F5, Inc. (NASDAQ:FFIV) Q1 2023 Earnings Call Transcript

Ray McDonough : Just two if I could. I understand you’re not giving any new software metrics right now. But can you talk about how contract duration trended on renewals? I understand you were selling three-year term license deals in that cohort. It’s really the first cohort of renewals that you’re seeing this year. Are you seeing any contraction of contract duration? And then the second question would be I appreciate the comment around double-digit EPS growth and the commitment there. But how should we think about cash flow growth and cash flow margins normalizing as you kind of lap the change towards more annual invoicing terms this year?

Frank Pelzer : Sure. Ray, why don’t I take both of those? The first in terms of changes in duration of the contracts, we are certainly sensitive in monitoring that, but we have not seen any discernible change in contract duration on the second term renewals or on the primary contracts that we are putting in place. And so that has not impacted us at this stage. In terms of the commitment to our double-digit EPS growth and cash flow, we are — we will see the benefits of some of the slowdown in the new flexible consumption programs that will then yield more actual cash in the back half because we’re not adding on as much of the upfront revenue recognition in relation to the cash that we are receiving. So we will start to see the benefit of that and see that normalize out a bit.

Part of the other benefit that we’re going to see for cash flow is that the supply chain issues that we’ve had and the extra purchase price variance and expedite fees those will largely come out, and those will help our cash flow from operations. So both of those, I think, will start to see a normalization. But it is one of the more difficult areas to predict in the model going forward.

Operator: Thank you. This concludes today’s question-and-answer session. This is the end of today’s conference. You may disconnect your lines at this time. Thank you for your participation.