Good afternoon and welcome to the F5, Inc. Third Quarter Fiscal 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. If anyone has any objections, please disconnect at this time. I'll now turn the call over to Ms. Suzanne DuLong. Ma'am, you may begin.

Hello and welcome. I am 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 here to answer questions during the Q&A session. A copy of today's press release is available on our website at f5.com, where an archived version of today's audio will be available through, October 28, 2024. We will post the slide deck accompanying today's webcast to our IR site at the conclusion of our call. To access the replay of today's webcast by phone, dial 877-660-6853 or 201-612-7415 and use meeting ID 13747602. The telephonic replay will be available through midnight Pacific Time, July 30, 2024. 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. We have summarized factors that may affect our results in the press release announcing our financial results and in detail in our SEC filings. In addition, we will reference non-GAAP metrics during today's discussion. Please see our full GAAP to non-GAAP reconciliation in today's press release and in the appendix of our earnings slide deck. Please note that F5 has no duty to update any information presented in this call. With that, I will turn the call over to Francois.

Thank you, Suzanne, and hello, everyone. Thank you for joining us today. I will speak to our Q3 highlights as well as our expectations for Q4. Frank will then review the details of our Q3 results and provide additional color on our outlook. We delivered Q3 revenue of $695 million, which is at the top end of our revenue guidance range. We also delivered non-GAAP EPS of $3.36. This is well above the top end of our guidance as a result of our continued operating discipline as well as some tax favorability in the quarter. Total software revenue grew 3% year-over-year and 13% sequentially. Our continued strong software renewals provide an indicator of both customer satisfaction and our momentum overall. In a positive shift from last quarter, during Q3, new software revenue also contributed to software growth in the quarter. Global services grew 3% in Q3. The combination of software and global services growth largely offset systems revenue, which was $130 million, down 16% year-over-year. During Q3, we started to see some areas of improving demand after a prolonged period of budget scrutiny, evidenced by improving pipeline and close rates. As a result, our team drove strong bookings growth in Q3, including an uptick in new business. Factoring in these signals, we expect Q4 revenue in the range of $720 million to $740 million, which puts us on track to deliver toward the top end of our FY '24 revenue guidance. Our outlook is informed by three considerations: one, our growing pipeline; two, our visibility into software renewals; and three, the continued strong expansion trends from customers. We expect FY '24 revenue of approximately $2.8 billion, roughly flat with FY '23. This is despite the roughly $180 million systems backlog headwind we have had to overcome this year. Given the…

Thank you, Francois, and good afternoon, everyone. I will review our Q3 results before I elaborate on our Q4 outlook. We delivered Q3 revenue of $695 million with a mix of 56% global services and 44% product revenue. Global services revenue of $387 million grew 3%, in line with our expectations, which reflected lapping the benefit of prior price increases. Product revenue totaled $308 million, down 6% year-over-year due to a lower level of backlog-related systems shipments than a year ago quarter. Systems revenue of $130 million demonstrates a slowing decline of 16% year-over-year. Software revenue totaled $179 million, representing 3% year-over-year growth and 13% sequential growth. Subscription-based revenue contributed $155 million or 87% of total software revenue, representing 2% growth year-over-year and 10% sequential growth. Subscription renewals remained strong in Q3 with continued solid expansion in our multi-year agreements. An exception to this trend is our Bot Defense point solution where the majority of customers are renewing, but some are opting for less sophisticated lower-cost options. Rounding out our software revenue, perpetual software contributed $24 million. Revenue from recurring sources contributed 77% of Q3's revenue, up from 75% a year ago. Recurring revenue includes the subscription-based revenue as well as the maintenance portion of our global services revenue. On a regional basis, revenue from Americas was down 4% year-over-year, representing 55% of total revenue. EMEA delivered a strong quarter with 5% growth representing 27% of revenue. APAC declined 1%, representing 18% of revenue. Looking at our major verticals, enterprise customers delivered another strong performance, representing 67% of product bookings in the quarter. Government customers also performed well representing 21% of product bookings, including 7% from US Federal. Finally, service providers represented 12% of Q3 product bookings. Our Q3 operating results were strong, reflecting our continued operating discipline. GAAP gross…

