F5(US:FFIV)2023-04-20 00:53Financial Data and Key Metrics Changes - The company reported Q2 revenue of $703 million, reflecting an 11% year-over-year growth, with non-GAAP EPS of $2.53 per share, exceeding the top end of guidance [23][57] - GAAP operating margin was 15.1%, while non-GAAP operating margin was 27.2% [27] - Cash flow from operations was $141 million, with capital expenditures of $11 million [28] Business Line Data and Key Metrics Changes - Global Services revenue grew 8% to $363 million, driven by strong maintenance renewals [23] - Systems revenue reached $209 million, representing a significant growth of 43% year-over-year [24] - Software revenue declined by 13% year-over-year to $132 million, primarily due to delays in new term-based subscriptions [24][44] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year-over-year, representing 54% of total revenue; EMEA grew 22%, accounting for 27% of revenue; APAC grew 9%, making up 18% of revenue [55] - Enterprise customers represented 67% of product bookings, while service providers and government customers accounted for 13% and 20%, respectively [26] Company Strategy and Development Direction - The company is focused on controlling costs and preparing for a potential recovery in customer spending, including a reduction of approximately 620 employees, or 9% of the workforce [19] - The strategy includes intensifying investments in software and hybrid multi-cloud solutions to drive long-term growth [34][52] - The company expects low-to-mid single-digit revenue growth for FY 2023, down from previous forecasts of 9% to 11% [15][61] Management's Comments on Operating Environment and Future Outlook - Management believes the current demand environment is temporary, with customer spending delays attributed to budget scrutiny rather than competitive pressures [10][16] - The company anticipates that as customers resume normal investment levels, it will be well-positioned to capture growth opportunities [62] - Management noted that the majority of software revenue comes from term subscriptions, which have seen a decline, impacting overall software revenue [14][44] Other Important Information - Deferred revenue increased by 12% year-over-year to $1.8 billion, driven by higher maintenance renewals [59] - The company plans to repurchase at least $250 million worth of shares during Q3, committing to return cash to shareholders [85] Q&A Session Summary Question: What should be assumed for services growth now? - The company did not update the mid-single-digit outlook for services but expects strong contributions as customers continue to sweat assets [36] Question: Which customer industry group caused the majority of the drag on guidance? - The pullback in spending has been broad across all verticals, with service providers particularly affected due to budget reductions [66][92] Question: How has new business declined from last quarter? - New business sales saw a slight acceleration in decline, with some renewals performing below expectations [70][95] Question: What were the expectations for software renewals? - Software renewals performed largely as expected, but there were some underperforming true forwards [71][80] Question: How is the company addressing the cost structure? - The company is reducing costs while focusing on high-return projects, ensuring a leaner operation to capture future growth opportunities [112][125]