- Earnings call transcript Q4 2022

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Operator

Good afternoon ladies and gentlemen and welcome to the F5, Inc Fourth Quarter Fiscal 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. And please be advised that this call is being recorded. After the prepared remarks there will be a question and answer session. [Operator Instructions] And finally, if anyone has any objections, please disconnect at this time. time, to this over the at Ms. to now I'd turn like call And President, Investor Vice DuLong, Suzanne Relations. ahead, go Please ma'am.

Suzanne DuLong

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

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

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

Francois Locoh-Donou

year the guidance you fourth hello, outlook 'XX architectural of everyone. results range. changing software especially before you, and end today. our Against year fiscal environment, our our team fourth 'XX. backdrop to These new earnings Thank rapidly discussing quarter our will new for the speak fiscal evident a and for first us dynamics Thank of and joining quarter share Suzanne, revenue at in the of delivered were I revenue. per top high projects our rollouts. guided related above end to and our QX

While new for projects lower of large-scale pause we digital multiyear we to headed customers business favor strong customers' some had usual. pipeline lower growth the expected. and in macro transformation concerns rates into as subscriptions had quarter, software than led a close We

We also in significant margins. higher stabilize. gross our critical Conversely, several broker revenue systems of at budget our which availability in thanks had with EMEA came versus market. improvement a components and customers QX the and to currency that the with foreign more headwinds APAC, exchange who estimates. conservative resized we saw delayed with customers scarce usage in challenges QX components prior better contribute hope These customers reflected would projects product spending quarters, marked are projects both including initial And costs, to in

teams year. and it. I and when for chain did Despite 'XX we in QX demand product higher remain favorable look the customer whole, partially to discipline record-breaking and drove at rate persistent way caution we customer saw began bookings and costs our I and our was were operating challenges We for year our When the a per fulfilling that step a back will us readily earnings and year. we share beginning as stayed able the quarter. customer enabled supply However, the the throughout offset outperform look which to priority FY continued strong growing systems tax not demand in acknowledge sales target envisioned QX,

several achieved we important addition, In milestones.

XX% in levels Over we was we our to and increasing APIs, add business recurring a double-digit with total product compound predictability in accomplishment FY of to security revenue very of and $X with annual X security total our less than model. expansion revenue; our from will diversification, our grown stability have represented revenue; revenue Security-related second, model journey our software 'XX 'XX demand transformation FY portfolio with in drove XX% growth applications XX% where the time, application recurring of rate. ago represented billion higher consumption revenue now mix revenue. of and just First, XX-XX for our our different hardware, to portfolio noteworthy our continue to a were and X-year product third, we securing of years software when and

over FX FX the These Finally, five as three and distributed delivering deployment during balanced unifying a continuum platforms are year, well significant systems. of launched years. resilient of SaaS and of customer-focused VELOS next-generation better and the across offerings significantly and stronger operating the we more revenue how included our base milestones new leverage. models. is significant expanding FX an leveraging have cloud as These with innovation capable our launches last evolved model services representative rSeries through we

to improving the year, business of likely to X% expect the In weight business component revenue some deliver from availability. XX%. a systems benefit Over from headwinds. as growth FY next to result our tailwinds to bear It's likely is 'XX we to our balance, macroeconomic of also

revenue remarks. Rule growth also We mid-teens, earnings to to and an the our non-GAAP also Frank to Rule will in operating earnings will going basis in forward. of low us to deliver deliver we to committed double-digit his annual benchmark Further, on outlook expect the means speak growth combination on operating enable to XX which our greater detail of in expect 'XX. business leverage FY we growth of the the maintain and XX in are

this though, the to him we earnings I deliver talk of and I reasons several year. why will Before believe pass revenue will the call to we strong growth

here stay. to is IT hybrid First,

unified can approach environments. infrastructure-agnostic means experience more multi-cloud customers, Our create a disparate we across

corresponding automation and and efficiencies enhancing cost We efficiencies. operational driving are

likely Our even customers as more a second, application use abuse rely create bought look advantage. protection, solutions, an likely ever-increasing for and operating surface. is our API customers to our seamless remain them reduce is complexity; so environment web with and fraud an for already DDoS on more application demand feels including ability to vulnerability firewall costs security advanced protection like security to resilient. Customers what defense cases and It is to to become across protect attack

systems of launch supply we FX market; growing expect contribute component our in and will improving gradually year cloud services, third, now we overall an in resilient drive With of combination revenue to growth rapidly distributed the security February of the the a attacker are SaaS-based systems 'XX. segment fiscal business a

change; largest fourth, prioritizing service world. ideal partners a breadth model and costs our an resilient investments, when structural one customers and around entities of Beyond are years In consumption to take share trusted shifting undergoing And from who and and may want hardware models when they via optimizing lived how distinct to are partner embracing an or an from factors competitors or likely just we we customers a will few adversity, flexible. SaaS removing and shift and prove of advantage. is subscription trust. to longer to of budget especially faced makes to good demand friction expect license XXXX, want a In priorities, Near finally, perpetual hardware and or enterprises, hardware, providers heavily form with enabling more approach, know be OpEx whether government us than the ago. traditional and with term, the to they customers the tend we their expected environment managed hybrid operationalized also software, rely opportunity partner IT, service, see times CapEx are for and another, we the organizations on consume consumption

