F5, Inc. · NASDAQ:FFIV
F5 — F5 Networks — Investor Day (November 2020)
50 slides from F5's investor day presentation, Nov 9, 2020
Slide 1: Event Preview – November 9, 2020
Event Preview – November 9, 2020
Slide 2: Forward-looking statements
Forward-looking statements This presentation 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, revenue mix, revenue growth rates and earnings range
Slide 3: Use of non-GAAP
Use of non-GAAP Unless otherwise indicated in the presentation, all financial measures are presented on a non-GAAP basis. Available GAAP measures are being provided in the following reconciliation tables for comparison. All forward-looking non-GAAP measures included in the outlook exclude estimates
Slide 4: 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
Slide 5: Pioneering the Adaptive Applications Era
Pioneering the Adaptive Applications Era François Locoh-DonouChief Executive Officer
Slide 6: How have we done since our 2018 Analyst and Investor Meeting
How have we done since our 2018 Analyst and Investor Meeting Systems Growth Rate Operating Margin & EPS Growth 1 Software transformation ahead of schedule 2 Security business is a scale leader in Application Security 3 Recurring revenue to support growthand earnings power 4 On track to deliver susta
Slide 7: All businesses will need to deliver apps that engage and amaze
All businesses will need to deliver apps that engage and amaze. We call these adaptive applications. We will lead in this new era through our unique position in application security, delivery and analytics. We are transforming our business at an unprecedented pace, driving top-line growth accelerati
Slide 8: All businesses will need to deliver apps that engage and amaze
All businesses will need to deliver apps that engage and amaze. We call these adaptive applications. We will lead in this new era through our unique position in application security, delivery and analytics. We are transforming our business at an unprecedented pace, driving top-line growth accelerati
Slide 9: Consumers expect a rich application experience
Consumers expect a rich application experience Products, services or company names referenced herein may be trademarks of their respective owners with no endorsement or affiliation, express or implied
Slide 10: Digital experiences stitched together from multiple application data paths
Today’s digital experiences are often stitched together from multiple application data paths spanning on-prem to edge ON-PREMISES DATA CENTER OR COLOCATION PUBLICCLOUD DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE END-USER APPLICATION BUSINESS LOGIC APPLICATION BUSINESS LOGIC APPLICATION BUSINESS LOGIC
Slide 11: Digital experiences blend traditional and modern applications
Most digital experiences are comprised of a blend of traditional and modern applications DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE END-USER MODERN APPS MODERN & TRADITIONAL APPS TRADITIONAL & MODERN APPS APPLICATION DATA PATHS ON-PREMISES DATA CENTER OR COLOCATION PUBLICCLOUD
Slide 12: Application technologies required along each data path
Along each data path, there are a set of application technologies required for securing and delivering the app Web appfirewall Secure access App/webserver Anti-fraud& anti-bot Denial ofservice Ingresscontroller API gateway Load balancer APPLICATION SECURITY APPLICATION DELIVERY Application business
Slide 13: Inconsistent technologies creating technical and operational debt
Inconsistency of technologies across environments is creating unsustainable technical and operational debt DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE END-USER Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot Secure access Web appfirewall APPLICATION SECU
Slide 14: Manual stitching is not fast or scalable
Manual stitching together is not fast or scalable, and it leaves organizations vulnerable DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE END-USER Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot Secure access Web appfirewall APPLICATION SECURITY APPLICATION
Slide 15: Attack surface and sophistication of attacks has increased
The attack surface and the sophistication of attacks has increased ON-PREMISES DATA CENTER OR COLOCATION PUBLICCLOUD DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE END-USER Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot Secure access Web appfirewall APPLIC
Slide 16: Rich telemetry is trapped in silos
Rich telemetry is trapped in silos, limiting insights into app performance and the end-user’s digital experience ON-PREMISES DATA CENTER OR COLOCATION PUBLICCLOUD DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot
Slide 17: Current state is untenable
The digital experience enabled through today’s rich applications is now table stakes. But what lies beneath is complex, vulnerable, and fragile. Current state is untenable.
