Slide 1: Q2 FY23 Results
Q2 FY23 Results PERIOD ENDING MARCH 31, 2023 Published April 19, 2023
Slide 2: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements including, among other things, statements regarding F5’s future financial performance including revenue, revenue growth, operating margins, earnings growth, planned stock repurchases, future customer demand and spending
Slide 3: GAAP to non-GAAP presentation
GAAP to non-GAAP presentation In addition to financial information prepared in accordance with U.S. GAAP, this presentation also contains adjusted financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facil
Slide 4: Business Overview
Business Overview François Locoh-Donou, President & CEO 4 © 2023 F5
Slide 5: GAAP results
GAAP results Q2FY22 Q2FY23 Revenue $634.2M $703.2M Gross margin 80.1% 77.9% Operating margin 11.8% 15.1% Net income $56.2M $81.4M EPS $0.92 $1.34 5 © 2023 F5
Slide 6: Business overview agenda
Business overview agenda We delivered a strong Q2 with revenue at the midpoint 1 of guidance and non-GAAP EPS above the high end of our range. Persistent macro uncertainty is leading to broader and more severe customer budget scrutiny impacting both 2 software and hardware demand and causing us to r
Slide 7: We delivered against our Q2FY23 guidance
We delivered against our Q2FY23 guidance Q2FY23 Q2FY23 Guidance Actuals Total revenue $690 to $710M $703M Non-GAAP gross margin ~80% 80.4% Non-GAAP operating $368 to $380M $374M expenses Non-GAAP EPS $2.36 to $2.48 $2.53 7 © 2023 F5
Slide 8: Q2FY23 results reflect stronger than expected systems shipments and services revenue
Q2FY23 results reflect stronger than expected systems shipments and strong global services revenue Q2FY23 Results +14% +8% Product Global Services Growth Growth -13% +43% Software Systems Growth Growth 8 © 2023 F5
Slide 9: Business overview agenda
Business overview agenda We delivered a strong Q2 with revenue at the midpoint 1 of guidance and non-GAAP EPS above the high end of our range. Persistent macro uncertainty is leading to broader and more severe customer budget scrutiny impacting both 2 software and hardware demand and causing us to r
Slide 10: Business overview agenda
Business overview agenda We delivered a strong Q2 with revenue at the midpoint 1 of guidance and non-GAAP EPS above the high end of our range. Persistent macro uncertainty is leading to broader and more severe customer budget scrutiny impacting both 2 software and hardware demand and causing us to r
Slide 11: Signs that the current demand environment is temporary
Signs that the current demand environment is temporary Direct Customer Strong Maintenance Steady Win Rates Factored Pipeline is Up Commentary Renewals Customers tell us delays are a Our win rates across theaters Increase in factored pipeline Strong maintenance renewals matter of budgets and and prod
Slide 12: We are operating with discipline and ensuring we are prepared when spending resumes
We are operating with discipline and ensuring we are prepared when customer spending resumes Delivering Operating Leverage Positioned to Drive Sustainable Reducing Costs & Margin Expansion Long-Term Growth • Reducing global headcount by • In FY23, we expect to deliver ~30% non- • Customers’ business
Slide 13: Q2FY23 Results
Q2FY23 Results Frank Pelzer, CFO & EVP 13 © 2023 F5
Slide 14: Q2FY23 revenue mix
Q2FY23 revenue mix $700 $634 $703 +11% $132 Total revenue $600 growth $152 $341M $298M product Revenue $ in millions $500 product revenue revenue $209 $400 $146 +14% +8% Product Global Services $300 revenue revenue growth growth $200 $337 $363 $100 -13% 43% Software Systems revenue revenue $0 growth
Slide 15: Q2FY23 revenue mix
Q2FY23 revenue mix $700 $132 $600 $152 Revenue $ in millions $500 $209 $400 $146 $300 ` $200 $337 $363 $100 $0 Q2FY22 Q2FY23 Global Services Systems Software Totals may not add due to rounding. 15 © 2023 F5
Slide 16: Q2FY23 revenue mix
Q2FY23 revenue mix $700 $132 $150 $600 $152 $38 25% Revenue $ in millions $500 $120 $23 $209 17% $400 $146 $90 $300 $60 $113 $109 $200 75% $337 $363 83% $30 $100 $0 $0 Q2FY22 Q2FY23 Q2FY22 Q2FY23 Global Services Systems Software Subscription Perpetual Totals may not add due to rounding. 16 © 2023 F5
Slide 17: Revenue from recurring sources
Revenue from recurring sources 31% 35% 69% 65% Recurring Non-recurring Q2FY22 Q2FY23 Recurring revenue includes subscriptions, SaaS-based and utility-based revenue and the maintenance portion of our global services revenue.. 17 © 2023 F5
Slide 18: Q2FY23 revenue contribution by geography
Q2FY23 revenue contribution by geography Regional revenue growth 19% 18% $119M $130M +9% Revenue growth APAC 25% 27% contribution by geo $ and % of revenue $156M $190M +22% Revenue growth EMEA 57% 54% $359M $383M +7% Revenue growth AMER Q2FY22 Q2FY23 Americas EMEA APAC Totals may not add due to roun
