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)

Q3FY23 Performance Highlights - F5 delivered Q3 revenue at the midpoint of guidance and non-GAAP EPS well above the high end of the guidance range[5, 6] - The company is demonstrating operating discipline and driving operating leverage[6] - There are early signs of demand stabilization[5, 6, 70, 105] Financial Results - Q3FY23 revenue reached $703 million[18], compared to $674 million in Q3FY22[24, 67, 132], representing a +4% increase year-over-year[91] - Non-GAAP gross margin was 82.5%[18, 20, 67, 117], slightly lower than the 83.2% in Q3FY22[51, 59, 67] - Non-GAAP operating margin was 33.2%[7, 67, 97, 117], up from 28.8% in Q3FY22[51, 67, 107] - Non-GAAP EPS was $3.21[18, 67, 98, 113], compared to $2.57 in Q3FY22[67, 107, 120] - Subscription software revenue grew +4% year-over-year[12, 19] Revenue Breakdown - Global Services revenue grew by +8% year-over-year[19, 45] - Product revenue grew by +1% year-over-year[19, 45] - Systems revenue grew by +5% year-over-year[19, 45] - Total software revenue decreased by -3% year-over-year[19, 45] but increased by +32% quarter-over-quarter[19] - 87% of total software revenue came from subscriptions[46] Cash Flow and Capital Allocation - The company has committed to using at least 50% of annual free cash flow for share repurchases beginning in FY23[35] - As of July 24, 2023, there was $982 million remaining under the authorized stock repurchase program[56]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited statements detail F5's financial position, performance, and liquidity for the quarter and six months ended March 31, 2023 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 | September 30, 2022 | Change | | :-------------------------------- | :------------- | :----------------- | :----- | | Cash and cash equivalents | $734,544 | $758,012 | $(23,468) | | Short-term investments | $20,710 | $126,554 | $(105,844) | | Accounts receivable, net | $485,622 | $469,979 | $15,643 | | Inventories | $50,745 | $68,365 | $(17,620) | | Total current assets | $1,825,175 | $1,912,224 | $(87,049) | | Total assets | $5,223,251 | $5,276,194 | $(52,943) | | Accounts payable | $69,952 | $113,178 | $(43,226) | | Deferred revenue (current) | $1,160,118 | $1,067,182 | $92,936 | | Current portion of long-term debt | $— | $349,772 | $(349,772) | | Total current liabilities | $1,525,603 | $1,839,951 | $(314,348) | | Total liabilities | $2,497,692 | $2,807,216 | $(309,524) | | Total shareholders' equity | $2,725,559 | $2,468,978 | $256,581 | [Consolidated Income Statements](index=5&type=section&id=Consolidated%20Income%20Statements) Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net revenues | $703,175 | $634,224 | $1,403,553 | $1,321,324 | | Cost of net revenues | $155,654 | $126,359 | $310,661 | $261,432 | | Gross profit | $547,521 | $507,865 | $1,092,892 | $1,059,892 | | Income from operations | $106,046 | $74,647 | $197,258 | $188,798 | | Net income | $81,436 | $56,236 | $153,838 | $149,795 | | Net income per share — diluted | $1.34 | $0.92 | $2.54 | $2.43 | - **Net Revenues increased 10.9%** for the three months and **6.2%** for the six months ended March 31, 2023, compared to prior year periods[11](index=11&type=chunk) - **Net Income increased 44.8%** for the three months and **2.7%** for the six months ended March 31, 2023, compared to prior year periods[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net income | $81,436 | $56,236 | $153,838 | $149,795 | | Total other comprehensive income (loss) | $242 | $(1,413) | $3,199 | $(2,555) | | Comprehensive income | $81,678 | $54,823 | $157,037 | $147,240 | - Total Other Comprehensive Income (Loss) shifted from a loss of **$(1,413) thousand** to an income of **$242 thousand** for the three months ended March 31, 2023, and from a loss of **$(2,555) thousand** to an income of **$3,199 thousand** for the six months ended March 31, 2023[14](index=14&type=chunk) [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Consolidated Statements of Shareholders' Equity Highlights (in thousands) | Metric | September 30, 2022 | March 31, 2023 | Change | | :-------------------- | :----------------- | :------------- | :----- | | Common Stock | $91,048 | $190,592 | $99,544 | | Retained Earnings | $2,404,106 | $2,557,944 | $153,838 | | Total Shareholders' Equity | $2,468,978 | $2,725,559 | $256,581 | - **Total Shareholders' Equity increased by $256,581 thousand** from September 30, 2022, to March 31, 2023, primarily driven by net income and stock-based compensation[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $298,554 | $216,875 | | Net cash provided by investing activities | $52,370 | $37,919 | | Net cash used in financing activities | $(377,369) | $(248,211) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(26,445) | $6,583 | | Cash, cash equivalents and restricted cash, end of period | $738,741 | $589,919 | - Net cash used in financing activities increased significantly due to the **voluntary prepayment of the Term Loan Facility ($350 million)** during the six months ended March 31, 2023[22](index=22&type=chunk) [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) F5 provides multi-cloud application security solutions, with no material changes to its GAAP-based accounting policies since fiscal year-end 2022 - F5, Inc provides multi-cloud application security and delivery solutions, enabling customers to develop, deploy, operate, secure, and govern applications across various architectures, including on-premises and public cloud[25](index=25&type=chunk) - **No material changes** to significant accounting policies or new accounting pronouncements were reported as of and for the three and six months ended March 31, 2023[27](index=27&type=chunk)[28](index=28&type=chunk) [2. Revenue from Contracts with Customers](index=10&type=section&id=2.%20Revenue%20from%20Contracts%20with%20Customers) The company's total non-cancelable remaining performance obligations were $1.8 billion, with 64.6% expected to be recognized within 12 months Capitalized Contract Acquisition Costs (in thousands) | Metric | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Balance, beginning of period | $77,220 | $77,836 | | Additional capitalized costs | $13,123 | $18,530 | | Amortization of capitalized costs | $(19,134) | $(19,092) | | Balance, end of period | $71,209 | $77,274 | Deferred Revenue Balances (in thousands) | Metric | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Balance, beginning of period | $1,691,580 | $1,489,841 | | Amounts added but not recognized | $785,122 | $723,631 | | Deferred revenue acquired | $1,800 | $10,591 | | Revenues recognized from opening balance | $(682,190) | $(624,327) | | Balance, end of period | $1,796,312 | $1,599,736 | - As of March 31, 2023, total non-cancelable remaining performance obligations were **$1.8 billion**, with approximately **64.6%** expected to be recognized over the next 12 months[32](index=32&type=chunk) [3. Fair Value Measurements](index=11&type=section&id=3.%20Fair%20Value%20Measurements) The company's financial assets are measured using a fair value hierarchy, with no material credit losses or impairment charges recognized - The Company categorizes financial assets and liabilities into a fair value hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) Assets Measured at Fair Value (March 31, 2023, in thousands) | Investment Type | Fair Value Level | Aggregate Fair Value | | :------------------------ | :--------------- | :------------------- | | Money Market Funds | Level 1 | $160,242 | | Corporate bonds and notes | Level 2 | $14,784 | | Municipal bonds and notes | Level 2 | $2,113 | | U.S. government securities | Level 2 | $4,301 | | U.S. government agency securities | Level 2 | $1,747 | | Equity investments | NAV* | $3,964 | | Total investments | | $187,151 | - **No impairment charges** related to intangible assets, goodwill, or long-lived assets were recognized during the three and six months ended March 31, 2023[47](index=47&type=chunk)[48](index=48&type=chunk) [4. Business Combinations](index=13&type=section&id=4.%20Business%20Combinations) F5 acquired Lilac Cloud in fiscal 2023 and Threat Stack in fiscal 2022 to enhance its technology and security capabilities - On February 1, 2023, F5 acquired Lilac Cloud, Inc to enhance its Content Delivery Network (CDN) technologies, with an **immaterial impact** on operating results[49](index=49&type=chunk) - On October 1, 2021, F5 acquired Threat Stack, Inc for approximately **$68.9 million in cash**, adding cloud security and workload protection solutions[50](index=50&type=chunk)[51](index=51&type=chunk) Threat Stack Acquisition: Allocated Purchase Consideration (in thousands) | Assets Acquired / Liabilities Assumed | Amount | | :------------------------------------ | :----- | | Deferred tax assets | $14,041 | | Other net tangible assets | $5,481 | | Cash, cash equivalents, and restricted cash | $911 | | Developed technology | $11,400 | | Customer relationships | $4,400 | | Goodwill | $43,282 | | Deferred revenue | $(10,591) | | Net assets acquired | $68,924 | [5. Balance Sheet Details](index=14&type=section&id=5.