Financial Data and Key Metrics Changes - In Q3, the company reported revenue of $674 million, reflecting a 4% year-over-year growth, with product revenue growth of 5% [18] - Software revenue grew 38% to $179 million, while systems revenue declined 18% year-over-year to $148 million due to supply chain challenges [19] - GAAP net income for the quarter was $83 million or $1.37 per share, while non-GAAP net income was $155 million or $2.57 per share [24] Business Line Data and Key Metrics Changes - Software represented 55% of product revenue, marking the second consecutive quarter where the majority of product revenue came from software [18] - Subscription-based revenue contributed 82% of total software revenue, a new high, with recurring sources totaling 72% of revenue, up from 66% in the prior year [20] - Global services revenue increased by 2% year-over-year to $348 million [19] Market Data and Key Metrics Changes - The Americas region delivered 5% revenue growth year-over-year, representing 57% of total revenue, while EMEA declined 7% and APAC grew 15% [21] - Enterprise customers accounted for 70% of product bookings, with service providers at 18% and government customers at 12% [21] Company Strategy and Development Direction - The company is focused on expanding its solutions portfolio and consumption models to adapt to macroeconomic uncertainties and inflation [17] - The strategic emphasis is on software growth drivers, including BIG-IP, NGINX, and F5 distributed cloud services [17] - The company anticipates improvements in systems revenue starting in Q2 of fiscal 2023 due to supply chain enhancements [9] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand in Q3 but acknowledged potential pressures on customer budgets due to macroeconomic factors [16] - The company is preparing for a cautious environment by monitoring customer signals and adjusting investments accordingly [17] - Management expressed confidence in sustained revenue and earnings growth due to successful business transformation efforts [17] Other Important Information - The company authorized an additional $1 billion for its share repurchase program, in addition to the remaining $272 million from the existing program [30] - Deferred revenue increased 14% year-over-year to $1.64 billion, driven by subscriptions and SaaS bookings growth [26] Q&A Session Summary Question: Clarification on backlog and software growth trajectory - The backlog was significantly higher in Q3 compared to Q2, with specific numbers to be released in the October call [33] - Management is optimistic about software growth drivers but will provide more guidance for fiscal 2023 in October [34][36] Question: Service provider reliance on F5 portfolio - Service providers are increasingly relying on F5 due to investments in cloud-native functions and capacity increases for 4G and 5G traffic [40][42] Question: Software metrics and deal flow - Management is tracking software metrics internally but is not ready to release them externally yet [58] - Both true-forwards and new deals contributed to software growth, but specific splits were not provided [63] Question: Customer buying behavior and pipeline activity - No concerns about order cancellations were noted, and the pipeline for Q4 is strong with large deals expected [66][70] - Management is cautious about potential impacts of macroeconomic factors on customer investment prioritization [71] Question: Internal preparations for macro changes - The company has slowed down hiring and delayed some investments in response to macroeconomic uncertainties [77] - Demand signals remain strong, and incentives for software sales will continue to be robust [78] Question: Back-end loaded quarter and DSO - The back-end loading was attributed to strong demand and some orders being pulled forward to avoid price increases [83] - DSOs are expected to normalize in the back half of FY '23 as shipping schedules improve [82]

| --- | --- | |-----------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | Q3FY22 Results | | | PERIOD ENDING June 30, 2022 | | | Published July 25, 2022 | | Forward-looking statements This presentation contains forward-looking statements including, among other things, statements regarding the continuing strength and momentum of F5's business, future financial performance including revenue, revenue growth and earnings growth; demand for application security and delivery services, and ...