We decades that earn have worked for trust. to

to us our growing and understanding Our of others, on give continuous these deep including our revenue, sticky innovation. customers and very how us count our and for installed their recurring protect which in our outlook base application among year. base next on helped on factors, optimize confidence It's our of

interesting highlight cases customer from I will conclude, QX. I Before use two

to applications, protect and the multi-cloud five complexity but customers' to fully first The public firewall, management traffic and of flexing against simplified protection how the and IP its regions. warranted. With of environments for application improved the its case retailer scalable company operations simplified that needs. customer cloud automation them its cloud augmented virtualized services. multiyear solutions bought needed. not goal deployment an capabilities, demands their developers existing dramatically form in a did with fit multi-cloud businesses. win of model and a a automated The distributed examples, cloud stack, and a selected the In cloud customer best cloud. native its to public ability with of deep needed so multi-cloud In a bots services including SaaS and environments, consume DDoS. based one-stop these to had security example this transport web big improve FX inefficiency subscription also single sizable case, both expansion API software traffic as support use that spiky services. or security FX a scale our security with we with consumption Automation The is capacity we quarter, South of customer now on-premise a services across hardware advanced big the into renewal distributed other automated want its automatically more expansion. example best-of-breed and In with as did consistent capacity solution worked delivered comprehensive infrastructure of cloud factor self-sufficient our to an the Defense, in their burst America we in its enabling security an is disparate platform gained their customer, global a FX, global IP FX the as more configuration their And With that

Now the Frank. Frank? call I turn to will

Frank Pelzer

revenue I to of X% delivered revenue quarter global services I outlook. Thank software QX growth. split revenue. X% software, million, reflecting year-over-year grew will our down of FY on to delivered systems Francois, year-over-year. $XXX $XXX revenue and and XX% everyone. to revenue good before million, with will service results. $XXX million the quarter speak out was 'XX review represented 'XX product then was systems. growth FY quarter you, picture, total in growth XX% moving recap XX% $XXX X% and revenue afternoon, million our QX briefly and our revenue Rounding global results We fourth X% Product XX% of revenue first in

take at closer Let's software our a growth. look

comprised of XX% totaled is software revenue, total $XXX remaining sales. from and came perpetual million SaaS our $XX QX's the which subscription-based Subscription-based utility-based XX% subscriptions, of and revenue perpetual offerings million license license term software revenue, Our includes revenue sales. or or

performance their renewals and as quarter, the and subscriptions expected. in Let's multiyear about solutions talk performed first our SaaS subscription

Francois projects related to noted, new we and customers the cycles, elongating scrutiny to from progressed, budget as and as architectural new rollouts. However, quarter began see particularly increased selling

pipeline the sources, regional was as growth EMEA expense and mix term On strong including declined X% models. XX% to X%, a QX in led basis, also had which in We in operating revenue, recurring XX% $XXX revenue representing of higher quarter was systems $XXX U.S. totaled total revenue quarter, of perpetual with of new associated revenue XX% represented providers with a guided to government believe Federal. we the lower to our utility-based of our XX% million, number new services in operating from of strong quarter. in from representing portion APAC of headed our I multiyear Non-GAAP declined XX% led the now broker XX% pressures well XX% the While customers and Enterprise customers Revenue and the customers revenue. critical gross bookings GAAP costs on and close represented software of of guidance representing expediting as rates delivered GAAP a margin of increasing dynamics operating of million. SaaS revenue. and as our was mix result line XX.X%. subscriptions share range. This below margin revenue for XX% product revenue sales Americas in foreign higher with into expense of subscriptions components maintenance XX%, was year-over-year, includes Service consumption QX. procuring budget deals. X%, these QX market. an the a XX.X%. results. was Non-GAAP represented will XX% tech-based

margin Our was GAAP operating XX.X%.

