F5 (FFIV) BofA Securities 2024 Global Technology Conference summary

Strategic vision and market context

• Focus is on addressing the growing complexity of hybrid and multi-cloud environments, with 88% of organizations operating in such settings and an average of 4.5 environments per organization.

• Security and application delivery are increasingly intertwined, with security now leading most customer conversations.

• The company aims to provide a unified platform for application security and delivery across all environments, simplifying IT operations and reducing costs.

• AI is expected to intensify existing challenges, making security and delivery solutions even more critical.

• Differentiation comes from the ability to cover private data centers, public cloud, and edge environments, unlike many competitors.

Software and SaaS transformation

• Software growth is driven by the expansion of applications and APIs, with SaaS adoption accelerating.

• Double-digit software growth is expected in FY 2025, primarily from renewals and flexible consumption programs.

• The transition to SaaS began with the Volterra acquisition, integrating legacy and new platforms for a consistent customer experience.

• SaaSification introduces new competition, especially from CDN vendors, but the company’s breadth of coverage is a key advantage.

• Internal transformation includes changes to sales, compensation, and channel strategies, with significant investment in IT and customer success.

Market and financial outlook

• The ADC (application delivery controller) market is low growth, with hardware units in mid-single-digit decline, but software and SaaS segments are growing.

• FY 2024 revenue guidance is -2% to flat, with headwinds from backlog depletion and hardware sales.

• Global services represent over half of revenue and are expected to be flat to low single-digit growth.

• Software is about 23% of revenue and is expected to see flat to modest growth in FY 2024, with stronger growth in FY 2025.

• Hardware (systems) is 24% of revenue and faces headwinds due to prior backlog and supply chain issues.