Financial Performance - The company recorded net income of $56.236 million for the three months ended March 31, 2022, an increase from $43.241 million in the same period of 2021, resulting in a basic net income per share of $0.93[127]. - Total net revenues decreased by 1.7% to $634.2 million for the three months ended March 31, 2022, compared to $645.3 million in the prior year, while increasing by 4.0% to $1.32 billion for the six months ended March 31, 2022, compared to $1.27 billion in the prior year[146]. - Product revenues decreased by 3.8% to $297.5 million for the three months ended March 31, 2022, compared to $309.2 million in the prior year, but increased by 7.3% to $640.7 million for the six months ended March 31, 2022, compared to $597.2 million in the prior year[147]. - The effective tax rate for the three months ended March 31, 2022, was 22.7%, compared to 17.0% for the same period in 2021, primarily due to the tax impact of stock-based compensation[119]. - The effective tax rate was 22.7% for the three months ended March 31, 2022, compared to 17.0% for the same period in the prior year[161]. Revenue and Sales - Total net product revenue for the three months ended March 31, 2022, was $297.518 million, compared to $309.189 million for the same period in 2021[132]. - Revenue from the Americas for the three months ended March 31, 2022, was $358.555 million, up from $346.052 million in the same period of 2021[130]. - International revenues represented 46.5% and 45.5% of total net revenues for the three and six months ended March 31, 2022, respectively, down from 49.9% and 49.3% in the same periods of the prior year[146]. - Systems revenue for the three months ended March 31, 2022, was $145.975 million, down from $200.950 million in the same period of 2021[132]. - Systems revenue decreased to $146.0 million for the three months ended March 31, 2022, from $200.9 million in the prior year, while software revenue increased to $151.5 million from $108.2 million in the prior year[148]. Acquisitions and Investments - The Company acquired Threat Stack for approximately $68.9 million in cash, enhancing its cloud security capabilities[71]. - The total assets acquired from Threat Stack amounted to $79.5 million, with net assets acquired of $68.9 million[73]. - The Company acquired Volterra for approximately $427.2 million in cash, aimed at creating a security-first edge platform[79]. - The total assets acquired from Volterra amounted to $432.4 million, with net assets acquired of $427.1 million[82]. - The company continues to evaluate possible acquisitions or investments in strategic businesses, products, or technologies[140]. Debt and Financing - The Company entered into a Term Credit Agreement for a senior unsecured term loan facility of $400.0 million, primarily used for the acquisition of Shape[94]. - As of March 31, 2022, the outstanding principal amount under the Term Loan Facility was $360.0 million, with a weighted average interest rate of 1.282%[99]. - The Term Loan Facility matures on January 24, 2023, with quarterly installments of 1.25% of the original principal amount[96]. - The Company had no outstanding borrowings under the Revolving Credit Facility as of March 31, 2022, with available borrowing capacity of $350.0 million[101]. - The Term Loan Facility had an outstanding principal amount of $360.0 million as of March 31, 2022, with a financial covenant requiring maintenance of a leverage ratio[172]. Assets and Liabilities - Cash and cash equivalents as of March 31, 2022, were $586.5 million, an increase from $581.0 million as of September 30, 2021[87]. - Inventories as of March 31, 2022, totaled $27.9 million, up from $22.1 million as of September 30, 2021[88]. - Unbilled receivables increased to $251.1 million as of March 31, 2022, compared to $215.4 million as of September 30, 2021[89]. - Accrued liabilities decreased to $301.2 million as of March 31, 2022, from $341.5 million as of September 30, 2021[92]. - As of March 31, 2022, cash and cash equivalents, short-term investments, and long-term investments totaled $922.0 million, a decrease of $121.4 million from $1,043.4 million as of September 30, 2021[164]. Operating Expenses - Operating expenses are primarily driven by personnel and related overhead expenses, with significant monitoring of marketing, travel, and professional fees[138]. - The Company’s operating lease expense for the three months ended March 31, 2022, was $18.5 million, compared to $18.0 million for the same period in 2021[103]. - Research and development expenses decreased by $4.6 million, or 3.3%, for the three months ended March 31, 2022, but increased by $11.5 million, or 4.5%, for the six months ended March 31, 2022[156]. - General and administrative expenses decreased by $9.3 million, or 