Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- F5 Inc (FFIV, Financial) delivered a record Q4 with $747 million in revenues, up 6% year over year, exceeding the high end of their guidance range.
- Software revenue grew by 19% year over year, highlighting strong performance in this segment.
- The company achieved a non-GAAP EPS of $3.67, which was $0.17 above the top end of their guidance range, indicating improved operating margins.
- F5 Inc (FFIV) has successfully transformed from a hardware-centric company to a leader in security and software for hybrid multi-cloud environments.
- The company expects revenue growth to accelerate in FY25, with a projected growth range of 4% to 5% from FY24, driven by a large software renewal opportunity and improving demand trends.
Negative Points
- Despite strong software growth, the SaaS and managed services revenue declined by 5% year over year due to planned legacy offering retirements and transitions.
- APAC region revenue declined by 3%, representing a challenge in that geographical market.
- The company anticipates only low single-digit revenue growth in the first half of FY25, indicating a cautious outlook for the early part of the fiscal year.
- F5 Inc (FFIV) has not baked in significant contributions from AI opportunities in their FY25 guidance, suggesting uncertainty in this emerging area.
- Service provider demand remains constrained, with the sector not showing a broad recovery, impacting overall growth potential.
Q & A Highlights
Q: Can you detail the composition of the strong software results in the quarter? Was it driven by renewals or new business?
A: The outperformance came from two main factors: expansion within the existing renewal base and new business activity from projects that had been delayed. This resulted in strong upside in software for the quarter and improved our outlook for FY25. - Francis Pelzer, CFO
Q: Why is there a high single-digit growth guidance for software in FY25 despite strong growth in FY24?
A: The guidance is driven by the macro trend of enterprises adopting hybrid and multi-cloud architectures. While AI is an emerging opportunity, significant contributions from AI are expected more in FY26 and beyond. - Francois Locoh-Donou, CEO
Q: Is the improvement in systems revenue due to share gains or accelerated refresh cycles?
A: The strength in systems is due to both competitive replacement opportunities and a more material tech refresh of our installed base. Customers are now more certain about their budgets and are reinvesting in their hardware infrastructure. - Francois Locoh-Donou, CEO
Q: What is the expected cadence of subscription revenue in FY25?
A: The renewal base is more weighted to the second half of the year, which will likely result in stronger software growth in the second half. The variability in revenue is due to the timing of renewals and the recognition of term-based licenses. - Cooper Werner, SVP of Finance
Q: Can you elaborate on the BIG-IP NGINX for Kubernetes and its target customer base?
A: The solution targets enterprises and service providers building AI factories at scale. It increases GPU utilization and serves multiple AI workloads. The opportunity is expected to materialize more in FY26 and beyond. - Francois Locoh-Donou, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
