Slide 1: Q3FY20 Results
Q3FY20 Results PERIOD ENDING JUNE 30, 2020 Published July 27, 2020
Slide 2: Forward-looking statements
Forward-looking statements This presentation and associated commentary contains forward-looking statements including, among other things, statements regarding the continuing strength and momentum of F5's business, future financial performance, projected and target revenue and earnings ranges, income
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: Introduction
Introduction François Locoh-Donou, CEO & President 4 | ©2019 F5
Slide 5: Q3FY2020 Results
Q3FY2020 Results Frank Pelzer, CFO & EVP 5 | ©2019 F5
Slide 6: GAAP results
GAAP results Q3FY19 Q3FY20 Revenue $563.4M $583.3M Gross margin 83.9% 81.8% Operating margin 18.2% 15.0% Net income $85.9M $69.9M Diluted EPS $1.43 $1.14 6 | ©2019 F5
Slide 7: Non-GAAP revenue
Non-GAAP revenue $ IN MILLIONS Growth $586 $600 $563 4% Non-GAAP revenue $ in millions $67 $97 +43% $500 Q3FY20 non-GAAP revenue: -12% $159 • 73% of software revenue from $400 $182 subscriptions $300 • ~66% of revenue from recurring sources $200 +5% $330 $314 • Continued services growth $100 $0 Q3FY
Slide 8: Non-GAAP revenue contribution by geography
Non-GAAP revenue contribution by geography % of Growth % of total $563 4% $586 total Non-GAAP revenue $ in millions 23% $110 19% $130 -15% Q3FY20 strength from U.S. and EMEA 24% $141 24% $133 +6% Robust Q3FY19 for APAC leads to tough Q3FY20 comparison 53% $301 +11% $334 57% Q3FY19 Q3FY20 North Ameri
Slide 9: Customer verticals as a % of product bookings
Customer verticals as a % of product bookings 19% 18% % of total product bookings 60% 67% 20% 15% Q3FY19 Q3FY20 Service Providers Enterprise Government TOTALS MAY NOT ADD TO 100% DUE TO ROUNDING. 9 | ©2019 F5
Slide 10: Non-GAAP gross and operating margins
Non-GAAP gross and operating margins AS A % OF NON-GAAP REVENUE NON-GAAP GROSS MARGIN NON-GAAP OPERATING MARGIN 90.0% 35.0% As a % of non-GAAP revenue Q3FY20 includes dilution from 33.1% Shape Security, acquired in January 2020 85.4% 85.0% 84.4% 30.0% 28.6% 80.0% 25.0% Q3FY19 Q3FY20 Q3FY19 Q3FY20 Q3
Slide 11: Non-GAAP net income and EPS
Non-GAAP net income and EPS NON-GAAP NET INCOME $ IN MILLIONS NON-GAAP NET INCOME NON-GAAP EPS $160 $2.60 Q3FY20 includes dilution from $2.52 Shape Security, acquired in $152 $2.50 Non-GAAP Net Income January 2020 $150 Non-GAAP EPS in $ $2.40 $ in millions Q3FY20 non-GAAP effective tax rate of 20.2%
Slide 12: Cash flow from operations
Cash flow from operations $ IN MILLIONS NGINX acq Shape acq $250 $206 $200 $182 $159 $ in millions $150 $144 $150 $100 $50 $- Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 12 | ©2019 F5
Slide 13: Cash and investments
Cash and investments $ IN MILLIONS NGINX acq Shape acq $1,600 $1,474 $1,400 $1,331 $1,206 Near term, given macro $1,200 $1,148 uncertainties, we are $1,026 prioritizing building cash $1,000 $ in millions $800 3-year $400M Term Loan associated with Shape acquisition to be paid $600 down over time $40
Slide 14: Q4FY20 outlook
Q4FY20 outlook PROVIDED JULY 27, 2020 Q4 FY2020 Non-GAAP Revenue1 $595 - $615M Non-GAAP Gross Margin 84% - 85% Non-GAAP Operating Expense $326 - $338M Non-GAAP Diluted EPS $2.30 - $2.42 FY20 Non-GAAP Effective Tax Rate 19.5% - 20.5% Share-based Compensation $52 - $53M 1 SHAPE HAS A SUBSCRIPTION SOFT
Slide 15: Q3FY20 Business Overview
Q3FY20 Business Overview François Locoh-Donou, CEO & President 15 | ©2019 F5
Slide 16: Our COVID-19 response and business impact
Our COVID-19 response and business impact EMPLOYEES CUSTOMERS BUSINESS IMPACT • We are nearly 100% work-from-home • Large enterprises and service • Incumbency is a large advantage. and expect the majority of F5ers will providers are: • Demand is proving more resilient than work remotely for the rema
Slide 17: Trends are emerging in our customer wins
Trends are emerging in our customer wins 1 THE APPEAL OF OUR SUBSCRIPTION OFFERINGS IS GROWING GLOBALLY • Subscriptions accounted for 73% of Q3FY20 software revenue • In Q3FY20, the team closed the largest number of subscription deals ever in a quarter 2 CUSTOMERS ARE INCREASINGLY CHOOSING F5 FOR A
Slide 18: Our Vision for Applications
