F5, INC. Q4 FY2024 earnings call

Key Highlights - Q4 2024 saw record revenues with $747M, up 6% YOY, and non-GAAP EPS of $3.67. FY 2024 revenue was at the top end of guidance, with software revenue up 11% YOY. - Transformation: Shifted from hardware-centric to security/software leader in hybrid multi-cloud. Software revenue grew from 13% to 58% of product revenue from FY 2017 to FY 2024; subscriptions grew from 20% to 85% of software revenue. - Industry Trends: Hybrid multi-cloud, distributed apps, API proliferation, increased security needs, and AI impact create challenges F5 is positioned to address. - Go-to-Market: Land new customers, expand footprint/wallet share, and renew/expand with existing customers. F5 Distributed Cloud Services has over 800 customers. - AI Opportunities: AI data ingestion, AI factory load balancing, and WAAP for secure AI inferencing; partnership with NVIDIA for BIG-IP Next on Kubernetes.

In Q4 2024, F5 generated $747 million in revenue, up 6% year-over-year. Product revenue was $358 million, up 10% YOY. Software revenue totaled $228 million, representing 19% growth YOY, with subscriptions contributing $204 million (89% of software revenue). Systems revenue was $130 million, down 3% YOY. Global Services revenue was $388 million, up 2%. Recurring revenue made up 78% of total revenue in Q4. Regionally, Americas contributed 58% of revenue (up 9% YOY), EMEA 26% (up 4% YOY), and APAC 16% (down 3% YOY). Vertically, enterprise customers accounted for 72% of Q4 product bookings.

FY 2025 Outlook - Revenue growth expected to be 4%-5% over FY 2024, back-end weighted. - Software: High-single digit growth. - Systems: Mid-single digit growth. - Global Services: Low-single digit growth. - Margin: Non-GAAP gross margin 83%-84%, operating margin ~35%. - Q1 2025: Revenue expected in the range of $705M-$725M, non-GAAP EPS $3.29-$3.41.

• Macro Uncertainty: Impact on customer IT budgets. - Competition: Threat from competitors in security/networking solutions. - AI Adoption: Slow enterprise AI adoption could affect growth.

Q: How was software growth composed in Q4?

A: Software growth in Q4 came from expansion in the existing renewal base and new business activity, including delayed projects moving forward.

Q: What's the outlook for systems revenue in FY 2025?

A: Systems revenue is expected to grow mid-single digits, driven by share gains from competitive takeouts and customer refresh trends.

Q: What's the cadence of subscription revenue in FY 2025?

A: Subscription revenue is back-end loaded due to the timing of the renewal base, with larger renewals occurring more in the second half of the year.

Q: Who is the target customer base for BIG-IP Next for Kubernetes?

A: The target is enterprises and service providers building AI factories, leveraging GPUs and Kubernetes environments.

Q: What's the status of price increases for hardware?

A: Hardware price increases are in the single-digit percentage range, with adjustments based on competitive environment and value provided to customers.