F5 Inc at Piper Sandler Growth Frontiers Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jim Fish - Piper Sandler & Co. - Analyst : Riveting statements. Anyways, high-level question here, how are enterprise (technical difficulty) history really. How are enterprises balancing sort of core work spending versus this kind of need to spend on AI? You guys started talking about data center modernization on your last couple of calls.

Question: Jim Fish - Piper Sandler & Co. - Analyst : Yeah. And you guys always are one of the first reporters and you guys started calling out essentially demand stability. I think Cisco recently echoed that and even Broadcom, if you want to go down the supply chain and start talking about network non-AI network spendability. So I guess what's driving the confidence in terms of the demand in the ecosystem that we're at a bottom, maybe '25 is a better network spend year. Is there a way to think about it between the systems versus the software, which I know can be hard to forecast?

Question: Jim Fish - Piper Sandler & Co. - Analyst : Got it. And a favorite topic of yours and mine is this little thing called Distributed Cloud services, I'd like to call it F5 as a Service, but I'll let your CMO take care of that. So really, what makes Distributed Cloud services different than what you can get out there from newer services? And how does that change the competitive landscape for you?

Question: Jim Fish - Piper Sandler & Co. - Analyst : So how are you thinking about packaging or bundling on DCS, especially as you start to think about what does API security, for example, require a WAF or not in some of that debate? Like first off, how do we think about it? Does it require that for the blocking and tackling or not? And then how do you think about that packaging approach?

Question: Jim Fish - Piper Sandler & Co. - Analyst : Got it. And Cooper, last week, we had a chance to chat a little bit around AI and what ways could F5 benefit both from the hardware and the software side on AI. And I know it doesn't necessarily work like this, but just trying to dumb it down a little bit. But is there a way to think about like for every load, like one load balancer to X amount on the GPU side, like -- and (technical difficulty)

Question: Jim Fish - Piper Sandler & Co. - Analyst : Got it. How does the shift towards AI and sort of cloud applications change the need for API security or your security suite generally?

Question: Jim Fish - Piper Sandler & Co. - Analyst : And last year or so, you guys have brought it up a little bit more on the calls your sort of legacy competitors. How do we think about what's coming up for renewal amongst your largest competitor there on the private side, how big that opportunity could be as we start thinking about back half of this year? I know you guys are fiscal year end September, but into kind of next calendar year, think about any programs in place to take advantage

Question: Jim Fish - Piper Sandler & Co. - Analyst : Makes sense. And so maybe within your own base, in terms of renewals and visibility that you have, so what's the breakdown of the expansions you see with software between upsell or increased capacity and cross-sell? Is there any impact from customers moving towards flexible consumption over the traditional term license? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 4:00PM, FFIV.OQ - F5 Inc at Piper Sandler Growth Frontiers Conference

Question: Jim Fish - Piper Sandler & Co. - Analyst : So you guys have been going through this little transition. I even call it a transition within a transition on sort of the SaaS piece, too. And you guys also not in this past quarter but two quarters ago talked about sort of roughly double-digit growth for software next year, but you guys clearly outperformed in Q3. So we'll see how you shake out here shortly. But you're now roughly two-thirds coming from the renewal base within recurring software. Is that what's driving the confidence in essentially a potential reacceleration of software as we start thinking about fiscal '25? And additionally, I don't think everybody has been aware, but you guys have really emphasized fiscal second half weighted for fiscal '24 and fiscal '25. Is the renewal timing having a huge play on that? Or is it something to do with sort of the SaaS business in terms of when you guys expect to come back? Can you walk us through that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 4:00PM, FFIV.OQ - F5 Inc at Piper Sandler Growth Frontiers Conference

Question: Jim Fish - Piper Sandler & Co. - Analyst : Got it. Circling back on sort of the security element and around bot manager, it was maybe the one thing that we could maybe pick on from last quarter. You guys called out it as a little bit weak. What's going on there, especially as competitors are saying bot manager has been really strong?

Question: Jim Fish - Piper Sandler & Co. - Analyst : Yeah. And Cooper, you guys announced a little bit of an incentive change. I don't think you guys are incentivizing on the services, the multiyear services. Why is now the right time? And how do we think about potential free cash flow impact?

Question: Jim Fish - Piper Sandler & Co. - Analyst : All right. We've got a little less than five minutes left. Are there any questions out there? Otherwise, I got plenty. Unidentified Participant Yeah. [Here for you]. Now we talked API security is really in the early innings and a lot of that [actually have to do with] education of customers, why they can't just use their WAFs to block some of these (inaudible). So can you help us understand what's going to be the catalyst to help customers understand we actually need this product. We can't just go with WAF, even if that can happen, or this is going to be a longer term tailwind educating customers, educating the market and eventually in '25 --?

Question: Jim Fish - Piper Sandler & Co. - Analyst : So there's a little debate tonight going on, I guess, but really, the crux of my question is around the Fed. You guys have a decent sized Fed business. I know you're involved with some projects here and there. So how do we think about Fed spending as we enter a really big Fed-sensitive quarter? What are they using you guys for, those types of things?

Question: Jim Fish - Piper Sandler & Co. - Analyst : And then just generally, you guys have raised prices in the past. I think you're trying to move more towards our series at this point on the system side, but sort of pricing power that you guys have left, especially if the legacy competitive environment is getting more and more favorable. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 4:00PM, FFIV.OQ - F5 Inc at Piper Sandler Growth Frontiers Conference

Question: Jim Fish - Piper Sandler & Co. - Analyst : Wow, that was spot on the time -- the shot clock here. So I think with that, we're going to wrap it up. Really appreciate it. Congrats both of you on your recent promotions.