Thank you, Frank. I truly cannot thank you enough for your partnership and counsel over the last six years. You have been an integral part of our executive leadership team with an immeasurable impact on F5. Your deep knowledge of software and SaaS-led businesses was instrumental to F5's successful transition to a software-led company. You have been a tireless advocate for F5, our business and our employees and an extraordinary partner and friend. I know it's not goodbye at this point, but I really want to thank you here and now. I will also echo your comments about Cooper. I have worked very closely with Cooper in my tenure at F5 and have enormous confidence in his ability to succeed you in the CFO role. In conclusion, I will reiterate that F5 is uniquely positioned to help our customers as they move forward in a hybrid and multi-cloud reality that brings with it untenable operational complexity, considerable cost and escalating security risks. As large enterprises across the globe are modernizing their IT infrastructures and driving IT cost optimization, they also are developing comprehensive AI strategies for their businesses. F5 is proving itself an invaluable partner in this modernization process and in enabling our customers to ready their IT infrastructure to leverage AI at scale. F5 is optimizing application security, delivery, management and performance across hybrid, multi-cloud environments with enhanced automation and meaningful operational efficiencies. Going forward, and especially as we enter the era of AI-driven applications. We believe customers will require a hybrid SaaS platform that covers all of their app security and delivery needs regardless of form factor. This is the world we have invested for and as customers gain more confidence in their IT budgets and priorities, we believe we are well-positioned to capture our share of their spend. Operator, please open the call to questions.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Tim Long with Barclays. Please proceed with your question.

Thank you. Congratulations and best of luck, Frank, and Cooper, congrats to you on the new role coming. I wanted to touch on the software side, Frank or Francois. I know you don't give a lot of -- all the specifics, but just looking at maybe the sequential growth, it seems a little surprisingly strong in the quarter there? Is there any way you can parse out for us kind of what drove the -- you said strong new business, any way you can quantify that? And then as far as the renewals, are these stronger true forwards? Is there better dollar retention? How do we, at a high level, think about the two aspects of what's looking better in software currently? And then at a hardware follow-up.

Sure, Tim. So thanks so much for the kind wishes and thanks so much for the question. Yes, Cooper is going to do a great job in the role. On the software in particular, as you know, we will update some of the ARR-type metrics at the end of Q4. So I don't want to get too much into that. But I would say that when we take a look at an NRR, it still is world-class across the business. The subscription renewals in particular continue to be quite strong with some expansion. We, obviously, talked about a little bit of a challenge in the bot business, which is helping us somewhat in that number. But what really was strong was the new business activity, which we see in the pipeline, in some cases, we see it in hardware and it converts into a software deal through the course of the negotiations. But more broadly, it was the -- guidance that we had given was really based off not necessarily expecting a lot of new business activity. And in the quarter, you obviously saw that we ended up at the top end of our guidance. So you can sort of extrapolate that into a lift in new business activity.

Okay, great. And then just quickly on hardware. I know is still a challenge, but it does seem like other pockets of networking is starting to see a bottom. How do you feel about where we are at these levels given that most of the backlog comparison is hopefully behind you?

Hi, Tim, it's Francois. Look, I think we have seen hardware stabilize over the last several quarters as customers have digested inventory. And over the last several quarters, we have seen a number of customers still sweating their assets in the current macro-environment, but we're starting to see that change. And so for this year, we are about at the levels we think we're going to be this year. But going into next year, our view is that there -- the demand signals on hardware are pretty good. And so our expectations is that hardware, next year, will certainly not decline, possibly could be up relative to this year. And it's driven by a few use cases, Tim. Number one is we have a strong pipeline of tech refresh activity and this is largely from customers that have digested their inventory or customers that were sweating assets and no longer can do that at this point. And we're starting to see that the close rates on this pipeline are going to be pretty strong. Specifically in the service provider space where they have sweated assets very aggressively, we're now starting to see large programs come up again for CapEx in hardware in service provider. And also, we're starting to see AI as a catalyst on the horizon for hardware. So, specifically for the few large enterprises or service providers that are building large AI factories. And one of the big issues in building these large GPU clusters, obviously, is the cost of training these models. And our technology specifically are high capacity, high performance, traffic management technology, BIG-IP is perfectly suited to improve the efficiencies of these large AI factories and thereby reduce the cost of them. So we have already won a couple of opportunities in this area. We think it's going to take time to develop, but we're starting to see that as well as a potential positive catalyst for FY 2025.

