Slide 1: Q3 FY23 Results
Q3 FY23 Results PERIOD ENDING June 30, 2023 Published July 24, 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, gross margins, operating leverage, earnings growth, future customer demand and spending, markets,
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 & Non-GAAP results
GAAP & Non-GAAP results GAAP results Non-GAAP results Q3FY23 Q3FY22 Q3FY23 Q3FY22 Revenue $703M $674M Revenue $703M $674M Gross profit $561M $544M Gross profit $579M $561M Gross margin 79.8% 80.6% Gross margin 82.5% 83.2% Operating profit $104M $107M Operating profit $233M $194M Operating margin 14.
Slide 6: Business overview
Business overview We delivered Q3 revenue at the midpoint and 1 non-GAAP EPS well above the high end of our guidance range. 6 © 2023 F5
Slide 7: We delivered against our Q3FY23 guidance
We delivered against our Q3FY23 guidance Q3FY23 Q3FY23 Guidance Actuals Total revenue $690 to $710M $703M Non-GAAP gross margin ~82% 82.5% Non-GAAP operating expenses $348 to $360M $346M Non-GAAP EPS $2.78 to $2.90 $3.21 7 © 2023 F5
Slide 8: Business overview agenda
Business overview agenda We delivered Q3 revenue at the midpoint and 1 non-GAAP EPS well above the high end of our guidance range. 2 We are seeing some early signs of demand stabilization. 8 © 2023 F5
Slide 9: We are seeing some early signs of demand stabilization
We are seeing some early signs of demand stabilization +8% Global Services revenue growth Y/Y +1% Product revenue growth Y/Y +5% Systems revenue growth Y/Y -3% Total software revenue growth Y/Y +32% Total software revenue growth Q/Q +4% Subscription software revenue growth Y/Y *Total software revenu
Slide 10: Business overview agenda
Business overview agenda We delivered Q3 revenue at the midpoint and 1 non-GAAP EPS well above the high end of our guidance range. 2 We are seeing some early signs of demand stabilization. We are demonstrating operating discipline and driving 3 operating leverage. 10 © 2023 F5
Slide 11: We are demonstrating operating discipline and driving operating leverage
We are demonstrating operating discipline and driving operating leverage 82.5% Non-GAAP >200 bps Q/Q gross margins >600 bps Q/Q 33.2% Non-GAAP operating margins >400 bps Y/Y 11 © 2023 F5
Slide 12: Q323 use case examples
Q323 use case examples F5 BIG-IP F5 NGINX Serves traditional apps on-premises, co-located or in cloud environments Serves modern, container-native and microservices-based apps and APIs • Taking share from competitors who have failed to invest. • Large enterprises adopting NGINX for cloud and Kuberne
Slide 13: Q323 use case examples
Q323 use case examples F5 Distributed Cloud Services F5 Distributed Cloud – API Security Portfolio of SaaS and managed services serving traditional and modern apps Exploding API endpoints require discovery and protection • Created via organic and inorganic investment and • Number of API endpoints ex
Slide 14: Q323 use case examples
Q323 use case examples F5 Distributed Cloud – Multi-cloud Networking Securely connect apps between on-premises, multi-cloud and edge environments at scale • F5’s ability to package networking, security, and distribution Claims management systems provider of apps and APIs is unique and changes the ga
Slide 15: Q3FY23 Results
Q3FY23 Results Frank Pelzer, CFO & EVP 15 © 2023 F5
Slide 16: Q3FY23 revenue mix
Q3FY23 revenue mix $700 $674 $703 +4% Total revenue $600 $174 growth $179 $328M $326M product Revenue $ in millions $500 product revenue revenue $155 $400 $148 +1% +8% Product Global Services $300 revenue revenue growth growth $200 $348 $374 $100 -3% 5% Software Systems revenue revenue $0 growth gro
Slide 17: Q3FY23 software revenue mix
Q3FY23 software revenue mix $180 $150 18% $33 13% $22 87% of total software Revenue $ in millions revenue from subscriptions $120 82% 87% $90 $60 $30 $146 $152 +4% Subscription software revenue growth Y/Y $0 Q3FY22 Q3FY23 Subscription Perpetual Total software revenue contains subscription and perpet
Slide 18: Revenue from recurring sources