Slide 18: A world where app portfolios adapt to environmental changes
APPLICATION INSIGHTS PUBLICCLOUD ON-PREMISES DATA CENTER OR COLOCATION DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot Secure access Web appfirewall APPLICATION SECURITY APPLICATION DELIVERY Web appfirewall Sec
Slide 19: An adaptive app automates redundant processes
APPLICATION INSIGHTS PUBLICCLOUD ON-PREMISES DATA CENTER OR COLOCATION DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE An adaptive app automates redundant processes for greater efficiencies Ingresscontroller Denial ofservice API gateway Load balancer App/webserver Anti-fraud& anti-bot Secure access Web ap
Slide 20: An adaptive app protects itself
APPLICATION INSIGHTS PUBLICCLOUD ON-PREMISES DATA CENTER OR COLOCATION DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE An adaptive app automates redundant processes for greater efficiencies It protects itself, securing all points of vulnerability Ingresscontroller Denial ofservice API gateway Load balance
Slide 21: Adaptive app capabilities
APPLICATION INSIGHTS PUBLICCLOUD ON-PREMISES DATA CENTER OR COLOCATION DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE An adaptive app automates redundant processes for greater efficiencies It protects itself, securing all points of vulnerability Ingresscontroller Denial ofservice API gateway Load balance
Slide 22: Adaptive app capabilities
APPLICATION INSIGHTS PUBLICCLOUD ON-PREMISES DATA CENTER OR COLOCATION DEVICE OR BROWSER EDGE DIGITAL EXPERIENCE An adaptive app automates redundant processes for greater efficiencies It protects itself, securing all points of vulnerability Ingresscontroller Denial ofservice API gateway Load balance
Slide 23: Four key requirements to enable adaptive apps
There are four key requirements to enable adaptive apps Simplify traditional app delivery for multi-cloud Enable modern app delivery at scale Secure every app anywhere Multi-cloud application security and delivery technologies Unlock the value of app insights 1 2 3 4
Slide 24: All businesses will need to deliver apps that engage and amaze
All businesses will need to deliver apps that engage and amaze. We call these adaptive applications. We will lead in this new era through our unique position in application security, delivery and analytics. We are transforming our business at an unprecedented pace, driving top-line growth accelerati
Slide 25: Remaining focused on solving customers' most important application challenges
As we evolve, we remain focused on our original purpose: solving our customers’ most important application challenges Load Balancer 1996 – 2004 Scale websites ApplicationDelivery Controller 2005 – 2015 Scale and secure mission-critical applications Multi-cloud Application Security & Delivery The Nex
Slide 26: A unique portfolio of assets to deliver adaptive applications
We have assembled a unique portfolio of assets to deliver adaptive applications Multi-cloud application security and delivery technologies Simplify traditional app delivery for multi-cloud Enable modern app delivery at scale Secure every app anywhere Unlock the value of app insights 1 2 3 4 BIG-IP O
Slide 27: In March 2018, we said we would extend our reach and role
IN MARCH 2018, We said we would extend our reach and expand our role 2019 Future Base Serverless Containers Private cloud Public cloud On premises TrafficManagement WAF,DDoS,Identity ApplicationAnalytics Security NewApplicationServices Role: We Make Apps Go Faster, Smarter, Safer Reach: Every App, A
Slide 28: Broadest app services portfolio expands addressable market
$1.8BTAM $3.5BTAM $8.3BTAM We have built the broadest available app services portfolio to dramatically expand our addressable market App Security App Insights App Delivery Simplify traditional app delivery for multi-cloud environments Enable modern app delivery at scale Secure every app anywhere Unl
Slide 29: Only portfolio that can deliver on adaptive applications opportunity
$2.0BTAM4% CAGR $7.6BTAM+30% CAGR $14.8BTAM+21% CAGR 2023 $3.1BTAM+1,358% CAGR ~$28BTotal TAM by 2023 $1.8BTAM $3.5BTAM $8.3BTAM We have assembled the only portfolio that can deliver on the opportunity of adaptive applications App Security App Insights App Delivery Simplify traditional app delivery
Slide 30: Recast go-to-market approach
Accelerate Pivot to Software and Subscription Expand Reach with Security Buyers Enhance Vertical Specialization Current Business Current Business Deepen Public Cloud Partnerships Focus with Data-driven,Targeted Outreach New Buyerswith Expanded Portfolio We have recast our go-to-market approach to ca
Slide 31: NGINX momentum post acquisition
16-mos post acquisition, FY20 Revenue Growth, FY19 to FY20 ~109%1 Growth in Average Deal Size +57% Growth in Number of Paid Subscription Customers +23% Innovation Velocity 3 major new solutions launched Portfolio Integration Security on NGINX, app visibility and management Go-to-market Velocity Full
Slide 32: Shape momentum post acquisition
8-mos post acquisition, FY20 Non-GAAP Revenue & ARR Growth, FY19 to FY20 (ratable subscription business) 35%1 & 44% Growth in Average Deal Size +47% Addition of New Customers +15% Innovation Velocity 2 new products launched Portfolio Integration Integrated with BIG-IP & Silverline Go-to-market Veloc
Slide 33: All businesses will need to deliver apps that engage and amaze
All businesses will need to deliver apps that engage and amaze. We call these adaptive applications. We will lead in this new era through our unique position in application security, delivery and analytics. We are transforming our business at an unprecedented pace, driving top-line growth accelerati
