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spk_0: good afternoon and welcome to the as five fourth quarter fiscal twenty twenty one financial assaults conference call at this time all participants are in a listen only mode after the speaker presentation there will be a question and answer session the ask a question during the session you will need to press bar one on your telephone if require any further assistance please press story zero also east conference is being recorded if anyone has any objections leave disconnect at this time l now trying to call over to miss sudan too long man he may begin
spk_1: hello and welcome i'm through dandy long as a vice president of investor relations from shallow go to new of vice president and ceo and frank peltier at five executive vice president and ceo will be making prepared remarks on today's paul other members of the i've executive team or also on hand to answer questions during the q and a session a copy of today's press release is available on our website at f r dot com where an arcade version of today's call will be available through january twenty fifth two thousand and twenty two today's live discussion is supported by slides which are viewable on the webcast and will be posted to are i our site at the conclusion of today's discussion to access the replay of today's call by phone dial eight hundred five eight five eight three six seven or four one six six to one for six for two and use meeting id six eight seven nine nine three five the telephonic replay of this call will be available through midnight pacific time october twenty seven for additional information or follow question please reach out to me directly at as don't belong at a five got home our discussion today will contain forward looking statements which include words such as believe anticipate expect and target these forward looking statements involve uncertainties than read the make hold your actual results to differ materially from those expressed or implied by the statement factors that may affect our results are summarized in the press release announcing our financial results and described in detail and rsvp filings please note that a five have no duty to update any information presented in this call with that i'll turn the pall over to fend for
spk_2: burger them and hello everyone thank you for joining up for it under pandemic condition but have preferred far longer than eighty one initially expected the a pipe dream beloved i'm not a very strong water faltering out a robot the or for got them a demand for application for clarity on delivery amid sky rocketing application go and fight the love with this security awareness or driving strong demand for advice illusion
spk_3: but the man by our portfolio earn our regional theater that you for driving eleven prefer revenue growth and our fourth consecutive quarter of double digit revenue growth we delivered thirty five percent software go to all for both of them grow and throughput though google services growth in the quarter would fulfil revenue representing forty five with that of what revenue in the border and eighty percent of our software coming from subscription we can feed the mark milestone of the milestone in our rapid transformation to a more software lead business i will speak more about our biggest driver them gotten the highlights from the border of the frog reviews are cure for and at y twenty one result in our outlook for to warm enough y twenty two
spk_4: wrong thank you for and swan good afternoon everyone review our to for result with one briefly recapping or fiscal year results as friends while just outlined our team deliver another very strong quarter fourth quarter revenue of six hundred and eighty two million is up eleven percent your ear and about the top and have a range please note as i review our revenue mix i will be referring to non gaap revenue measures for the year ago period you for product revenue of three hundred and forty million is up twenty one percent your we're representing a significant acceleration from six percent in the same period last year you force software revenue grew thirty five percent to one hundred and fifty two million representing forty five percent a product revenue up from forty percent in the year ago period systems revenue of one hundred and eight million is up twelve percent compared to queue for last year when systems were down eight percent rally another avenue picture we continued she strength from our global services at three hundred and forty two million in queue for up to percent compared to last year and representing fifty percent of revenue taking a closer look at our softer revenue customers preference for subscription based consumption models is evident in queue for twenty one subscription based revenue represented eighty percent of total soccer revenue up from seventy six percent in the year ago period subscription based revenue includes are radically recognized as a service offerings and our solution sold as turn based licenses within subscriptions customer demand is driving substantial volume and value growth from a multiyear subscriptions the deal volume of are multi your suggestions more than doubled your of a year in his coaching five hundred in total this consumption model offers flexibility for the customer and through the annual true forward and normal were no cycles offers as visibility to customers utilization and consumption patterns in addition we ended the year with more than six hundred sauce and service customers reflecting good a fifty percent year earlier revenue from occurring sources which includes term subscriptions as a service and utility base revenue as well as the maintenance portion of our services revenue total sixty seven percent of revenue in the corner on a regional makes you think you for america's delivered eleven percent revenue growth the every year representing fifty nine percent of total revenue a mere delivered eleven percent growth representing twenty four percent of revenue and they've got delivered nine percent growth accounting for seventeen percent of revenue the strength and queue for span customer verticals as well enterprise customers represented sixty nine percent of product bookings in the quarter service providers are presented thirteen percent and government customers represent eighteen percent including eight percent from us federal i will now share a to for operating results gap gross margin and queue for was eighty one point one percent non gaap gross margin was eighty three point seven percent dat operating expenses were four hundred and twenty seven million non gaap operating expenses were three hundred and fifty nine or gap operating margin and you've what was eighteen point five percent non gaap operating margin was thirty two point four percent our gap effective tax rate for the quarter was ten point three percent are non gaap effective tax rate was fifteen percent gaap net income for the quarter was one hundred and eleven million or one dollar and eighty cents per share non gaap net income was one hundred and eighty five million or three dollars and one cent per share i will now turn to the balance sheet we generated one hundred and ninety seven million in cash flow from operations and you for cash and investment total of approximately one