Revenue from recurring sources 28% 25% 72% 75% Recurring Non-recurring Q3FY22 Q3FY23 Recurring revenue includes subscriptions, SaaS-based and utility-based revenue and the maintenance portion of our global services revenue.. 18 © 2023 F5
Slide 19: Q3FY23 revenue contribution by geography
Q3FY23 revenue contribution by geography Regional revenue growth 19% 18% $131M $123M -6% Revenue growth APAC 23% 26% contribution by geo $ and % of revenue $156M $181M +16% Revenue growth EMEA 57% 57% $387M $398M +3% Revenue growth AMER Q3FY22 Q3FY23 Americas EMEA APAC Totals may not add due to roun
Slide 20: Q3FY23 customer verticals as a % of product bookings
Q3FY23 customer verticals as a % of product bookings 18% 13% % of total product bookings 12% 21% 70% 66% Q3FY22 Q3FY23 Enterprise Government Service Provider Totals may not add to 100% due to rounding. 20 © 2023 F5
Slide 21: Q3FY23 non-GAAP gross and operating margins
Q3FY23 non-GAAP gross and operating margins Non-GAAP Gross Margin Non-GAAP Operating Margin 100.0% 40.0% 83.2% 82.5% 33.2% 80.0% 30.0% 28.8% % of non-GAAP revenue % of non-GAAP revenue 60.0% 20.0% 40.0% 10.0% 20.0% 0.0% 0.0% Q3FY22 Q3FY23 Q3FY22 Q3FY23 See appendix for GAAP to non-GAAP reconciliatio
Slide 22: Q3FY23 non-GAAP net income and EPS
Q3FY23 non-GAAP net income and EPS Reflects 18.1% Q3FY23 and 17.4% Q3FY22 non-GAAP effective tax rate Non-GAAP Net Income Non-GAAP EPS $250 $4.00 $194 $3.21 $200 $3.00 $155 $2.57 $150 $ in millions $2.00 $100 $1.00 $50 $0 $0.00 Q3FY22 Q3FY23 Q3FY22 Q3FY23 See appendix for GAAP to non-GAAP reconcilia
Slide 23: Cash flow from operations
Cash flow from operations $180 $165 $158 $160 $154 $141 $140 $120 $ in millions $100 $80 $71 $60 $40 $20 $0 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 23 © 2023 F5
Slide 24: Cash and investments
Cash and investments $1,000 $894 $10 $127 $757 $760 $696 $750 $19 $21 $5 $6 $668 $13 $8 $196 $54 $ in millions $500 $758 $735 $677 $606 $250 $542 $0 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Cash and cash equivalents Short-term investments Long-term investments 24 © 2023 F5
Slide 25: Deferred revenue
Deferred revenue $2,000 $1,760 $1,796 $1,791 $1,692 $1,637 $1,500 9% $ in millions $1,000 Q3FY23 Y/Y Growth $500 $0 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 25 © 2023 F5
Slide 26: We are committed to returning cash to shareholders
We are committed to returning cash to shareholders Share Repurchases ($ 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 • FY23 YTD we have used 68% of our free cash flow toward share $400 repurchases. • As o
Slide 27: Business Outlook
Business Outlook 27 © 2023 F5
Slide 28: Our Q423 outlook
Our Q423 outlook Q4FY23 Guidance Total revenue $690 to $710M Non-GAAP gross margin ~83% Non-GAAP operating expenses $338 to $350M Share-based compensation $55 to $57M FY23 effective tax rate ~20% Non-GAAP EPS $3.15 to $3.27 28 © 2023 F5
Slide 29: Key takeaways
Key takeaways 1 2 3 We are seeing some early and We are seeing demonstrable proof We are delivering on the operating encouraging signs of demand points that the differentiated discipline we committed to and stabilizing. solutions portfolio we are creating expect to produce additional through a combi
Slide 30: Q&A
Q&A 30 © 2023 F5
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Slide 32: Appendix
Appendix 32 © 2023 F5
Slide 33: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Gross Profit Reconciliation ($ in thousands) Q3FY23 Q3FY22 GAAP gross profit $560,959 $543,755 Stock-based compensation $7,297 $7,203 Amortization and impairment of purchased intangible assets $10,984 $9,960 Facility-exit costs $150 $62 Acquisition-related charges $45
Slide 34: GAAP to non-GAAP reconciliation (continued)
GAAP to non-GAAP reconciliation (continued) Income from Operations Reconciliation ($ in thousands) Q3FY23 Q3FY22 GAAP operating income $103,569 $107,464 Total adjustments related to revenue $0 $0 Total adjustments related to gross profit $18,476 $17,321 Total adjustments related to operating expense
Slide 35: 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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