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].

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].