Okay. Thank you. Appreciate it.

Thank you, Tim.

Thank you. Our next question is from Meta Marshall with Morgan Stanley. Please proceed with your question.

Great. Thanks. Maybe to start following up on Tim's question, just in some of that better pipeline, is that Distributed Cloud, is that NGINX, clearly you're kind of talking about some of the systems upside, but just if any more kind of disclosures around what kind of the makeup of that better pipeline is? And then maybe as a second question, I know you noted better expansion as well. Is that coming from kind of new products or customers expanding in their product portfolio within F5 or higher volumes? Thanks.

Hi, Meta. So the comments I just made were specific to hardware where, in fact, we have seen a stronger pipeline of tech refresh. But generally, our pipeline has been strong and that applies as well to NGINX and Distributed Cloud. Where this come from, Meta, is we've talked about the ball of fire and you've heard this term, but generally, our enterprise customers are really in a crisis because to be able to deliver the digital experiences that they have to deliver, they have to operate in these hybrid and multi-cloud environments and the complexity of these environments is escalating. So to give you an example, if you go back a year ago, we had about 20% of our customers that operated in more than six infrastructure environments and that has doubled in the last year to now 40% of our customers operating in these environments. And that creates a risk because of inconsistent security policies between this cloud and that cloud in this on-prem environment. It drives up operational cost, it forces them to use multiple vendors where they could use less vendors or consolidate on one. And all of these constitute this daunting complexity that we are on a mission to simplify. And so it's really the portfolio that we have put together with NGINX, Distributed Cloud and BIG-IP that creates effectively a single platform that can extinguish this ball of fire and really simplify hybrid and multi-cloud environments for our customers. In my prepared remarks also, I mentioned a couple of examples of that. We had a big security company that was using BIG-IP and used Distributed Cloud to augment their footprint and standardize their security across multiple environments, leveraging the portfolio of F5. So the pipeline that we're seeing across these product lines is really an effect of hybrid and multi-cloud complexity, being very present for our customers and us having multiple products to really address that complexity and simplify the operations of our customers.

Great. Thank you.

Thank you. Our next question is from James Fish with Piper Sandler. Please proceed with your question.

Hey guys, thanks for the questions here and congrats to you, Frank, on retirement, and Cooper, on the promotion. Looking forward to working with you more, Cooper. Maybe not to pick on something you guys mentioned here, but on the Bot Manager side, shape has been kind of problematic over the last year or so based on what you guys have said? I guess, what are you guys doing to try to change the trajectory of Bot Manager and how are you thinking about any potential security bundles between Bot Manager WAF and API security pieces, especially given you talked about customers looking at lower-cost alternatives?

Thank you, Jim. I'll take that one. And what we're seeing in Bot, so in the Bot Management solution that is a high-end managed service. And it is a point solution. This is where Frank was sharing that we have been challenged on this area because it is a point solution and it is at the high end of the managed services scale. And we're seeing the majority of customers actually see enormous value in the solution and are renewing their subscription. But some customers not only want a lower end solution but also want to have a platform and have Bot as part of a platform bundle. And so our plan has been to migrate and take that technology, take the most sophisticated Bot technology that is on the market that we now have and integrate that technology onto our F5 Distributed Cloud platform. And so we now have Bot as part of F5 Distributed Cloud, our SaaS solution and we are now commercializing Bot as part of that bundle. In fact -- and we're getting quite a bit of traction on that. In fact, if you look at our WAAP as a service customers so those are customers that would buy a bundle that includes WAF, Bot, API security and DDoS, any one combination of these four services. The number of WAAP as a service customers that we have has doubled over the last year, but those are WAAP customers on our platform using the bundle. So it's really a transition, Jim, from a point solution at the high end to a solution that's part of a platform and part of a bundle, which is where I think our customers want to go.

Got it. And Frank, for you, one of the questions I'm getting here after ours is around you guys talked about raising fiscal Q4 kind of outlook. Last quarter, you guys kind of gave some color around fiscal '25. So growth rate goes up this year, should we continue to expect the dollar numbers that you outlined last time as kind of a good proxy for fiscal '25 at this point or are you still feeling confident in those growth rates on higher numbers? Thanks, guys.