point o four billion a quarter and dsl was forty five days and capital expenditures for the quarter were seven million deferred revenue increased seventeen percent your year to one point four eight nine billion up from one point two seven three billion the growth in total deferred was largely driven by subscription and south bookings growth and to a lesser extent the phone service maintenance finally we ended the quarter with approximately six thousand four hundred and sixty employees up approximately eighty from huge rate this does not include a practically lady employees added with the threat stock acquisition which closed in our fiscal first quarter of two thousand and twenty two i will now briefly reach out or full year two thousand and twenty one results for the year revenue grew ten percent to two point six billion product revenue of one point two five million grew twenty one percent from the prior year and accounted for forty eight percent of total revenue up from forty four percent in the year ago period within product drive a new software group thirty seven percent to five hundred million a bead on our outlook for ad or about thirty five percent growth for the year systems revenue and f y twenty one group twelve percent to seven hundred and forty eight million mobile services group two percent to one point three six billion representing fifty two percent of the revenue looking more closely at our softer revenue said fiscal two thousand and eighteen we've grown our software avenue at a forty nine percent compel it annulled birth rate and our software subscription revenue and one hundred and fifteen percent on them in a new growth rate jab gross margin in f y twenty one was eighty one point one percent non gaap gross margin was eighty three point nine percent our gap operating margin know why twenty one was fifteen point one percent and are non gaap operating margin was thirty one point six percent our job effective tax rate for the year was fourteen point four percent our non gap effective tax rate for the year the seventeen point seven percent yeah that income for f y twenty one was three hundred and thirty one million or five dollars and thirty four cents per share gaap net income with six hundred and seventy one million or ten dollars eighty one cents per share application security is a big and growing reason customers from the a five our application security offerings including de dos protection advance vulnerability advance for web application firewall and bought fraud and abuse protections are increasingly recognized as industry leading as a result we estimate or standalone security product revenue grew twenty six percent in f y twenty one to approximate three hundred and fifty million reflecting a thirty eight percent on canada an annual growth rate since f y eighteen including bundled security offerings and an estimate for our services revenue associated with security we estimate the total application security portion of our business grew to more than nine hundred million and up by twenty one represent a an approximately thirty five percent of total revenue supply chain challenges had been well knowledge across the industry over the last year our supply chain team continue to do an impressive job managing global supply chain constraints and working through our supplier ecosystem to managed through challenging conditions at this point like many others we are working with extensively times in part as a result of supply chain constraints we ended up y twenty one with approximately one hundred and twenty five nine and backlog the vast majority of which is system based now let me share our guidance for our first quarter as well as some color on our view for have like twenty two unless otherwise stated please note that my guidance comments reference nine gab metrics let me start with sharing our expectations for the first quarter of two thousand twenty two we are targeting she one revenue in the range of six hundred and sixty five to six hundred eighty five million implying roughly eight percent growth at the midpoint we expect to one twenty two gross margins of approximately eighty four percent we estimate operating expenses of three hundred and forty two to three hundred and fifty four million archie one earnings target is two dollars and seventy one cents to two dollars and eighty three cents per share with a share count of approximately sixty two million we expect she wants share based compensation expense of approximately sixty four to sixty six million now let me share some operating expectations for are two thousand twenty two fiscal year or the year we expect revenue growth of eight nine percent we expect sartre growth of between thirty five and forty percent we expect the range of software variability we will see quarter to quarter will narrow relative to what we have carrying in the past this is due in part to what we expect will be a higher contribution from radical revenue over time and also in part due to increase scale of our software business of law we expect systems revenue growth will be flat just slightly up for the year and we continue expect low single digits local services revenue growth i know that all of these revenue expectations are at or above our most recent rise and to outlook provided in january with the vulture acquisition announcement we anticipate continued pressures related to our global supply chain in the next several quarters we expect these pressures world's off and some increased costs related to the expedite fees and sourcing of long lead time components in light of this dynamic we anticipate non gaap gross margins of approximately eighty three point five to eighty four percent for the year and we will continue to closely monitor the situation as we have throughout the past year we continue to target operating on the wall of what he basis where the combination of our revenue growth and non gaap operating margins total forty the combination of are strong f y twenty one revenue growth and our continued operating just plain enabled us to achieve the forty in for out of four quarters enough y twenty one ahead of our initial horizon to target we continue to target achieving the will of for the enough y twenty two given our anticipated revenue growth and the ongoing benefit from the cost reduction in the ships that we discussed at our intellect and investor meeting last year we expect non gap operating margin in the range of thirty two to thirty three percent for applied twenty two we expect article operating margin seasonality which translates to operating margins stepping down into to improve in in the back half of the year we anticipate are full fiscal year of tax affected active tax rate will be at around twenty one percent with some fluctuations for the record it the just does not account for any potential future federal tax changes we expect fiscal two thousand and twenty june stock based compensation expense in the range of two hundred fifty the two hundred seventy million in capital expenditures in the range of forty to sixty million finally for the year we expect share counts remain at approximately sixty two million shares inclusive of the expected cherry purchase five hundred million during
