Okay. Hello, everybody. Thank you for joining. Tim Long here, Barclays, IT hardware analyst. Thank you for coming by, to see F5. I almost said F5 Networks. I got the old company name in there. Happy to have, François and Frank here, to walk us through. I got a bunch of questions here, so, I think you can give us a little safe harbor first. Thank you, Tim. Appreciate it. Before I respond, I need to get our safe harbor on record. Please note that our discussion today may contain forward-looking statements which involve uncertainties and risks. Our actual results may differ materially from those expressed or implied by these statements. Please see our SEC filings for more information on these risk factors. Excellent. Great. Thank you. So maybe, François, I'll start with you, kind of higher level. There's been a lot of change at the company over the last few years, so maybe, you know, walking next year, priority to, for the business. Well, thank you, Tim. And yes, indeed, there has been a lot of change. If you go back several years ago, we were primarily a hardware company, and the view of the market at the time was that, you know, pretty much all applications would move to a single cloud. That has not happened, and, you know, most large enterprises today, in fact, 90% of our customers, operate now in multi-cloud environment, both on-prem, traditional data centers, private, private cloud environment, as well as multiple public clouds. And their biggest issue today is how to, you know, deploy and secure applications in these hybrid cloud environments, and doing that is actually dauntingly complex. And we feel that with the investments we've made in our portfolio, both organically in the development of our BIG-IP technologies as well as through the acquisitions of NGINX and Shape and Volterra, we now have a portfolio to address these hybrid cloud environments, and we're uniquely positioned to drive that. And so with that, the priorities, you know, looking at the next 12 months, is number one, visualizing our multi-cloud vision and, you know, helping our customers deploy and secure applications in these multi-cloud environments. Number two, the continued adoption and development of our Distributed Cloud Services platform, which is our SaaS platform that actually will help all these environments. And number three, continuing to ensure that we meet and exceed our commitment to double-digit earnings per share growth this year. Okay, great. That's a good, good place to start. Maybe, let's start hitting some of the software pieces. And Frank, if you want to go first here. You know, last quarter was end of a fiscal year, so it was a little bit more clarity on the businesses, but maybe just take a few minutes to walk us through kind of the software model and visibility. And obviously, you have SaaS, you have perpetual, you have term. It's a little more complicated than most companies. So, you know, just kind of walk us through how you look at it, how investors should look to those businesses going forward. Sure, absolutely. So Tim, the way we think about our business is we have deployable models, and we've got, you know, models that we provide as a service. And in those deployable models, specifically within software, we have perpetual software, and then we have term-based software. Within the services that we provide, we have a pure SaaS business, and we have managed services. And for the first time at the end of October, we sort of split out the revenue components of all three of those. Prior to that, we had always talked about the perpetual business and the subscription business, so combine those two. So what we are trying to give people insights to is that we've got different dynamics that happen with each. So on the perpetual side, you know, in FY 2023, that actually declined by 25%, but that was really more from the fact that 2022 was unusually strong as opposed to anything about that business. We generally think of that business as sort of a flat business. It's a way that some of our customers, particularly service providers and some larger financial institutions, really still want to own their their software or their hardware on premise. So we offer that as a flexible option for them. Over a longer period of time, we think that that's a flat business. When we take a look at our term business, we look at that in relation to what is new and the new opportunities that are adding into that revenue base every year, and then the pieces that are coming up for renewal are actually true through that. And, you know, up until probably the beginning of FY 2023, we had seen the new business growing rather quickly. And then the current side of that business was growing, but it hadn't really come up for renewal yet. So we saw a lot of great activities that were happening with the growth of that business with our true boards. But only in 2022 did we start to actually see some renewal. That's a part of the business that really probably affected our overall growth rate three from the expectation we had at the beginning of the year versus where we ended up. We expected to be 15%-20% growth within our software business. In FY 2023, we were actually flat for that business. The way we modeled that is that we thought, you know, the recurring revenue was going to do a certain, certain thing, which it ended. The new business that had been growing, you know, 25% to 35%, we thought that was going to be flat, and that actually