Yes, absolutely. I appreciate the question, Jim. So look, we'll have more to say in October about FY '25. We're not updating anything as of now for FY '25. My starting point would still be go back to what I said in October of a mid-single digit growth off of a flat-to-low single digit FY '24. And you'll probably triangulate around to the number where we are. We are still in the process of our FY '25 planning process. What we absolutely will do is deliver 35% operating margin off of that revenue number. And that is largely based off of the confidence that we've got in the subscription renewals and how they are playing out. The one thing that I'd probably add is if you take a look as I just want to make sure there's no confusion as we look ahead into next year versus maybe what happened in this quarter, we do expect more of that growth to come in the back half of FY '25 because of just where we see the subscription renewals and the larger ones really happening in the back half of '25. And so I would expect the first half to be relatively flat, maybe slightly up depending on what happens with some of the new business activity and if that momentum continues. But more of that growth is going to come in the back half of FY '25 of what we did in FY '24. So I just want to directionally give you that's the way we're thinking about the business.

Helpful. Congrats again on retirement, Frank.

Thanks so much. I appreciate it, Jim.

Thank you. Our next question is from Michael Ng with Goldman Sachs. Please proceed with your question.

Hey, good afternoon. Thanks for the question. I just have two. First on software. I was wondering if you could comment on how the potential headwinds related to the retirement of the legacy SaaS businesses and migration of Silverline to DCS has gone relative to expectations. I was just wondering if you could update us, I think previously you had said an up to $65 million headwind there. And then second, in your prepared remarks, you talked about no longer incentivizing customers toward multi-year maintenance. I was wondering if you could just provide a little bit of additional color on why there's a good market change there. Thank you very much.

Yes. I'll start with the question on the transition in the SaaS business. Things are progressing pretty much the way we expected to. Indeed, we have about $65 million of legacy in the $200 million ARR that we shared in October. We -- some of this is products that we have retired and other is services that we intend to migrate to our Distributed Cloud platform. Those migrations have started. We are early in the curve. We did say it would be a two-year journey. So we are early in the process, but the migration are starting and largely going to plan. What we're seeing in that business is, A, on the -- as Frank mentioned earlier, on the -- at the high end of the Bot Manager business, we are seeing there some churn because we're seeing a lot of customers renewing, but some customers not renewing, wanting to move to lower-end solution or platform-based solutions. But on the flip side, in our SaaS platform on Distributed Cloud, we are seeing strong growth, strong new customer adoption, and that's driven by the bundle of offerings that we have in the platform. I mentioned WAAP earlier as an incredible offering, but it's also -- that traction is also driven by API security. So securing APIs is becoming a really big challenge for enterprises. You'll hear more about this in quarters and years to come because AI is going to make the importance of API security even greater. But we're seeing significant traction in this area in part because we have built the most comprehensive API security solution that goes from code scanning to comprehensive discovery of APIs all the way to protecting these APIs. And so it's eliminating weeks on end of manual testing and analysis in a solution that automates all of that. The -- and so the traction we're seeing is year-on-year. The number of API customers, API security customers that we have has tripled since last year. So those are the dynamics in the SaaS and managed services business.

And Michael, on the maintenance question, this is the maintenance associated with our perpetual hardware and software. And as most people know, our global service organization is world-class, they do an amazing job in all the customer relationships and they lead -- that has led to significant, very high attach rates throughout those products for a long period of time, frankly, on some of those products. And so what we have seen over time is that, generally, the discounts that we offer for those services upfront. Over time, we try to recoup some of that discount rate as each renewal cycle goes through. And what we found is that, with our super-high attach rate, the quality of the service that we delivered and the fact that we are a very cash-generative company, we don't really need three years of cash upfront to lock in those customers. The service does it itself, the product does itself. And so we did need to continue to incentivize through higher discounts and multi-year maintenance agreements and have strategically moved away from that. So that was really the comment in relation to the deserve -- the deferred revenue associated with our services business.

Great. Thanks, Francois. Thanks, Frank.

Yes, sure, Mike.

Thank you.

Thank you. Our next question is from Alex Henderson with Needham & Company. Please proceed with your question.

