Slide 1: Q4FY23 & FY23 Results
Q4FY23 & FY23 Results PERIOD ENDING September 30, 2023 Published October 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, profitability, earnings growth, earnings per share expectations, future customer demand and spendi
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 Q4FY23 Q4FY22 FY23 FY22 Q4FY23 Q4FY22 FY23 FY22 Revenue $707M $700M $2,813M $2,696M Gross profit $566M $553M $2,220M $2,156M Gross profit $585M $570M $2,293M $2,227M Gross margin 80.1% 78.9% 78.9% 80.0% Gross margin 82.7% 81.4% 81.5% 82.6% Operat
Slide 6: We delivered against our Q4FY23 guidance
We delivered against our Q4FY23 guidance Q4FY23 Q4FY23 Guidance Actuals Total revenue $690 to $710M $707M Non-GAAP gross margin ~83% 82.7% Non-GAAP operating expenses $338 to $350M $345M Non-GAAP EPS $3.15 to $3.27 $3.50 6 © 2023 F5
Slide 7: Q4FY23 performance highlights
Q4FY23 performance highlights +9% Global Services revenue growth Y/Y 11% Total software* revenue growth Y/Y +27% +10% Subscription software* revenue growth Y/Y Total software* revenue growth Q/Q *Total software revenue includes subscription and perpetual software. Subscription software revenue inclu
Slide 8: FY23 highlights
FY23 highlights Subscription Renewals F5 Distributed Cloud Competitive Takeout Meaningful Operating Services’ SaaS Traction Improvements Performed largely to plan 29% of Distributed Cloud Good success displacing a Non-GAAP operating in a tough environment, a SaaS customers are new traditional ADC co
Slide 9: Considerations in our FY24 outlook
Considerations in our FY24 outlook Macro F5 • Continued application and API growth fueled by automation • ~$180 million revenue headwind from FY23 backlog and new use cases fulfillment • Customer spending caution persists into FY24, but is • Flat-to-modest software revenue growth stable – Continued
Slide 10: Our outlook for FY24 & FY25
Our outlook for FY24 & FY25 FY24 Target Operating FY23A Outlook Model (FY25+) Flat to low-single- Mid-single-digit Revenue 4% growth digit decline growth Non-GAAP operating margin 30.2% 33% to 34% 5% to 7% growth $11.70 Non-GAAP EPS (≥10% growth on a tax 14.8% growth y/y neutral basis to FY23) *Free
Slide 11: F5 is the only company that can deliver, secure & optimize any app & API anywhere
F5 is the only company that can deliver, secure & optimize any app & API anywhere F5’s converged portfolio is resonating • F5’s security and deliver solutions offer a custom fit for every app and API. with customers who are able to deploy the • The combination of our deployable software and solution
Slide 12: Q423 use case examples
Q423 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 • BIG-IP’s data plane performance, automation capabilities • Large enterprises adopting NGINX for cloud and and sea
Slide 13: Q423 use case examples
Q423 use case examples F5 Distributed Cloud Services - WAAP F5 Distributed Cloud – Multi-Cloud Networking Protect apps and APIs deployed across clouds and edge sites Securely connect apps between on-premises, multi-cloud and edge • Industry-leading SaaS-based WAF and bot protection, • F5’s ability t
Slide 14: Q423 use case examples
Q423 use case examples F5’s Converged Portfolio Advantage Customers choosing F5 to secure apps & APIs across multiple environments • Only F5 can serve every app and API across all environments. • The power of our converged portfolio is resonating with customers. Financial Services Provider • Custome
Slide 15: Q4FY23 Results
Q4FY23 Results Frank Pelzer, CFO & EVP 15 © 2023 F5
Slide 16: Revenue mix and year-over-year change
Revenue mix and year-over-year change Revenue mix Year/Year change $800 $700 $700 $172 $700 $168 $703 $132 $703 $174 $707 +1% $600 $191 Total revenue Revenue $ in millions growth $500 $209 $155 $178 $173 $134 $400 -7% +9% $300 Product Global Services revenue revenue $200 growth growth $350 $360 $363
Slide 17: Software revenue mix
Software revenue mix $210 87% $191 $180 $172 $174 $25 $168 $22 $150 $41 $38 $132 of Q4FY23 total software Revenue $ in millions revenue from subscriptions $120 $23 +27% $90 $166 $152 $131 $129 $60 $109 $30 Subscription software revenue growth Y/Y $0 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Subscription Pe
Slide 18: 76% of our Q4FY23 revenue is recurring
76% of our Q4FY23 revenue is recurring 24% 33% 67% 76% Q4FY22 Q4FY23 Recurring Non-recurring Recurring revenue includes term subscriptions, SaaS & managed services, utility-based revenue and the maintenance portion of our global services revenue. 18 © 2023 F5
Slide 19: Revenue contribution by geography
Revenue contribution by geography Y/Y regional revenue growth Q4FY23 16% +4% 17% 18% 18% 17% growth APAC 23% 26% 26% 26% contribution by geo 27% % of revenue +16% growth EMEA 61% 57% 57% 57% 54% -6% growth AMER Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Totals may not add to 100% due to rounding. Americas E
Slide 20: Customer verticals as a % of product bookings