was down double digits. So that led us, you know, to be up 9% in that business as a whole, but it was obviously different than our expectations going into the year. And then within the SaaS business, we talked about there's we've got a strongly growing distributed cloud business that offers a relatively low base. And we've got about $65 million of the $200 million of SaaS managed service that we do expect to moderate out of the revenue over the next couple of years. And that piece of the business, obviously, let me just put out some people understood, and that we see distributed cloud growing. We don't think from a revenue side, it's gonna be able to make up for some of that loss over the next couple of years, but bookings, we expect to continue to grow relative, a, a very nice way. Okay, great. Great. And then maybe just, you know, you did talk a little bit about net dollar retention, and just- Yeah Talk to us about where you are. I know it's very complicated and a lot on the back end, but where, where is F5 with more regular disclosure around some of these software lines? Yeah. So what we talked about is, you know, in terms of net dollar retention, we had two different dynamics going on. It's not easy for us to convert the 606 revenue back into a subscription revenue just due to systems limitations and other factors. But it's safe to say that that piece of the business is probably, you know, world-class above 120%, and the SaaS managed service piece was not. It was, you know, below that. And so that combination is kind of left us in a good place for us to meet the commitments that we thought we were gonna do within that recurring, recurring piece, but it was coming from two different spots. We will continue to look at that, and we have committed to talking about those numbers on an annual basis. We will see if we get to a place where we start to talk about those on a quarterly basis. Okay, great. You mentioned the $65 million. You know, in my discussions, a lot of investors were kind of happy to see the streamlining of that business. So maybe talk to us a little bit about when you, François, you're looking holistically at the software businesses, what was it about these that made sense to kind of walk away from the business? And, you know, how is this gonna make the model maybe more consistent going forward? Well, we're excited about our SaaS and managed services business, because we, you know, we see a number of our customers who are consuming our hardware or our software, who also want to consume for some of their application estate. They want to actually serve these applications through a SaaS management offering, and we're now in a position to capture, all of their, you know, or a large majority of their wallet share because of the different model. On the SaaS and managed services, there were two dynamics that led us to making that rationalization. The first is, we have a platform called Silverline, that we've had for many, many years, which was offering a limited set of managed services, and we knew that we wanted to retire this platform and over time migrate all customers to distributed cloud. Distributed cloud is a more modern platform. It is offering already today, and will in the future, offer more services, so it's a better way to serve these customers. They were, you know, around $35 million of managed services revenue that are on Silverline today, that would, over time, you know, we would expect to migrate a number of customers to distributed cloud. We don't think it's gonna be 100%, that all of them will go to distributed cloud, but we're hoping the majority of them will. and then there's another, you know, the other half or so of that $65 million is a number of managed service offerings, that we had launched in the market, and for which we didn't feel the ROI was what we expected, or legacy offerings from companies we acquired, that we didn't feel we had the right ROI, and we made a decision to rationalize these services out and focus on the ones that are being really successful. And that's why we're retiring about $65 million of revenue stream in SaaS and managed services. But the other part of that $200 million, which is about 135 or so, we feel very good about, and we think over time is going to continue to grow. Okay, great. Great. You know, Frank, you mentioned, like, new deal activity was weak last year, and obviously, you know, investors hear a lot of enterprise companies have had the same thing happening. So where do you think we are now with macro impact deal activity? Is this something that you think we'll work through in the next few quarters, or is there potentially more of a hang in there? The exact timing of it, I wish I had a, like, clear crystal ball that would tell me. But I will say that, you know, we have seen pipeline activity increase, which is great. You know, we'll see what the gross rates look like from that. We'll talk about that, you know, next in January. As a whole, when we looked at the model and what we talked about for FY 2024, we weren't expecting a tremendous rebound in new activity. The exception to that is probably in our hardware business, our systems business. We do expect our bookings rate to be higher than what we saw in FY 2023, and we think that there's a combination of factors, including just the how long can you sweat out the competitive dynamics in that marketplace, is, you know, other sort of having, you know, foreign jurisdictions that