spk_3: if lightweight you as we previously discussed with that i will try to call back to france bought francoise thank you for aren't are very strong fourth quarter results are the perfect top twelve above our opponents in a fight for one in the last eighteen months our reliance on application both of business and and i consumer has escalated sharply and likely forever changed
spk_5: our customers are massively accelerating digital transformation to keep up with current the map and forecast the growth they are doing earth while also working for consistently need consumers higher expectations for application performance and availability and while also ensuring their application and that consumers beta or
spk_3: secure it might overfishing with investors i am often asked what is potentially misunderstood about five let me address the key points here first traditional on for this application continue to grow help to the prevailing expectations from to the three years ago in fact traditional ass are generating more traffic and more revenue than ever because every aspect of life and business relies on application for i find this mean big ip the men will continue to go in both software and system form factors
spk_6: second contrary to early cloud hide the vast majority of traditional applications are not being the fact that they are either remaining on premise or they are moving to the cloud the their late than ship motion in other words as five run applications or remaining a fast
spk_3: to of five as a result big ip is growing both on friday during in public cloud third modern container based applications continue to grow at a rapid pace and not only for new applications customers or gulping new modern components on to traditional application to improve the user experience in many cases cloud native application security and deliberate simply are not robust enough to meet the application need for at five with means accelerating engineer the man enabling up security and still for modern application often as a compliment the big guy p and finally given the volume of business and data that is now flowing through application and increasingly of nature of application application security has taken on new significant where in the path network and infrastructure security when the focus for the than band of the like we expect application security will be one of the hottest areas of investment over the next decade as five is one of the few players one hundred percent focused on application security and we protect not just accept the application but also how the are you are the result we expect our role and reputation as a leading application security provider will accelerate the some of these points at five differentiated and well positioned to benefit from significant emerging sexual train there are some companies focused on applications there also are some focused on application security at five in the only one that is that the epicenter of these two specular forces with a focus experts
spk_2: the and the technology after to secure and deliver any application and where they've grown are opportunity in real customer trained the new faces
spk_3: a quarter i talked about five sustainable customer train we expected to drive demand for help avoid let's revisit those trend with some customer examples them to for number one enterprise customers developers and dev up things are using engine x to insert security earlier in the application life cycle and you like without protect delivers will bust application security for microsoft isn't with the flexibility and agility developer the man in one example during to form with secured energy next when with a global insurance group they are migrating the consumer facing insurance or listen into a public cloud for risk mitigation and jury reason they required a skeletal and container finally solution the also needed enterprise grade security capable of protecting their strategic high value up and guaranteeing risk management compliant and they wanted all of this within a lightweight footprint that could drive automation hey the time and money and your next without protect with the natural choice try number to heighten security concerns that high profile rent somewhere at that are escalating the man for top notch application security and fraud and abuse mitigation would pronounce application growth and an ever expanding fledgling limping including high profile went somewhere and potential something a back with the drawing them
spk_2: for application security a plot environments and rising demand for fraud and bought the bank
spk_3: during you for a north american electric utility experienced the credentials stuffing attack resulting in substantial infrastructure failure more than six million customers had to reset their account passwords
spk_6: based on their experience of the big i do customer the ability to lead five for help shape was emergency onboard and identified high volumes of automated traffic and deployed highly effective mitigation measures to stop it back
spk_3: trend number three customers are leveraging as five for could containers and probably of architectures our growth in modern application continues to accelerate driven by engine like google letters and cloud native deployments we are seeing federal top use case the much for engine acts including managing it be i optimizing cooper that is traffic management and load balancing cloud native and hybrid cloud application with customers modern applications experiencing significant and past and swings in loser the then they need infrastructure that fills up automatically to meet user the men are down to save cloud boss during your for a canadian on my investment manager selected end your next move their cooper meditate application into production upscale initially they attempted to you a competitive solution but it lacked perform and and did not integrate well with that has she prop council or with a w ws out of killing and you like plus the liver low latency and high up time to improve user experience and integrated seamlessly with a w was out of killing to spin down a half of their influences during off peak traffic demand try number for customers are scaling their existing hardware they've been perfect perfection to handle accelerating application was driving continued strength for big ip system we are finding that customers are often looking for scale both their existing infrastructure and a modern up infrastructure simultaneously this is particularly true among back and fat provide of customers who continue to experienced rapid adoption and growth of their digital products and sort of in the latest of a growing list of examples during your for the high court such provider selected the five to help them skill both the traditional apps on big ip and their modern public cloud apps with engineer that deal was made sweeter by the fact that into like the white the competitor that wasn't performing as fallen finally turned number five customers are leveraging big i'd be for transformation including twelve migration and automation initiative that the man we have any public ip systems and software is about more than just capacity additions customers all sorts using big i'd be to drive transformation often combining it with engineer and fighting particularly well suited for enterprises that operate book modern and traditional application which most be and