11.9%, for the three months ended March 31, 2022, and by $6.8 million, or 4.8%, for the six months ended March 31, 2022[157]. - Sales and marketing expenses decreased by $16.1 million, or 6.6%, for the three months ended March 31, 2022[155]. Restructuring and Impairments - The Company initiated a restructuring plan in the first quarter of fiscal 2022, resulting in a restructuring charge of $7.9 million[133]. - The Company recorded an impairment of $6.2 million against the Shape trade name intangible asset in Q1 fiscal 2022[66]. - In Q1 fiscal 2021, the Company recorded an impairment of $23.5 million against the operating lease right-of-use asset related to the exit of six floors in its corporate headquarters[67]. - A restructuring charge of $7.9 million was recorded for the six months ended March 31, 2022, related to workforce reduction[158]. Deferred Revenue and Performance Obligations - The total deferred revenue balance at the end of March 31, 2022, was $1.6 billion, up from $1.4 billion at the end of March 31, 2021, representing a growth of about 17%[49]. - The company expects to recognize revenues on approximately 65.2% of the remaining performance obligations over the next 12 months, which amounts to approximately $1.04 billion[50]. - Deferred revenues increased in the second quarter of fiscal year 2022 due to growth in the subscriptions business[140]. Tax and Compliance - The Company had $66.2 million of unrecognized tax benefits as of March 31, 2022, which could affect the effective tax rate if recognized[120]. - The Company is currently under audit by various states and foreign jurisdictions for multiple fiscal years, which may impact future financial statements[121]. - 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[120]. - The Company was in compliance with all financial covenants as of March 31, 2022, including maintaining a leverage ratio[97]. Market Conditions and Risks - The company expects challenging global supply chain conditions, particularly semiconductor constraints, to impact revenues from systems sales[138]. - Cash from operations may be affected by risks such as the COVID-19 pandemic, but no significant adverse impacts on interest rates have been noted as of March 31, 2022[178]. - The company is actively monitoring inflation but does not believe it has had a material effect on its business or financial condition[179].

| --- | --- | |------------------------------|-------| | | | | | | | | | | | | | | | | | | | Q2FY22 Results | | | | | | PERIOD ENDING March 31, 2022 | | | Published April 26, 2022 | | Forward-looking statements This presentation contains forward-looking statements including, among other things, statements regarding the continuing strength and momentum of F5's business, future financial performance including revenue, revenue growth and earnings growth; demand for application security and delivery services, a ...

F5, Inc. (NASDAQ:FFIV) Q2 2022 Earnings Conference Call April 26, 2022 4:30 PM ET Company Participants Suzanne DuLong - Investor Relations Francois Locoh-Donou - President and Chief Executive Officer Frank Pelzer - Executive Vice President and Chief Financial Officer Conference Call Participants Joe Cardoso - JPMorgan James Fish - Piper Sandler Amit Daryanani - Evercore Alex Henderson - Needham Meta Marshall - Morgan Stanley Victor Chiu - Raymond James Jim Suva - Citigroup Rod Hall - Goldman Sachs Operator ...

Financial Performance - For the three months ended December 31, 2021, the Company reported net income of $93.6 million, an increase from $87.7 million in the same period of 2020, resulting in a basic net income per share of $1.54 compared to $1.43 in 2020[122]. - Total revenues for the three months ended December 31, 2021, were $687.1 million, up from $624.6 million in the same period of 2020, representing a year-over-year growth of approximately 10.0%[126]. - The Americas region generated $403.0 million in revenue for the three months ended December 31, 2021, compared to $343.1 million in 2020, reflecting a growth of approximately 17.5%[126]. - The Company’s net product revenues for the three months ended December 31, 2021, totaled $343.1 million, an increase from $288.0 million in the same period of 2020, indicating a growth of approximately 19.2%[126]. Deferred Revenue and Performance Obligations - The total deferred revenue balance at the end of the period was $1.576 billion, up from $1.359 billion year-over-year, representing a growth of about 16%[48]. - The company expects to recognize approximately 65.9% of the remaining performance obligations, valued at around $1.6 billion, over the next 12 months[49]. - The company recognized revenues of $365.5 million related to the opening balance of deferred revenue for the three months ended December 31, 2021, compared to $335.7 