%20Balance%20Sheet%20Details) This note provides a detailed breakdown of specific balance sheet accounts, highlighting changes between reporting periods Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | March 31, 2023 | September 30, 2022 | | :------------------------------------ | :------------- | :----------------- | | Cash and cash equivalents | $734,544 | $758,012 | | Restricted cash | $4,197 | $4,195 | | Total | $738,741 | $762,207 | Inventories (in thousands) | Metric | March 31, 2023 | September 30, 2022 | | :-------------------- | :------------- | :----------------- | | Finished goods | $9,697 | $10,164 | | Raw materials | $41,048 | $58,201 | | Total | $50,745 | $68,365 | Other Current Assets (in thousands) | Metric | March 31, 2023 | September 30, 2022 | | :-------------------- | :------------- | :----------------- | | Unbilled receivables | $339,029 | $319,707 | | Prepaid expenses | $87,430 | $57,340 | | Capitalized contract acquisition costs | $33,031 | $34,658 | | Other | $74,064 | $77,609 | | Total | $533,554 | $489,314 | [6. Debt Facilities](index=15&type=section&id=6.%20Debt%20Facilities) F5 prepaid its $350.0 million Term Loan Facility in full and maintained full availability under its Revolving Credit Facility - On December 15, 2022, F5 **voluntarily prepaid the entire $350.0 million principal balance** and $3.0 million in accrued interest of its Term Loan Facility, releasing the Company from all related obligations[63](index=63&type=chunk) - As of March 31, 2023, the Company had **no outstanding borrowings** under its $350.0 million Revolving Credit Facility and maintained full available borrowing capacity, remaining in compliance with all covenants[65](index=65&type=chunk)[66](index=66&type=chunk) [7. Leases](index=16&type=section&id=7.%20Leases) The company's operating lease liabilities totaled $303.1 million, primarily for office spaces, with a weighted average remaining term of 8.8 years Total Lease Expense (in thousands) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Operating lease expense | $12,181 | $11,870 | $24,697 | $23,784 | | Short-term lease expense | $744 | $619 | $1,399 | $1,175 | | Variable lease expense | $5,650 | $6,034 | $10,986 | $12,278 | | Total lease expense | $18,575 | $18,523 | $37,082 | $37,237 | Operating Lease Liabilities (in thousands, except lease term and discount rate) | Metric | March 31, 2023 | September 30, 2022 | | :------------------------------------------------------- | :------------- | :----------------- | | Operating lease right-of-use assets, net | $216,293 | $227,475 | | Operating lease liabilities, current | $43,215 | $42,523 | | Operating lease liabilities, long-term | $259,916 | $272,376 | | Total operating lease liabilities | $303,131 | $314,899 | | Weighted average remaining lease term (in years) | 8.8 | 9.2 | | Weighted average discount rate | 2.73 % | 2.66 % | Future Operating Lease Payments (in thousands) | Fiscal Years Ending September 30: | Operating Lease Payments | | :-------------------------------- | :----------------------- | | 2023 (remainder) | $25,738 | | 2024 | $49,002 | | 2025 | $41,249 | | 2026 | $31,530 | | 2027 | $30,310 | | 2028 | $28,444 | | Thereafter | $138,797 | | Total lease payments | $345,070 | | Less: imputed interest | $(41,939) | | Total lease liabilities | $303,131 | [8. Commitments and Contingencies](index=17&type=section&id=8.%20Commitments%20and%20Contingencies) The company has a $40 million purchase commitment and recently received a favorable ruling in the Lynwood NGINX lawsuit, which is under appeal - The Company has a **$40 million unconditional purchase commitment** with a supplier for systems components over a four-year term, with $1.2 million remaining under the first year's commitment as of March 31, 2023[74](index=74&type=chunk) - The Lynwood Investment CY Limited lawsuit, alleging intellectual property infringement related to NGINX software, was **dismissed in F5's favor**[76](index=76&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - Accrued warranty costs were **not material** as of March 31, 2023, and September 30, 2022[73](index=73&type=chunk) [9. Income Taxes](index=19&type=section&id=9.%20Income%20Taxes) The effective tax rate increased due to stock-based compensation impacts, and the company holds $70.5 million in unrecognized tax benefits Effective Tax Rate | Period | March 31, 2023 | March 31, 2022 | | :-------------------- | :------------- | :------------- | | Three months ended | 25.1 % | 22.7 % | | Six months ended | 24.8 % | 18.8 % | - The change in the effective tax rate is primarily due to the tax impact of **stock-based compensation**[83](index=83&type=chunk) - As of March 31, 2023, the Company had **$70.5 million of unrecognized tax benefits** and is currently under audit by various state and foreign jurisdictions[84](index=84&type=chunk)[85](index=85&type=chunk) [10. Shareholders' Equity](index=19&type=section&id=10.