Key TakeawaysF5 shares moved sharply higher in pre-market trading Tuesday after the cloud management and security software company announced fiscal second-quarter sales guidance that beat analysts' expectations.Sales growth in the company's Asian and European markets helped offset weakness in its North American market.The F5 share price continues to gain upward momentum, but may encounter resistance near the March 2022 swing high at the $217 level. F5, Inc. Source: TradingView.com.F5, Inc. (FFIV) shares ...

One sign that we’re in a resilient bull market presently is that we’ve strolled into a potentially thorny period of economic and earnings data with market levels up more than a week straight, and we keep climbing further into the green (decidedly as of this afternoon’s trading). Jobs Week, earnings reports from four of the so-called “Magnificent 7” market leaders from 2023, and a fresh Federal Open Market Committee (FOMC) meeting all await market participants from now til Friday, and thus far we haven’t bat ...

F5 Networks (FFIV) came out with quarterly earnings of $3.43 per share, beating the Zacks Consensus Estimate of $3.03 per share. This compares to earnings of $2.47 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 13.20%. A quarter ago, it was expected that this computer networking company would post earnings of $3.22 per share when it actually produced earnings of $3.50, delivering a surprise of 8.70%.Over the last four quarter ...

SEATTLE--(BUSINESS WIRE)--F5, Inc. (NASDAQ: FFIV) today announced financial results for its first quarter ended December 31, 2023. “Our team delivered solid first quarter results, including revenue near the high end and earnings per share above the high end of our guidance ranges,” said François Locoh-Donou, F5’s President and CEO. “As a result of our continued operating discipline we delivered more than 1,000 basis points improvement in GAAP operating margin and more than 900 basis points improvement in ...

F5, Inc. (FFIV) is scheduled to report first-quarter fiscal 2024 results on Jan 29.For the fiscal first quarter, F5 estimates revenues in the range of $675-$695 million ($685 million at the midpoint). The Zacks Consensus Estimate for revenues is pegged at $687.1 million, suggesting a 1.9% decline from the year-ago quarter’s sales of $700.4 million.The company anticipates non-GAAP earnings in the range of $2.97-$3.09 per share ($3.03 at the midpoint). The Zacks Consensus Estimate stands at $3.03 per share, i ...

SEATTLE--(BUSINESS WIRE)--F5, Inc. (NASDAQ: FFIV) will host a strategy and product session for investors and financial analysts from 1:00 p.m. to approximately 3:15 p.m. PT on Thursday, February 8, 2024 in connection with F5’s premier application security and delivery conference, AppWorld 2024. During the event F5 leadership will discuss the hybrid, multi-cloud challenges faced by large organizations worldwide, including the implications of AI on applications and security, and how F5’s portfolio is uniquel ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) F5 is a multi-cloud application services and security provider, optimizing and protecting applications and APIs across on-premises, cloud, and edge environments. [General Business Overview](index=4&type=section&id=1.1%20General%20Business%20Overview) F5 offers multi-cloud application services and security solutions, including packaged software, SaaS, and managed services, to a global customer base. - F5 provides multi-cloud application services and security, optimizing and protecting applications and APIs across on-premises, cloud, and edge environments[21](index=21&type=chunk) - Solutions include packaged software (perpetual, subscription, pay-per-use), SaaS, managed services, high-performance systems, and global services[22](index=22&type=chunk) - Customers include large enterprises, public sector, government, and service providers, with business managed across Americas, EMEA, and APAC geographical regions[23](index=23&type=chunk) [Strategy and Priorities](index=4&type=section&id=1.2%20Strategy%20and%20Priorities) F5's strategy focuses on addressing multi-cloud application delivery and security challenges, enhancing customer experience, and leveraging AI for growth in security and SaaS. - **85% of organizations** operate both traditional and modern application architectures in multi-cloud environments, leading to increased operational complexity and expanded threat surfaces[25](index=25&type=chunk) - F5 offers integrated, AI and machine learning-driven solutions through its BIG-IP, F5 NGINX, and F5 Distributed Cloud Services product families to support and protect traditional and modern applications and APIs across data centers, cloud, and edge locations[26](index=26&type=chunk) - Key strategies include addressing multi-cloud application delivery and security challenges, transforming customer experience (unified, frictionless, digital sales, SaaS delivery capabilities), and capturing growth opportunities in security and SaaS[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - F5 leverages AI to enhance the performance and efficiency of existing security solutions, address new AI workloads, and develop new products based on the evolving application and data security landscape[31](index=31&type=chunk) [Products and Solutions](index=6&type=section&id=1.3%20Products%20and%20Solutions) F5 offers a comprehensive portfolio including Distributed Cloud Services for unified SaaS security, NGINX for modern applications, and BIG-IP for traditional application security and delivery. - F5 Distributed Cloud Services provide unified security, networking, and application management SaaS, leveraging F5's global network for performance and control in hybrid, multi-cloud, or edge environments[36](index=36&type=chunk) - F5 Distributed Cloud WAAP offers comprehensive SaaS security solutions, including advanced WAF, DDoS mitigation, enhanced API security, and AI-driven bot mitigation[37](index=37&type=chunk) - The F5 NGINX technology suite provides lightweight, agile ADC and API connectivity solutions for modern, container-native, microservices applications, including NGINX Plus, NGINX Management Suite, NGINX Ingress Controller, and NGINX App Protect[39](index=39&type=chunk)[40](index=40&type=chunk) - The F5 BIG-IP family offers feature-rich, highly programmable, and configurable application security and delivery solutions for traditional applications, including BIG-IP security products (e.g., Access Policy Manager, Advanced WAF) and BIG-IP application delivery products (e.g., Local Traffic Manager, DNS)[40](index=40&type=chunk) [Competition](index=8&type=section&id=1.4%20Competition) F5 faces intense competition across application delivery, security, and multi-cloud networking from both established vendors and public cloud providers. - In application delivery, F5 BIG-IP products compete with Citrix Systems and VMware; lightweight F5 NGINX products compete with Amazon Web Services (AWS), Google Cloud Platform, Envoy, HAProxy, and Microsoft Azure[44](index=44&type=chunk) - In application security, F5 competes with companies such as Akamai, Cisco, Citrix Systems, Cloudflare, Fortinet, Imperva, Juniper Networks, Palo Alto, and Radware[45](index=45&type=chunk) - F5 Distributed Cloud Services compete in multi-cloud networking and SaaS security with traditional networking vendors like VMware and Cisco, pure-play vendors like Aviatrix, and some public cloud providers[46](index=46&type=chunk) [Corporate Functions](index=9&type=section&id=1.5%20Corporate%20Functions) F5's corporate functions encompass global customer support, continuous product innovation, diverse sales and marketing channels, outsourced manufacturing, backlog management, human capital development, and ESG initiatives. [Customer Services and Technical Support](index=9&type=section&id=1.5.1%20Customer%20Services%20and%20Technical%20Support) F5 provides extensive global services, including maintenance, consulting, training, and technical support, to attract and retain large enterprise and service provider customers. - F5 offers comprehensive support services, including phone and online technical support, hardware repair and replacement, software updates, online tools, consulting, and training services[48](index=48&type=chunk) - Services are provided directly and through a multi-tiered support model leveraging channel partner capabilities[49](index=49&type=chunk) [Product Development](index=9&type=section&id=1.5.2%20Product%20Development) F5's future success relies on continuous innovation and product improvement, with global engineering teams focused on identifying technological opportunities and developing AI-driven solutions. - F5's engineering organization is dedicated to maintaining technological leadership through innovation and new product development, including specialized teams focused on disruptive innovation[50](index=50&type=chunk) - Intellectual property is protected through patents, copyrights, trademarks, and trade secret laws in the U.S. and internationally[52](index=52&type=chunk) [Sales and Marketing](index=9&type=section&id=1.5.3%20Sales%20and%20Marketing) F5 sells products and services globally to enterprises, government entities, and service providers through direct sales and various channel partners, with marketing efforts focused on rebranding and expanding customer reach. - F5 sells products and services globally to enterprises, government, and service providers through direct sales teams and channel partners (distributors, value-added resellers, managed service providers, system integrators)[55](index=55&type=chunk) - International revenue accounted for **43.7% of net revenue** in fiscal year 2023[54](index=54&type=chunk) Major Distributors' Contribution to Total Net Revenue (FY2023) | Distributor | % of Total Net Revenue (FY2023) | | :---------- | :------------------------------ | | Ingram Micro, Inc. | 15.6% | | Synnex Corporation | 15.0% | - Marketing focuses on rebranding, enhancing F5's value proposition, and expanding reach to new customer segments beyond NetOps (DevOps, SecOps, CISO, and cloud architects)[62](index=62&type=chunk) [Manufacturing](index=10&type=section&id=1.5.4%20Manufacturing) F5 outsources system manufacturing to Flex Ltd., which builds, assembles, and tests products in Mexico and China, but reliance on single-source components poses supply chain risks. - Hardware manufacturing is outsourced to third-party contract manufacturer Flex Ltd., which builds, assembles, tests, and drop-ships from its facilities in Guadalajara, Mexico, and Zhuhai, China[64](index=64&type=chunk)[67](index=67&type=chunk) - F5 currently sources several hardware components from single or limited sources, which could lead to significant lead time variations and potential inventory holding or scrap material charges for unused components[66](index=66&type=chunk) [Backlog](index=11&type=section&id=1.5.5%20Backlog) Product backlog, primarily system-based, represents confirmed but unfulfilled orders and is not a reliable indicator of future revenue due to potential customer cancellations or rescheduling. - Product backlog is primarily system-based but is not a reliable indicator of future revenue due to potential customer cancellations or rescheduling[68](index=68&type=chunk) Product Backlog (FY2023) | Metric | Amount | | :----- | :----- | | Product Backlog (as of FY2023 end) | ~$53 million | [Human Capital Management](index=11&type=section&id=1.5.6%20Human%20Capital%20Management) F5 is committed to fostering a people-first, high-performing, diverse, and inclusive global team, investing in employee growth and competitive compensation, despite a recent decline in belonging scores. - As of September 30, 2023, F5 had **6,524 employees globally**, with **49% in the United States**[70](index=70&type=chunk) - Employee engagement surveys indicate high satisfaction with F5's culture (**83% of employees are proud to work for F5**, **87% feel treated fairly regardless of background**, and **80% believe F5 has a great culture**)[72](index=72&type=chunk) - "Sense of belonging" scores decreased from **84% in FY2022 to 76% in June 2023**, primarily due to layoffs, flexible work policies, and incentive program adjustments[73](index=73&type=chunk) - F5 provides development opportunities through initiatives like Innovation Month, Idea Fest, Tech Days, and Learning Days (e.g., Generative AI), along with tailored learning paths, leadership coaching, and global mentorship programs[75](index=75&type=chunk) - In FY2023, F5 adjusted compensation and benefits, including reducing executive annual cash bonuses and MBO program funding, and updated its "Freedom to Flex" policy requiring employees within a 30-mile commute of an F5 office to work in the office 30 days per quarter[83](index=83&type=chunk)[84](index=84&type=chunk) [Environmental, Social & Governance (ESG)](index=13&type=section&id=1.5.7%20Environmental,%20Social%20%26%20Governance%20(ESG)) F5 is committed to ESG principles, aiming to reduce emissions, promote community engagement through F5 Global Good, and maintain strong governance under its Code of Business Conduct and Ethics. - F5 is committed to reducing absolute Scope 1 and 2 emissions by **50%** and absolute Scope 3 emissions by **43% by 2030**, against a 2021 baseline[86](index=86&type=chunk) - In FY2023, over half of global employees participated in "Global Good" programs, contributing over **10,400 volunteer hours** and donating over **$3.8 million** to more than 3,000 non-profits worldwide through company matching and grant selection committees[88](index=88&type=chunk) - Governance adheres to F5's Code of Business Conduct and Ethics, with ESG programs overseen by the Board's Nominating and ESG Committee[89](index=89&type=chunk)[90](index=90&type=chunk) [Executive Officers of the Registrant](index=13&type=section&id=1.5.8%20Executive%20Officers%20of%20the%20Registrant) This section lists F5's executive officers and their positions as of November 14, 2023, along with brief professional backgrounds. Executive Officers as of November 14, 2023 | Name | Age | Position | | :----------------- | :-- | :------------------------------------------------- | | François Locoh-Donou | 52 | President, Chief Executive Officer and Director | | Tom Fountain | 47 | Executive Vice President of Global Services and Chief Strategy Officer | | Frank Pelzer | 53 | Executive Vice President and Chief Financial Officer | | Scot Rogers | 56 | Executive Vice President and General Counsel | | Kara Sprague | 43 | Executive Vice President and Chief Product Officer | | Chad Whalen | 52 | Executive Vice President of Worldwide Sales | [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) F5 faces a range of operational, strategic, legal, financial, and general risks that could significantly impact its business, operating results, financial condition, and reputation. [Operational and Execution Risks](index=15&type=section&id=1.6.1%20Operational%20and%20Execution%20Risks) F5 faces risks from cloud/SaaS trends, security vulnerabilities, reliance on key personnel and third-party manufacturers, unpredictable sales cycles, and international operations. - Cloud and SaaS-based computing trends pose competitive and execution risks, potentially leading to decreased revenue or gross/operating margins due to evolving pricing and delivery models and new competitors[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Security vulnerabilities in F5's IT infrastructure or multi-cloud application security and delivery products and services could result in data breaches, system disruptions, liability, and reputational/financial harm[108](index=108&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) - The company's success depends on attracting and retaining qualified executives and employees; changes in management or inability to recruit/retain talent could significantly impact operations[116](index=116&type=chunk) - Outsourcing hardware manufacturing to a single contract manufacturer (Flex Ltd.) presents risks of supply delays, quality issues, or business harm if the relationship terminates[120](index=120&type=chunk) - Unpredictable and lengthy sales cycles, especially with a channel-centric sales model, make future operating results difficult to forecast[123](index=123&type=chunk) - Reliance on quarter-end order fulfillment means any delays in sales orders or manufacturing/shipping could result in lower-than-anticipated revenue for the quarter[125](index=125&type=chunk) - International operations expose F5 to risks such as difficulties in contract enforcement, uncertain intellectual property protection, regulatory changes, and currency fluctuations[126](index=126&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Strategic and Industry Risks](index=15&type=section&id=1.6.2%20Strategic%20and%20Industry%20Risks) F5's demand is sensitive to economic conditions and industry trends, facing intensified competition from consolidation and new entrants, and challenges in rapidly evolving technology and AI development. - Demand for F5's products depends on customers' overall economic conditions and the general demand for application security and delivery solutions, which fluctuate with economic conditions and purchasing patterns (e.g., shift to subscription models)[133](index=133&type=chunk) - Industry consolidation and new entrants, including large cloud providers, intensify competition, potentially leading to customer attrition or reduced revenue growth rates[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - The company's success relies on timely development and market acceptance of new software and system products and features in a rapidly changing technological environment with evolving industry standards[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - Issues related to artificial intelligence (AI) development and use, such as algorithmic flaws, rapid evolution, competition, ethical, and legal concerns, could lead to legal/regulatory actions, reputational damage, or significant business impact[142](index=142&type=chunk) [Legal and Regulatory Risks](index=15&type=section&id=1.6.3%20Legal%20and%20Regulatory%20Risks) F5 faces risks from data privacy non-compliance, government sales complexities, intellectual property litigation, and international export controls on encryption technology. - Failure to adequately protect personal information or comply with evolving data protection and privacy laws could result in enforcement actions, fines, damages, and reputational harm[144](index=144&type=chunk) - Selling to government entities involves high competition, lengthy processes, changing certification requirements, budget impacts, and audit risks[145](index=145&type=chunk) - F5 faces litigation risks, particularly intellectual property claims, which can be costly, time-consuming, and disruptive to normal business operations, potentially leading to damages, royalties, or product modifications[146](index=146&type=chunk)[148](index=148&type=chunk) - U.S. export controls and foreign import regulations on encryption technology could delay product introductions in international markets, limit deployment in global systems, or entirely prevent product export or import to certain countries[152](index=152&type=chunk) [Financial Risks](index=16&type=section&id=1.6.4%20Financial%20Risks) F5's financial performance is subject to volatility from income tax provisions, foreign currency fluctuations, changes in accounting standards, and the effectiveness of internal controls over financial reporting. - Income tax provisions are volatile and can be affected by changes in business operations, tax laws, transfer pricing, and valuation changes of deferred tax