Great. Thanks. First off, let me say congratulations to the two people involved in these changes. Frank, it's great working with you. And I certainly look forward to working more with Cooper who's been fabulous over the years. So my question is, first and foremost, is there any change in the sales staffing levels? Have you been seeing any increase in poaching by competitors? There's been some chatter around a couple of your competitors who have had some management changes that they pulled some pretty good people out of F5 on the sales front. Is that accurate or inaccurate? And then the second question, more to the environment. As we look at the year of efficiency to take Zuck's comment and extend it out to multi-years, which is really the right frame -- timeframe, that appears to have run its course and does it look like it's starting to show a stability in the application arena where applications are starting to reaccelerate broadly. Is that a metric that we can use to get at least a directional qualification on F5's outlook? For instance, if we see strong sales or application growth at the cloud companies, is that a read-through to you guys?

Hi, Alex. Let me take you through two questions. Let me start with your question on our sales -- on the sales side and staffing level. So at the highest level, I will tell you our attrition in sales is well below industry norms and has been that way for a while, in part because of the culture we nurture at F5 and the very strong leadership team that we have in the sales organization. We have an extraordinary sales team at F5. I am very proud of the sales team we have, the relationship that we have with large enterprise customers across our sales organizations and the way that this organization is serving our customers. I'm actually proud that competitors are trying to poach a person here or there, but it takes way more than a couple of hires to recreate the enterprise go-to-market model that we have built over 20-plus years, not just with our own field teams, but also with our several 1,000 channel partners that get up every day and to go promote F5 and build relationship with customers. So I feel very, very confident about our go-to-market organization and very confident about our competitiveness in continuing to hire and retain the best salespeople on the market. Then as a -- as it really to your second question around how to think about outlook for F5, yes, it is a big positive. The dynamic you mentioned around where customers are at in their application rationalization is a big positive for F5 because our business is driven by the number of applications, the complexity of applications and also where -- the distribution of applications. And so increasingly, what we are seeing, Alex, is that customers have to place their application in multiple infrastructure environments. I mentioned a stat earlier, about 40% of organizations operating in more than six infrastructure environments. That creates flexibility for customers, but on the other hand, it creates massive complexity. And we have built the only platform in the industry that can truly secure and deliver and optimize any of these applications or API regardless of where they're at. We truly are the only infrastructure-agnostic player in the market, in app security and delivery. And so this distribution of application which will accelerate with AI, right, is a big positive for us. And it will accelerate with AI because as you know, AI has the issue of data gravity. Models want to be close to where the data is, inference needs to run where inference is going to run. And so we're seeing also more distribution of apps and app components with AI. Again, that plays to the F5's capability in solving this ball of fire problem.

Great. Thanks for the clarity.

Thank you. Our next question is from Simon Leopold with Raymond James. Please proceed with your question.

Thanks for taking the question. First, Frank and Cooper, congratulations on the job switching. Best of luck to both of you. First of all, this might be a tricky question for you to answer, but one of the anecdotes we've picked up is regarding Broadcom's price adjustments on VMware, and the thought was that this was affecting your business because it was perhaps shifting budgets for your customers. Now clearly, you put up a very strong software number this quarter. And I'm wondering if this is either despite what's happening with the VMware pricing or if there's some other explanation and maybe this number would be even better if not for that.

I mean, anecdotally, I think you are right in the sense that I have heard, again, anecdotally from a couple of customers where in the short term in terms of coping with these price increases, they have had to pull budget and into the VMware Broadcom situation. I have not seen that as a very significant trends across a large base of customers. And I also think it's a fairly short-term reaction to what's going on with -- I think that will settle out a little differently down the road. So that's perhaps the only validation that I have for the anecdote you just raised.

Great. And then just as a follow-up. In terms of the way you're envisioning your opportunities with enterprise adoption of AI, would you expect that your opportunity would be correlated to essentially traditional server sales? And I'm presuming that really in the GPU clusters, that NVIDIA is -- basically has its own internal load balance. And so that's not your use case. I just wanted to clarify that. Thank you.