you're like integrations a big ip for by differentiation over competitor and twelve made of offering and we will act then burst with integration into volterra of the edge during you for the big be an engine x combination was selected by one of the largest online betting company in asia pacific a customer who professes more than one billion annual transaction needed hybrid on premises bit of security as well have the ability to support modern up development and new engaging multimedia capability they selected big id and and genetics and the foundation for their digital transformation let me touch briefly on service provider and i'll voltaire i to question father before concluding are prepared remarks we had to get it would provide irving that like twenty one while it's true that several of the trains i have just described the also applied to service provider customers they also face unique challenges as a result the forger defines you migration and growing find you traffic demands that far our service provider demand have some largely from for he for network of blood a big fan hardware to buy for the an agreed existing infrastructure to handled by you traffic we expect software used jason's will begin to emerge of carriers virtualized the veggie for looking forward our voltaire a platform is generating significant interest from so it's a lighter did you it as a way to inside their capability that the edge of creating five g in a box offering balfour the good transition to this cutting progress on the integration of altera authorize a universal edge platform which will enable us to insert critical applications others that the edge and allow our customers to consume be services in a fast former our initial priority nonsecurity offerings we have one the best if not the best application security software back from the industry including our web application bow all of the ddos protection a the i security and bob to to believe we are taking that entire security that and integrating it natively into the vulgar a platform our first priority is a faster secure already offering that will address the shift toward modern web apps and in the eye and we are on tried to the letter with an outcome that and twelve to eighteen months integration window or rican acquisition a threat that a leader in cloud security and what one protection is the dying to accelerate our thoughts security offerings with cloud and point elementary and analytics the better detection and response trackback also augments or telecom a tree and bottle security and technology at the team and i won't take this opportunity to once again that welcome the entire thread back to were five in calling we are more confident than ever in our vision and in our ability to continue to execute the combination of application growth or expanded soldiers platform are continuously evolving go to market strategy and our vision for the future of adaptive application is resonating with customers and put some of the the of federal emerging strong sexual a trends i extend my heartfelt thanks to the entire advice team for their fat fat photos and execution
spk_0: other team we have accomplished more faster than anyone in an off thought we could we got more work ahead but i am more confident than ever in our ability to achieve our goals my thanks to to our customers and partners for beating on our journey will have and providing guidance and support along the way but that operator we will open the call to chew on it
spk_4: as a reminder to ask a question you will need to pass taiwan on your telephone can i join question fast and key
spk_7: your first question comes from funny battery with credit since your july is open
spk_4: i thank you for giving a question and he'd given us quite a bit talk about illness conference call
spk_8: i wanna shoot the first question over it's rank and i won't talk about the backlog and the backlog composition and you mentioned the majority of systems are system based backlog but i wanted to break down the customer next of that backlog it's you could just tell us a little bit more about what's going on there
spk_4: don't have a lot more to add i will say that the the edit the girl of accurately which is law and they continue to increase in the back on that ship in the end of war source provider customers probably fall into that well having said that it's either that with the ones will find that the allowance than almost all of that is is it
spk_3: got it got it and then are francois just kind of shifting over to you i want to talk about the us federal segments and how they made up about eight percent of total revenue max i'm are you expecting elevated levels of us federal activity and the upcoming quarters which would actually be almost out of the
spk_7: seasonal pattern of your model
spk_9: most of the short answer the of know if it were at work what what we're seeing in the federal burgers just follows the regular to the malady that we've we've seen over the years and we don't expect the fundamental change about adam
spk_10: gotta thank you are under overtime aroused
spk_11: they get some your next question comes from that a my shown at morgan stanley
spk_12: and great
spk_13: of send me and it's just
spk_14: cover the insurance
spk_12: be one when you know they were facing a daughter of an entry point why
spk_13: needed an ass
spk_11: for the concept activity and to find a good fan for that are your seen at pick up
spk_15: and then on a second for into some any kind of impact or shame
spk_6: more free expression of any other
spk_3: and how we should thank god i'm jane our have the confidence thanks i do not pay for the questions when you start on shape
spk_6: yeah you know the couple of quarters ago we didn't mention we're seeing the earth a won't get it times to clothe on the proof of concept that largely because customers were not
spk_3: in the office and getting those done what we're we're taking the little longer
spk_7: ah we have seen that a base over the last the of schumacher
spk_6: and in the world working a pick up in not traction and momentum their ah and they specifically i think an ecommerce the area we gotta a number of our customers who the applications are revenue generating ah and they are constantly under these either account think of attacks the bought attack
spk_2: that are causing disruption to their business
spk_3: until they want to move pretty quickly on on getting things are getting things done you know i've had insurance against jupiter attacks are often times on there and or types of course think go very very quickly because the business the swap it for generally we are happy with a quota we just had good bad with their shape an ingenue only guy would fade out of the other thing we're seeing with customers is
spk_6: not be and be a number of customers something evaluating their security posture as a result about from of a high profile bleacher that have been well publicized
spk_3: and that has resulted overall in a bid a very strong a year for for the federal for us and security
spk_6: but especially in the second half where our customers that you know had reinvigorated the motion of attaching security for big ip and with also seen the the momentum with them with shape and security so that's a world that the picture western security as he will is your second question on on gross margins