Slide 19: Q2FY23 customer verticals as a % of product bookings
Q2FY23 customer verticals as a % of product bookings 15% 13% 20% % of total product bookings 20% 65% 67% Q2FY22 Q2FY23 Enterprise Government Service Provider Totals may not add to 100% due to rounding. 19 © 2023 F5
Slide 20: Q2FY23 non-GAAP gross and operating margins
Q2FY23 non-GAAP gross and operating margins Non-GAAP Gross Margin Non-GAAP Operating Margin 100.0% 40.0% 82.9% 80.4% 80.0% 30.0% % of non-GAAP revenue % of non-GAAP revenue 26.5% 27.2% 60.0% 20.0% 40.0% 10.0% 20.0% 0.0% 0.0% Q2FY22 Q2FY23 Q2FY22 Q2FY23 See appendix for GAAP to non-GAAP reconciliatio
Slide 21: Q2FY23 non-GAAP net income and EPS
Q2FY23 non-GAAP net income and EPS Reflects 20.8% Q2FY23 and 21.3% Q2FY22 non-GAAP effective tax rate Non-GAAP Net Income Non-GAAP EPS $200.0 $3.00 $153.6 $150.0 $2.53 $130.8 $2.13 $ in millions $2.00 $100.0 $1.00 $50.0 $0.0 $0.00 Q2FY22 Q2FY23 Q2FY22 Q2FY23 See appendix for GAAP to non-GAAP reconci
Slide 22: Cash flow from operations
Cash flow from operations $180 • Cash flow over time has been $160 $154 $158 impacted by multi-year $141 $140 subscription sales which are $127 invoiced annually and therefore $120 spread cash collections over $ in millions $100 time. $80 $71 $60 $40 $20 $0 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 22 © 20
Slide 23: Cash and investments
Cash and investments $1,000 $922 $35 $894 $10 $127 $757 $760 $750 $301 $19 $21 $5 $668 $8 $196 $54 $ in millions $500 $758 $735 $587 $606 $250 $542 $0 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Cash and cash equivalents Short-term investments Long-term investments 23 © 2023 F5
Slide 24: Deferred revenue
Deferred revenue $2,400 • Q2FY23’s deferred revenue $1,760 $1,796 growth was largely driven by $1,692 $1,600 $1,637 strong service maintenance $1,600 renewals for both systems and perpetual software. $ in millions $800 $0 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 24 © 2023 F5
Slide 25: Business Outlook
Business Outlook 25 © 2023 F5
Slide 26: Our Q323 outlook
Our Q323 outlook Q3FY23 Guidance Total revenue $690 to $710M Non-GAAP gross margin ~82% Non-GAAP operating expenses $348 to $360M Share-based compensation $60 to $62M Non-GAAP EPS $2.78 to $2.90 26 © 2023 F5
Slide 27: We are committed to returning cash to shareholders
We are committed to returning cash to shareholders Share Repurchases ($ in millions) $600 • We have committed to using at least 50% of annual free cash flow for share $500 $500 repurchases beginning in FY23. $500 • During Q2FY23, we remained out of the market as we analyzed the potential $400 impact
Slide 28: Our Q323 and FY23 outlook
Our Q323 and FY23 outlook Q3FY23 FY23 Guidance Guidance Low-to-mid Total revenue $690 to $710M Total revenue growth single-digit growth Non-GAAP gross margin ~82% Non-GAAP operating margin ~30% Non-GAAP operating expenses $348 to $360M Non-GAAP effective tax rate 21% to 22% Share-based compensation
Slide 29: Key takeaways
Key takeaways 1 The current demand environment is temporary 29 © 2023 F5
Slide 30: Key takeaways
Key takeaways 1 2 The current demand environment As customers resume more is temporary normal levels of investment F5 will be a differentiated partner for them. 30 © 2023 F5
Slide 31: Key takeaways
Key takeaways 1 2 3 The current demand environment As customers resume more We have implemented cost is temporary normal levels of investment F5 will reductions and continue to strive be a differentiated partner for to achieve double-digit earnings them. growth. We also have intensified our investme
Slide 32: Q&A
Q&A 32 © 2023 F5
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Slide 34: Appendix
Appendix 34 © 2023 F5
Slide 35: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation GAAP-to-Non-GAAP Reconciliation Gross Profit Reconciliation ($ in thousands) Q2FY23 Q2FY22 GAAP gross profit $547,521 $507,865 Stock-based compensation $7,583 $7,341 Amortization and impairment of purchased intangible assets $9,959 $9,959 Facility-exit costs $150 $611
Slide 36: GAAP to non-GAAP reconciliation (continued)
GAAP to non-GAAP reconciliation (continued) Income from Operations Reconciliation ($ in thousands) Q2FY23 Q2FY22 GAAP operating income $106,046 $74,647 Total adjustments related to gross profit $17,766 $18,019 Total adjustments related to income from operations $85,186 $93,463 Non-GAAP income from o
Slide 37: GAAP to non-GAAP reconciliation (continued)
GAAP to non-GAAP reconciliation (continued) The non-GAAP adjustments, and F5's basis for excluding them from non-GAAP financial measures, are outlined below: Stock-based compensation. Stock-based compensation consists of expense for stock options, restricted stock, and employee stock purchases throu
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