Slide 34: Three key indicators for long-term success
There are three key indicators for our long-term success Software TransformationSoftware contributes the majority of product revenue Software SubscriptionSoftware subscription is 80%+ of software revenue Operating DisciplineOperating model is balanced by our guiding principle of the “Rule of 40”(rev
Slide 35: Software transformation is outpacing expectations
Our software transformation is outpacing our expectations FY17-20 NON-GAAP REVENUE CAGR 1Comprises term license subscriptions, utility, and as-a-Service offerings. See appendix for GAAP to non-GAAP reconciliation. Software1 Mix Trends(% of Non-GAAP Product Revenue) 44%
Slide 36: F5's software transformation outpacing other companies
In only three years, F5’s software transformation is substantially outpacing other companies 1F5 percentage is as a percent of non-GAAP product revenue. See appendix for GAAP to non-GAAP reconciliation.Source: Company filings. Softwareas % Product Revenue 35%1FY20 Mix 37%FY20 Mix 21%FY13 Mix 5%FY14
Slide 37: Revenue quality improving with software subscription growth
Our revenue quality is improving with software subscription growth FY17-20 NON-GAAP REVENUE CAGR 1Comprises standalone software, including term-license subscriptions, utility, and as-a-Service offerings. See appendix for GAAP to non-GAAP reconciliation. Software Subscription1 Mix(% of Non-GAAP Softw
Slide 38: A sizable and growing application security player
We are a sizable and growing application security player 1 Comprises standalone security offerings including systems, standalone software licenses and security subscription services. See appendix for GAAP to non-GAAP reconciliation. Standalone Security1 Mix(% of Non-GAAP Product Revenue) FY17-20 NON
Slide 39: One of the top two application security players
1Includes standalone products, Shape Security, Silverline, attached security, and security services. See appendix for GAAP to non-GAAP reconciliation. Total Non-GAAP Security Revenue FY2020 >$750M >$350M Security Services Revenue (28-30% of ~$1.3B) ~$275M Standalone Security Product Revenue ~$125M A
Slide 40: Evolution of Non-GAAP Operating Margins
Evolution of Non-GAAP Operating Margins We have made deliberate investments to drive our transformation while maintaining a focus on operating discipline FY1836.1% Long TermMid 30’s% FY2030.4% Accelerated Organic Software TransformationNew offerings: per-app vADC, automation, orchestration, cloud in
Slide 41: Significant annualized cost reductions over the next five years
We are poised to achieve significant annualized cost reductions over the next five years Corporate / Company Wide COGS / Gross Margin Research and Development Sales and Marketing Enacted two significant staff reductions (~10%) in past 3 yearsLeverage low-cost locations and automationExecute acquisit
Slide 42: FY20A, Horizon and long-term targets
FY20A Horizon 2 (FY21-22) Long-Term Targets (circa 2025) Software growth 52% 35% to 40% CAGR >20% Software % of product revenue 35% >50% >75% Systems growth -10% High-to-mid single-digit decline High-to-mid single-digit decline Services growth 5% Low single-digit growth Low single-digit growth to fl
Slide 43: Three key indicators driving double-digit EPS growth
There are three key indicators for our long-term success Driving double-digit EPS growth Software TransformationSoftware contributes the majority of product revenue Software SubscriptionSoftware subscription is 80%+ of software revenue Operating ModelOperating model is balanced by our guiding princi
Slide 44: Committed to returning capital to shareholders
During FY21, we are committed to accelerated share repurchases of $500 millionDuring FY22, we are committed to $500 million in share repurchasesBeginning in FY23, we intend to return 50% of free cash flow to shareholders via share repurchases We expect to pursue targeted M&A which accelerates our Ad
Slide 45: All businesses will need to deliver apps that engage and amaze
All businesses will need to deliver apps that engage and amaze. We call these adaptive applications. We will lead in this new era through our unique position in application security, delivery and analytics. We are transforming our business at an unprecedented pace, driving top-line growth accelerati
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Slide 47: Appendix
| ©2019 F5 47 Appendix
Slide 48: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation (Amounts in Thousands) FY17 FY18 FY19 FY20 GAAP revenue $2,090,041 $2,161,407 $2,242,447 $2,350,822 Acquisition-related write-downs of assumed deferred revenue $0 $0 $0 $6,824 Non-GAAP revenue $2,090,041 $2,161,407 $2,242,447 $2,357,646 GAAP gross profit $1,736,556 $1
Slide 49: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation (Amounts in Thousands) FY17 FY18 FY19 FY20 GAAP operating expense $1,172,600 $1,209,027 $1,367,407 $1,550,668 Stock-based compensation — sales and marketing $69,655 $61,533 $69,477 $88,446 Stock-based compensation — research and development $53,399 $47,327 $40,886 $50
Slide 50: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation (Amounts in Thousands except per share data) FY17 FY18 FY19 FY20 GAAP operating income $563,956 $590,899 $518,463 $392,267 Total adjustments related to revenue $0 $0 $0 $6,824 Total adjustments related to gross profit $30,807 $29,447 $31,558 $51,711 Total adjustments