are now allowing us the ability to sell those through our channels. And so we do expect an increase in activity in bookings. It's not gonna make up for the $180 million of backlog headwind that we've got going in that business. So you're not gonna see revenue grow, but we will see bookings internally, grow from the levels that we saw in FY 2023. Okay, great. François, you mentioned distributed cloud. It's still kind of early days, but what are you hearing from customers on that? You know, how is that impacting your ability to take share and really be a more important partner with a lot of the enterprises you deal with? Well, we are, you know, customers are excited. And we serve large enterprises, customers, Tim, as you know, across technology, you know, financial services, telcos and then healthcare, manufacturing, there's a number of verticals. And the platform actually is playing across all verticals. And the big benefits that customers are seeing is, A, the ability to secure, you know, full application security stack, including API security, protection against DDoS, application firewall, and also bots, which are an increasingly problem. So it's a full application security stack. The ease of implementation of the platform is a real big benefit 'cause customers can get to value very quickly. And the ability to run this platform in any environment that customers need is a big benefit relative to alternatives in the market. And brought to the platform, you know, high efficacy that is known for. So the very high efficacy, you know, against the attacks that we have had on-premise, in our hardware, in our software, we're bringing that to the world of SaaS, and that is a differentiation relative to the companies that have been there. And then, so that's on the security side. And then in terms of the problem that customers are having around having applications across multiple cloud, we are an early player into this multi-cloud networking market. And so those capabilities are pretty unique. To combine cloud networking and security in the same platform is actually unique to F5, and we're seeing customers pretty excited about that. So we think the combination—both of those are growth markets. We think the combination of these capabilities and future capabilities that will come on the platform actually are going to be an important differentiator for F5. And then, you know, the last thing is for large enterprises that have application that they want to keep supported by hardware on-prem or software on-prem, and other applications for which they just want a service, as opposed to owning the package hardware or software, having one vendor that can provide all of that with the same security engine, same application delivery engine, is actually a pretty compelling proposition. So that's the other piece of feedback we're hearing from customers. It's a big simplification in their environment. Okay. And where are you now with i t's been a while for the acquisitions that you mentioned. Is everything fully integrated across, you know, the company? And obviously you streamlined, taken some things out, NGINX, CockroachDB. Maybe talk a little bit about having the different, you know, different aspects of the platform. So in the world of packaged software and packaged hardware, this is where BIG-IP plays and NGINX play, and they generally—they can play standalone, but they also play increasingly together. A number of customers who are having modern applications and virtual applications in their environment. Those integrations are largely completed, both from a technical perspective, porting capabilities from BIG-IP on NGINX, porting security on NGINX, and from a commercial perspective, offering our partners and our customers a single vehicle to deploy these technologies. And we're seeing the benefit of that in what we call our flexible consumption programs. We used to call them ELAs, but flexible consumption programs today. In the world of SaaS and managed services, we are still, you know, doing some integration, and the product rationalization that I talked about is part of that. But essentially, you know, we want all of our customers to be on the distributed cloud platform, which is, you know, a modern platform that gives them better experiences, and we're still playing I think over the next 12-24 months, we will complete the majority of the integration work we wanted to do there. Okay, great. You talked a little bit about security. Maybe just level set for us. I know you break that out kind of once a year, so it's been increasingly our piece of the revenue is both standalone and, and integrated with BIG-IP. Talk a little bit about F5 differentiation there, and is that an area that you continue to, to see, you know, outgrowing the rest of the business? Yes, over time, we expect it to continue to outgrow the rest of the business. We did share, Tim, as you know, last year that we crossed $1 billion in security revenues. I think this past year, 2023, was a little over $1 billion. And the differences for F5 is, of course, number one, you know, we have always been known for high efficacy security solutions. So not just good enough security, but best security, and that continues to be a differentiator in the enterprise market. Number two is we have a very complete application security stack. We've made a decision to be focused in the space of security around securing applications. But in the whole securing application, we