assets/liabilities[155](index=155&type=chunk) - Foreign currency fluctuations, particularly a strengthening U.S. dollar, could increase the effective cost of solutions for international customers and negatively impact operating results as some operating expenses are denominated in non-U.S. currencies[156](index=156&type=chunk) - Changes in financial accounting standards or their interpretation could significantly impact reported financial results and the manner in which business operations are conducted[157](index=157&type=chunk) - Failure to maintain effective internal controls over financial reporting could adversely affect the accuracy of financial reporting and investor confidence[158](index=158&type=chunk) [Risks Related to Common Stock](index=16&type=section&id=1.6.5%20Risks%20Related%20to%20Common%20Stock) F5's stock price can fluctuate significantly due to operating results, market factors, and anti-takeover provisions that may deter changes in company control. - Quarterly and annual operating results can fluctuate significantly due to factors like customer order size, quarter-end sales patterns, and credit risk, leading to stock price volatility[159](index=159&type=chunk) - Anti-takeover provisions, such as the Board's power to issue preferred stock and charter provisions requiring advance notice for shareholder meeting matters, could delay or prevent a change in company control[160](index=160&type=chunk) - Stock price fluctuates due to various factors, including operating results, analyst reports, competitor news, and overall market conditions[161](index=161&type=chunk) [General Risks](index=16&type=section&id=1.6.6%20General%20Risks) F5 faces general risks from macroeconomic downturns, geopolitical conflicts, and catastrophic events that could disrupt operations, supply chains, and customer demand. - Ongoing macroeconomic downturns or uncertainties (inflation, high interest rates, slower growth, supply chain disruptions, geopolitical conflicts like the Russia-Ukraine war) could impact customer demand and operating costs[163](index=163&type=chunk) - Operations and employees in Israel face risks from political, economic, and military conditions, including potential business disruptions due to employee conscription[164](index=164&type=chunk) - The business faces disruption risks from catastrophic events like earthquakes, fires, power outages, floods, and human-caused issues such as terrorism, as well as climate change, potentially affecting supply chains, manufacturing, and logistics[165](index=165&type=chunk)[166](index=166&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable, indicating no unresolved staff comments. - No unresolved staff comments[170](index=170&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) F5 leases its primary administrative, sales, marketing, and R&D facilities in Seattle, Washington, and maintains additional leased office spaces globally, which are deemed sufficient for current and future business needs. - F5 leases its primary administrative, sales, marketing, and research and development facilities (approximately **515,000 square feet**) in Seattle, Washington, with the lease expiring in 2033[171](index=171&type=chunk) - The company leases additional office space globally and believes its existing facilities or the ability to lease additional space are sufficient for future growth needs[172](index=172&type=chunk) [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference into Note 12—Commitments and Contingencies of the financial statements. - Information on legal proceedings is detailed in Note 12—Commitments and Contingencies to the financial statements[173](index=173&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable, indicating no mine safety disclosure information. - No mine safety disclosures[174](index=174&type=chunk) PART II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) F5's common stock trades on the Nasdaq Global Select Market under "FFIV," with a policy to retain cash for business development, acquisitions, and stock repurchases rather than dividends. [Market Information and Dividends](index=32&type=section&id=2.1%20Market%20Information%20and%20Dividends) F5's common stock trades on Nasdaq under "FFIV," with 39 record holders as of November 7, 2023, and no plans for future dividends. - Common stock trades on the Nasdaq Global Select Market under the symbol "FFIV"[177](index=177&type=chunk) Common Stock Price (FY2023) | Date | Closing Sales Price | | :--- | :------------------ | | November 7, 2023 | $156.11 | - As of November 7, 2023, there were **39 holders of record** for common stock[179](index=179&type=chunk) - F5's policy is to retain cash for business, acquisitions, and stock repurchases; dividends are not anticipated in the foreseeable future[180](index=180&type=chunk) [Issuer Purchases of Equity Securities](index=32&type=section&id=2.2%20Issuer%20Purchases%20of%20Equity%20Securities) The Board authorized an additional **$1 billion** for common stock repurchases in July 2022, with F5 repurchasing **$350 million** in FY2023 and **$922 million** remaining authorized. - The Board authorized an additional **$1 billion** for the common stock repurchase program in July 2022, incremental to the existing **$5.4 billion** program[182](index=182&type=chunk) Common Stock Repurchases (FY2023) | Metric | Value | | :-------------------- | :------------ | | Shares Repurchased (FY2023) | 2,454,382 | | Average Price per Share (FY2023) | $142.62 | | Amount Repurchased (FY2023) | $350.0 million | | Remaining Authorized (as of Sep 30, 2023) | $922 million | - Repurchases are conducted through private transactions, accelerated stock repurchase programs, or open market purchases[182](index=182&type=chunk) [Performance Measurement Comparison of Shareholder Return](index=34&type=section&id=2.3%20Performance%20Measurement%20Comparison%20of%20Shareholder%20Return) This section provides a graphical comparison of F5's common stock cumulative total return against the Nasdaq Composite, S&P 500, and S&P 500 Information Technology indices through September 30, 2023. - The company's stock closing price on the last trading day of FY2023 (September 29, 2023) was **$161.14 per share**[190](index=190&type=chunk) - The graph compares F5's cumulative total return against major indices (Nasdaq Composite, S&P 500, S&P 500 Information Technology) for the period from September 30, 2018, to September 30, 2023[188](index=188&type=chunk)[189](index=189&type=chunk) [Reserved](index=35&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved, with no specific information provided. - Item 6 is reserved[191](index=191&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) F5's total net revenue grew **4.4% to $2.813 billion** in FY2023, driven by system product revenue and service contract renewals, while managing debt and executing stock repurchases. [Overview](index=36&type=section&id=2.4%20Overview) F5 is a leading provider of multi-cloud application security and delivery solutions, with revenue from global services and product sales, experiencing soft new product demand but strong maintenance contract renewals in FY2023. - F5 is a leading provider of multi-cloud application security and delivery solutions, helping customers develop, deploy, operate, secure, and manage applications across any architecture[193](index=193&type=chunk) - Revenue is derived from global services and product sales, including BIG-IP software and systems, F5 NGINX software, and F5 Distributed Cloud Services offerings[194](index=194&type=chunk) - New product demand was soft from late FY2022 through FY2023 due to macroeconomic uncertainty and customer budget constraints, but maintenance contract renewals for existing products remained strong[194](index=194&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=2.5%20Critical%20Accounting%20Policies%20and%20Estimates) F5's critical accounting policies involve significant estimates and judgments, particularly in revenue recognition, business combinations, and lease obligations. - Critical accounting policies involve significant estimates and judgments, including revenue recognition, business combinations (fair value of acquired assets), and lease obligations[197](index=197&type=chunk)[277](index=277&type=chunk) - Revenue recognition follows a five-step approach: identify contract, identify performance obligations, determine transaction price, allocate transaction price, and recognize revenue when performance obligations are satisfied[199](index=199&type=chunk)[295](index=295&type=chunk) - Revenue for hardware and perpetual software products is generally recognized at the point of delivery when the customer has an obligation to pay; SaaS products and post-contract customer support (PCS) revenue are recognized ratably over the service period[201](index=201&type=chunk)[202](index=202&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - Sales commissions for initial service contracts and subscription products are deferred and amortized on a straight-line basis over the benefit period (3 to 5 years for subscription products, 4.5 years for initial services)[203](index=203&type=chunk)[299](index=299&type=chunk) [Results of Operations](index=38&type=section&id=2.6%20Results%20of%20Operations) F5's operating results for FY2023 show increased net revenue driven by services and systems, a slight decline in gross margin, and a significant increase in restructuring charges due to workforce reductions. [Net Revenues](index=38&type=section&id=2.6.1%20Net%20Revenues) Total net revenues increased **4.4% to $2.813 billion** in FY2023, with product net revenue up **1.3%** driven by systems, and service net revenue up **7.2%** due to maintenance renewals and price increases. Net Revenues (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | YoY Change (FY23 vs FY22) | | :---------------- | :------- | :------- | :------- | :------------------------ | | Products | $1,334,638 | $1,317,117 | $1,247,084 | +1.3% | | Services | $1,478,531 | $1,378,728 | $1,356,332 | +7.2% | | **Total Net Revenues** | **$2,813,169** | **$2,695,845** | **$2,603,416** | **+4.4%** | | Products (% of total) | 47.4% | 48.9% | 47.9% | -1.5 pp | | Services (% of total) | 52.6% | 51.1% | 52.1% | +1.5 pp | Net Product Revenue by Systems and Software (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | | :--------------- | :------- | :------- | :------- | | Systems revenue | $670,652 | $651,902 | $748,192 | | Software revenue | $663,986 | $665,215 | $498,892 | | **Total Net Product Revenue** | **$1,334,638** | **$1,317,117** | **$1,247,084** | | Systems revenue (% of product) | 50.2% | 49.5% | 60.0% | | Software revenue (% of product) | 49.8% | 50.5% | 40.0% | Software Revenue by Consumption Model (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | | :----------------- | :------- | :------- | :------- | | Subscriptions | $555,941 | $521,809 | $390,202 | | Perpetual licenses | $108,045 | $143,406 | $108,690 | | **Total Software Revenue** | **$663,986** | **$665,215** | **$498,892** | | Subscriptions (% of software) | 83.7% | 78.4% | 78.2% | | Perpetual licenses (% of software) | 16.3% | 21.6% | 21.8% | - International revenue accounted for **47.1% of total net revenue** in FY2023, compared to **44.8% in FY2022** and **47.5% in FY2021**[208](index=208&type=chunk) - Service revenue growth in FY2023 was due to increased maintenance contract renewals from an existing customer base delaying new product purchases, and price increases implemented in FY2022[212](index=212&type=chunk) Major Distributors' Contribution to Total Net Revenue | Distributor | FY2023 | FY2022 | FY2021 | | :---------- | :----- | :----- | :----- | | Ingram Micro, Inc. | 15.6% | 20.0% | 19.2% | | Synnex Corporation | 15.0% | 13.4% | 11.1% | [Cost of Net Revenues and Gross Profit](index=40&type=section&id=2.6.2%20Cost%20of%20Net%20Revenues%20and%20Gross%20Profit) Total cost of net revenues increased **10% to $593.3 million** in FY2023, primarily due to system revenue growth, higher component costs, and expedited fees, resulting in a gross margin decrease to **78.9%**. Cost of Net Revenues and Gross Profit (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------- | :------- | :------- | :------- | | Cost of Products | $375,192 | $319,713 | $286,293 | | Cost of Services | $218,116 | $219,914 | $206,853 | | **Total Cost of Net Revenues** | **$593,308** | **$539,627** | **$493,146** | | **Gross Profit** | **$2,219,861** | **$2,156,218** | **$2,110,270** | | Product Cost (% of product revenue) | 28.1% | 24.3% | 23.0% | | Service Cost (% of service revenue) | 14.8% | 16.0% | 15.3% | | **Gross Margin (% of total revenue)** | **78.9%** | **80.0%** | **81.1%** | - Cost of net product revenue increased by **17.4%** in FY2023, primarily due to higher system product revenue, increased component costs, and expedited fees[215](index=215&type=chunk) - Cost of net service revenue as a percentage of net service revenue decreased from **16.0% in FY2022 to 14.8% in FY2023**, partly due to a reduction in professional services headcount[216](index=216&type=chunk) [Operating Expenses](index=41&type=section&id=2.6.3%20Operating%20Expenses) Total operating expenses remained flat at **$1.747 billion** in FY2023, with sales and marketing and general and administrative expenses decreasing, while restructuring charges significantly increased to **$65.4 million** due to layoffs. Operating Expenses (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | YoY Change (FY23 vs FY22) | | :-------------------- | :------- | :------- | :------- | :------------------------ | | Sales and marketing | $878,215 | $926,591 | $929,983 | -5.2% | | Research and development | $540,285 | $543,368 | $512,627 | -0.6% | | General and administrative | $263,405 | $274,558 | $273,635 | -4.1% | | Restructuring charges | $65,388 | $7,909 | $0 | +726.7% | | **Total Operating Expenses** | **$1,747,293** | **$1,752,426** | **$1,716,245** | **-0.3%** | | Sales and marketing (% of net revenue) | 31.2% | 34.4% | 35.7% | | Research and development (% of net revenue) | 19.2% | 20.1% | 19.7% | | General and administrative (% of net revenue) | 9.4% | 10.2% | 10.5% | | Restructuring charges (% of net revenue) | 2.3% | 0.3% | 0% | - Sales and marketing expenses decreased primarily due to a **$18.4 million reduction in personnel costs** (headcount reduced from 2,500 to 2,170) and a **$13.2 million decrease in marketing spend**[218](index=218&type=chunk) - Research and development headcount decreased from **2,170 in FY2022 to 2,095**[219](index=219&type=chunk) - General and administrative expenses decreased due to a **$7.0 million reduction in legal, accounting, and tax services fees** paid to external consultants, and a headcount reduction from 984 to 855 employees[220](index=220&type=chunk) - Restructuring charges in FY2023 totaled **$65.4 million**, including **$56.7 million** from third-quarter layoffs (approximately **620 employees**, or **9% of global workforce**) and **$8.7 million** from first-quarter layoffs[221](index=221&type=chunk)[222](index=222&type=chunk) [Other Income and Income Taxes](index=42&type=section&id=2.6.4%20Other%20Income%20and%20Income%20Taxes) Operating income increased to **$472.6 million** in FY2023, with net other income significantly rising to **$13.4 million** due to higher interest income and reduced foreign exchange losses, leading to a net income of **$394.9 million**. Other Income and Income Taxes (in thousands, except percentages) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------ | :------- | :------- | :------- | | Income from operations | $472,568 | $403,792 | $394,025 | | Other income (expense), net | $13,420 | $(18,399) | $(7,088) | | Income before income taxes | $485,988 | $385,393 | $386,937 | | Provision for income taxes | $91,040 | $63,233 | $55,696 | | **Net Income** | **$394,948** | **$322,160** | **$331,241** | | Income from operations (% of net revenue) | 16.8% | 15.0% | 15.1% | | Other (expense) income, net (% of net revenue) | 0.5% | -0.7% | -0.3% | | Income before income taxes (% of net revenue) | 17.3% | 14.3% | 14.8% | | Provision for income taxes (% of net revenue) | 3.3% | 2.3% | 2.1% | | **Net Income (% of net revenue)** | **14.0%** | **12.0%** | **12.7%** | - Net other income (expense) increased by **$31.8 million** in FY2023, primarily driven by a **$16.5 million increase in interest income** and a **$9.8 million reduction in foreign exchange losses**[223](index=223&type=chunk) - The effective tax rate increased to **18.7% in FY2023** (from **16.4% in FY2022**), mainly due to the tax impact of stock-based compensation and tax reserves[224](index=224&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=2.7%20Liquidity%20and%20Capital%20Resources) F5's cash, cash equivalents, and investments decreased by **$85.7 million to $808.4 million** in FY2023, primarily due to debt repayment and stock repurchases, partially offset by **$653.4 million** in operating cash flow. Liquidity and Capital Resources (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Cash, cash equivalents and investments | $808,391 | $894,110 | $1,043,385 | | Cash provided by operating activities | $653,409 | $442,631 | $645,196 | | Cash provided by (used in) investing activities | $36,393 | $218,116 | $(445,335) | | Cash used in financing activities | $(653,299) | $(476,508) | $(468,280) | - The decrease in cash and investments in FY2023 was primarily due to the repayment of **$350 million** in term loans and **$350 million** in common stock repurchases, partially offset by cash flow generated from operating activities[228](index=228&type=chunk) - Cash flow from operating activities increased to **$653.4 million** in FY2023, up from **$442.6 million in FY2022**, mainly due to increased net income and higher customer collections[229](index=229&type=chunk) - F5 maintains a **$350 million revolving credit facility**, with no outstanding borrowings as of September 30, 2023, and is in compliance with all covenants[233](index=233&type=chunk)[370](index=370&type=chunk) - Deferred revenue continued to grow in FY2023, primarily driven by increased maintenance renewal contracts from the existing installed base and growth in the subscription business[199](index=199&type=chunk) [Obligations and Commitments](index=44&type=section&id=2.8%20Obligations%20and%20Commitments) As of September 30, 2023, F5 had **$85.4 million** in tax liabilities related to uncertain tax positions and **$30 million** in non-cancelable long-term purchase commitments for system components. - As of September 30, 2023, F5 had **$85.4 million** in tax liabilities related to uncertain tax positions[235](index=235&type=chunk) - Non-cancelable long-term purchase commitments for system components totaled **$30 million** as of September 30, 2023, part of a four-year agreement requiring **$10 million** in annual purchases[237](index=237&type=chunk)[409](index=409&type=chunk) - Other significant commitments include operating lease obligations[236](index=236&type=chunk) [Recently Adopted Accounting Standards](index=44&type=section&id=2.9%20Recently%20Adopted%20Accounting%20Standards) There have been no significant changes in recently issued or adopted accounting standards compared to those disclosed in the company's FY2022 10-K report. - No significant changes in recently issued or adopted accounting standards compared to the prior fiscal year[239](index=239&type=chunk)[318](index=318&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) F5's market risk exposure is limited, with minimal impact expected from interest rate changes on its short-term investments, and inflation and foreign currency risks currently deemed non-material but subject to future changes. [Interest Rate