spk_3: yes argos margin have been impacted by the challenges on the supply chain
spk_6: you know whether it's summer in tweet in prices on some components or
spk_3: some next but i choose to to get our supplier or when we needed so that the supply chain generally have been quite a challenging environment
spk_16: and generally we have you know we have managed that are pretty well with without team ah but it continues to get challenging environment so we're going to continue to monitor
spk_10: the development and and none
spk_7: and and will adjust over kind of of get into and i thank him
spk_4: your next question comes from changed since red peppers handling i got you got on a prank a little bit of a laborer up or not it's rather eat out by knocking can help with a bit understand the amount of a kind software that is tom life and arson sap with this point out know it's just south of it's actually not and ten percent of the all golf alec fine today and within that time license fees well clearly of go get or not gonna get out specifically should we think about the growth rate of engine as we exited the yeah there i think so much for that the comments and questions and i and you know we have not split out those two components on but i you know what we what we like to see which we have continued to see his you know what it means to have that subscription peace ah
spk_7: that makes the the number that we have to get for the coming year in a much that it's upset of the software revenue a given those dynamics of the subscription based on that split between what i would say the term subscription versus the south subscription we have nots without that yet about you know stage and were working
spk_4: changing the monitor and in i will watch know when that get substantial and i'd shy but i've done this your second question
spk_7: i just how to weaken other up and max
spk_10: like i could have launched yeah so i enjoy max continues to grow incredibly well within within the the base or again this corner we saw up i'm on not your subscriptions arm and next was in more than fifty percent of those ah which you know is driving a great use cases on both sides
spk_7: and on our customer bases you know we can feed see strong growth on the overall customer base with an inch next of kin that connects customers out of the i wasn't happy with progress fishing and ejects and quick homer key for me i'm trying to actually think about that of a tom likely for the as fast or that such as business by that radical cop thank you got
spk_6: like a gym
spk_3: here next question comes from rod home at goldman sachs
spk_6: great thanks for the question guys are the i wanted to just check on the guidance and see what can you guys could give any idea what you're taking lunch with them than thapar trajectory and few one
spk_7: a to whine and then i've got a followup you that thing
spk_3: a on a them
spk_6: are you know don't we don't die donna a quarterly basis for breakdown of hardware software
spk_3: but i need the indicators that that i would give you the having you for the annual guidance for revenue your i'm into nine percent the for software were guiding to thirty five to forty percent for that for years and the hardware a flight to london your slightly up
spk_4: on on software particularly in fact fight mentioned that but i wanna i wanna strike that you know what we dated for thirty five to forty percent last year for the full year we we finish the year at thirty seven
spk_6: it'll end but in inside the year there was strong variability especially in the in the footpath and of what we it so we feel like the line between thirty five to forty we do it by we will be less variability the field and we saw last year in part because we have better visibility into a portion of our revenues that are coming from man
spk_7: business that is already contracted and mean also in part because it it at the scale of the business so expect off the line that runs for the of the fiscal year we've always advocate your quarter to quarter they could be some variability
spk_6: you know above or below that range we expect about their ability will be left without okay thanks reply and then i i get big picture i want a to check the on its are thinking on certain been twenty two and you know and i i look at eighteen nineteen twenty all three years and systems are down are putting down ten percent and did you group it and twelve percent in twenty one
spk_3: and on and i i recognize you're saying flattened slightly down that sort it i'm thinking flattish and twenty two but what what gives you confidence that twenty one why didn't you know an anomaly be seen that across a lot of different infrastructure company that we cover our where they'd a ping a lot of the man and twenty one and he people are extrapolating
spk_6: nine to twenty two but in a while twenty one not at more of an anomaly that it is that you know you know you'd or more for you i guess
spk_3: yeah and and run from our perspective
spk_6: what one would look at powerful you are reading a rude twelve percent in than in twenty one and and know our demand was even stronger than that because we in a we ended up with the of backlog
spk_3: a large backlog of the end of the year at the when when you look at you know that the men and twenty twenty one
spk_6: in front of it actually with think is ah i wouldn't call it an anomaly but we think some of it are try again factors that will go away weeping there was some element of a other catch up the men because the man was quite depressed and i feel twelve month ago and they also may have been a couple of by specific factors earlier in the year when we announce iraq up and of software development some from customers jumped on back to to be fresh quickly and for with somebody or one of factors but not something that there might be factor that are not trained it
spk_3: and that will it and then not specifically the the traffic a new the edge of traditional application and i is going and is going to continue to grow thicker of these applications are generating more revenue more customer loyalty and yield more large companies depend on the deputies and fool when you're like a twenty twenty one there some element that one authors elements that are not am when we look at that and project to the future
spk_6: ah oh and i filled us that the demand for a big ip as a franchise for what hardware and software if you think that combination of we feel better about the demand for big ip in the future or even be ultimately fully to what would be better
spk_7: then what we would have fed a year ago
spk_10: now what will be the next between big ip hardware and software
spk_17: you know in in the future is still in a pub to predict because a lot of it depends on individual customers situation and been when they're ready to migrate to software ah and when they're not ah but it you think the combination of have to think we certainly feel better about it today than we did twelve month ago and that because of factors that
spk_4: and are not an anomaly though the factors that i can affect your reported that will continue on
spk_17: right okay fine talk to get have thanks for the time he got
spk_7: he next question comes from can one on with barclays
