those our our XX

Jim Suva

so much the for Thanks Great. details.

Frank Pelzer

Yes.

Operator

comes Our Goldman the Hall your ask Sachs. question. of Please Rod line of from next question

Rod Hall

you guess what for all I that the chain happen way do to an that the the challenges. these supply year give wanted Can curious of kind Thanks there? words, And to to that change. sooner the of I to us midpoint, think your visibility then and And as year here? other on timing is. due then of of $XX we you Hi I In But to of it’s guys. expecting calculating better there. this guide change you million Thanks. Yes. supply September to in end or are have most am question. just reduction full do just I encompasses fiscal ongoing – you am million. the duration come the I about idea back comes at $XX get

Frank Pelzer

Yes. Rod, on I start that will one.

our out we the the it couple on for continue lower lay QX, experienced hardware the not the past of as have quarters QX likely in we as side think pressures that we see as in I look, So on. is models, continued near-term point

ramp the I will that QX quarter. us will systems be is green to low think calendar in see impact the on and of improvement. I for Francois shoots that noted coming the calendar to up start you ‘XX. QX in some this will start point don’t that of But And think side,

more in QX low the of think or point I QX ‘XX. is

Francois Locoh-Donou

‘XX, XXXX.

Frank Pelzer

Well, it’s QX of ’XX, but…

Francois Locoh-Donou

QX of ‘XX. of ‘XX, QX

Frank Pelzer

Yes.

Rod Hall

or to with days. check out, I then to now back questions Do things. really. And DSOs? also there, your why demand also you we further just wanted the XX the to in guess that’s in and in starting on regarding Okay. seeing noticed the you I supply, assume temporary that’s are you are are side that I – indicating of – I DSOs customers order to due up people two jump but jumped have to

that. about Sorry

Frank Pelzer

Yes.

and will DSO first Francois then one, me up the Let side, on Rod. the pick I start let

this when quarter, for quarter factor out a the a up been in no earlier – lot this purely in a and going that to in bit hardware was three. therefore, changes shipments the billing is of month of all. we So, quarter. more of little were at This leading had lot the a on And it

more the calculation. up balance dynamic XX-day of legitimate to in AR function so There on It’s of going that’s AR the things are see just terms going net DSO just that nature a balance nothing that And window is by up, of there. in the cycle. any

So, nothing there.

Francois Locoh-Donou

in Yes. have terms of both. seen behavior, customer we And well,

order order for the net out we where of months have placed kind order so is are few be ordering to our ahead several see of that’s behaviors, to to means plan to – quarters, are two some guess shipped And So, chain we that the behavior customers started and the we and who strong. their and place, ahead have have ahead, about is have I are due be planning it when well quarter. who we – I ahead back.” once last move we in trend same this next it pushing the is the we into take who out to create say, continues same But times. delaying I will What delays. which seeing expected are “Hey, to at time, leverage customers the lost other the account extended place landed including and last a supply orders you part And demand to see also been and the not those to lead demand

Rod Hall

Great.

guys. a Okay lot. Thanks questions. Good

Frank Pelzer

you. thank Absolutely. Rod,

Operator

to time Jason question at we will take last Ader William Due from constraints, our Blair.

open. is line Your

Unidentified Analyst

clarification just This for taking Jason. for Hey. Sebastien on Thanks the opening one question. an is question. I and have

that being the just terms issues, specialized to chips. of about XXXX last still and sure expected you haven’t million So, changed than revenue lead correct? chain of expectation. pushed fiscal that’s fiscal make Is ‘XX. components it’s mentioned into at further in networking out want for supply out the year the in quarter, pushing And really I those lead have all that like just and those year the been standard and $XX pushed times revenue times

Francois Locoh-Donou

quarter, that. – guide of all The right last clarify the this about million semiconductor down components. And just entire to you $XX me linked let additional is are specialty quarter. that So,

power power all on but in semiconductor type also challenges specifically and causing chipset, of not we networking delays are the that the more that’s therefore are And the Now, it’s revenues. some shipments and the that And components chipsets. is in of of side that shaping combination delays components. distribution, power of have with networking they

Unidentified Analyst

it. Got

bit And for you, Francois. then helpful. follow-up, a as That’s ended open more Okay. a maybe

– to becoming with channel, the as that historically – of is channel more revenue or to are you software, terms generate still partner managed at services, less relationship to shift of In drive sort all? have your as changing them reliant Are revenue revenue, been of you the is on VARs, you your MSPs, that reliant guys the you subscription, on growth?

Francois Locoh-Donou

models have of of to continue with such and And the part a them of model own on some is what of has that part a them that of frankly, add moved embraced can are of helping that be of actually, No, benefit number have systems our our fact, number partners of also customers new distributors really and we we to these of have great wanted us our important ton that ahead do towards were embark our to their a – and we are resellers them FX part and us partners to have to to our FX in seeing key software-centric value ecosystem. and transformation. contributed found And and our software-centric transformation software But software integrators, as several them model. And business model. the were over a accelerate journey ways growth quarters. last they a

partners are So, no, bring continue partner-centric our a with innovate and our solutions we with are model, to customers. we going software to to continue going to to great

Unidentified Analyst

Got it. Thank you. That’s have. all I

Operator

And this concludes today’s call.

disconnect. now may You

F5 (FFIV) 27 Apr 222022 Q2 Earnings call transcript