Risk](index=45&type=section&id=2.10%20Interest%20Rate%20Risk) F5's cash equivalents are invested in high-quality, short-term securities, and a sudden 10% change in interest rates is not expected to materially impact the portfolio's fair value or operating results. - Cash equivalents are invested in high-quality, short-term securities (maturities not exceeding three years, with an average maturity not exceeding one and a half years)[240](index=240&type=chunk) - A sudden **10% change in interest rates** is not expected to materially impact the fair value of the investment portfolio or operating results[240](index=240&type=chunk) [Inflation Risk](index=45&type=section&id=2.11%20Inflation%20Risk) F5 currently believes inflation has not materially impacted its business, but significant inflationary pressures could harm financial performance if higher costs cannot be fully offset by price increases. - F5 believes inflation has not materially impacted its business to date[241](index=241&type=chunk) - Significant inflationary pressures could prevent F5 from fully offsetting higher costs through price increases, potentially harming business and financial performance[241](index=241&type=chunk) [Foreign Currency Risk](index=45&type=section&id=2.12%20Foreign%20Currency%20Risk) F5's foreign currency risk is currently limited as most business is U.S. dollar-denominated, but a strengthening dollar could increase international customer costs, and risk may grow with international expansion. - Most of F5's sales, cost of net revenues, and operating expenses are denominated in U.S. dollars, thus it has not experienced significant foreign currency transaction gains or losses to date[242](index=242&type=chunk) - A strengthening U.S. dollar could increase the effective cost of solutions for international customers[242](index=242&type=chunk) - Foreign currency risk may become more significant in the future as international operations expand[242](index=242&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents F5's audited consolidated financial statements for the fiscal year ended September 30, 2023, including balance sheets, income statements, and cash flow statements, along with notes, all receiving unqualified opinions from PwC. [Report of Independent Registered Public Accounting Firm](index=47&type=section&id=2.13%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued unqualified opinions on F5's consolidated financial statements and the effectiveness of internal control over financial reporting as of September 30, 2023. - PricewaterhouseCoopers LLP issued unqualified opinions on F5's consolidated financial statements and the effectiveness of internal control over financial reporting as of September 30, 2023[249](index=249&type=chunk) - A critical audit matter involved revenue recognition for certain product and service contracts, requiring significant auditor effort[256](index=256&type=chunk)[257](index=257&type=chunk) [Consolidated Financial Statements](index=49&type=section&id=2.14%20Consolidated%20Financial%20Statements) This section provides key highlights from F5's consolidated balance sheets, income statements, and cash flow statements for fiscal years 2021-2023. Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :-------------------------- | :----------- | :----------- | | Total Assets | $5,248,333 | $5,276,194 | | Total Current Liabilities | $1,472,781 | $1,839,951 | | Total Shareholders' Equity | $2,800,232 | $2,468,978 | Consolidated Income Statement Highlights (in thousands, except per share amounts) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------------- | :------- | :------- | :------- | | Total Net Revenues | $2,813,169 | $2,695,845 | $2,603,416 | | Gross Profit | $2,219,861 | $2,156,218 | $2,110,270 | | Income from Operations | $472,568 | $403,792 | $394,025 | | Net Income | $394,948 | $322,160 | $331,241 | | Net Income per Share — Diluted | $6.55 | $5.27 | $5.34 | Consolidated Cash Flow Statement Highlights (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Net cash provided by operating activities | $653,409 | $442,631 | $645,196 | | Net cash provided by (used in) investing activities | $36,393 | $218,116 | $(445,335) | | Net cash used in financing activities | $(653,299) | $(476,508) | $(468,280) | | Cash, cash equivalents and restricted cash, end of year | $800,835 | $762,207 | $584,333 | [Notes to Consolidated Financial Statements](index=55&type=section&id=2.15%20Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to F5's consolidated financial statements, covering significant accounting policies, revenue recognition, business combinations, fair value measurements, balance sheet details, debt, leases, income taxes, shareholders' equity, stock-based compensation, net income per share, commitments, restructuring, employee benefits, and segment information. [Summary of Significant Accounting Policies (Note 1)](index=55&type=section&id=2.15.1%20Summary%20of%20Significant%20Accounting%20Policies%20(Note%201)) This note details F5's accounting principles, including GAAP compliance, consolidation, use of estimates, and policies for cash, investments, receivables, inventory, property, business combinations, goodwill, intangible assets, software development costs, long-lived asset impairment, revenue recognition, contract acquisition costs, warranties, product warranties, R&D, advertising, income taxes, foreign currency, segments, and stock-based compensation. - F5's financial statements are prepared in accordance with GAAP, requiring significant estimates and judgments for areas like revenue recognition, business combinations, and lease obligations[275](index=275&type=chunk)[277](index=277&type=chunk) - Goodwill is tested for impairment annually, with no impairment identified in FY2023[289](index=289&type=chunk)[290](index=290&type=chunk) - Finite-lived intangible assets (developed technology, customer relationships, patents and trademarks, trade names, non-compete covenants) are amortized over **4 to 15 years**[291](index=291&type=chunk) - Software development costs are expensed as R&D because costs incurred after technological feasibility are not material[292](index=292&type=chunk) - Stock-based compensation includes restricted stock units (RSUs), employee stock purchase plans (ESPPs), and options assumed in acquisitions, with expenses recognized on a straight-line basis[310](index=310&type=chunk)[313](index=313&type=chunk) - In FY2023, performance stock award metrics were revised to include earnings per share, replacing software revenue[315](index=315&type=chunk) [Revenue from Contracts with Customers (Note 2)](index=61&type=section&id=2.15.2%20Revenue%20from%20Contracts%20with%20Customers%20(Note%202)) This note details capitalized contract acquisition costs and contract balances, with capitalized costs decreasing to **$66.5 million** in FY2023 and deferred revenue increasing to **$1.775 billion**, with **63.5%** of remaining performance obligations expected to be recognized within 12 months. Capitalized Contract Acquisition Costs (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Balance, beginning of year | $77,220 | $77,836 | $70,396 | | Additional capitalized costs | $26,960 | $37,897 | $41,719 | | Amortization of capitalized costs | $(37,712) | $(38,513) | $(34,279) | | **Balance, end of year** | **$66,468** | **$77,220** | **$77,836** | Deferred Revenue Balances (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :----------- | :----------- | :----------- | | Balance, beginning of year | $1,691,580 | $1,489,842 | $1,272,632 | | Amounts added but not recognized | $1,162,698 | $1,167,143 | $1,122,081 | | Deferred revenue acquired | $1,800 | $10,591 | $779 | | Revenues recognized from opening balance | $(1,080,957) | $(975,996) | $(905,650) | | **Balance, end of year** | **$1,775,121** | **$1,691,580** | **$1,489,842** | - Total non-cancelable remaining performance obligations as of September 30, 2023, were **$1.8 billion**, with **63.5%** expected to be recognized within the next 12 months[323](index=323&type=chunk) [Business Combinations (Note 3)](index=61&type=section&id=2.15.3%20Business%20Combinations%20(Note%203)) F5 completed acquisitions of Lilac Cloud, Inc. in FY2023 to enhance CDN technology, Threat Stack, Inc. in FY2022 for cloud security, and Volterra, Inc. in FY2021 to establish an edge platform, all resulting in recognized goodwill and intangible assets. - Acquisition of Lilac Cloud, Inc. in February 2023 to enhance CDN technology; this acquisition had no material impact on operating results[325](index=325&type=chunk) - Acquisition of Threat Stack, Inc. for **$68.9 million** in October 2021, adding cloud security and workload protection solutions[326](index=326&type=chunk)[327](index=327&type=chunk) Threat Stack Acquisition – Acquired Assets (in thousands) | Asset | Amount | Estimated Useful Life | | :-------------------- | :------- | :-------------------- | | Deferred tax assets | $14,041 | | | Other net tangible assets | $5,481 | | | Cash, cash equivalents, restricted cash | $911 | | | Developed technology | $11,400 | 5 years | | Customer relationships | $4,400 | 5 years | | Goodwill | $43,282 | | | **Total Assets Acquired** | **$79,515** | | | Liabilities assumed (Deferred revenue) | $(10,591) | | | **Net Assets Acquired** | **$68,924** | | - Acquisition of Volterra, Inc. for **$427.2 million** in January 2021, establishing an edge platform for enterprises and service providers[332](index=332&type=chunk)[333](index=333&type=chunk) Volterra Acquisition – Acquired Assets (in thousands) | Asset | Amount | Estimated Useful Life | | :-------------------------- | :------- | :-------------------- | | Cash, cash equivalents, restricted cash | $14,012 | | | Other tangible assets | $7,499 | | | Developed technology | $59,500 | 7 years | | Customer relationships | $500 | 1 year | | Goodwill | $350,863 | | | **Total Assets