spk_4: thank you i'm yet to question just like her well first am maybe you guys mentioned it to true for it's you to give us our an update on kind of what you guys you're seeing on on some of those larger term deals and as it as and because to usage traffic growth and things like how they were running it had show any any car you can give us on true for gin and what that means from reliability and to next year the and and second
spk_6: thanks for the update on on overall security the annals they also gave us a look into the cloud verticals i'm just wondering if you could kind of update us on your how that that cloud vertical performed in fiscal twenty one are and what you're expecting moving forward their thank you
spk_18: hm
spk_6: so on the on the true for that wheatley which is said it also though that you know the ada of that we saw this quarter was actually better than what we saw in three three am i i have to preference that by you know it's small group of customers the perfect fit their second term and they're in their multi year subscription
spk_4: remus with us up but we saw you know a physically healthy stuff up between the initial terminals and the second term and so that all very quick as it and then in terms of the true ford expansions with in the terms of for those customers are the to a customer base again that was a bit higher than where we
spk_3: we're last quarter i can't say that that's going to absolutely continue or but we're very very optimistic by or the progress that we've seen ah in the data that we gotten so far today filler to him on your on your second question and the just to clarify when you for the club to go to when we talked about out loud revenue and family
spk_6: analysts they were talking about atheism and being deployed in in public or environment very specifically for in that been not number which and the time with it is better than a hundred million we do not include lot of the business you do with a hike the scalar faster rider it's got the writers where we are in their infrastructure and helping them deliver applications the saw that food but our our with that definition clarified around our card number continued for blog or am i didn't order to it's one hundred percent software of course i n n have grown faster than i will grow a software growth rate continue this year and where where we are seeing are a lot of traction in the last twelve months is ah
spk_3: in what we call point it offers on on marketplaces and so essentially and that that is consumed as a utility ah
spk_6: by law journal private and it is increasingly the truth that large enterprises had and commitments with their major public cloud providers
spk_3: and we've done all the integration of technical and commercial that allowed than a brighter to retire their spend commitment on at five
spk_6: and would feel an acceleration that trend and done it yet another way that we are we moving friction in the consumption of a fight for our in followed loud and and we're getting the benefit of that i'm in terms of group the other am
spk_19: big a real growth i think the public cloud is a generic are a number of the internet deployment continue to happen
spk_10: in in public cloud and cloud native environment
spk_20: and we are seeing a ah in engine eggs and you know i think that shared the when you step back and you look at a fixed i felt that big ip franchise within the last two years and one other things that you to we did well was that big ip consolidated a lot of functionality initially load balancing but then security
spk_7: authentication encryption on a single platform and that made things operationally much simplify customers and that that rated the big ip franchise and were essentially feeling the emergence of the same playbook ah with with engineers are both on prime any public lab environment ah good that for modern application and that be the type of application security and delivery that we doing not an app is it not necessarily exactly the same there are things like in greg controllers people feel that they have to secure authentic
spk_20: get their a b i so we we operate the i get laid been to encrypt their traffic inside yourself it's my so we offer that as well and of course we offer our security and protection but when you think that sweep of application security and deliver services were thing that playbook rule for and your next and that's also one of the fact that the globe in public while
spk_21: to fought for it by i can't
spk_6: your next cause chin comes transonic channel gene is keeping my gun i found it
spk_3: my question on so i guess i just wanted to ask you wouldn't be out your dog is that you have a great twenty five years already did
spk_6: nine percent of the target for next year that's about five and be of he has you thinking about can progress from killer than the facts straight v go to the papers typed and it's a great double digit growth g e this gonna be way to these targets after that did you even i'm asking i guess little on in spite of issues talking about strong mind me asking a question from investors off hundreds of this strength really you over say maybe some bought a ticket
spk_22: ip of the enterprise customers are you trying to get back in the global has you thinking about how the
spk_3: outlook and i'm on a thinking
spk_6: yeah thank thank you for make and
spk_3: in of course there there is quite a bit of time of the pre now and and the twenty twenty five
spk_6: one but cure you're right thing the way we look at it from me i could you know what when you look back at will watch or months ago and are only been billion and we thought about a long time target of getting to double digit when you go
spk_3: that wouldn't put up a year on it but we felt that that we wanted to get the that no one from a faggot
spk_23: i look back at work today
spk_21: the unfit of the girl the thing that we thought what help us out around gloating fast and security goldman and your next ah and our new guy but position and i feel that going roughly part part of the planet by the view that we had at the time
spk_3: what is join better in overall the demand for they can't be in i think in in that going better than they have an element of it that is them
spk_6: that it more the secular trend will go on for for several years and and for that kind of the next now in a if you start back from it funny what what you're seeing you in three or four years ago ah they located in few of the world but they all out for gonna go to a public cloud and that canada that the future the well
spk_3: i'm i'm sure you're feeling from the number of industry datapoint including the cloud providers actually say not themselves that a reality for a large enterprises is ilk for the last many decades they have always been told that they just have to get to the next thing and everything is gonna go to the next thing and that the practical reality of that it it hasn't happened at and in their the realization now that it's not about the next thing it's about managing editor a genius environment