Customer verticals as a % of product bookings 13% 13% 13% 9% 21% 19% 21% 20% 21% % of total product bookings 17% 67% 72% 66% 62% 66% Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Enterprise Government Service Provider Totals may not add to 100% due to rounding. 20 © 2023 F5
Slide 21: Non-GAAP gross and operating margins
Non-GAAP gross and operating margins Non-GAAP Gross Margin Non-GAAP Operating Margin 90.0% 40.0% 33.2% 33.9% 82.5% 82.7% 81.4% % of non-GAAP revenue % of non-GAAP revenue 80.4% 80.4% 80.0% 30.0% 27.3% 27.2% 26.5% 70.0% 20.0% 60.0% 10.0% Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q4FY22 Q1FY23 Q2FY23 Q3FY23
Slide 22: Non-GAAP net income and EPS
Non-GAAP net income and EPS Reflects 14.0% Q4FY23 and 14.1% Q4FY22 non-GAAP effective tax rate Non-GAAP Net Income Non-GAAP EPS $250 $4.00 $3.50 $209 $194 $3.21 $200 $3.00 $2.62 $2.53 $158 $149 $154 $2.47 $150 $ in millions $2.00 $100 $1.00 $50 $0 $0.00 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q4FY22 Q1FY
Slide 23: Cash flow from operations
Cash flow from operations $200 $190 $165 $154 $158 $150 $141 $ in millions $100 $50 $0 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 23 © 2023 F5
Slide 24: Cash and investments
Cash and investments $1,000 $894 $10 $808 $127 $5 $760 $696 $6 $750 $21 $5 $6 $668 $13 $8 $54 $ in millions $500 $758 $797 $735 $677 $606 $250 $0 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 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 $1,775 $1,692 $1,500 +5% $ in millions $1,000 Q4FY23 Y/Y Growth $500 $0 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 25 © 2023 F5
Slide 26: Share repurchases since committing to return cash in FY21
Since committing to return cash to shareholders in FY21, we have consistently delivered on our repurchase commitments Share Repurchases ($ in millions) 58% $600 $500 $500 $500 of FY23 free cash flow* used for buyback $400 • We used 58% of our ~$600M free cash $350 flow in FY23 for share repurchases.
Slide 27: FY23 Results
FY23 Results 27 © 2023 F5
Slide 28: Revenue mix and year-over-year change
Revenue mix and year-over-year change Revenue mix Year/Year change $3,000 $2,813 $2,696 $2,500 $2,242 $2,358 $2,605 $500 $665 $664 +4% $365 Total revenue Revenue $ in millions $240 $2,000 growth $671 $748 $652 $746 $668 $1,500 +1% +7% Product Global Services $1,000 revenue revenue $1,356 $1,379 $1,4
Slide 29: Software revenue mix by consumption model
Software revenue mix by consumption model $700 Software Revenue Components (FY22 & FY23) $665 $664 1 Term-Based Subscriptions $600 $108 $143 2 SaaS & Managed Services $500 $500 3 Perpetual Licenses $109 $203 $199 $400 Revenue $ in millions $365 $300 $107 $240 $200 $108 $391 $323 $353 $257 $100 $132
Slide 30: Software revenue mix: Term-Based Subscriptions
Software revenue mix by consumption model $700 1 Term-Based Subscriptions $665 $664 • Comprised of BIG-IP and NGINX deployable $600 $108 software including new, renewal, and true- $143 forward revenue for both annual and multi-year $500 $500 subscriptions. Revenue $ in millions $109 $203 • Sales of
Slide 31: Software revenue mix: SaaS & Managed Services
Software revenue mix by consumption model $700 2 SaaS & Managed Services $665 $664 • Comprised of F5 Distributed Cloud SaaS $600 $108 offerings, managed services, legacy SaaS $143 offerings. $500 $500 • Sales recognized ratably as product revenue Revenue $ in millions $109 $203 over the term of the
Slide 32: SaaS & Managed Services ARR
SaaS & Managed Services ARR 2 SaaS & Managed Services • ARR was $198M at the end of FY23, down ~2% $65 year over year as a result of: – Solid early momentum from the SaaS ARR $ in millions offerings of F5 Distributed Cloud Services – Underperformance of advanced anti-bot and anti-fraud managed servi
Slide 33: Software revenue mix: Perpetual Licenses
Software revenue mix by consumption model $700 3 Perpetual Licenses $665 $664 • Down year over year after an unusually strong $600 $108 FY22. $143 $500 $500 Revenue $ in millions $109 $203 $199 $400 $365 $300 $107 $240 $200 $108 $391 $323 $353 $257 $100 $132 $0 FY19 FY20* FY21* FY22 FY23 Subscriptio
Slide 34: 71% of our FY23 revenue is recurring with a double-digit CAGR
71% of our FY23 revenue is recurring with a double-digit CAGR Recurring Revenue1 Mix (% of Non-GAAP Total Revenue) 60% 10% 71% FY19-23 Non-GAAP Recurring Revenue CAGR $1.35B FY19 $2.0B FY23 Recurring revenue includes term subscriptions, SaaS & managed services, utility-based revenue and the maintena
Slide 35: Security is driving a growing percentage of our total revenue
Security is driving a growing percentage of our total revenue FY23 Total Security FY23 Standalone Security $1.1B FY23 security revenue ~$475M FY23 standalone security revenue 40% of total 36% of product revenue revenue 1Comprised of standalone security offerings, bundled security offerings and relat
Slide 36: FY23 product backlog
FY23 product backlog • Product backlog returned to $250 pre-supply chain challenge $231 levels in FY23. $200 • Product backlog was elevated in FY21 and expanded in FY22 $ in millions $150 due to ongoing semiconductor $125 shortages. $100 • The vast majority of product backlog is related to systems.