Acquired** | **$432,374** | | | Liabilities assumed | $(5,233) | | | **Net Assets Acquired** | **$427,141** | | [Fair Value Measurements (Note 4)](index=63&type=section&id=2.15.4%20Fair%20Value%20Measurements%20(Note%204)) F5 uses a three-level fair value hierarchy for financial assets and liabilities, with Level 1 for money market funds and Level 2 for corporate/municipal bonds and U.S. government securities, and recorded a **$3.5 million** impairment on operating lease right-of-use assets in FY2023 due to restructuring. - Fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), Level 3 (unobservable inputs)[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - Money market funds are classified as Level 1 investments; corporate/municipal bonds and U.S. government securities are classified as Level 2 investments[342](index=342&type=chunk) Total Investments by Fair Value Level (in thousands) | Type | Level | FY2023 Fair Value | FY2022 Fair Value | | :-------------------- | :---- | :---------------- | :---------------- | | Money Market Funds | 1 | $392,592 | $276,294 | | Corporate bonds and notes | 2 | $4,324 | $49,878 | | Municipal bonds and notes | 2 | $1,099 | $4,916 | | U.S. government securities | 2 | $0 | $84,074 | | U.S. government agency securities | 2 | $737 | $5,750 | | Equity investments (NAV) | * | $5,068 | $3,118 | | **Total Investments** | | **$403,820** | **$424,030** | - In FY2023, an impairment of **$3.5 million** was recorded on operating lease right-of-use assets due to restructuring[350](index=350&type=chunk)[353](index=353&type=chunk) - In FY2022, an impairment of **$6.2 million** was recorded on the Shape trade name intangible asset[351](index=351&type=chunk)[353](index=353&type=chunk) [Balance Sheet Details (Note 5)](index=66&type=section&id=2.15.5%20Balance%20Sheet%20Details%20(Note%205)) This note provides detailed classifications of balance sheet accounts, showing cash, cash equivalents, and restricted cash totaling **$800.8 million**, inventories decreasing to **$35.9 million**, goodwill increasing to **$2.289 billion**, and net intangible assets decreasing to **$151.0 million** with **$29.1 million** in amortization expense for FY2023. Cash, Cash Equivalents, and Restricted Cash (in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $797,163 | $758,012 | | Restricted cash in other assets, net | $3,672 | $4,195 | | **Total cash, cash equivalents and restricted cash** | **$800,835** | **$762,207** | Inventories (in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :---------- | :----------- | :----------- | | Finished goods | $11,699 | $10,164 | | Raw materials | $24,175 | $58,201 | | **Total Inventories** | **$35,874** | **$68,365** | Goodwill (in thousands) | Metric | Amount | | :-------------------------- | :----------- | | Balance, September 30, 2022 | $2,259,282 | | Other business acquisitions | $29,396 | | **Balance, September 30, 2023** | **$2,288,678** | Intangible Assets, Net (in thousands) | Type | Sep 30, 2023 Net Carrying Amount | Sep 30, 2022 Net Carrying Amount | | :-------------------- | :-------------------------------- | :-------------------------------- | | Developed technology | $129,233 | $168,104 | | Customer relationships | $12,344 | $20,512 | | Patents and trademarks | $4,041 | $4,249 | | Trade names | $5,351 | $7,423 | | Non-compete covenants | $0 | $0 | | **Total Intangible Assets, Net** | **$150,969** | **$200,288** | - Amortization expense for intangible assets was **$29.1 million** in FY2023[362](index=362&type=chunk) [Debt Facilities (Note 6)](index=67&type=section&id=2.15.6%20Debt%20Facilities%20(Note%206)) F5 fully repaid its **$350 million** term loan in December 2022 and maintains a **$350 million** revolving credit facility, which matures in January 2025, with no outstanding borrowings as of September 30, 2023. - F5 fully and voluntarily repaid its **$350 million** term loan on December 15, 2022, including **$3.0 million** in accrued and unpaid interest[366](index=366&type=chunk) - F5 maintains a **$350 million** senior unsecured revolving credit facility, which matures on January 31, 2025, with options for two one-year extensions[368](index=368&type=chunk)[370](index=370&type=chunk) - As of September 30, 2023, there were no outstanding borrowings under the revolving credit facility, and F5 had **$350 million** available for borrowing[370](index=370&type=chunk) - The revolving credit agreement was amended in May 2023 to replace LIBOR with SOFR as the reference rate for borrowings[368](index=368&type=chunk)[369](index=369&type=chunk) [Leases (Note 7)](index=70&type=section&id=2.15.7%20Leases%20(Note%207)) F5's operating lease expense totaled **$73.2 million** in FY2023, primarily for its Seattle headquarters, with operating lease right-of-use assets at **$195.5 million** and total operating lease liabilities at **$281.0 million** as of September 30, 2023. Operating Lease Expense (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------- | :------- | :------- | :------- | | Operating lease expense | $47,036 | $47,302 | $47,993 | | Short-term lease expense | $2,986 | $2,465 | $2,953 | | Variable lease expense | $23,139 | $23,209 | $25,200 | | **Total Lease Expense** | **$73,161** | **$72,976** | **$76,146** | Operating Lease Balances (in thousands, except lease term and discount rate) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :------------------------------------ | :----------- | :----------- | | Operating lease right-of-use assets, net | $195,471 | $227,475 | | Operating lease liabilities, current | $41,421 | $42,523 | | Operating lease liabilities, long-term | $239,565 | $272,376 | | **Total operating lease liabilities** | **$280,986** | **$314,899** | | Weighted average remaining lease term | 8.6 years | 9.2 years | | Weighted average discount rate | 2.77% | 2.66% | Future Operating Lease Payments (in thousands) | Fiscal Years Ending September 30 | Operating Lease Payments | | :------------------------------- | :----------------------- | | 2024 | $48,709 | | 2025 | $41,095 | | 2026 | $31,559 | | 2027 | $30,394 | | 2028 | $28,340 | | Thereafter | $138,797 | | **Total lease payments** | **$318,894** | [Income Taxes (Note 8)](index=71&type=section&id=2.15.8%20Income%20Taxes%20(Note%208)) F5's income tax provision for FY2023 was **$91.0 million**, with an effective tax rate of **18.7%**, influenced by stock-based compensation and tax reserves, and net deferred tax assets increased to **$290.7 million**. Income Before Income Taxes by Geography (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------ | :------- | :------- | :------- | | United States | $268,314 | $217,323 | $189,398 | | International | $217,674 | $168,070 | $197,539 | | **Total** | **$485,988** | **$385,393** | **$386,937** | Provision for Income Taxes (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------- | :------- | :------- | :------- | | Current | $199,582 | $103,930 | $132,625 | | Deferred | $(108,542) | $(40,697) | $(76,929) | | **Total Provision** | **$91,040** | **$63,233** | **$55,696** | Effective Tax Rate Reconciliation (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Income tax provision at statutory rate | $102,058 | $80,933 | $81,257 | | State taxes, net of federal benefit | $6,806 | $6,012 | $5,118 | | Tax impact of foreign operations | $(20,230) | $(21,435) | $(26,881) | | R&D and other credits | $(19,198) | $(18,917) | $(18,055) | | Stock-based and other compensation | $20,145 | $15,070 | $12,740 | | Other | $1,459 | $1,570 | $1,517 | | **Total Provision for Income Taxes** | **$91,040** | **$63,233** | **$55,696** | Net Deferred Tax Assets (in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :-------------------- | :----------- | :----------- | | Deferred tax assets | $480,901 | $373,436 | | Valuation allowance | $(43,942) | $(46,136) | | Deferred tax liabilities | $(146,288) | $(146,716) | | **Net Deferred Tax Assets** | **$290,671** | **$180,584** | - Total unrecognized tax benefits as of September 30, 2023, were **$79.2 million**, of which **$51.2 million** would impact the effective tax rate if recognized[383](index=383&type=chunk) [Shareholders' Equity (Note 9)](index=74&type=section&id=2.15.9%20Shareholders'%20Equity%20(Note%209)) F5's Board authorized an additional **$1 billion** for common stock repurchases in July 2022, with the company repurchasing and retiring **2,454,382 shares** for **$350 million** in FY2023, leaving **$922 million** authorized for future repurchases. - The Board authorized an additional **$1 billion** for the common stock repurchase program in July 2022[386](index=386&type=chunk) Common Stock Repurchases (in thousands, except per share amounts) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------- | :------- | :------- | :------- | | Shares repurchased | 2,454 | 2,611 | 2,501 | | Average price per share | $142.62 | $191.47 | $199.90 | | Amount repurchased | $350,049 | $500,023 | $500,000 | - As of September 30, 2023, **$922 million** remained authorized for repurchases[388](index=388&type=chunk) [Stock-based Compensation (Note 10)](index=74&type=section&id=2.15.10%20Stock-based%20Compensation%20(Note%2010)) F5 recognized **$236.7 million** in stock-based compensation expense in FY2023, operating an Employee Stock Purchase Plan (ESPP) and various acquisition-related incentive plans, with performance stock award metrics revised to include earnings per share. Stock-based Compensation Expense (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------------- | :------- | :------- | :------- | | Stock-based compensation expense | $236,650 | $249,216 | $243,279 | | Income tax benefit | $44,700 | $47,300 | $44,100 | - Unrecognized stock-based compensation costs totaled **$162.7 million** as of September 30, 2023, mostly expected to be recognized over approximately two years[389](index=389&type=chunk) - F5's ESPP allows eligible employees to