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

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

in due balance cash to Our net tax expenditures were sheet. was days. XX or generated $XXX million We DSO for effective income Similar QX. chain quarter SaaS the $X is and rate up the was billion the $X.XX driven share. quarter year-over-year Capital for and now turn million to quarter, flow $XXX million. lesser approximately was to deferred levels totaled the and, back-end historical challenges. I quarter at non-GAAP income XX.X% was million service billion, XX% This from flow per subscriptions bookings in $XX extent, in will $XXX the to $X.XX $X.XX GAAP Deferred last maintenance. from and from cash end. was Cash shipping operations quarter this resulting linearity growth by quarter for a to QX. investments revenue increase in ongoing supply largely up from increased

we recap 'XX approximately our FY briefly with will Finally, now quarter X,XXX ended the I employees. results.

for XX% revenue grew revenue of total year, $X.X from billion prior accounted year the revenue. billion. the $X.X to and of X% For grew Product X%

in of software significant revenue. with the Francois milestone year, product we As achieved XX% noted, representing a

grew from at subscription to declined services $XXX a forwards term perpetual XX% revenue $X.X majority year, Subscription total expansions license and inter Global both $XXX revenue. XX% and revenue 'XX a to annual to revenue from growth Since have rate. renewals at million annual systems to growth grew term-based including and growth rate. driven XX% for growth annual billion. FY growth software compounded rate compounded software a software the continue the 'XX, In Software XX% software models, subscriptions true million. or at subscription represent of X% our FY license XX% perpetual FY 'XX, came revenue we growth. while

distributed FX we for growth a February, with SaaS-based of software vector consumption introduced in With model. have services business the new cloud a launch our

traction SaaS with We customer early are scaling revenue the but platform, thrilled for the time. ratable takes

be services, available Silverline from Shape We distributed solutions We contributor cloud services a delivery unified FX expect creating revenue cloud are FX to customers. to transitioning SaaS and fully meaningful for our in previously a platform will all services, of including future. our distributed the managed

and to revenue and other grows its both revenue the matures. contribution metrics look disclose will business We as relevant ratable

FY In the Our in 'XX reflecting a base. closed $XXX than with software revenue rate compound of from approximately backlog, majority product backlog is FY which more This annual us FY towards XX% driving recurring, 'XX FY 'XX. up FY million is of $XXX XX% We since in space. 'XX, revenue million product system in is was vast and approximately revenue XX% an growth in growth recurring 'XX. XX% from up higher our

gross 'XX. compounded 'XX the stand-alone security cancelable, in hardware was margin which we low XX%. total exclusively gross to are representing derived approximately very This FY sold will I of deployment GAAP cancellation continue Non-GAAP software our years estimate to 'XX, FY cases since FY orders security turn revenue. Francois was our delivered our XX.X%. a revenue, 'XX performance. solutions includes ago, for to from billion grew nonexistent either security models, XX% use backlog SaaS now $XXX security in or in Two million. While see mentioned, rates. operating we portion margin XX% growth solutions. revenue reflects $X we to began revenue rate We annual of disclosing in product FY

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

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

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

income stated, was annual a income 'XX comments operating tax million will or per $XXX expected fiscal was $XXX $X.XX rate per metrics. state FY year 'XX. net my otherwise or share. from Non-GAAP to for income share million for outlook reference XXXX share. our than benefit guidance non-GAAP filing primarily now net FY Unless FY $XX.XX due Our I our dispute lower tax GAAP was 'XX returns.

FY macroeconomic we in around current 'XX, in XX% to balance the revenue growth expect QX. projects As view also factors In scrutiny a expect This tailwinds 'XX. systems in to dynamics component FY between experienced incorporates It we and be and year caution what around to headwinds. Francois customer gradually budget we will X% improving new caution. our from similar the deliver business availability to noted, during

result, for As of growth a the software to expect we XX% XX% year.

the when in revenue chain to growth half systems critical with to expect risk abate. towards supply We begins 'XX components weighted second FY growth related

Finally, model, the Shifting of we first revenue improve services. impact to and the from low to trends year growth acute half FY supply operating model our second to half. mid-single-digit in operating outweighing in 'XX we expect usual chain pressures to expect global gradually seasonality. the remain This will dynamic our our our likely

in margin more and FY QX margin operating be revenue, of weighted expected and to 'XX. Specifically, gross are QX expansion

We approximately realization flowing we year. cost announced progress chain expect increases previously the through our of supply combination XX% price with gross FY through price 'XX and moderating the from margins as of

operating margin We will the discipline XX% in the for continued operating expense to non-GAAP result of XX% expect in year. range

And expect We expect year. 'XX to in will our rate to deliver to effective XX%. non-GAAP the low growth tax be XX% FY EPS we for the mid-teens

Francois would As these ranges, with for noted, achieve our results Rule target of 'XX. FY we XX in

maintaining on earnings committed basis. forward an to are going it double-digit annual and growth We

now pay Our FY we free Shape the in matures year in 'XX we we term remaining expectation acquisition commitment made related last and the repurchases, consistent the when outlook cash will $XXX XXXX. for is QX our Included that loan outlook the share 'XX. it incorporates this of for Day. speak expectation with our the of January at XX% to FY to balanced Analyst our flow to down allocate I that will our our on approach million