million for the same period in 2020[48]. Capitalized Contract Acquisition Costs - The company's beginning balance of capitalized contract acquisition costs was $77.8 million as of December 31, 2021, compared to $70.4 million for the same period in 2020, reflecting an increase of approximately 6.3%[46]. - Amortization of capitalized contract acquisition costs was $9.4 million for the three months ended December 31, 2021, compared to $8.2 million for the same period in 2020, indicating an increase of 14.6%[46]. - The company added $10.5 million in capitalized contract acquisition costs during the three months ended December 31, 2021, compared to $9.7 million in the same period of 2020, marking an increase of approximately 8.2%[46]. Acquisitions - The company acquired Threat Stack, Inc. for approximately $68.9 million in cash, with an additional $1.5 million in transaction costs incurred[72][74]. - The total assets acquired from Threat Stack amounted to $79,515,000, with goodwill recognized at $43,956,000[76]. - The acquisition of Volterra, Inc. was completed for approximately $427.2 million in cash, with $9.5 million in transaction costs incurred[80][81]. - Total assets acquired from Volterra were valued at $432,928,000, with goodwill recognized at $351,417,000[83]. Investments and Cash Position - As of December 31, 2021, total cash, cash equivalents, and restricted cash amounted to $515.8 million, a decrease from $584.3 million as of September 30, 2021[87]. - As of December 31, 2021, total short-term investments amounted to $346,901,000, with a fair value of $346,548,000, reflecting a gross unrealized loss of $363,000[68]. - The company reported long-term investments totaling $77,316,000, with a fair value of $76,991,000, indicating gross unrealized losses of $325,000[68]. - The company has no credit losses on any investments within its portfolio as of December 31, 2021[71]. - The company’s cash equivalents measured at fair value were $19.3 million as of December 31, 2021[60]. Impairments - The company recorded an impairment of $6.2 million against the Shape trade name intangible asset during the three months ended December 31, 2021[64]. - The total impairment charges for the three months ended December 31, 2021, were $6.2 million, compared to $6.9 million in the same period of 2020[67]. - The Company recorded an impairment of $6.7 million against the right-of-use asset related to the integration of the former Shape headquarters[102]. Debt and Lease Liabilities - The Company had $365.0 million outstanding under the Term Loan Facility as of December 31, 2021, with a weighted average interest rate of 1.282%[94]. - The Revolving Credit Facility, with an aggregate principal amount of $350.0 million, had no outstanding borrowings as of December 31, 2021[97]. - Operating lease liabilities totaled $334.5 million as of December 31, 2021, with future operating lease payments expected to be $384.8 million[102]. Tax and Compliance - The effective tax rate for the three months ended December 31, 2021, was 16.3%, a decrease from 25.1% in the same period of 2020, primarily due to the tax impact of stock-based compensation[114]. - The Company is currently under audit by various states and foreign jurisdictions for fiscal years 2015 through 2020, with potential changes in unrecognized tax benefits anticipated within the next twelve months[115]. - The financial covenant requires the Company to maintain a leverage ratio of consolidated total indebtedness to consolidated EBITDA, and it was in compliance as of December 31, 2021[94]. Restructuring and Share Repurchase - The Company initiated a restructuring plan in the first quarter of fiscal 2022, resulting in a restructuring charge of $7.9 million, affecting approximately 70 positions[128]. - The Company repurchased 539,000 shares at an average price of $232.14, totaling $125.0 million, with $647.5 million remaining authorized for future share repurchases as of December 31, 2021[120]. Market Risk and Currency - The majority of sales and expenses are denominated in U.S. dollars, resulting in minimal foreign currency transaction gains and losses[173]. - Management reports no material changes to quantitative and qualitative disclosures about market risk compared to the previous annual report[173].

F5, Inc. (NASDAQ:FFIV) Q1 2022 Earnings Conference Call January 25, 2022 4:30 PM ET Company Participants Suzanne DuLong – Vice President of Investor Relations François Locoh-Donou – President and Chief Executive Officer Frank Pelzer – Executive Vice President and Chief Financial Officer Conference Call Participants James Fish – Piper Sander Sami Badri – Credit Suisse Amit Daryanani – Evercore Alex Henderson – Needham Rod Hall – Goldman Sachs Meta Marshall – Morgan Stanley Samik Chatterjee – JPMorgan Paul Si ...