purchase common stock at an **85% discount**, with **2,444,575 shares** available for awards as of September 30, 2023[391](index=391&type=chunk) - In FY2023, performance stock award metrics were revised to include earnings per share, replacing software revenue[315](index=315&type=chunk) Restricted Stock Unit Activity (FY2023) | Metric | Performance Stock Units Outstanding | Restricted Stock Units Outstanding | | :-------------------- | :-------------------------------- | :-------------------------------- | | Balance, Sep 30, 2022 | 208,116 | 1,137,619 | | Units granted | 131,491 | 1,448,427 | | Units vested | (92,677) | (1,113,259) | | Units cancelled | (47,012) | (247,401) | | **Balance, Sep 30, 2023** | **199,918** | **1,225,386** | Stock Option Activity (FY2023) | Metric | Number of Shares | Weighted Average Exercise Price per Share | | :-------------------- | :--------------- | :-------------------------------------- | | Balance, Sep 30, 2022 | 164,796 | $33.34 | | Options granted | 2,051 | $4.55 | | Options exercised | (56,516) | $26.38 | | Options cancelled | (4,463) | $61.35 | | **Balance, Sep 30, 2023** | **105,868** | **$35.31** | [Net Income Per Share (Note 11)](index=78&type=section&id=2.15.11%20Net%20Income%20Per%20Share%20(Note%2011)) Basic net income per share was **$6.59** and diluted net income per share was **$6.55** in FY2023, with dilutive common stock equivalents from stock options and restricted stock units totaling **361,000 shares**. Net Income Per Share Calculation (in thousands, except per share amounts) | Metric | FY2023 | FY2022 | FY2021 | | :------------------------------------ | :------- | :------- | :------- | | Net income | $394,948 | $322,160 | $331,241 | | Weighted average shares outstanding — basic | 59,909 | 60,274 | 60,707 | | Dilutive effect of common shares | 361 | 823 | 1,350 | | Weighted average shares outstanding — diluted | 60,270 | 61,097 | 62,057 | | **Basic net income per share** | **$6.59** | **$5.34** | **$5.46** | | **Diluted net income per share** | **$6.55** | **$5.27** | **$5.34** | [Commitments and Contingencies (Note 12)](index=79&type=section&id=2.15.12%20Commitments%20and%20Contingencies%20(Note%2012)) As of September 30, 2023, F5 had **$30 million** in non-cancelable long-term purchase commitments for system components and is involved in litigation, including an intellectual property lawsuit regarding NGINX software, where F5 prevailed in district court but the case is currently on appeal. - Non-cancelable long-term purchase commitments for system components totaled **$30 million** as of September 30, 2023[409](index=409&type=chunk) - F5 is involved in litigation, including a lawsuit by Lynwood Investment CY Limited regarding NGINX software intellectual property, where F5 prevailed in district court but the case is currently on appeal to the Ninth Circuit Court of Appeals[410](index=410&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) - F5 has not recorded any accrual for loss contingencies related to legal proceedings, believing it has meritorious defenses and that an unfavorable outcome is not probable or reasonably estimable[414](index=414&type=chunk)[415](index=415&type=chunk) [Restructuring Charges (Note 13)](index=80&type=section&id=2.15.13%20Restructuring%20Charges%20(Note%2013)) In FY2023, F5 initiated a restructuring plan, incurring **$56.7 million** in charges during the third quarter related to the layoff of approximately **620 employees** (9% of its global workforce) and exiting leased space, in addition to **$8.7 million** in first-quarter layoff expenses. - In the third quarter of FY2023, F5 incurred **$56.7 million** in restructuring charges, including **$53.2 million** for severance (approximately **620 employees**, or **9% of global workforce**) and **$3.5 million** for reducing leased facility space[416](index=416&type=chunk) - In the first quarter of FY2023, an additional **$8.7 million** in restructuring charges was recorded for workforce reductions[417](index=417&type=chunk) [Employee Benefit Plans (Note 14)](index=80&type=section&id=2.15.14%20Employee%20Benefit%20Plans%20(Note%2014)) F5 offers a 401(k) savings plan, with company contributions totaling approximately **$13.7 million** in FY2023, which vest over four years. Company Contributions to 401(k) Plan (in millions) | Metric | FY2023 | FY2022 | FY2021 | | :-------------------- | :------- | :------- | :------- | | Company contributions | $13.7 | $14.0 | $13.2 | - Company contributions to the 401(k) plan vest over four years[419](index=419&type=chunk) [Segment Information (Note 15)](index=80&type=section&id=2.15.15%20Segment%20Information%20(Note%2015)) F5 operates in one reportable segment but provides disaggregated revenue information by geographic region (Americas, EMEA, Asia Pacific) and product type (systems, software), with the Americas generating the highest revenue at **$1.584 billion** in FY2023. - F5 operates in one reportable operating segment[309](index=309&type=chunk)[420](index=420&type=chunk) Revenue by Geographic Region (in thousands) | Region | FY2023 | FY2022 | FY2021 | | :----------- | :------- | :------- | :------- | | Americas | $1,584,374 | $1,572,855 | $1,457,736 | | EMEA | $741,598 | $634,759 | $667,219 | | Asia Pacific | $487,197 | $488,231 | $478,461 | | **Total** | **$2,813,169** | **$2,695,845** | **$2,603,416** | Net Product Revenue by Type (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :--------------- | :------- | :------- | :------- | | Systems revenue | $670,652 | $651,902 | $748,192 | | Software revenue | $663,986 | $665,215 | $498,892 | | **Total Net Product Revenue** | **$1,334,638** | **$1,317,117** | **$1,247,084** | Long-Lived Assets by Geographic Location (in thousands) | Region | Sep 30, 2023 | Sep 30, 2022 | | :----------- | :----------- | :----------- | | Americas | $128,328 | $136,472 | | EMEA | $24,336 | $17,376 | | Asia Pacific | $17,758 | $14,334 | | **Total** | **$170,422** | **$168,182** | [Changes in and

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $707 million, reflecting a 1% year-over-year growth, with global services contributing 54% and product revenue 46% [85] - For FY '23, total revenue grew 4% to $2.8 billion, with global services revenue growing 7% to $1.5 billion and product revenue growing 1% to $1.3 billion [90] - GAAP net income for Q4 was $152 million or $2.55 per share, while non-GAAP net income was $209 million or $3.50 per share, exceeding guidance [88] - The company expects FY '24 revenue to be flat to down low-single-digits from FY '23, factoring in a $180 million revenue headwind from backlog fulfillment [128] Business Line Data and Key Metrics Changes - Software revenue grew 11% year-over-year to $191 million, with subscription-based revenue increasing 27% to $166 million, representing 87% of Q4 total software revenue [57] - Systems revenue declined 25% year-over-year to $134 million, reflecting lower backlog-related shipments and demand stabilization at lower levels [35] - Global services revenue grew 9% to $382 million, driven by high maintenance renewals and price increases [35] Market Data and Key Metrics Changes - Enterprise customers represented 72% of product bookings in Q4, while service providers accounted for 9% and government customers for 19% [58] - The company noted that North America has been more stable compared to Asia and European markets, with early signs of stabilization in enterprise demand [109] Company Strategy and Development Direction - The company is focused on transitioning its SaaS and managed services offerings, with a planned retirement of legacy offerings contributing to a $65 million revenue headwind [127] - The company aims to leverage its unique position in the market to deliver hybrid, multi-cloud solutions that simplify application and API deployment, security, and management [132] - The company expects to return to mid-single-digit revenue growth in FY '25, driven by application and API growth and the need for security solutions [130] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about early signs of stabilization in demand, particularly from enterprise customers, but acknowledged ongoing budget scrutiny [120] - The company anticipates continued customer spending caution into FY '24, with expectations for customers to begin reinvesting in application infrastructure [76] - Management highlighted the importance of their converging portfolio in addressing multi-cloud challenges faced by customers [103] Other Important Information - The company returned 58% of its annual free cash flow to shareholders through share repurchases [45] - The company ended FY '23 with approximately $922 million remaining on its share repurchase program [99] Q&A Session Summary Question: What are the headwinds from the transition in managed services? - The headwind from the transition is approximately $65 million, primarily from the retirement of the legacy Silverline managed services platform, with plans to migrate customers to Distributed Cloud [136] Question: What signs of stabilization are being observed? - Signs of stabilization include customers who have received hardware after delays in 2023 and are now ready to order again, particularly in the enterprise market [111] Question: How does the company view the hardware business moving forward? - The company expects a rebound in the hardware business in 2024, driven by a stronger hardware pipeline and improved close rates [118]

Forward-looking statements 2 ©2023 F5 In addition to financial information prepared in accordance with U.S. GAAP, this presentation also contains adjusted financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facilitate comparisons between periods and with respect to projected information. These adjusted financial measures are non-GAAP and should be considered in addition to, but not as a substitute for, the inform ...