%20Shareholders'%20Equity) The company has $1.232 billion remaining under its share repurchase authorization after repurchasing $40.0 million in stock - On July 25, 2022, the Board authorized an additional **$1.0 billion** for the common stock share repurchase program, with **$1,232 million remaining authorized** as of March 31, 2023[86](index=86&type=chunk)[87](index=87&type=chunk) Common Stock Repurchases (in thousands, except per share data) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Shares repurchased | — | 610 | 263 | 1,148 | | Average price per share | $— | $204.96 | $151.87 | $217.71 | | Amount repurchased | $— | $125,012 | $40,005 | $250,023 | [11. Net Income Per Share](index=20&type=section&id=11.%20Net%20Income%20Per%20Share) Diluted net income per share increased to $1.34 for the quarter and $2.54 for the six-month period ended March 31, 2023 Net Income Per Share Computation (in thousands, except per share data) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net income | $81,436 | $56,236 | $153,838 | $149,795 | | Weighted average shares outstanding — basic | 60,330 | 60,573 | 60,211 | 60,693 | | Dilutive effect of common shares | 361 | 832 | 326 | 968 | | Weighted average shares outstanding — diluted | 60,691 | 61,405 | 60,537 | 61,661 | | Basic net income per share | $1.35 | $0.93 | $2.55 | $2.47 | | Diluted net income per share | $1.34 | $0.92 | $2.54 | $2.43 | [12. Segment Information](index=20&type=section&id=12.%20Segment%20Information) F5 operates as a single segment, with quarterly revenue growth driven by a 43.0% increase in systems revenue - The Company operates in **one reportable operating segment**[91](index=91&type=chunk) Revenues by Geographic Region (in thousands) | Geographic Region | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :---------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Americas | $383,103 | $358,555 | $785,261 | $761,546 | | EMEA | $190,439 | $156,374 | $374,554 | $318,435 | | Asia Pacific | $129,633 | $119,295 | $243,738 | $241,343 | | Total | $703,175 | $634,224 | $1,403,553 | $1,321,324 | Net Product Revenues by Systems and Software (in thousands) | Product Type | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :----------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Systems revenue | $208,689 | $145,975 | $381,721 | $326,132 | | Software revenue | $131,892 | $151,543 | $299,418 | $314,535 | | Total net product revenue | $340,581 | $297,518 | $681,139 | $640,667 | [13. Restructuring Charges](index=21&type=section&id=13.%20Restructuring%20Charges) The company initiated restructuring plans in fiscal 2023 and 2022, incurring charges of $8.7 million and $7.9 million, respectively - Restructuring plans were initiated in the first quarters of fiscal 2023 and 2022 to align strategic and financial objectives and optimize resources, including a **reduction in force**[95](index=95&type=chunk) Restructuring Activity (in thousands) | Metric | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Accrued expenses, beginning of period | $— | $— | | Restructuring charges | $8,740 | $7,909 | | Cash payments | $(8,130) | $(6,644) | | Accrued expenses, end of period | $610 | $1,265 | [14. Subsequent Events](index=21&type=section&id=14.%20Subsequent%20Events) F5 initiated a new restructuring plan in April 2023, impacting 9% of its workforce and expecting to incur $45.0 million in related costs - On April 19, 2023, F5 initiated a restructuring plan affecting approximately **620 employees**, or **9%** of its global workforce[97](index=97&type=chunk) - The Company expects to incur approximately **$45.0 million in severance benefits** and other related costs in fiscal year 2023, with additional costs for reducing leased facilities space yet to be estimated[98](index=98&type=chunk)[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses F5's financial results, highlighting revenue growth from systems and services amid macroeconomic headwinds and strategic debt prepayment [Overview](index=22&type=section&id=Overview) - F5 is a leading provider of multi-cloud application security and delivery solutions, offering cloud-based, software-as-a-service, and software-only solutions optimized for multi-cloud environments[101](index=101&type=chunk) - Customer