have a full application security stack, and it's the same stack in SaaS, in software and hardware. That is actually very unique. We, we essentially are the only platform for all of that across the platform. The third thing we're seeing, a big differentiator, is run the stack in any environment for our customers, which means, you know, we can essentially secure any application or API anywhere for customers. That is a unique proposition at a time where customers are looking to de-complicate their environment, potentially reduce the amount of vendors, the ability to do that in all consumption factors and do it across any environment is unique to F5, and it's a big help in simplifying what they're doing. Okay, great. Great. Maybe I just wanted to touch on services for one. I know Tom is here, but you'll, one of you guys can take this. It's been a good business, and I think it, it adds up with what you're saying, cutting assets, and it looks like, you know, it, it's been outperforming. What's the outlook there? It feels like a very good, stable business that maybe doesn't get the credit it deserves. So I don't know if there's a question in there, but- Yeah. Talk to the importance of it and kind of how we should look at that, as kind of stable, high-margin growth as we see this. Absolutely. So, our service business is kind of several components. The smallest is actually a professional services side of the business. And, you know, the bigger, meatier chunk of it, that's a very high margin for a service business, is what's been associated with the hardware deployment that we've had, you know, for decades, as well as a allocation of our flexible consumption programs, that come into the services revenue stream, a bit at a slightly lower level than some of the professional revenues that may come into that, stream. So, those are the components of the service business. In FY 2023, that actually grew 7%. That was unusual. It was a factor of a couple of things. The primary factor is the service, generally, a derivative of the product price. When we raised prices in July of 2022 because of pricing issues that then had the benefit of our services revenue stream in FY 2023. But that's a, well, it's not something that we expect to trend going forward. The other component of it was sweating the assets, and so people who we would have expected to migrate over to a new platform or software or our SaaS solutions stayed on their traditional hardware solutions for longer than what we had planned with the model. And both of those factors are what led to that 7% increase. Over time, we've talked about flat to low single-digit growth, and that's healthy in that business. We'll just see more of that come through the product revenue stream, in our growth rates, with SaaS that has zero allocation from service stream. Okay, great. Maybe to hardware, I think you touched on kind of the order headwind that you're gonna face. But it, it's been a crazy 2-3 years where I guess we expected there'd be a lot more hardware software, but then some companies still wanted hardware and then didn't want hardware. So what are you seeing from the customer base on consumption model, whether it's, you know, a virtual or, or a hardware-based product? And, you know, what, what is that trend gonna look like going forward? Well, I think in general, you know, we're seeing more customers want to move to software first consumption models. Customers need their part for flexibility of being able to put the software in different y ou know, I mentioned multi-cloud earlier. It's the flexibility. If you're not sure where all your apps are gonna be, software appliances, you can deploy them in a private cloud, on-prem, potentially move your licenses to the public cloud. That's important. But sometimes it's for economic model, prefer to move to a subscription or an OpEx model rather than a CapEx model. And also, you know, to some automation initiatives in organizations. So generally, the trend is going to be towards more software. What it means for the hardware business is this, and what we've seen last six years, despite the gyrations of, you know, supply chain and maximum and all of this, is the hardware business, and we have a number of customers who have use cases that will be hardware for many years across all of our verticals. So hardware business is gonna be durable. We do expect that the unit demand in hardware over time is probably gonna see decline, demand in hardware units, because of the general aspiration for software. And though the durability will come from all of these use cases that are hardware-based, you know, including sometimes repatriation of workloads, including use cases that require hardware acceleration, a lot of customers that require big throughput. All of that is providing durability in the hardware, but when you aggregate all these dynamics, we think the demand, the unit demand for it, is kind of as you decline over time. Okay. We definitely don't think of our business as a from-to. We think of it as a hardware and software, and SaaS, and then services. We wanna provide this sense more seamlessly, consistency across that. So, when customers, you know, really think about their application infrastructure, they have a sort of, you know, repeatable management dashboard to look at that will go across deployment. Okay, great. I did wanna touch on the telco end market and the challenge for a lot of companies. Just curious what you're seeing