PART I. FINANCIAL INFORMATION [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited Q3 2023 financial statements reflect increased revenues and net income, alongside shifts in assets, liabilities, and cash flow activities [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to $5.12 billion, liabilities fell to $2.46 billion due to debt repayment, and shareholders' equity rose to $2.66 billion Consolidated Balance Sheets Highlights (in thousands) | Account | June 30, 2023 | September 30, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total current assets** | $1,713,784 | $1,912,224 | ($198,440) | | Cash and cash equivalents | $677,498 | $758,012 | ($80,514) | | **Total assets** | **$5,119,156** | **$5,276,194** | **($157,038)** | | **Total current liabilities** | $1,489,541 | $1,839,951 | ($350,410) | | Current portion of long-term debt | $— | $349,772 | ($349,772) | | **Total liabilities** | **$2,461,653** | **$2,807,216** | **($345,563)** | | **Total shareholders' equity** | **$2,657,503** | **$2,468,978** | **$188,525** | [Consolidated Income Statements](index=5&type=section&id=Consolidated%20Income%20Statements) Q3 2023 saw total revenues increase 4.2% to $702.6 million and net income rise 7.2% to $89.0 million, despite a $56.6 million restructuring charge Income Statement Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YoY Change | 9 Months 2023 | 9 Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **$702,642** | **$674,488** | **+4.2%** | **$2,106,195** | **$1,995,812** | **+5.5%** | | Products | $328,175 | $326,482 | +0.5% | $1,009,314 | $967,149 | +4.4% | | Services | $374,467 | $348,006 | +7.6% | $1,096,881 | $1,028,663 | +6.6% | | **Gross Profit** | **$560,959** | **$543,755** | **+3.2%** | **$1,653,851** | **$1,603,647** | **+3.1%** | | **Income from Operations** | **$103,569** | **$107,464** | **-3.6%** | **$300,827** | **$296,262** | **+1.5%** | | Restructuring charges | $56,648 | $— | N/A | $65,388 | $7,909 | +726.8% | | **Net Income** | **$88,976** | **$83,019** | **+7.2%** | **$242,814** | **$232,814** | **+4.3%** | | **Diluted EPS** | **$1.48** | **$1.37** | **+8.0%** | **$4.02** | **$3.80** | **+5.8%** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q3 2023 increased to $90.0 million, driven by higher net income and positive foreign currency translation adjustments Comprehensive Income (in thousands) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $88,976 | $83,019 | $242,814 | $232,814 | | Other comprehensive income (loss) | $1,041 | ($1,998) | $4,240 | ($4,553) | | **Comprehensive Income** | **$90,017** | **$81,021** | **$247,054** | **$228,261** | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased to $2.66 billion by June 30, 2023, primarily due to net income, partially offset by $290.0 million in stock repurchases - For the nine months ended June 30, 2023, the company repurchased **2,075 thousand shares** of common stock for **$290.0 million**[20](index=20&type=chunk) - Net income of **$242.8 million** and stock-based compensation of **$183.4 million** were the primary contributors to the increase in shareholders' equity during the nine months ended June 30, 2023[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly increased to $463.6 million, while financing activities used $591.9 million for debt repayment and stock repurchases, resulting in an $84.3 million net cash decrease Cash Flow Summary (in thousands) | Activity | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$463,608** | **$288,276** | | **Net cash provided by investing activities** | **$43,958** | **$147,394** | | **Net cash used in financing activities** | **($591,913)** | **($470,249)** | | Repurchase of common stock | ($290,041) | ($500,023) | | Payments on term debt agreement | ($350,000) | ($15,000) | | **Net decrease in cash** | **($84,347)** | **($34,579)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue, debt, and restructuring, highlighting the Lilac Cloud acquisition, Term Loan repayment, and Q3 2023 restructuring plan - F5 provides multi-cloud application security and delivery solutions, available as cloud-based, software-as-a-service (SaaS), and software-only solutions, along with professional services[26](index=26&type=chunk) - On February 1, 2023, the Company acquired Lilac Cloud, Inc., a provider of Content Delivery Network (CDN) technologies[51](index=51&type=chunk) - On December 15, 2022, the Company fully prepaid its Term Loan Facility, including the outstanding principal of **$350.0 million**[66](index=66&type=chunk) - In Q3 2023, the Company initiated a restructuring plan, including a **9% workforce reduction**, incurring **$56.7 million** in costs[99](index=99&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth driven by services, softer product demand due to macroeconomic uncertainty, increased operating expenses from restructuring, and strong liquidity after debt repayment and stock repurchases - Management noted changes in customer buying patterns due to the uncertain macroeconomic environment, leading to softer demand for both software and systems products[105](index=105&type=chunk) - This is viewed as temporary, with stronger maintenance renewals signaling purchase delays rather than competitive losses[105](index=105&type=chunk) Revenue Performance (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | YoY Change | 9 Months 2023 | 9 Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **$702,642** | **$674,488** | **+4.2%** | **$2,106,195** | **$1,995,812** | **+5.5%** | | Product Revenues | $328,175 | $326,482 | +0.5% | $1,009,314 | $967,149 | +4.4% | | Service Revenues | $374,467 | $348,006 | +7.6% | $1,096,881 | $1,028,663 | +6.6% | - Gross margin decreased to **79.8%** in Q3 2023 from **80.6%** in Q3 2022, and to **78.5%** for the nine-month period from **80.4%** a year ago, primarily due to higher product costs including component cost increases and expedite fees[113](index=113&type=chunk) - The company's liquidity remains strong, with cash and investments totaling **$696.5 million**[124](index=124&type=chunk) - The decrease from the prior year-end was mainly due to a **$350.0 million** debt prepayment and **$290.0 million** in stock repurchases, offset by **$463.6 million** in cash from operations[124](index=124&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies interest rate, inflation, and foreign currency as primary market risks, with no material changes noted and most transactions in U.S. dollars - Interest Rate Risk: A sharp rise in market interest rates could adversely impact the fair value of the company's fixed income investment portfolio[135](index=135&type=chunk) - Inflation Risk: While being monitored, inflation has not had a material effect[136](index=136&type=chunk) - However, significant inflationary pressure could increase costs, and a constrained customer spending environment could harm business[136](index=136&type=chunk) - Foreign Currency Risk: The majority of sales and expenses are denominated in U.S. dollars, so foreign currency transaction gains and losses have not been significant[137](index=137&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[140](index=140&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[141](index=141&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a legal dispute with Lynwood Investment CY Limited over NGINX software, where F5 won dismissal and attorneys' fees, both of which Lynwood has appealed - In the case of Lynwood Investment CY Limited v. F5, the court granted F5's motion to dismiss without leave to amend on August 16, 2022, and entered final judgment against Lynwood[82](index=82&type=chunk) - Lynwood has appealed this decision to the Ninth Circuit Court of Appeals[82](index=82&type=chunk) - The court subsequently granted F5 attorneys' fees of over **$0.8 million**, which Lynwood has also appealed[83](index=83&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Adverse macroeconomic conditions, including inflation and supply chain disruptions, continue to soften customer demand, impacting business, revenues, and profitability - Adverse global macroeconomic conditions have softened customer demand and purchase decisions, which may limit the company's ability to forecast future business activities[144](index=144&type=chunk) - Continued worsening of macroeconomic conditions could adversely affect business through softer demand for products and services, as well as unfavorable increases to operating costs, which could negatively impact profitability[144](index=144&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased approximately 1.8 million shares for $250 million in Q3 2023, with $982 million remaining authorized under its common stock repurchase program - On July 25, 2022, the Board of Directors authorized an additional **$1.0 billion** for the common stock share repurchase program[145](index=145&type=chunk) - As of June 30, 2023, **$982 million** remained available for repurchase[145](index=145&type=chunk) Share Repurchases for Q3 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | 76,271 | $131.13 | | May 2023 | 1,611,454 | $137.48 | | June 2023 | 135,811 | $147.50 | [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[148](index=148&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) Two company executives adopted Rule 10b5-1 trading plans for future share sales during Q3 2023 - On May 1, 2023, Scot Rogers, EVP, General Counsel, adopted a Rule 10b5-1 plan for the sale of **4,500 shares**[149](index=149&type=chunk) - On May 1, 2023, Chad Whalen, EVP, Worldwide Sales, adopted a Rule 10b5-1 plan for the sale of **5,585 shares**[150](index=150&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include Certifications Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and various XBRL data files[151](index=151&type=chunk)