F5(FFIV) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - F5 reported record Q4 revenues of $747 million, a 6% year-over-year increase, exceeding guidance [8] - Non-GAAP EPS for Q4 was$ 3.67, with EBIT of $0.17 above guidance, indicating improved operating margins [9] - For FY '24, total revenue was$ 2.82 billion, slightly up from FY '23, with software revenue growing 11% [48][50] - Recurring revenue increased to $2.1 billion, representing 76% of total revenue, up from 52% in FY '17 [13] Business Line Data and Key Metrics Changes - Software revenue in Q4 was$ 228 million, a 19% increase year-over-year, with subscription-based software revenue at $204 million, growing 23% [39] - Systems revenue totaled$ 130 million, down 3% year-over-year, but demand improved over the quarter [39] - For FY '24, software revenue was $735 million, accounting for 58% of product revenue, with subscriptions making up 85% of software revenue [50] Market Data and Key Metrics Changes - Revenue from the Americas grew 9% year-over-year, representing 58% of total revenue, while EMEA grew 4% and APAC declined 3% [41] - Enterprise customers accounted for 72% of Q4 product bookings, with government customers at 18% and service providers at 10% [42] Company Strategy and Development Direction - F5 is transitioning from a hardware-centric model to a security and software leader in hybrid multi-cloud environments, expanding its total addressable market [11] - The company aims to leverage its software renewal opportunities and growing pipeline to accelerate revenue growth in FY '25, projecting 4% to 5% growth [14] - F5 is focusing on app and API security, simplification, and standardization to address the complexities of hybrid multi-cloud architectures [23][25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in FY '25 growth prospects, driven by strong industry trends and effective go-to-market strategies [15][72] - The emergence of AI and hybrid multi-cloud architectures is expected to create new opportunities for F5, with a focus on optimizing AI workloads [29][35] - Management noted that while AI adoption is still early, F5 is well-positioned to capitalize on future opportunities in this space [88] Other Important Information - F5's Board of Directors authorized an additional$ 1 billion for stock repurchase, bringing the total available to $1.4 billion [47] - The company ended Q4 with approximately 6,560 employees [48] Q&A Session Summary Question: Composition of software revenue growth - Management indicated that strong software performance was driven by expansion within the existing customer base and new business activity from delayed projects [77][78] Question: Software growth guidance and AI adoption - Management explained that the guidance reflects macro trends in hybrid multi-cloud adoption, with expectations for continued growth despite early AI adoption [82][84] Question: Systems revenue outlook - Management noted that systems revenue growth is attributed to both competitive replacements and tech refreshes as customers gain budget certainty [92][93] Question: Subscription revenue dynamics - Management clarified that any implied deceleration in subscription revenue is due to the timing of renewals, which are back-end loaded [97][98] Question: BIG-IP Next for Kubernetes customer base - Management highlighted that the solution targets both service providers and enterprises building AI factories, with significant potential for future growth [105][106]