$X.XX is margin to million operating earnings approximately million. estimate range $XXX in And $XXX revenue share. $XXX gross non-GAAP $X.XX our We million per XX%. expect We QX to QX target of to of $XXX the expenses QX million of with

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

Francois Locoh-Donou

we increasingly customers' points. believe reiterate managing 'XX and positioned to well including few Thank with applications positioned key With a and are $X our pressing for SaaS-based a revenue increasing the and the growth, easing billion growing earnings To and are most complex solutions, application mix you, are of complexity protecting challenges, we deliver distributed well and scaling We an business of FY aligned security IT environments. hybrid we Frank. future.

date successful portfolio, our our have and in efforts to mix. transformation expanded innovation software driving hardware Our substantially balance

and growth what Operator, and In confidence and line the earnings we top availability component continue headwinds As both business model and and to to to sustained increased revenue a would improving call balance resulting the we result, to rule of discipline, open macroeconomic we a tailwinds of please ability growth. double-digit prepared FY meaningful to driving see our Q&A? remarks double-digit concludes growth. sustainable beyond, basis have from today. FY deliver 'XX in are XX stronger in earnings growth and deliver likely expect we on a In This our to the annually. you exercise expect operating 'XX,

Operator

our of Take first Tim Instructions] Long Barclays. from [Operator this question afternoon

Tim Long

to if one, A there really big few Number you was here. ago, quarters and when here, I few About started pretty could. is with I a think, term deals three large all years a software related there.

Just Were then follow-ups. renewed? lot I aggregate? for curious Could out? a And they to can should of what in upside on you kind talk come them? Or those have deals renewal. those They about were renewed then. more a or up those bit see handful really just pushed Were lost deals larger, we they a little contributed that deals of three-year back

Francois Locoh-Donou

Francois. it's Tim,

both these number really mean that, these on renew they of in seen renewal what we've which And deals as was has saw really large been expansion the first to and renewed. addition, were we've in a that the QX we seen healthy. strong. had we very by And XXXX, on these where XXXX, deals I that deals far throughout year of what As

So happy the we're really with renewals.

different And where into a to pipeline -- -- it ended was on quarter. behavior the customer close because software overall what relates saw stronger towards rates we for in end business. As being to the a -- a we And not up particular. into we was going we them saw quarter expected had shortfall QX, we had on really business the number the the new new of in really it what the be

and expectations to mentions in delayed, postponed some customers being the by being and environment. environment a pressures reaction remarks for the per As deals the largely macro being resized recessionary some prepared as around

of strong that as needed business. really But that existing good far renewal all out happen as deals So new dynamic with played to the renew, only expansion. we rates in and

Tim Long

Also ago, security then updated has kind could the years I'm into hoping Day And Analyst you $XXX the over you to us cloud number update million year? number the helpful. cloud how a the give at vertical. gave on transpired is there, which vertical a of you few revenue some that business

Francois Locoh-Donou

I don't have an update for you there.

hybrid we're more with more enterprises cloud both. here our being in they're and or for stay seeing into business, to pretty both seeing with and course, to and is in we've what And more here cloud do them grow applications IP environment automate software, general, on-prem cloud that, public augmenting be but positioned just want and is who to Tim, able public has are big technology more, What leveraging on-prem Our with cloud, software. their large customers but do to cloud. environments, private of that continued substantially. and the to going not increasingly, software, we being we're And our NGINX seeing

cloud with business, course, grown. in the public in that cloud cloud of in environment, hybrid we number and applications growth the seeing of public the our So has the we're support

Operator

at Sami Badri to Suisse. now Credit next go We

Sami Badri

two So I have the team. for

is that The first on you my here. interest Francois just peaked question made that a of comment kind

think take that likely I durable along and those you And share. and said existing may or hardware from said other You is revenue something companies lines. customers more

to comment, Are what here? on bit factors? a a been hardware that could expand from it's other different just taking color form you bit some used us share from Maybe give companies, companies, you software little just you we've could Now before. hearing little

path year The through other question the is and for growth fiscal revenue the 'XX. systems

low the capture. where Frank, through XQ fiscal is been point up revenue year then the I fiscal revenue we systems was And of XQ 'XX of peak and capture. kind historically, the discussion ramp think, of systems of a there's

just we to a systems path little better? through could bit glide just that Just path go understand the

Francois Locoh-Donou

Yes. take I'll first Sam, second the take Frank part, I will and think the part.