buying patterns showed **softer demand** for software and systems products and services in the first half of fiscal 2023 due to macroeconomic uncertainty and budget constraints, though strong maintenance renewals suggest delayed purchases[102](index=102&type=chunk) [Summary of Critical Accounting Policies and Estimates](index=23&type=section&id=Summary%20of%20Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies and estimates include revenue recognition, accounting for business combinations, and accounting for leases, which require complex, subjective judgments[105](index=105&type=chunk) - There were **no material changes** to critical accounting policies and estimates compared to the prior fiscal year's Annual Report on Form 10-K[106](index=106&type=chunk) [Impact of Current Macroeconomic Conditions](index=23&type=section&id=Impact%20of%20Current%20Macroeconomic%20Conditions) - Worsening global macroeconomic conditions, including inflation and higher interest rates, may adversely affect F5's business by **softening customer demand** and increasing operating costs[107](index=107&type=chunk) - Cash and investments **decreased by $134.1 million** for the first six months of fiscal year 2023, primarily due to the **$350.0 million Term Loan Facility prepayment** and **$40.0 million in common stock repurchases**, partially offset by **$298.6 million from operating activities**[108](index=108&type=chunk) - Deferred revenues continued to increase in the second quarter of fiscal year 2023 due to growth in the subscriptions business, and days sales outstanding (DSO) was **62 days**[108](index=108&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Net Revenues (in thousands, except percentages) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Products | $340,581 | $297,518 | $681,139 | $640,667 | | Services | $362,594 | $336,706 | $722,414 | $680,657 | | Total | $703,175 | $634,224 | $1,403,553 | $1,321,324 | | Percentage of net revenues (Products) | 48.4 % | 46.9 % | 48.5 % | 48.5 % | | Percentage of net revenues (Services) | 51.6 % | 53.1 % | 51.5 % | 51.5 % | Net Product Revenues by Systems and Software (in thousands, except percentages) | Product Type | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Systems revenue | $208,689 | $145,975 | $381,721 | $326,132 | | Software revenue | $131,892 | $151,543 | $299,418 | $314,535 | | Total net product revenue | $340,581 | $297,518 | $681,139 | $640,667 | | Percentage of net product revenues (Systems) | 61.3 % | 49.1 % | 56.0 % | 50.9 % | | Percentage of net product revenues (Software) | 38.7 % | 50.9 % | 44.0 % | 49.1 % | Operating Expenses (in thousands, except percentages) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Sales and marketing | $233,076 | $228,826 | $466,181 | $462,861 | | Research and development | $141,363 | $135,838 | $283,686 | $266,109 | | General and administrative | $67,036 | $68,554 | $137,027 | $134,215 | | Restructuring charges | $— | $— | $8,740 | $7,909 | | Total Operating Expenses | $441,475 | $433,218 | $895,634 | $871,094 | | Operating Expenses as % of Net Revenue | 62.8 % | 68.3 % | 63.8 % | 65.9 % | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents, short-term investments, and long-term investments totaled **$760.0 million** as of March 31, 2023, a decrease of **$134.1 million** from September 30, 2022[126](index=126&type=chunk) - The decrease in cash and investments was primarily due to the voluntary prepayment of the **$350.0 million Term Loan Facility** and **$40.0 million in common stock repurchases**, partially offset by **$298.6 million in cash provided by operating activities**[126](index=126&type=chunk) - Cash provided by investing activities was **$52.4 million** for the six months ended March 31, 2023, primarily from investment maturities and sales, partially offset by acquisitions and capital expenditures[129](index=129&type=chunk) [Obligations and Commitments](index=28&type=section&id=Obligations%20and%20Commitments) - Principal commitments as of March 31, 2023, included operating lease obligations and a **$40 million unconditional purchase commitment** with a component supplier over four years, with **$31.2 million remaining outstanding**[132](index=132&type=chunk)[134](index=134&type=chunk) - **No material changes** in lease obligations were reported compared to the prior fiscal year's Annual Report on Form 10-K[133](index=133&type=chunk) [Recent Accounting Pronouncements](index=28&type=section&id=Recent%20Accounting%20Pronouncements) - The anticipated impact of recent accounting pronouncements is discussed in Note 1 to