Our Vision for Applications François Locoh-Donou, CEO & President 18 | ©2019 F5
Slide 19: Application services enable fast and secure digital customer experiences
Application services enable fast and secure digital customer experiences APPLICATION SERVICES APPLICATION Web app Secure Denial of Anti-fraud SECURITY firewall access service & anti-bot Application APPLICATION End-user business logic App / web Ingress API Load DELIVERY server controller gateway bala
Slide 20: Challenges exist in the landscape of app services in place today
Challenges exist in the landscape of app services in place today APPLICATION Web app Secure Denial of Anti-fraud SECURITY firewall access service & anti-bot Application APPLICATION End-user business logic App / web Ingress API Load DELIVERY server controller gateway balancer High operational No holi
Slide 21: Customers deserve application insights and automation
Customers deserve application insights and automation APPLICATION INSIGHTS & AUTOMATION APPLICATION Web app Secure Denial of Anti-fraud SECURITY firewall access service & anti-bot Application APPLICATION SECURITY APPLICATION End-user business logic App / web Ingress API Load DELIVERY server APPLICAT
Slide 22: F5 is uniquely positioned to deliver application insights and automation
F5 is uniquely positioned to deliver application insights and automation APPLICATION INSIGHTS & AUTOMATION TELEMETRY CONFIGURATION APPLICATION SECURITY APPLICATION DELIVERY Application End-user business logic F5’S UNIQUE ARCHITECTURE POSITION AND PRODUCT PORTFOLIO Delivers applications Collects tele
Slide 23: With Shape, F5 is now developing a comprehensive application analytics platform
With Shape, F5 is now developing a comprehensive application analytics platform AI-enabled Digital Application Analytics- security and experience performance enabled business fraud protection management management and AIOps services APPLICATION ANALYTICS PLATFORM Instrumentation Ingestion Data lake
Slide 24: Adaptive applications increase revenue, reduce costs, and better protect users
Adaptive applications increase revenue, reduce costs, and better protect users AI-enabled security & Digital experience App performance Analytics-enabled fraud protection management management & AI-Ops business services CLOUD-BASED AI, ANALYTICS, & ORCHESTRATION MANAGEMENT AND TELEMETRY VIA CONTROL
Slide 25: We launched Shape AI Fraud Engine (SAFE)
2020 We launched Shape AI Fraud Engine (SAFE) to enable SAFE detects devices that demonstrate “high zip velocity” One “customer”, M, ordered $3,142 of food, for 42 zip codes, over 128 orders AI-based fraud protection Real-time AI-powered fraud elimination Found $600K of fraud in one month for F500 r
Slide 26: We are bringing our adaptive applications vision to life
We are bringing our adaptive applications vision to life Our vision is that an application, Modern like a living organism, will naturally adapt based on the environment, Act 2 REACH becoming an adaptive application. Act 4 It will grow, shrink, defend and Act 3 heal itself as needed. Traditional We a
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Slide 28: Appendix
Appendix 28 | ©2020 F5
Slide 29: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Gross Profit Reconciliation ($ in thousands) Q3FY19 Q3FY20 GAAP revenue $563,394 $583,252 Acquisition-related write-downs of assumed deferred revenue $0 $2,670 Non-GAAP revenue $563,394 $585,922 GAAP gross profit $472,627 $477,212 Stock-based compensation $5,118 $6,77
Slide 30: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Income from Operations Reconciliation ($ in thousands) Q3FY19 Q3FY20 GAAP operating income $102,740 $87,621 Total adjustments related to revenue $0 $2,670 Total adjustments related to gross profit $8,615 $14,495 Total adjustments related to operating expense $74,933 $
Slide 31: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation The non-GAAP adjustments, and F5's basis for excluding them from non-GAAP financial measures, are outlined below: Acquisition-related write-downs of assumed deferred revenue. Included in its GAAP financial statements, F5 records acquisition-related write-downs of assu
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