FY ‘25, we’ve got our, you know, a bigger pool of expansion revenue than we do in FY ‘24 and ‘24 is growing on top of ‘23, so all of these continue to compile upon themselves. As I just mentioned to me Meta that, you know more than 60% of the outlook that we’ve got within our software revenue is coming, you know, from that cohort that we feel pretty good about seeing which is the term renewals, as well as true forwards plus SaaS and managed service renewal piece that we’ve got in the revenue stream. So both of those, you know, we feel very confident about, and it’s probably the highest visibility that we’ve got within the revenue stream.
Francois Locoh-Donou: Thank you, Frank. And to your second question, Michael on SaaS and managed services. So, like, if we talk about, you know, FY ‘22 to FY ‘23, you saw that the ARR there was flat to slightly down. There are two reasons for that. One is, yes, the transitions we talked about started in ‘23 and there was about call it roughly, you know, $12 million of ARR that we transitioned out of the business in 2023. The other reason is at the high-end of the bot business, we saw quite a bit of softness, especially in the second-half of the year, as customers had significant budget scrutiny and you know we’re reluctant unless they were under immediate attack, to really implement our more sophisticated solutions. We think over time that will change, but specifically this year with the macro pressures and budget scrutiny, we saw a lot of softness there, both in, you know, new bookings and in some churn in some cases.
So that is the FY ‘22 to FY ‘23. So from going into 2024, well, you asked about, you know, is this transition is a multi-year transition. Yes, we expect that the $65 million of, of revenue stream that we are transitioning will work themselves out over the next couple of years, so over FY ‘24 and FY ‘25 they are a headwind to total growth. However, we are quite excited by what’s happening with F5 out of the SaaS portion of our offerings, specifically SaaS on F5 Distributed Cloud. We have launched a WAF offerings, the security offering, you know, about 18 months ago. We are seeing extraordinary traction on that. As I said earlier, we’ve won over 500 customers in that period, all of whom are enterprise customers. And we are seeing very rapid traction on that.
We’re also seeing rapid traction on the multi-cloud networking market, where we bring both networking and security capabilities and we’re quite differentiated to anybody in the market. So that has grown fast and we expect that portion of the business to continue to grow fast, and overtime become a, a majority of this SaaS and managed services portfolio.
Michael Ng: Thank you, Frank. Thank you, Francois. Very helpful.
Francois Locoh-Donou: [Indiscernible] Michael.
Operator: Our next question comes from the line of Tim Long with Barclays. Please proceed with your question.
Tim Long: Thank you. Two, if I could as well. First, Francois, I think you talked about replacing competitor with, in the ADC, both hardware and software, domain. Could you dig into that a little bit more, is that something that you think it is kind of, it’s a one-off or do you think there is a sustainable move there and how is that happening. And then second, just on the, you know, the changes in the transitions in software, it sounds like you know, move into Distributed Cloud services makes a lot of sense. Having looked at some of those businesses and kind of you know, moving on from them. Does that change your view of kind of synergies across product offerings or is it a sign that maybe those businesses didn’t have the same synergy and that’s why you’re not, you know, you’re not going forward with them. Thank you.
Francois Locoh-Donou: Thanks, Tim. Maybe let me start with the second part. No, it’s not about synergies. So there are two aspects of that, Tim in terms of the transitions we’re talking about the $65 million of transition. One is a legacy platform that we have, you know that — on which we have built managed services offering. We have now built a with the F5 Distributed Cloud in much more modern platform with an architecture that’s differentiated, and that’s gaining rapid traction and we want to transition our customers through this modern platform. And that was always the plan to do that. However, you know, we have to first of all, build a platform and build all the security capabilities on the platform, to be able to start this transition.
So we’re very excited that we were able to do all this work on the Volterra platform over the last couple of years, and we’re able to start this transition in 2023. The second part of the revenue stream that is being retired is not about synergies, it’s new offerings that we had launched recently, that we hope to do well in the market. But given the macro environment and what we’ve seen as the early traction on these offerings, we’ve made some decisions as you know, in April to rationalize our portfolio and focus on the most attractive investment, and we decided to not go forward with these products. So that’s the second part of your question. On the — I should say that the last thing I’d say about that is, in terms of the synergies between elements of the portfolio, no — we are actually very encouraged on what we’re seeing.
We’re seeing actually a number of customers, who already have BIG-IP adopt Distributed Cloud. You know so for a set of applications they have BIG-IP on-prem or in the cloud, so hardware or software, and then they want to have software-as-a-service for in — other applications in their state. And they really want to have the consistency of you know security engine, security policies across all these environments and we’re able to do that with BIG-IP, as well as our SaaS and managed services. NGINX also had a very strong quarter in Q4, and that was driven in-part by the security capabilities that we ported from BIG-IP onto NGNIX and that same security stack is now in use in Distributed Cloud. So the synergies, especially in terms of security across our portfolio are, are playing out, and we expect that they will accelerate actually over the next couple of years, as we, we do more and more conversion between the SaaS and deployable products.
Now, for the first part of your question, in terms of the ADC competitors, look Tim, here it’s — we have over the last four years, you know, we made a decision to continue to invest in the future of the ADC franchise, and specifically, building the next generation hardware form factors for our ADC franchise and the next generation software form factors that together bring to on-prem deployments, the benefit of the cloud, such as, you know, multi-tenancy rapid upgrades, seamless upgrades, and make it way easier for customers to operationalize ADCs, and have a better total cost of ownership. Those investments are paying out in the market in terms of us gaining share and being able to displace our traditional competitors in, you know, even in situations where they are incumbent, and take share from them.
And we think that, you know, that’s not a one-off. Our expectation is, that will continue, and, you know, we’re pretty excited because, this year we’re introducing the next generation software platform on BIG-IP that we think is also even more differentiated than what we’ve had in the market. So I expect that will continue and it’s you know, hopefully a pay-off for the investment we’ve made over the last four years.
Tim Long: Okay. Thank you.