the accompanying Notes to Consolidated Financial Statements[136](index=136&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) F5 manages interest rate, inflation, and foreign currency risks, none of which have materially affected the business to date - The Company's fixed income investment portfolio, with **3% in U.S. government and agency securities** as of March 31, 2023, is subject to interest rate risk, where rising rates could impact fair value and declining rates could affect interest income[137](index=137&type=chunk) - Inflation has **not materially affected** the business to date, but significant inflationary pressures could prevent cost offsets through price increases or constrain customer purchasing[138](index=138&type=chunk) - Foreign currency transaction gains and losses have **not been significant** due to the majority of transactions being in U.S. dollars, but this risk may increase with international expansion[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2023 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were **effective** as of March 31, 2023[142](index=142&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended March 31, 2023[143](index=143&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Details on legal proceedings, including the NGINX software lawsuit, are referenced in Note 8 of the financial statements - Information regarding legal proceedings is detailed in **Note 8 - Commitments and Contingencies** of the Notes to Financial Statements[145](index=145&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company highlights potential adverse effects from continued macroeconomic downturns on its business, operations, and customer demand - Continued macroeconomic downturns or uncertainties, such as rising interest rates, inflation, and geopolitical conflicts, may adversely affect the Company's business, financial condition, and operating results by **softening customer demand** and **increasing operating costs**[147](index=147&type=chunk) - This section updates the risk factors discussed in Part I, Item 1A 'Risk Factors' in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022[146](index=146&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board of Directors authorized an additional $1.0 billion for share repurchases, with $1.2 billion remaining under the program - On July 25, 2022, the Board authorized an additional **$1.0 billion** for the common stock share repurchase program[148](index=148&type=chunk) - As of March 31, 2023, **$1.2 billion remained authorized** to purchase shares under the program[148](index=148&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to F5, Inc - This section is marked as '**Not applicable**'[150](index=150&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No other information is reported in this section - This section contains **no additional information**[151](index=151&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including incentive plans, agreements, and required certifications - Exhibits include F5, Inc Incentive Plan, Employee Stock Purchase Plan, Severance Agreement, Lilac Cloud Equity Incentive Plans, Sarbanes-Oxley Act certifications, and XBRL documents[152](index=152&type=chunk) SIGNATURES - The report was signed on behalf of F5, Inc by Francis J Pelzer, Executive Vice President, Chief Financial Officer, on May 5, 2023[157](index=157&type=chunk)[159](index=159&type=chunk)

Q2FY23 Performance - F5 delivered Q2 revenue of $703 million, which was at the midpoint of guidance[3, 68] - Non-GAAP EPS for Q2 was $2.53, exceeding the high end of the guidance range[5, 71] - Q2FY23 GAAP net income was $814 million, compared to $562 million in Q2FY22[3] - Q2FY23 GAAP diluted net income per common share was $134, compared to $092 in Q2FY22[3] Revenue and Growth - Total revenue in Q2FY23 was $7032 million, compared to $6342 million in Q2FY22[3] - Systems revenue grew by 43% in Q2FY23[96, 101] - Software revenue decreased by 13% in Q2FY23[96, 101] - Global Services revenue increased by 8% in Q2FY23[70, 101] - Product revenue increased by 14% in Q2FY23[96, 101] Future Outlook and Strategy - The company expects to repurchase at least $250 million worth of shares during Q3FY23[48] - F5 expects to deliver approximately 30% non-GAAP operating margins and 7% to 11% non-GAAP earnings growth in FY23[9] - Q3FY23 revenue is guided to be between $690 million and $710 million[25, 118]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $703 million, reflecting an 11% year-over-year growth, with non-GAAP EPS of $2.53 per share, exceeding the top end