F5 Networks, Inc. (NASDAQ:FFIV) Q1 2020 Earnings Conference Call - Final Transcript

Jan 27, 2020 • 04:30 pm ET

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F5 Networks, Inc. (NASDAQ:FFIV) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, and welcome to the F5 Networks First Quarter Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I'll now turn the call over to Ms. Suzanne DuLong. Madam, you may begin.

Executive
Suzanne DuLong

Hello, and welcome. I'm Suzanne DuLong, F5's Vice President of Investor Relations. Francois Locoh-Donou, F5's President and CEO; and Frank Pelzer, F5's Executive Vice President and CFO, will be making prepared remarks on today's call. Other members of the F5 executive team are also on hand to answer questions during the Q&A portion of today's call.

A copy of today's press release is available on our website at f5.com, where an archived version of the call will be available through April 26, 2020. The replay of today's discussion also will be available through midnight Pacific tomorrow, January 28, by dialing 800-585-8367 or 416-621-4642. For additional information or follow-up questions, please reach out to me directly at s.dulong@f5.com.

Our discussion today, will contain forward-looking statements, which include words such as believe, anticipate, expect and target. These forward-looking statements involve uncertainties and risks that may cause our actual results to differ materially from those expressed or implied by these statements. Factors that may affect our results are summarized in the press release, announcing our financial results and described in detail in our SEC filings. Please note that F5 has no duty to update any information presented in this call.

With that, I'll turn the call over to Francois.

Executive
Francois Locoh-Donou

Thank you, Suzanne, and good afternoon everyone. Thank you for joining us today. I will talk briefly to our business drivers, before handing over to Frank to review the quarter's results in detail.

We have been investing to evolve our business to better meet our customers' changing application demands. Today, we are delivering our world-class application services across a wider range of deployment and consumption models. As a result, customers are increasingly deploying F5 in multi-cloud environments, driving a shift in our revenue mix towards software. Customer demand for consistent application security and reliable application performance, drove 5% total revenue growth in our first quarter.

Strong customer demand for security use cases, including WAF and SSL, as well as ongoing ELA traction, fueled our 50% software growth. We are very pleased with our continued software traction. We continue to expect 60% to 70% software growth for 2020, including contribution from Shape Security, which closed on Friday, last week. Our software growth was partially offset by our systems business, which was down 11%, as customers increasingly look to consume F5 solutions as software.

Our services business was very strong in the quarter, delivering 8% revenue growth. Services is benefiting from our robust software sales over the last several quarters, including the second full-quarter of NGINX-related sales. Overall, we continue to execute well against our long-term strategy, and are pleased by the pace of our continued transition to a software-driven business.

I will speak more