my on hardware. commentary on So

segments Let me three quickly. just on comment

with segment. me the Let ADC start

XXXX we for and their They're using the also with before. to create our public to have go season. been from capabilities using with environment. allows edition taking in them this as and share FX FX environment. And couple applications cloud. with in a to hybrid the So have we A public in that happening as good in can to and they're traffic give that on-prem the help have on a global cloud, spiky And a our that where the Number help cloud their that between really brought and but that, these And and automate is on-prem when public edition have the result, throughout that are deal into retailer peak for feel I'll they to them necessary, virtual in ADC our balance to example to load hardware, new partner have of needed a automation we customers other. cloud customer, retail have the one bursting built website you franchise, our hardware virtual we they invest from customers features cloud segment, competitors of traditional on-prem, are one, continued they to really reasons. they have go hardware trying need where public implementations can but a

unique the we've ADC want investments environment. move we're proposition there created and these more hybrid seeing So business, made really cloud for to and customers a to more our have automated

security. element is second hardware driving The

ransomware. security, continue decryption traffic across we've where both seen market We now augmentation business have service the we driven XG and seen encryption, hardware, performance infrastructure. capacity then security grow and provider protection strong against hardware XG our in XG also on of application to and by resilience for And

the So these the really drivers hardware are business. on

but backlog expect increase we course, that Frank? with as XXXX. been ship seen XXXX, in all you that the we challenged Of steadily demand, to to have of through have

Frank Pelzer

that shipping issue. remains Sami, quarters are but for on. efforts engineering lot between that feel a fewer were component broker to to team mix access a us I been can't our we And will broadly go that on are availability, for generally, our chain speaking there today, actually these in Yes. it's I in those about some see do question, that QX certainly strongly decommitting that be because and out QX components. some the confident feel and promise with and have I vendors and fortunate in redesigning. of about to of What to QX, improved critical and big And gotten we able less your in chain be and we in still market. We it's going to systems. The has on now, supply that the QX, improvement the been there that where right and is us -- continue QX the of still few have successful buffered to components a market de-commenced respinning QX supply the ability and

gives is the on broadly. But risk have supply the the critical the still point, should done balance And chain that's for definitely point low of is are us. depending that But few end is that these perspective, of a whether of by few our news are is from TBD There in Some at a of good early. QX things still components. improving or confidence QX. what those the the beginning The QX us half. back be of a those low QX, come in

Operator

Henderson We'll go next Needham. now Alex of to

Alex Henderson

quarter into forward we Great. hoping talk the you're I current the was that and could year a mechanics guidance. about little assuming bit

the You talked quarter. erosion about some pipeline during

delays and in closure weakening rates about talked You projects.

you given to environment? get or back talk forward outright So worse be to at I prior was terms canceled projects metrics, delayed, and you're particularly of in from rebound the what the they depressed where assuming current delayed been were those rates expected could are are or look you hoping they here, stay have about stay assuming when the you that

Francois Locoh-Donou

software that we've specifically, And on for materially existing in we subscriptions, and customers. projects expect is throughout what that we're renewal of that that the look the we customers these our what the see that have utilization on so from different guidance we renewal Alex, to from seeing We in a healthy behavior multiyear of 'XX terms seen renewal -- when our continues. assumption XXXX don't projects rates. these seen rate and from

there on scrutiny hand, they will by will that customers are, especially and will the delayed projects were than year. on down that to resized that we assuming see We the and big be multiyear way these projects they more more in other size be last or continue

And business new new of subscription affect multiyear will that agreements. in so terms the

And we're year-over-year so in growth business. our expect represents not half large total you business, still when planning coming projects total for these Alex, new software look XXXX. the from at we don't reference, business And of new -- software over on our

that still we new meaningful with And that's affected be this on so dependency have macro part business, will a XXXX the environment. and in this

these actually back projects the beyond will of up. Now you if XXXX, we new expect come that go rate

scale expect and and We time, services to healthy expect over and And have managed continue our to business a SaaS expansion. to of renewals grow. rate we also

us. a factors, long-term a for And we as XX%-plus be the so for software, our still rate growth target with growth these right consider to rate

Alex Henderson

And of one the progresses? that change half but you more, can the to last by be in the a iSeries and it's to rSeries between R? the expect question. larger transition or a the around The mix the -- mechanics you product Would business, as percentage more percentage clearly, 'XX about systems I from going meaningful back talk the

Francois Locoh-Donou

Alex. Yes,

in exact large have iSeries be I We mix don't XXXX, exiting back and of should assuming XXXX. and but of I in expect that XXXX, between ship that what we the be the transition here, accelerate you for Alex, will iSeries. the rather you think, rSeries half will rSeries especially majority the than will

Operator

take now from question at Samik We our JPMorgan. next Chatterjee

Samik Chatterjee

a the your 'XX just trying systems for for guess I revenue the I'm guidance first on bit. to understand still fiscal one,

satisfy XQ continue understand the on is by a you're to you buying that market. had the You systems from revenue I big premium where costs broker do path is that markets customers? you that? more that buying in of downside demand of the to terms follow-up. if broker just And I have here you sort wanted in margin to gross of a sort expectations from essentially of can your there build from to sort you going were and step-up Or if for components top outlined there embedding the on into and from that, of

Frank Pelzer

Sure, Samik.