Slide 37: Non-GAAP gross and operating margins
Non-GAAP gross and operating margins Non-GAAP Gross Margin Non-GAAP Operating Margin 90.0% 40.0% 85.5% 84.9% 83.9% 34.3% 82.6% % of non-GAAP revenue % of non-GAAP revenue 81.5% 31.6% 30.4% 30.2% 80.0% 30.0% 28.9% 70.0% 20.0% 60.0% 10.0% FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 See appendix
Slide 38: Non-GAAP net income and EPS
Non-GAAP net income and EPS Reflects 18.3% FY23 and 18.1% FY22 non-GAAP effective tax rate Non-GAAP Net Income Non-GAAP EPS $800 $14.00 $705 $671 $12.00 $11.70 $626 $623 $10.81 $575 $10.36 $10.19 $600 $10.00 $9.37 $ in millions $8.00 $400 $6.00 $4.00 $200 $2.00 $0 $0.00 FY19 FY20 FY21 FY22 FY23 FY19
Slide 39: Business Outlook
Business Outlook 39 © 2023 F5
Slide 40: Assumptions in our FY24 outlook
Assumptions in our FY24 outlook Assumption Near-Term Growth Impact Customer spending caution continues into FY24 +/- Global services growth returns to low-single-digit - ~$180M revenue headwind from FY23 backlog - Share gains in traditional ADC + Strength from term-subscription renewals + Growth fro
Slide 41: Our FY24 outlook
Our FY24 outlook FY24 FY23A Outlook Flat to low-single- Revenue 4% growth digit decline Non-GAAP gross margin 81.5% 82% to 83% Non-GAAP operating margin 30.2% 33% to 34% Effective tax rate 18.3% 21% to 23% $11.70 5% to 7% growth Non-GAAP EPS (≥10% growth on a tax 14.8% growth y/y neutral basis to FY
Slide 42: Our target operating model for FY25+
Our target operating model for FY25+ FY24 Target Operating FY23A Outlook Model (FY25+) Flat to low-single- Mid-single-digit Revenue 4% growth digit decline growth Non-GAAP gross margin 81.5% 82% to 83% 83% to 84% Non-GAAP operating margin 30.2% 33% to 34% 35%+ Effective tax rate 18.3% 21% to 23% $11
Slide 43: Our Q1FY24 outlook
Our Q1FY24 outlook Q1FY24 Outlook Total revenue $675 to $695M Non-GAAP gross margin 82% to 83% Non-GAAP operating expenses $332 to $344M Share-based compensation $58 to $60M FY24 effective tax rate 21% to 23% Non-GAAP EPS $2.97 to $3.09 43 © 2023 F5
Slide 44: Three pillars of our long-term operating model
Three pillars of our long-term operating model Sustained mid-single-digit Non-GAAP operating Strong capital return revenue growth margin expansion via share buybacks supported by our differentiated achieved through gross margin of at least 50% of annual positioning in attractive end markets improvem
Slide 45: Q&A
Q&A 45 © 2023 F5
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Slide 47: Appendix
Appendix 47 © 2023 F5
Slide 48: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Revenue Reconciliation ($ in thousands) Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY19 FY20 FY21 FY22 FY23 GAAP revenue $700,033 $700,378 $703,175 $702,642 $706,974 $2,242,447 $2,350,822 $2,603,416 $2,695,845 $2,813,169 Acquisition-related write-downs of assumed deferred rev
Slide 49: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Income from Operations Reconciliation ($ in thousands) Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY19 FY20 FY21 FY22 FY23 GAAP operating income $107,530 $91,212 $106,046 $103,569 $171,741 $518,463 $392,267 $394,025 $403,792 $472,568 Total adjustments related to revenue $0 $0
Slide 50: 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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