on your side, being a little bit different angle in the networks than some of the more traditional equipment. And what are you guys seeing there? And, you know, do you think that's an area that when we finally get 5G applications and, you know, moving, that it could be a better end market for F5? Well, we think it will be, you know, I think as other companies, what we've seen in the telco market is in general, service providers sweating assets and currently trending, and in general, the transition to 5G has been delayed, I think, at least a couple of years ago what expectations have been three years ago. There are exceptions to that, and so we're seeing, you know, one or two large service providers who have launched 5G offerings are seeing substantial increase in demand and traffic on their network, and we will, you know, we will benefit from that from in the near term. And we will get in both software, when these type of architectures are in place, and in hardware for those customers that are augmenting 4G, and just adding capacity in the 4G infrastructure to deal with initial, 5G traffic. So generally, we're starting to see degrees of service providers, you know, resuming spending driven by the 5G offering. Okay. That's great. Maybe, maybe if you wanna talk about margins a little bit. I know you guys obviously went through a little headcount reduction there, not, not a little headcount reduction, a very nice margin improvement with that. Talk a little bit about how you see, you know, operating projects, you know, looking forward the next few years. Obviously, you have a very high, very close to start with, which, which, which helps. So maybe give us a little sense on how that'll look in the model. Sure. So you, you're absolutely right. Have a high growth market. It had been higher- Yes. A nd impacts from largely the crazy component pricing that we were seeing in 2022, portions of 2023, largely worked their way into the inventory. And so we are seeing improved margin, that obviously helps the operating margin as well. We have three initiatives in AI that will also improve both the gross margin and the operating margin side. Specifically using, like many other companies, you know, AI technology to helping us production, helping in our product development in terms of co-piloting developers to streamline some of those outputs, and then also in our sales and marketing areas. Over time, also, the benefits of a subscription model with these have reduced that expense bookings ratio, that you know we continue to be focused on. So, we talked specifically about gross margins more in 2025, in that 33%-34% range, and then growing 100 basis points from there, likely to 35%+. So we see that as natural. We continue to look for efficiencies. We've got specific programs that are going out and looking for that. We've seen improvements in our discount rates and other factors, so a little bit. So bit. So all of these are things that we continue to expand on, to get double-digit EPS growth and growth business going forward. We had to talk about this year, possibly below that, which we don't know if that would go on with tax. But looking at a pre-tax basis, we expect to get there this year as well. Okay, great. And then maybe just on capital allocation, update us there, and François, if you can talk a little about M&A. I mean, there was a lot of activity, then a pause in integration to where, where is your head now in that dynamic? Well, you know, we've had a lot of focus on, I, I mentioned earlier, some of the integration and the organic growth in the portfolio. We've made big investments in our core franchise, BIG-IP, and we're now releasing next generation hardware and software. We think that's going to allow us to continue to gain share in the ADC market. We're making substantial investment in NGINX and distributed cloud because we see the opportunity there in these growth markets, modern apps and, and SaaS, and we, we still have a lot of organic work to do there. So that, of course, remains the priority. In terms of, you know, potential inorganic activities, we will continue to be disciplined about that. And, and when we're looking at potential services, you know, continue our build versus buy. Where we would see the, you know, potential opportunities there is distributed cloud and accelerate potential other services that could come on the platform, you know, inorganically in the future. If you think back of what we did with BIG-IP, over the last, you know, 15 years, BIG-IP really initially started as purely application delivery. But it, it was at a point in application infrastructure where it was convenient for our customers to consolidate other services, other services, including security, some through organic development, some through acquisition. We got in the WAF market, for example, by acquisition. It's we will probably have a similar opportunity on the SaaS space with distributed cloud, and this is where we might look at, at acquisitions in the future. You know, inside the framework that we do it now, where we've committed that more than at least 50% of our free cash flow would be used for share repurchase, and the other 50% for other activities. If you look at our track record over the last couple of years, it's been way more than 50% on share repurchases. Okay, great. Look at that, we finished exactly on time. Thank you very much. Thanks so much. Both of you guys. Thank you, Tim. Appreciate it. Yep.