spk_6: and being able to it'll run application in on time environment in public cloud increasingly at the edge inculcation environment and enterprises a very comfortable that that going to be the reality and accommodation have has shifted not to how do i get to a public cloud in the future but more the architectural coefficient around okay i'm going to be in all the places what is the simplest way to that we're complexity for me what is the simplest way in which i can manage and one my up with your in the clock is hybrid environment and both collaborations like at five i spent like five years positioning ourselves alfalfa the environment and what having a lot of joy
spk_3: chickens were able to support customers you know on friend in public cloud in private cloud a modern application increasingly at the edge and we feel that that that's gonna be a factual a trend that got a lot for several years for that that's what we're positioning for canadian that's what we're generally we feel good about you know that the
spk_6: like for years as i just have fun of that he dumps off as a shady companies and you talk about application for guaranteed of the strongest growth areas that you're looking at and he should we assume the most a gambling that evaluate going forward of every focused on next segment thank you well you know i football we we have he like a day i think i said before that young
spk_3: you know we did the tween it or acquisitions in quick succession that food is pretty substantial acquisition between shape and and action both era and for you know the republic here are will be felt that we needed to really focus on the completing integrations of you know she'd been and genetics and and both during that period and we're well on our way of doing not and adding that dinner with would continue to be focused on on that them on those organic the integration than expansion than out like that brings a very interesting new capability to at five in giving up visibility into is clouded by ottoman and being able to absorb the environment in which cloud workloads are running ah which compliments very nicely at the rest of our security portfolio which as you can see is one hundred percent focused on on application security
spk_21: and eventually shielding the the broader
spk_0: or for you and an application security that thought that that been that the focus and
spk_24: ah a dumb the potential future i'm at a it all over time will continue to evaluate you know building versus buying you know you've hardly said before with very disciplined about about back you know he thought always lived a preference is the bill
spk_25: but pay for time to market order that there's an opportunity to do something that accelerate average and then we look at that the focus of that will continue to be a on fulfilling that vision for that of applications on which it all is essentially about the world of it all running application
spk_26: and for large enterprises
spk_24: is phil very manual you don't fuck with complexity and fought with fragility and we have a a an architectural vision that weeping and gonna bring way more automation as you know way that have time for applications with stronger security and way better intelligence and insights about the proponents of applications and that's what we will focus on on bringing that goes into our customers bring it up to reality and everything or quarter you know organically or
spk_27: warrior eat organically down the road we are making not there's and more and more the reality and and if i think elevating a five to more than you know at the a strategic
spk_28: a partner for our our apartment digital transformation rather than let you know a solution player got a i like it your neck because she comes from alexander's and be damage
spk_29: how much
spk_24: talk about it what trench between last year the share market marketshare projects looks like looks to be like picked up share over the course of here to talk about our
spk_30: my gift shop around sixty five percent market share's that accurate within
spk_27: these were close
spk_28: i like of kara and don't we we have ah we're very happy with what we're seeing in terms of the adoption of and next now i'm fucking i mention and can't i is a variety of roles an arm and and in an application for example one one thing and commonly reported as the youth of engine act as a web server on
spk_31: and it is true that we have overtaken apache are interactive is the number one weeding out web server ah there's other users like reverse proxy an internet games as a as an eighty i gateway and he can management if ability and your next year now increasingly ever the workload protection ah capability and and in those areas and there's less
spk_28: ah let's reporting on on shares on until at least and the one of the one on has are you know very regularly than reporting and wifi and consistent aims of as the web server keith and we're very happy with the help get could you talk about the degree to which you're able to identify the number
spk_24: coders are working with your a technology to what extent that
spk_28: great great worry
spk_30: read for touched on the code to talk about your outreach their
spk_24: to what extent that
spk_30: that that to keep building blocks as we go forward
spk_6: yep the we've we've always had a very active community of engaged to an individuals around outside five technologies and even if you go and you look at our our our he'd million big ip i'm given it was one of the most programmable rocky pollution than available in a market we had a very active community of contributors you are sharing a iraq old a solution
spk_3: and and are actively contributing and continue to actively contribute you are or developer community now that ah that community has grown even further at the extended am our our our portfolio with intellect on as you know didn't even enter next have an open an open floor model any and like open source attract a wider
spk_6: roddy of application developer but you'd better a fundamental technology for their solution and up an additional expansion of of the lauper community around that and if we look ahead and i as it ever expanding our portfolio and looking into building our what transpired acted out with the bull para are offering on we expected to continue be a very important part of our tech
spk_3: knowledge in our strategic direction of appealing to developers and providing them the tools they need for the deliver at full and digital experiences
spk_6: quantification of
spk_3: no qualifications the time
spk_6: flight one last one but competition between clock slack off my other players that space thanks i'm your colleagues who we are and
spk_3: what for the most part of our own food we we don't
spk_32: the to impeach buried directly with the woodpile player that with of the the i'm a significant overlap funny
spk_33: i didn't bat will grow more as we introduce
spk_10: our volcker a platform food too wide distribution put the integration ah because we will play way more a be edge
spk_7: with the fact that you're the offering for a wide range of customers and i'll we we do or the outcome i specifically would shape security in the them in a puppet thing customers again for the ducks i'm in bed be no i didn't dare they are approaches the bundle security with their feet again especially for for customers that are using their opinion we have unopposed know more about best in class every from from you know and applied customers that them fleas a significant premium on