of guidance [23][57] - GAAP operating margin was 15.1%, while non-GAAP operating margin was 27.2% [27] - Cash flow from operations was $141 million, with capital expenditures of $11 million [28] Business Line Data and Key Metrics Changes - Global Services revenue grew 8% to $363 million, driven by strong maintenance renewals [23] - Systems revenue reached $209 million, representing a significant growth of 43% year-over-year [24] - Software revenue declined by 13% year-over-year to $132 million, primarily due to delays in new term-based subscriptions [24][44] Market Data and Key Metrics Changes - Revenue from the Americas grew 7% year-over-year, representing 54% of total revenue; EMEA grew 22%, accounting for 27% of revenue; APAC grew 9%, making up 18% of revenue [55] - Enterprise customers represented 67% of product bookings, while service providers and government customers accounted for 13% and 20%, respectively [26] Company Strategy and Development Direction - The company is focused on controlling costs and preparing for a potential recovery in customer spending, including a reduction of approximately 620 employees, or 9% of the workforce [19] - The strategy includes intensifying investments in software and hybrid multi-cloud solutions to drive long-term growth [34][52] - The company expects low-to-mid single-digit revenue growth for FY 2023, down from previous forecasts of 9% to 11% [15][61] Management's Comments on Operating Environment and Future Outlook - Management believes the current demand environment is temporary, with customer spending delays attributed to budget scrutiny rather than competitive pressures [10][16] - The company anticipates that as customers resume normal investment levels, it will be well-positioned to capture growth opportunities [62] - Management noted that the majority of software revenue comes from term subscriptions, which have seen a decline, impacting overall software revenue [14][44] Other Important Information - Deferred revenue increased by 12% year-over-year to $1.8 billion, driven by higher maintenance renewals [59] - The company plans to repurchase at least $250 million worth of shares during Q3, committing to return cash to shareholders [85] Q&A Session Summary Question: What should be assumed for services growth now? - The company did not update the mid-single-digit outlook for services but expects strong contributions as customers continue to sweat assets [36] Question: Which customer industry group caused the majority of the drag on guidance? - The pullback in spending has been broad across all verticals, with service providers particularly affected due to budget reductions [66][92] Question: How has new business declined from last quarter? - New business sales saw a slight acceleration in decline, with some renewals performing below expectations [70][95] Question: What were the expectations for software renewals? - Software renewals performed largely as expected, but there were some underperforming true forwards [71][80] Question: How is the company addressing the cost structure? - The company is reducing costs while focusing on high-return projects, ensuring a leaner operation to capture future growth opportunities [112][125]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-26041 F5, INC. (Exact name of registrant as specified in its charter) Washington 91-1714307 (State or other jurisdicti ...

F5, Inc. (NASDAQ:FFIV) Q1 2023 Earnings Conference Call January 24, 2023 4:30 PM ET Company Participants Suzanne DuLong - Head of IR François Locoh-Donou - President and CEO Frank Pelzer - Executive Vice President and CFO Conference Call Participants Sami Badri - Credit Suisse Tim Long - Barclays Alex Henderson - Needham & Company Samik Chatterjee - JPMorgan Amit Daryanani - Evercore ISI Meta Marshall - Morgan Stanley James Fish - Piper Sandler Victor Chiu - Raymond James Thomas Blakey - KeyBanc Capita ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 000-26041 F5, Inc. (Exact name of Registrant as specified in its charter) Washington 91-1714307 (State or other juri ...

F5, Inc. (NASDAQ:FFIV) Q4 2022 Results Conference Call October 25, 2022 4:30 PM ET Company Participants Suzanne DuLong - Head of IR Francois Locoh-Donou - President and CEO Frank Pelzer - Executive Vice President and CFO Conference Call Participants Tim Long - Barclays Sami Badri - Credit Suisse Alex Henderson - Needham Samik Chatterjee - JPMorgan Paul Silverstein - Cowen Meta Marshall - Morgan Stanley James Fish - Piper Sandler Victor Chiu - Raymond James Jim Suva - Citigroup Operator Good afternoon ladies ...