I and on get the for to improving resins are these have to largely some plagued months. as actually shipping market our that gross us gone X critical and redesigns with an components the certainly jump is the actually start we through through of that and dependent critical don't in. The margin that we quarters, the product is past have why Francois we not can there components work assumption we because broker that now are without So X

into in -- our so is largely be said, our by I for operating QX. is of that gross beginning as the assumption And completed end the that our work margins to baked year. and And margins QX, of expected, as

Francois Locoh-Donou

Samik, the just Yes. happen. we've to chain the stability before, we're to have we've general prior although general is let in decommits days I we the quarters. mean, And in me the -- seen continue decommits had over that. seeing think that, supply answer less than than The what generally, more by last just -- we seen seen I XX

also their made our seen from more specifically capacity progress we they're extending are starting -- that us, Our get we generally, by more to And capacity. to suppliers lot hearing supply. at fabs on have a suppliers on

into in -- give engineering done work already components. of of the pointed, inside hardware. that have the probably So around aspects is the feel to But for XXXX. in most X confidence delivered design more that these a the has FX as say, year on of factor Frank biggest we going and constrained hardware we've strong I we should Part back the to will deliver X months. very we why would us that's And half us more next

Samik Chatterjee

tend guess, the look them also portfolio. second customer know of architecture and Francois, magnitude customers them Like a moderate I question software customers macro. growth and easier for of for terms here. trend OpEx portfolio virtual the because you're starting alternatives thinking to up what particularly to spinning bit, model about the it sound seeing there's from they're going in that relation in And see are sort of there the that are the to of big concerned relative a model follow-up from transition sort creative in of to more in the more doesn't hearing going customers cases think prefer companies set you sort to if tough there there they the that's that's or of we changes towards customers a I'm into with are has different you're we of does do? or where to the really the setting CapEx But up most or other the macro. shift model, terms wondering like what terms some -- of in OpEx that the particularly a how And making editions move your of are from the in your if that seeing different an I a of convenience like of for them you're hearing, prefer something lift

Francois Locoh-Donou

think, over there than think I macro subscriptions today. level, general that time, a customers Samik, be and services -- the more trend there buying buying at SaaS will Yes, are are I

FX to to general trend. right, consumption be that able serve these able news for the we be that's portfolio and customers think serve that license, to I Software-as-a-Service. industry, in or to I will have and is SaaS in models, The hardware our or in macro the positioned think in software we all good or trend perpetual also subscription follow

is an that who -- point they project the pressure still that project, time. be a move in have want capitalized. have with seen some Already OpEx number so behaviors And to different segment. a want that advantage we customers customer different there's there to of And feel are in there's but where by customers and a forward is different buy this we behavior at quarter,

customers And otherwise. but model. to we move they project, to OpEx so to are been that forward have not a able an offer And gone would would able project, are forward the with because move to these CapEx they subscription have able are

CapEx, think strong to advantage. trend. is a of quite to going provides moving FX the we potentially year time, flexibility a some a we of CapEx that constrained the trend are in that I budget others XXXX, that still to customers believe, offer, the so of flexibility on is going And were think OpEx we advantage. that see is described in more and at that actually I strong But the beginning Over the I

Operator

We go Silverstein next Cowen. Paul now at to

Paul Silverstein

the downsizing, two Francois, and Frank, how going how this terms back Or comments us handfuls if about projects apologize referencing. for is you're But Is pervasive to this your I'm back I forth the handful, cetera. quantify a has been that to softness, in large of weakness customers, about? referring Can you that going you're how just this different of actually many widespread? many several projects between talking calls. asked. delays, very you're already et the the

Francois Locoh-Donou

to in the the of inflation, coming of EMEA and first fulfilling say, budget. was restrained where was combination Paul, and it would and all, crisis exchange most I volatility wanting really currency it acute APCJ,

is where it So acute. was most this

it's $X hundreds deals that definitely of but -- million-plus those where saw probably is terms of are of it not customers, customers, double-digit we deals. number In deals more number Typically, are of the in and it's that.

the just you pushed out. of deals that gives these impact so being sense And a of

Paul Silverstein

EMEA was in was Was comment? I Asia First Pac. acute most that say it the you and hear

Francois Locoh-Donou

Yes.