[Part I](index=4&type=section&id=PART%20I) [Business](index=4&type=section&id=Item%201.%20Business) F5 is a multi-cloud application security and delivery company transitioning to a software and SaaS model, driven by strategic acquisitions and channel partnerships [General and Strategy](index=4&type=section&id=Item%201.%20Business%20-%20General%20and%20Strategy) F5 is transforming into a software and SaaS-driven multi-cloud application security company, leveraging strategic acquisitions to enable adaptive applications - F5 is a multi-cloud application security and delivery company, enabling adaptive applications that automatically adjust to performance, availability, or security changes[12](index=12&type=chunk)[20](index=20&type=chunk) - The company is transforming towards software and SaaS, with product revenue from software sales growing **40%** in fiscal 2021 and comprising **40%** of total product revenue[16](index=16&type=chunk) - Strategic acquisitions, including NGINX (May 2019), Shape Security (Jan 2020), and Volterra (Jan 2021), are central to F5's growth, expanding its portfolio across modern applications, fraud prevention, and edge-as-a-service[14](index=14&type=chunk)[21](index=21&type=chunk) - At the end of fiscal 2021, the company had a product backlog of approximately **$124.9 million**, primarily for systems-based products[17](index=17&type=chunk) [Products and Solutions](index=6&type=section&id=Item%201.%20Business%20-%20Products%20and%20Solutions) F5 offers a diverse product portfolio for traditional and modern applications, including BIG-IP and NGINX technologies, with a strong focus on comprehensive security solutions - **BIG-IP Family** offers application delivery solutions for traditional applications, available as physical appliances (iSeries, VIPRION, VELOS) and software-only Virtual Editions (VEs)[29](index=29&type=chunk)[31](index=31&type=chunk)[33](index=33&type=chunk) - **NGINX Technologies** provide lightweight, agile solutions such as NGINX Plus and NGINX App Protect for modern, container-based applications and microservices environments[34](index=34&type=chunk)[35](index=35&type=chunk) - **Security Solutions** include F5 Advanced WAF, Shape's AI platform for fraud and bot protection, Volterra's ML-based API security, and Silverline for fully-managed security services like WAF and DDoS protection[38](index=38&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Competition](index=8&type=section&id=Item%201.%20Business%20-%20Competition) F5 navigates a diverse competitive landscape across application delivery, modern application management, and security, facing both established players and emerging cloud-native providers - **Application Delivery:** Competes with Citrix Systems, AWS, Microsoft Azure, and VMware[49](index=49&type=chunk) - **Modern Applications (API management, Kubernetes):** Competes with emerging players such as Apogee and Kong[50](index=50&type=chunk) - **Application Security (WAF, bot detection, fraud):** Competes with Akamai, Citrix, Imperva, Juniper, Cloudflare, Fastly (Signal Sciences), and PerimeterX[51](index=51&type=chunk)[52](index=52&type=chunk) [Corporate Functions](index=8&type=section&id=Item%201.%20Business%20-%20Corporate%20Functions) F5's global operations are supported by outsourced manufacturing, a channel-focused sales model, significant R&D investment, and intellectual property protection - Hardware manufacturing is outsourced to Flex Ltd., with facilities in Mexico and China[76](index=76&type=chunk) - The company relies on a channel sales model, with Ingram Micro, Inc. and Synnex Corporation accounting for **19.2%** and **11.1%** of total revenues in fiscal year 2021, respectively[69](index=69&type=chunk)[71](index=71&type=chunk) Research and Development Expenses (in millions) | Fiscal Year | R&D Expense | | :--- | :--- | | 2021 | $512.6 | | 2020 | $441.3 | | 2019 | $408.1 | - F5 holds **433** U.S. patents and **59** international patents to protect its intellectual property[62](index=62&type=chunk) [Human Capital](index=11&type=section&id=Item%201.%20Business%20-%20Human%20Capital) F5 prioritizes employee engagement, diversity, and flexible work arrangements for its 6,461 global employees, fostering a strong corporate culture - As of September 30, 2021, the company had **6,461** employees, with **52%** in the U.S. and **48%** internationally[81](index=81&type=chunk) - Employee engagement is high, with a May 2021 survey indicating **81%** feel a sense of belonging, **88%** are proud to work for F5, and **87%** believe F5 has a great culture[88](index=88&type=chunk) - The company fosters diversity and inclusion through **seven** Employee Inclusion Groups (EIGs) and has published its inaugural Diversity and Inclusion Report[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - The "Freedom to Flex" program, established in 2018, allows employees to choose between office, remote, or hybrid work models[87](index=87&type=chunk) [Environmental, Social & Governance (ESG)](index=13&type=section&id=Item%201.