spk_4: it'll hobby world class efficacy again on attacks and any wouldn't go well without them with a couple of segment so we're going to be more and more competition with the players are and i think erm other disruptor with are universal and platform that competition is going to go or we feel very good about the the attributes of fun volcker why and when combined evolved these attributes that open are green have an edge universal platform and in newport bear the of their contrast the security fact that if i provide from shapes come from big id ah yeah did you have a formidable offering for popular that want to consume security other service at the edge and a love going to be a of abetting recovering angelic your next question comes from paul silverstein accounting thank you for screws in the and wandered up a sermon hop on the last one sorted off my five questions on put on a serious note friends one find apologize if you all have only answer these questions because you're thought faster than i can listen that big one of our first off with you're you are pretty much rebellion of and past can walk into the insight on the glide path considering the significance watching challenges you face long that we by of minister before responses on the same topic
spk_17: in that he far from the crooked if not recently remember going super model for some twenty two what in the supply chain sanctions will respect like growth rate will listen to communicate online that in fine you also related can you dress i assume your disability on is where it's my person was born in gen house and
spk_4: through out increasing number cause you provided you've learned from forecasts are just like you can find that that is in fact because it was boy has been drinking and eating fat cosmos or who values one bedroom for there's so much yeah also have a little start with your second question i guess burst out so in terms of you know what we what we think about four or outlook on the a cyber said supply chain
spk_7: we've said in the in the prepared remarks at it does not exist they are materially better outlook in terms of or supply chain
spk_6: it didn't do it will get components a bill for everything else and so we are assuming that ah
spk_27: we are looking at the each nine percent on
spk_0: on what we believe we can ship what we believe that it will be for those cars
spk_6: in terms of the specific operating margin expansion as recall we had a thirty two the forty four percent raise to be tightened up to thirty two the thirty three percent of largely driven by of the gross margin hits but we have been seeing a what we expect to see a because of some those the fighting constraints up kids and so on we are increasing obviously the efficiencies obscene and this is by looking that up a letter week and it at that on that thirty one point six percent so you know at the midpoint almost one hundred this point increase our but we're doing that you know on the backs of having higher clock on the bus much besides actually it's more of
spk_7: fish is useful for the upward watch economy you don't question and front good into to be clear if it's attention as to determine who to you anything on from some
spk_6: on a clear that i go insist a that from what we see right now all i mean i you know again we're early and eighty one so anything is possible and but in a what we what we seem to have obviously although the things that we've been reading from the other donors are collectively i don't think people are seen him sorry to see some improvement in the back out with that by twenty calendar or which is argue for obviously i'm so it doesn't leave us a time when to catch up understood in have some has been boy improve because of want for accounting firm customers on the visibility are high visibility on demand i think has improved i think the visibility answered by has not and so in a matching those to offered long wait times it's it's hard to say that you know you you catch up within a reasonable period of time i appreciate the response thank you much
spk_7: you can can can change will be taking our last question from for had no chance were empty and partners
spk_2: ah thank you both couldn't have you know
spk_3: ah divine clarification your thought is good too a good way to go on any glider but soon fifty million dollars of lebanon contribution from trudged back and and it can i got that that it almost all entirely soft they're recording is a
spk_6: ah yes the fifteen just a clear idea of you broke up of or zeigler are of the for the question is if we exclude be tracks back acquisition ah than you would hypothetically not have roughly fifty percent of young that be coming from software
spk_3: given the stranded you're being and in enforcement so one
spk_6: do you love kind of like understanding your your your target a they doubted him at the analysts say if they're like something that you feel is a slowdown in terms of organic soft god i guess i don't understand how good at the at the putting a gate analysts the you had highlighted the you'd expect
spk_3: achieved roughly fifty percent of cut up on if you have you been difficult to get i'm coming from software so it fits good point one is kind of forty seven percent of my magic night and i you'd expect significant acceleration and software and fiscal pointing to the discipline understand what change and soft i bought him going forward
spk_6: that hasn't yet in in in love with the playing on
spk_4: yeah
spk_7: five thank you like to put to be clear we are in fact our target that we laid out our a muscle we we said thirty five to forty percent and thirty seven percent this year and we got it for thirty like the body next year
spk_34: and whether or not we exit next year at a mix between hardware and software that is that people that are more of software
spk_7: we've added we will get there eventually because the trajectory on on software is one of growth and wait wait which third overtime time we both think hardware will be
spk_6: in a an engine of growth
spk_7: but frankly if we don't hit that target logical the hardware as a totally over the phone will be very happy with that
spk_4: and and not not yet partly because of we'll what's going on in the short time but what happened because what it wanted twins like to is a that the big ip franchise overall it doing better than we thought and be all these customers that are expanding at that time you're approaching hardware a not making it transition to software he creates a bigger install base for us to migrants to software down the road in actually didn't pick very good news over time even for supported by because we have a much bigger real estate saw were you know that what more focused on a for thing if you look at it in absolute dollars and then we will absolutely hit the target that we gave for you know software revenue for that five in a not arise into a bill that two dollars translate to fifty percent make a fine if they don't because because on one has ever performed will be happy with
spk_7: he thought it could just effect if there's stating what we said before we get our paper get two percent of that would be the equivalent of the forty five percent about the gestating she for and so are the stretcher is absolutely heading in that direction calm and in a stay tuned it's que one
spk_0: yeah actually i just
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