Paul Silverstein

Was America, there in in North weakness particular? U.S. appreciable any

Francois Locoh-Donou

We there But meaningful, saw a North would say, America. date. customer of to I behavior I North say, this change in in a would wasn't little in America bit overall,

Paul, of the of will of this you say at see companies South. being delayed that America and deal changing deals budget Paul, to North and had euros revenues in multiple guidance, our have behavior, be with for we level. to multinationals in the that an large Now we of $XXX,XXX to I on example Board are above this any of scrutiny mean, approved were more assuming we that some give billions process But that

sense But So that Asia gives Europe and of behavior scrutiny level in less today. was Pac. a in America of a that you we lot especially saw, the North

Paul Silverstein

about America based just terms North future concern of that's American you would about with your in caution And Or North customers looking prudent? on conversations outlook? that the there's forward, signs your being

Francois Locoh-Donou

they date do we've say to patterns directly were would not change I from going their heard North that to customers and American this.

happens now, be combination of working two prudent and a I customer to this So that not going the predict North over Whether immune these just feeling is I our in assumption from patterns quarter North will that changes can't but that or being see it to in we're it quarters would it's time. here say America America. fall

Paul Silverstein

something experiencing? why it's one Europe And their you that just on just more widespread impact to is at to a that plus between simultaneously tonight I not But quarter tie risk specific for Francois, more can you. last appear referenced wondering, terms in it generic experiencing the one you're the sounds and And Juniper be share? or to different. in sub of question, guidance. more either of I'm America discrepancy North be it my announced, in but what or the for macro meaningful asking the they of to appear little here. to what any the product bit FX They market with referencing, Or account Russian of perhaps would outside meaningfully sounds thoughts mean, worse its you your

Francois Locoh-Donou

couple on of things A Yes. that.

of the described seen I all, First -- mostly in something segment. say, is should enterprise I've what we've the

QX. XXXX say provider segment. was strong the and substantial strong that we've Service in service wouldn't in seen in change a approach I provider throughout was So

not the expect should segments we to product that's are going our we So behavior, think it is And it in forward, focused it's to we've North I'm of I see. that not processes date that seen then difference as the as in I in the specific on said, that our do to -- here. that segment relates but seen general. changing also what as America, add, because will spend a customers affect IT I'm terms seeing we've I in

pushed were the deals mentioned out. I so that And

competitors. to lost deals any actually seen haven't We

more to fair So share still the deals. changed. We haven't dynamics competitive our than continue win of

So FX-specific or I don't think it's product-specific.

Pac, it's I in Asia certainly think think it's I Europe and broader.

Paul Silverstein

balanced it mostly it Europe? across Or is both? Is

Francois Locoh-Donou

both. across balanced It's

Operator

We'll go Marshall Stanley. next now Morgan to Meta at

Meta Marshall

then rSeries? the iSeries? and biggest are opting kind assume for customers, both they to the to the what of with of wanted majority And get due to today across Or we just I of transition sense then vast are inhibitors rSeries the headwinds primarily for purchases the I iSeries? and of should still your that a kind margin are gross broker the

Francois Locoh-Donou

the are Thank The Meta. of you, -- One only -- two. really headwinds biggest so two rSeries qualification to the product. to is transitioning

that are possible. our they done don't So today, on a cycle to that through to operate for Meta. to the the but gates, rSeries. some we cycle things And to ability Those make second availability component have and ship qualification is go as rSeries have customers short two demand as issue

ever have is Now we transition the we fastest I capabilities seeing ramp what the to say a should terms continue series to that to rSeries. from far one our that are because in in generation ramp of the demand expect in so the that of is we And next. seen

is operate performance environments. automated to customers and balance this private want the when they traffic and to public or price between in one, that more to on-prem cloud want environment, but ability cloud have Of cloud course,

a true gross margin, seeing fast affecting then ramp iSeries and both that it broker rSeries. we're why the as to relates buys rSeries. on to that's And So is

Operator

Sandler. go now at James to Piper next We Fish

James Fish

the is we had business aggregate, and should half in over where I term growth, just on the fiscal buckets business mentioned XX% in each year circle from software? as software new wanted new. versus on XX% that to in to SaaS. finish a finished is roughly about back the we're bit. earlier how 'XX Alex's there the versus these you think then perpetual about question way this still Appreciate to little three of for to color But a and But thinking for renewals

Frank Pelzer

And I question, Jim. appreciate the

is not splitting true components plus Francois of than some SaaS you our more that some guidance at sort you midpoint renewals on will number. at give those for on sense -- coming We are I look the and in point range than his a take half business. that think plus of the less said That guidance the that the forwards point. of half software from new business But the of discussion out if this of

contribution business As particularly contribution coming the it expect how been we continue a about has the FY new that's grow. look say end as the strong as out, to down today. clearly, where as such the over as going of matures to that I'm at But business to take come to that, is the years, we overall 'XX. going are and SaaS we not think to we at point more where growth not that XX% we rate nearly to have more

or XX-plus And themselves, reach rate. of compounding as contribution so see of that's in second the within the dynamics fourth platform And in frankly nascent those the SaaS third company. to that's we the term still the consumption anticipation are the we that top overall we've the that growth upon flexible particularly the the revenue of percent longer renewal its got on or growth programs in the cycle these