So the -- if you pull way up, Simon, in terms of AI, the big trends that are emerging, the big issues are, number one, cost and number two, security or safety and security. So let me talk to each for a moment. The cost issue, it's first with the companies, there are few digital innovators that are building large AI factories and they're investing massive amounts in these GPU clusters, but there is a challenge around the utilization of these GPUs. And so our high capacity data ingestion capability, our high capacity load balancing solutions are a perfect fit to increase the efficiency of these AI factories or low balance traffic between multiple AI clusters, thereby reducing the cost per query, if you will, of these infrastructures. And so there we see an immediate opportunity with existing products for the companies that are building these kinds of factories, where I think the opportunity shifts in the long term is for all enterprises who will deploy an AI in their environments and who will want to run inference in their environment. A big issue is going to be how do you secure these AI models and we believe that APIs are absolutely key -- securing APIs is the key to securing data and securing AI workloads. And for that reason, we have placed significant investment in API security. And I mentioned earlier that we are already seeing year-on-year a tripling of the number of API security customers that we have. That has not been driven by AI yet, but we expect AI to be a substantial catalyst on that solution going forward.

Perfect. Thank you.

Thank you. We'll take our final question from Sebastien Naji with William Blair. Please proceed with your question.

Great. Thanks for taking my question. I just wanted to first echo the congratulations to both you, Frank and Cooper as well. My first question is really around the mix shift between software and hardware. It just seems like over the last few years, that mix shift to software has been maybe a little bit slower than expected with many customers preferring to stick to their hardware form factors. I'm just wondering as we enter a new upgrade cycle here in fiscal year '25, could something change? Could we see a more rapid shift to more software solutions this time around?

I think we talked about the dynamics, the dynamics of hardware and software and what we see as the catalyst for hardware in next year. But I should say, we don't preference -- we've been very clear about that over the last several years that part of the value that our customers see in F5 relative to other players is that we don't force them to adopt one delivery model or the other. We are advisors and we help them make the right choices, but we don't force them. And I think especially relative to SaaS players who come into large enterprises and are asking them to change the way they do business to go adopt talent solutions, we're completely different in the sense that we meet our customers where they are. And if that is starting with hardware and modernizing with software or hybrid hardware-software solution or it's leveraging hardware or software in their environment and then SaaS for a certain number of applications, we meet our customers where they're at and we provide them flexibility and choice that is unparalleled in the industry. And that differentiates us from either the traditional ADC vendors that have historically only have hardware-software clients or the pure SaaS infrastructure players that do not have hardware-software consumption models and therefore want to force customers to do something different. And that doesn't work for large enterprises either. So we -- that is really how we go to market. And in terms of how will that manifest itself in terms of hardware and software next year and we will see. We've got good catalysts on hardware. We think our software is going to continue to grow. We did say that we expected to return to double-digit growth in software next year. We still feel that way. And so that's where we are overall in the mix of these solutions. But the most important for our customers is the combination of both and meeting them where they are to modernize their environment and solve their ball of fire problem.

Got it. That's helpful. Maybe as a quick follow-up, when you're successfully cross-selling F5 customers to some of the Distributed Cloud Security solutions, are you typically displacing another vendor or is there a lot of greenfield opportunity for things like API security where maybe they're not -- they don't have a dedicated solution for that yet?

So it's both. It's a combination of both. We've shared, I think, earlier in the year that about two-thirds of our distributed cloud customers are BIG-IP customers or existing F5 customers and about one-third are net new customers to F5, they have never had a relationship with F5. So we're also acquiring new logos with Distributed Cloud. However, as it relates to customers with whom we are cross-selling, sometimes it is customers who had to go to a pure SaaS player before F5 had a SaaS solution. And so therefore had to increase their complexity because they would use F5 on-prem and they would either use a public cloud player for some applications or a CDN or edge player for applications, thereby creating complexity and multiplicity of vendors. And now that we have F5 Distributed Cloud and we've built some integrations, they are coming back to us saying, actually, I can have a single vendor for all of my application deliver and security. I can have consistent security across all my environments. That is way simpler for me and therefore, that's a better solution for me. So yes, at times, this is displacing SaaS players essentially that had gone into the environment. And sometimes it is greenfield. It's a set of applications that they were perhaps not yet protecting and for which Distributed Cloud comes with our full application security bundle and solves a big problem of security and complexity for them.

Great. Thank you.

This concludes today's call. You may now disconnect. Thank you for your participation.