Financial Position - The balance of capitalized contract acquisition costs at the end of June 30, 2022, was $76.674 million, a slight decrease from $75.604 million at the end of June 30, 2021[45]. - The balance of deferred revenue at the end of June 30, 2022, was $1.637 billion, compared to $1.441 billion at the end of June 30, 2021, reflecting an increase of 13.6%[47]. - Cash and cash equivalents as of June 30, 2022, were $541.88 million, down from $580.98 million as of September 30, 2021[85]. - Unbilled receivables increased to $277.77 million as of June 30, 2022, from $215.40 million as of September 30, 2021[87]. - Intangible assets decreased to $211.67 million as of June 30, 2022, from $237.18 million as of September 30, 2021[88]. - Accrued liabilities decreased to $291.61 million as of June 30, 2022, from $341.49 million as of September 30, 2021[90]. - The company reported total debt investments of $296.396 million as of June 30, 2022, with unrealized losses of $2.252 million[58]. - As of June 30, 2022, the outstanding principal amount under the Term Loan Facility was $355.0 million, with a weighted average interest rate of 2.092% for the three months ended June 30, 2022[97]. - The Company had no outstanding borrowings under the Revolving Credit Facility as of June 30, 2022, maintaining an available borrowing capacity of $350.0 million[99]. Revenue and Performance - The total non-cancelable remaining performance obligations under contracts with customers as of June 30, 2022, was approximately $1.6 billion, with an expected revenue recognition of 64.1% over the next 12 months[48]. - The company expects to recognize revenues on approximately 22.0% of remaining performance obligations in year two and the remaining balance thereafter[48]. - Total net product revenue for the three months ended June 30, 2022, was $326.5 million, compared to $309.9 million for the same period in 2021, representing a 5.1% increase[132]. - Revenue from the Americas for the three months ended June 30, 2022, was $387.1 million, an increase from $369.4 million in the same period of 2021[131]. Acquisitions - The Company acquired Threat Stack for approximately $68.9 million in cash, enhancing its cloud security capabilities[69]. - The total assets acquired from Threat Stack amounted to $79.5 million, with goodwill of $43.96 million[71]. - The Company acquired Volterra for approximately $427.2 million in cash, creating an edge platform for enterprises[77]. - The total assets acquired from Volterra amounted to $432.37 million, with goodwill of $350.86 million[80]. Debt and Financing - The Term Loan Facility matures on January 24, 2023, with quarterly installments of 1.25% of the original principal amount[94]. - The Company incurred $2.2 million in debt issuance costs related to the Term Loan Facility, reducing the carrying value of the debt[92]. - The margin for LIBOR-based loans was 1.125% as of June 30, 2022[93]. - The Term Loan Facility requires a leverage ratio financial covenant, which may affect future interest rates on outstanding borrowings based on company performance[181]. Tax and Compliance - The effective tax rate for the three months ended June 30, 2022, was 18.0%, up from 4.9% for the same period in 2021[117]. - The Company had $69.5 million of unrecognized tax benefits as of June 30, 2022, which could affect the effective tax rate if recognized[118]. - The Company anticipates changes in its existing liabilities for unrecognized tax benefits within the next twelve months, but does not expect these changes to be material[118]. - The Company is currently under audit by various states and foreign jurisdictions for multiple fiscal years, which may impact its financial condition[119]. - As of June 30, 2022, the Company was in compliance with all financial covenants related to its debt facilities[95]. Shareholder Activities - The Company repurchased a total of 2.5 million shares of common stock at an average price of $199.90 per share through Accelerated Share Repurchase agreements[121]. - The Company has $272 million remaining authorized for share repurchases under its current program as of June 30, 2022[129]. - The company maintains a share repurchase program that allows for acquisitions in private transactions or open market purchases, with no minimum purchase requirement[137]. Operational Insights - The Company recorded a restructuring charge of $7.9 million in the first quarter of fiscal 2022 due to a reduction in force affecting approximately 70 positions[133]. - The total lease expense for the three months ended June 30, 2022, was $17.7 million, compared to $19.1 million for the same period in 2021[101]. - The Company expects to receive approximately $14.3 million in sublease income, with $1.9 million to be received for the remainder of fiscal 2022[103]. - The future operating lease payments total $354.6 million, with the largest payment of $48.3 million due in 2023[103]. - The weighted average remaining lease term was 9.5 years as of June 30, 2022[103]. Risk Management - The company is actively monitoring inflation but does not believe it has had a material effect on its business or financial condition[182]. - The company is subject to interest rate risk, with potential adverse impacts on the fair value of its fixed income portfolio due to market interest rate fluctuations[179]. - The company has not noted any adverse impacts to interest rates that would materially affect interest owed on principal borrowings as of June 30, 2022[181]. - The company has not experienced significant foreign currency transaction gains or losses, as most sales and expenses are in U.S. dollars[183]. Internal Controls - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected the company's reporting[187]. - The company’s disclosure controls and procedures were evaluated as effective as of June 30, 2022, ensuring timely decision-making regarding required disclosures[186].