James Fish

But line to top bit continues rate you on? begin some is inflect those get a about free that little receivables purchases cash maybe But and to there higher the unbilled more? purchases. switch and normalizing gears point conversion of the way around free higher to cash inventory of stuff. to side, the does of rate kind flow at and And going on normalize what down. flow And given talked a flow cash start software inventory have the just come I something transition that off it's And term for conversion

Frank Pelzer

in certainly, in peaked for have we've there. than platform the is from we'll FY 'XX. we seen of at be a really price our is we that things Jim, hope maybe and the so point this looking FY purchase much healthier in hopefully Yes. but beginning the far believe FY 'XX, fees the purchases had will that improve that variances, convergence what expedite have year, 'XX, start the the to double out And

you more and as so redesigns these well in going dissipate programs. I'm of where flow forecast as give are than But exact getting cash once the much an this starting 'XX. will and dynamics rate components a the FY you're though from tick expect the much of dissipate free as better down and further we at third that saw to not are more clips even that are much flow The consumption not it from as flexible to cash in 'XX driven to do at revenue free certainly we in are FY done, purchasing up for -- time. we second and So more what you year have

Operator

James. Simon We'll go next now to of Raymond Leopold

Victor Chiu

This Simon is Victor in Leopold. for Chiu

quantify international the question. primarily this becoming customers? more impact Maybe observed customers. a noted you delays us You by the that And Was help relatively international from from demand housekeeping goods you've FX? driven expensive house -- for can quick

assumption in the FX under that a correct mostly U.S. You're transacts dollars. Is assumption? that

Francois Locoh-Donou

to of a purchasing say, yen increased over little a euro Yes. done if currency. question, there's you're had increase hardware a that's increase, world in course, Yes, that, have driven your But you've price in significant or Yes. And hardware, FX, top specifically, was and price a the on devaluation by on customer that And we've impact of had two XX%. if that. of would I the correct of you assumption. FX large of course, a it are

it's spend. much of In these buy tough environment internationally. hasn't that, is less say saw not software, approach in I a and But does you despite economic a as because their budget price to and that combination primarily been devaluation we environment a just Your increase macroeconomic And of a changing it inflation, there people software. software, did. deal would as much as delays currency for preparing and little in pronounced

Victor Chiu

So your year? and in outlook FX kind stays of next your any of incorporate improvement in assumes that it environment it for outlook is as that the kind doesn't

Francois Locoh-Donou

That's correct.

Operator

at go next We now Daryanani Evercore. to Amit

Unidentified Analyst

Amit. on Lauren This is for

around fiscal for margins about maintaining at of kind the guide of potential year gross full your XX%. a two the comfort for backlog of start mid-teens is you're XX%. So and around then down And EPS low implies work the Can to about me. the in we down first second, maybe on and guide kind growth, how 'XX kind QX but thinking

you are year? about of we as thinking how the throughout kind ramp So the go

Frank Pelzer

Sure.

the Obviously, that ramp. have the in question on QX, associated of headwinds do start QX did I we the we on back to revenue half don't last this year-over-year why the systems. not type of year QX with in that So year same

guidance that anticipated our in in so decline is we fairly on get a dramatically, QX, And QX as but ramping to and QX. especially

the will question. so -- back the half And that's -- of those in

Francois Locoh-Donou

second question is first the one Well, question. the the is --

Frank Pelzer

yes, we backlog quickly backlog work satisfaction think year, From as that for backlog. On so that I'm working backlog Yes, to down customer we would the possible. -- down about and standpoint, a as sorry. as like

we improve from outlook orders requests, new in. multiple getting coming actually force particularly can out sales are how boxes quickly order get We our in for the to on

on. up will we we versus where end that And outlook so expect revenue quickly ship, do which see we between work the blend year. as on the environment our demand backlog, is of end down as what to mostly the we based not at know capacity that to is systems the I can our in

Operator

this to time Suva And will last afternoon Jim due our Citigroup. we constraints, question take of from

Jim Suva

I software your more half heard X the be with for items? your you customers the guess, demand just early back being seems something hardware from that on I'm can't little together discussions various components half get Because like both to bit something it Was would deliverable. second fiscal the loaded complete all software? a more And wondering about the on to or kind now. back loaded side, was for and from the months or, say mention just of I more 'XX you it of it half

Frank Pelzer

to doing Yes, the for are rework Jim, purely new was guidance ability builds. and we the component ship availability those and the the about that systems

be much so to is and that's stronger expectation and us. QX And revenue QX QX quarters for systems going that than our a QX are

Operator

call. today's conclude will this And

disconnect. now may You

F5 (FFIV) 26 Oct 222022 Q4 Earnings call transcript