%20Business%20-%20Environmental%2C%20Social%20%26%20Governance%20%28ESG%29) F5 is expanding its ESG commitment with environmental targets, significant social contributions through its Global Good program, and robust governance oversight - **Environmental:** Commits to disclosing science-aligned Scope 1 and 2 targets in FY2022 and declaring 2030 Science-Based Targets with SBTi in FY2023[96](index=96&type=chunk) - **Social:** F5 and its employees donated over **$4.8 million** to over **2,900** non-profits worldwide in fiscal 2021 through the F5 Global Good program[97](index=97&type=chunk) - **Governance:** The Nominating and Governance Committee of the board of directors has expanded its charter to include oversight of ESG programs[98](index=98&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including market competition, product development, security vulnerabilities, supply chain disruptions, operational complexities, acquisition integration, litigation, and the ongoing impact of the COVID-19 pandemic - **Market and Competition:** Business is dependent on IT spending and faces risks from cloud computing trends, industry consolidation, and intense competition in application delivery and security markets[112](index=112&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) - **Product and Technology:** Success depends on timely new product development, with risks including security vulnerabilities in IT systems or products that could cause significant financial and reputational harm[125](index=125&type=chunk)[128](index=128&type=chunk) - **Supply Chain:** The company relies on a single contract manufacturer for hardware and faces risks from supply interruptions or delays of components from limited sources, exacerbated by global shortages[144](index=144&type=chunk)[146](index=146&type=chunk) - **Operations and Sales:** Risks include an unpredictable sales cycle, reliance on distribution partners, challenges in government sales, and complexities of international commerce[147](index=147&type=chunk)[150](index=150&type=chunk)[169](index=169&type=chunk) - **Acquisitions and Litigation:** The company faces risks in integrating acquired businesses like Volterra and Shape, and is subject to litigation, including intellectual property disputes[178](index=178&type=chunk)[177](index=177&type=chunk) - **COVID-19 Pandemic:** The pandemic could disrupt customer demand, supply chains (leading to delays and shortages), and overall financial performance[191](index=191&type=chunk)[192](index=192&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - Not applicable[196](index=196&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) F5's principal facilities, including its 515,000 square foot Seattle headquarters, are leased globally for various corporate functions - The company's corporate headquarters in Seattle, Washington, consists of approximately **515,000 square feet** of leased space, with the lease expiring in **2033**[197](index=197&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is detailed in Note 13 of the Notes to Financial Statements - Information regarding legal proceedings is detailed in Note 13 - Commitments and Contingencies[199](index=199&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable - Not applicable[200](index=200&type=chunk) [Part II](index=31&type=section&id=PART%20II) [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) F5's common stock trades on Nasdaq, the company retains cash and does not pay dividends, and it executed a $500 million Accelerated Share Repurchase in fiscal 2021 - The company has not paid dividends and does not anticipate declaring them in the foreseeable future[206](index=206&type=chunk) - In February 2021, the company entered into Accelerated Share Repurchase (ASR) agreements totaling **$500 million**, repurchasing **2.5 million shares** at an average price of **$199.90 per share**[209](index=209&type=chunk) - As of September 30, 2021, **$773 million** remained authorized for future share repurchases[210](index=210&type=chunk) [Selected Financial Data](index=33&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is no longer required due to amendments to Regulation S-K - Item 6 is no longer required due to the adoption of amendments to Regulation S-K[215](index=215&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2021, total net revenues grew 10.7% to $2.60 billion, driven by strong software revenue growth, while cash and investments decreased due to share repurchases and acquisitions Fiscal Year 2021 Financial Highlights (in thousands, except percentages) | Metric | FY 2021 | FY 2020 | % Change | | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **$2,603,416** | **$2,350,822** | **10.7%** | | Product Revenue | $1,247,084 | $1,025,856 | 21.6% | | Service Revenue | $1,356,332 | $1,324,966 | 2.4% | | Gross Profit | $2,110,270 | $1,942,935 | 8.6% | | Gross Margin | 81.1% | 82.6% | (1.5 p.p.) | | Income from Operations | $394,025 | $392,267 | 0.4% | | Net Income | $331,241 | $307,441 | 7.7% | Product Revenue Breakdown (in thousands) | Product Type | FY 2021 | FY 2020 | % Change | | :--- | :--- | :--- | :--- | | Systems Revenue | $748,192 | $668,313 | 12.0% | | Software Revenue | $498,892 | $357,543 | 39.5% | | **Total Product Revenue** | **$1,247,084** | **$1,025,856** | **21.6%** | - Cash and investments decreased by **$269.4 million** to **$1.04 billion**, primarily due to **$500.0 million** for share repurchases and **$411.3 million** for acquisitions (mainly Volterra), offset by **$645.2 million** in cash from operations[260](index=260&type=chunk) - As of September 30, 2021, the company had **$370.0 million** of principal outstanding under its Term Loan Facility, maturing in January 2023[271](index=271&type=chunk)[440](index=440&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company is exposed to interest rate risk, with a hypothetical 100 basis point increase potentially reducing its investment portfolio by $3.4 million, while foreign currency risk is currently not significant - **Interest Rate Risk:** A hypothetical **100 basis point** increase in interest rates at September 30, 2021, could reduce the market value of the investment portfolio by approximately **$3.4 million**[278](index=278&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, and the company does not currently engage in foreign currency hedging[279](index=279&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, an unqualified audit opinion from PricewaterhouseCoopers LLP, and notes detailing business combinations, debt, litigation, and segment information [Report of Independent Registered Public Accounting Firm](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%20-%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified audit opinion on the financial statements and internal controls, highlighting the valuation of Volterra's developed technology as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[288](index=288&type=chunk) - A critical audit matter was identified regarding the valuation of the **$59.5 million** developed technology intangible asset from the Volterra, Inc. acquisition, due to significant judgment in estimating its fair value, particularly the royalty rate assumption[297](index=297&type=chunk)[298](index=298&type=chunk) [Notes to Consolidated Financial Statements](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%20-%20Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on business combinations including Volterra, Shape, and NGINX acquisitions, debt facilities, share repurchases, ongoing litigation, and segment information - **Business Combinations (Note 3):** Details the acquisition of Volterra, Inc. on January 22, 2021, for a total purchase price of **$427.2 million**, including **$59.5 million** for developed technology[386](index=386&type=chunk)[389](index=389&type=chunk) - **Debt Facilities (Note 7):** As of September 30, 2021, **$370.0 million** of principal was outstanding under the Term Loan Facility for the Shape acquisition, maturing in January 2023[435](index=435&type=chunk)[440](index=440&type=chunk) - **Shareholders' Equity (Note 10):** On February 3, 2021, the company initiated a **$500 million** Accelerated Share Repurchase (ASR), buying back **2.5 million shares**, with **$773 million** remaining authorized as of September 30, 2021[463](index=463&type=chunk)[466](index=466&type=chunk) - **Litigation (Note 13):** The company is a defendant in a lawsuit by Lynwood Investment CY Limited regarding NGINX intellectual property and is defending three separate patent infringement actions filed by Proven Networks LLC[489](index=489&type=chunk)[493](index=493&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=86&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure - None[511](index=511&type=chunk) [Controls and Procedures](index=86&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2021, with no material changes during the fourth fiscal quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[514](index=514&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of September 30, 2021, based on the COSO framework, a conclusion audited by PricewaterhouseCoopers LLP[516](index=516&type=chunk)[517](index=517&type=chunk) - No material changes were made to the company's internal control over financial reporting during the fourth fiscal quarter[518](index=518&type=chunk) [Other Information](index=87&type=section&id=Item%209B.%20Other%20Information) The company reports no other information to disclose for this item - None[519](index=519&type=chunk) [Part III](index=88&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=88&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement[522](index=522&type=chunk) [Executive Compensation](index=88&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the definitive Proxy Statement - The required information is incorporated by reference from the "Executive Compensation" and related sections in the Proxy Statement[523](index=523&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=88&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the definitive Proxy Statement - The required information is incorporated by reference from the "Security Ownership of Certain Beneficial Owners and