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

Page 3 of 12

Frank Pelzer: Yes. Alex, let me start with the backlog question. I’m going to turn it over to François for your second question. So on backlog, what we’ve talked about is that we will disclose that once a year if it’s material, meaning more than 10%, but we weren’t going to talk specifics in any one given quarter. I will say similar to Q1 last year, where we talked about percent move up, we were down a bit more than 10% this quarter in backlog from where we ended in Q4, and that was largely a result of our ability to ship based off of some of the product redesigns that we were able to achieve. And so we were quite happy with seeing that reduction in backlog from a customer satisfaction standpoint. And then François, I think we’ll talk to your second question.

François Locoh-Donou: So Alex, on the rSeries, there were — there have been two factors that have sort of gated the ramp and growth of the rSeries over the last several quarters since we launched it. First is what you mentioned, the number of use cases and applications that rSeries could cover relative to the iSeries. And second was our ability to build and ship rSeries, which has been significantly constrained with some of the components. The good news is both of these factors are going away over the next couple of quarters. So on the supply chain factors, we are seeing better component availability and also access to broker markets where we are still constrained. We still have constraints on rSeries. We still had in Q1, and but a lot of the redesigned efforts that we have already done will be complete by the end of our second quarter.

And so we are seeing lead times on rSeries will be improving in our second quarter and beyond. And then the second aspect in terms of the application, the number of use case that rSeries can cover will pretty much be at parity with iSeries, if not in the June quarter, in the September quarter. So in both cases, there’s a lot of progress. There is a lot of demand for rSeries. And I think you should expect that rSeries will certainly grow into FY ’24 to become the vast majority of what we ship in terms of appliances.

Operator: Our next question is from Samik Chatterjee with JPMorgan.

Samik Chatterjee : I guess for the first one, if I can, François, ask you to sort of share a bit more color on in terms of budget scrutiny, which regions as well as customer…

Frank Pelzer : Samik, we’re having a hard time hearing you. You may want to speak up.

Samik Chatterjee : Can you hear me now?

Frank Pelzer: Yes, much better.

Samik Chatterjee : Yes. So first question was really more about sort of François’ comments on the budget scrutiny that you’re seeing, which regions and maybe customer verticals as well, are you seeing the most sort of scrutiny from? And where do you stand in relation to like as you sort of are in the early days of fiscal 2Q in terms of either quantifying it in terms of a sales cycle or conversion cycle? Are you continuing to see those sort of conversion cycles get extended or time line get extended? Or are you starting to find a sort of levels set to a longer duration in terms of the conversion cycle? And I have a follow-up.

Page 3 of 12