Management" section in the Proxy Statement[524](index=524&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=88&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the definitive Proxy Statement - The required information is incorporated by reference from the sections concerning director independence and related person transactions in the Proxy Statement[525](index=525&type=chunk) [Principal Accountant Fees and Services](index=88&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the definitive Proxy Statement - The required information is incorporated by reference from the sections concerning fees paid to PricewaterhouseCoopers LLP and audit committee procedures in the Proxy Statement[526](index=526&type=chunk) [Part IV](index=89&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the Consolidated Financial Statements and various exhibits filed as part of the Form 10-K report - Lists the Consolidated Financial Statements and Exhibits filed with the report; financial statement schedules were omitted as not applicable, material, or included elsewhere[529](index=529&type=chunk) [Form 10-K Summary](index=89&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is reported as not applicable - Not applicable[530](index=530&type=chunk)

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $682 million, an 11% year-over-year increase, exceeding guidance [10] - Product revenue for Q4 was $340 million, up 21% year-over-year, a significant acceleration from 6% in the same period last year [10] - Software revenue grew 35% to $152 million, representing 45% of product revenue, up from 40% in the previous year [10][11] - GAAP net income for Q4 was $111 million or $1.80 per share, while non-GAAP net income was $185 million or $3.01 per share [16] - For the fiscal year 2021, total revenue grew 10% to $2.6 billion, with product revenue of $1.25 billion growing 21% [18][19] Business Line Data and Key Metrics Changes - Software growth was 35%, systems growth was 12%, and global services growth was 2% in Q4 [8] - Subscription-based revenue represented 80% of total software revenue in Q4, up from 76% in the previous year [11] - The deal volume of multi-year subscriptions more than doubled year-over-year, approaching 500 in total [12] Market Data and Key Metrics Changes - In Q4, the Americas delivered 11% revenue growth, representing 59% of total revenue, while EMEA and APAC delivered 11% and 9% growth, accounting for 24% and 17% of revenue, respectively [15] - Enterprise customers represented 69% of product bookings in Q4, with service providers at 13% and government customers at 18% [15] Company Strategy and Development Direction - The company is focused on application security, anticipating it to be a significant area of investment over the next decade [38] - F5 aims to achieve the Rule of 40, combining revenue growth and non-GAAP operating margins totaling 40, which was achieved in FY '21 [29][30] - The integration of Volterra is a priority, enhancing security offerings and enabling critical application services at the edge [57] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing pressures related to global supply chain challenges, which may increase costs [28] - The company expects revenue growth of 8% to 9% for FY '22, with software growth projected between 35% and 40% [25] - Management expressed confidence in the demand for BIG-IP, citing both transient and secular factors driving growth [78][89] Other Important Information - The company ended FY '21 with approximately $125 million in backlog, primarily system-based [23] - The acquisition of Threat Stack is expected to enhance F5's cloud security capabilities [59] Q&A Session Summary Question: Can you provide more details on the backlog composition? - The backlog primarily consists of system-based orders, with a significant portion from service provider customers [62] Question: Are you expecting elevated levels of U.S. federal activity in the upcoming quarters? - No significant changes are expected in the federal business, which follows regular seasonality [63] Question: What is the impact of supply chain challenges on gross margins? - Supply chain challenges have impacted gross margins due to increased prices and expedite fees, but the company is managing the situation well [68] Question: How should we think about the growth rate of NGINX? - NGINX continues to grow well, with over 50% of multi-year subscriptions including NGINX [72] Question: What gives you confidence that 2021 wasn't an anomaly for systems revenue? - Demand for BIG-IP is expected to grow due to increasing reliance on traditional applications, despite some transient factors in 2021 [78][89] Question: How is the cloud vertical performing? - The cloud vertical continues to grow faster than overall software growth, with significant traction in private offers on marketplaces [84]

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, no par value FFIV NASDAQ Global Select Market Emerging Growth Company ☐ 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 June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitio ...