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F5(FFIV) - 2025 Q3 - Quarterly Report
F5F5(US:FFIV)2025-08-06 18:29

PART I. FINANCIAL INFORMATION This part provides F5, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed accounting notes Item 1. Financial Statements This section details F5, Inc.'s unaudited consolidated financial statements, encompassing balance sheets, income statements, cash flows, and comprehensive accounting notes Consolidated Balance Sheets The company's financial position shows total assets of $6.11 billion and total liabilities of $2.64 billion as of June 30, 2025 | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :-------------------------------- | | Total Assets | $6,113,499 | $5,613,004 | | Total Liabilities | $2,641,815 | $2,483,626 | | Total Shareholders' Equity | $3,471,684 | $3,129,378 | | Cash and cash equivalents | $1,426,957 | $1,074,602 | | Deferred revenue (total) | $1,956,962 | $1,797,959 | Consolidated Income Statements This section reports the company's financial performance over specific periods, including revenues, expenses, and net income | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net Revenues | $780,370 | $695,495 | $2,277,982 | $2,069,446 | | Net Income | $189,912 | $144,079 | $501,887 | $401,482 | | Net income per share — basic | $3.29 | $2.46 | $8.65 | $6.82 | | Net income per share — diluted | $3.25 | $2.44 | $8.54 | $6.75 | - Net Revenues increased 12.2% for the three months ended June 30, 2025, and 10.1% for the nine months ended June 30, 2025, compared to the prior year11 - Net Income increased 31.8% for the three months ended June 30, 2025, and 25.0% for the nine months ended June 30, 2025, compared to the prior year11 Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income items | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $189,912 | $144,079 | $501,887 | $401,482 | | Foreign currency translation adjustment | $3,752 | $(1,232) | $2,354 | $886 | | Comprehensive income | $193,664 | $142,856 | $504,241 | $402,446 | Consolidated Statements of Shareholders' Equity This section details changes in the company's shareholders' equity over specific periods, including net income and stock repurchases | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Total Shareholders' Equity | $3,471,684 | $3,010,745 | | Repurchase of common stock (3 months) | $(125,105) | $(150,608) | | Repurchase of common stock (9 months) | $(375,595) | $(402,198) | | Net income (3 months) | $189,912 | $144,079 | | Net income (9 months) | $501,887 | $401,482 | Consolidated Statements of Cash Flows This section reports the company's cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $741,598 | $545,914 | | Net cash used in investing activities | $(55,689) | $(53,471) | | Net cash used in financing activities | $(337,660) | $(355,131) | | Net increase in cash, cash equivalents and restricted cash | $348,249 | $137,312 | | Cash, cash equivalents and restricted cash, end of period | $1,429,031 | $938,523 | - Net cash provided by operating activities increased by 35.8% for the nine months ended June 30, 2025, compared to the prior year23 Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Summary of Significant Accounting Policies This section outlines the key accounting principles and methods used in preparing the financial statements - F5, Inc. is a global leader in application delivery and security solutions, offering cloud, software, and hardware solutions for hybrid, multicloud environments26 - Accounting policies for investments and fair value of financial instruments have been updated to include equity investments with no readily determinable fair value28 - The Company is evaluating the impact of new accounting pronouncements: ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures)323334 2. Revenue from Contracts with Customers This section details the company's policies and disclosures related to revenue recognition from customer contracts | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Capitalized Contract Acquisition Costs (end of period) | $72,292 | $61,316 | | Deferred Revenue (end of period) | $1,956,962 | $1,772,584 | - Total non-cancelable remaining performance obligations were $2.0 billion as of June 30, 2025, with 61.4% expected to be recognized as revenue over the next 12 months38 3. Fair Value Measurements This section provides information on the fair value of financial instruments and the methodologies used for their measurement | Investment Type (in thousands) | June 30, 2025 Fair Value | September 30, 2024 Fair Value | | :----------------------------- | :----------------------- | :---------------------------- | | Money Market Funds (Level 1) | $760,409 | $437,273 | | Equity investments | $15,034 | $8,580 | | Total investments | $775,443 | $445,853 | - Interest income from cash, cash equivalents, and investments for the nine months ended June 30, 2025, was $29.7 million, up from $25.0 million in the prior year50 4. Business Combinations This section discloses details of business acquisitions completed by the company, including goodwill recognized - Completed two acquisitions in fiscal 2025, recording $12.0 million in goodwill, with an immaterial impact on operating results54 - Completed two acquisitions in fiscal 2024, recording $23.6 million in goodwill, with an immaterial impact on operating results55 5. Balance Sheet Details This section provides further disaggregation and details of specific accounts within the consolidated balance sheets | Account (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------------- | :------------ | :----------------- | | Cash, Cash Equivalents and Restricted Cash | $1,429,031 | $1,078,340 | | Inventories | $66,920 | $76,378 | | Other Current Assets | $631,302 | $569,467 | | Accrued Liabilities | $281,413 | $300,076 | 6. Debt Facilities This section describes the company's debt arrangements, including credit facilities and their status - The $350.0 million Revolving Credit Facility expired on January 31, 2025, with no outstanding borrowings at expiration63 7. Leases This section provides details on the company's lease arrangements, including liabilities, terms, and expenses | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Total Operating Lease Liabilities | $259,818 | $249,564 | | Weighted average remaining lease term | 7.8 years | 7.9 years | - Total lease expense for the nine months ended June 30, 2025, was $49.6 million, compared to $50.2 million in the prior year65 - The Company expects to receive $8.2 million in sublease income, with $0.7 million in the remainder of fiscal 2025 and $7.5 million thereafter67 8. Commitments and Contingencies This section discloses the company's contractual commitments, warranties, and potential legal or regulatory contingencies - The Company has a one-year warranty for systems products, with additional coverage available through service maintenance agreements70 - Total non-cancelable long-term purchase commitments outstanding as of June 30, 2025, were $10.0 million71 - The Lynwood Investment CY Limited v. F5 Networks et al. lawsuit, concerning NGINX software intellectual property, was partially remanded to the District Court for further proceedings on a copyright claim7576 9. Income Taxes This section provides details on the company's income tax expense, effective tax rates, and unrecognized tax benefits | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Effective Tax Rate | 10.8% | 16.0% | 15.4% | 18.4% | - The decrease in the effective tax rate is primarily due to changes in unrecognized tax benefits and the tax impact of stock-based compensation80 - Unrecognized tax benefits totaled $84.8 million at June 30, 2025, with no material changes expected within the next twelve months81 10. Shareholders' Equity This section details changes in the company's shareholders' equity, including share repurchase programs and their impact - The Board of Directors authorized an additional $1.0 billion for the common stock share repurchase program on October 25, 2024, bringing the total remaining authorization to $1,047.4 million as of June 30, 20258485 | Metric (in thousands, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Shares repurchased | 488 | 873 | 1,459 | 2,338 | | Amount repurchased | $125,010 | $150,018 | $375,029 | $400,047 | 11. Net Income Per Share This section presents the basic and diluted net income per share calculations for the company | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic Net Income Per Share | $3.29 | $2.46 | $8.65 | $6.82 | | Diluted Net Income Per Share | $3.25 | $2.44 | $8.54 | $6.75 | 12. Segment Information This section provides financial data by operating segment and geographic region, along with key customer information - The Company operates in one reportable operating segment88 | Revenue Type (in thousands) | 3 months ended June 30, 2025 | 9 months ended June 30, 2025 | | :-------------------------- | :--------------------------- | :--------------------------- | | Americas | $430,971 | $1,259,070 | | EMEA | $202,073 | $620,431 | | APAC | $147,326 | $398,481 | | Systems revenue | $180,855 | $519,968 | | Software revenue | $207,983 | $574,563 | - Key customers for the three months ended June 30, 2025, included Synnex Corporation (18.4% of total net revenue) and Ingram Micro, Inc. (17.0% of total net revenue)90 13. Restructuring Charges This section details the costs associated with the company's restructuring plans, including workforce reductions - Restructuring plans were initiated in fiscal 2025 and 2024 to align strategic and financial objectives and optimize resources, including workforce reductions91 | Metric (in thousands) | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Restructuring charges | $11,321 | $8,655 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses F5's financial condition and operational results, analyzing revenue growth, cost structures, liquidity, cash flows, and capital resources, noting macroeconomic impacts Overview This section provides a high-level introduction to F5's business, market position, and recent financial trends - F5 is a global leader in application delivery and security solutions, offering cloud, software, and hardware solutions for hybrid, multicloud environments96 - Revenue is derived from sales of products (BIG-IP software/systems, F5 NGINX software, F5 Distributed Cloud Services) and services (maintenance, training, consulting)97 - Customer demand improved in the second half of fiscal 2024 and continued into fiscal 2025, following macroeconomic stabilization97 - Deferred revenues increased to $1.96 billion as of June 30, 2025, from $1.80 billion as of September 30, 2024, primarily due to maintenance renewal contracts and subscription offerings101 Results of Operations This section analyzes the company's financial performance, including revenue, gross profit, operating expenses, and net income | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total Net Revenues | $780,370 | $695,495 | $2,277,982 | $2,069,446 | | Net Product Revenues | $388,838 | $308,489 | $1,094,531 | $914,510 | | Net Service Revenues | $391,532 | $387,006 | $1,183,451 | $1,154,936 | | Gross Profit | $631,742 | $559,070 | $1,847,885 | $1,655,519 | | Operating Expenses | $435,425 | $395,980 | $1,287,589 | $1,187,953 | | Net Income | $189,912 | $144,079 | $501,887 | $401,482 | - Total net revenues increased 12.2% for the three months and 10.1% for the nine months ended June 30, 2025, primarily due to increased product revenues (systems and software) and service revenues103 - Gross margin for the three months ended June 30, 2025, was 81.0%, up from 80.4% in the prior year108 - The effective tax rate decreased to 10.8% for the three months and 15.4% for the nine months ended June 30, 2025, primarily due to changes in unrecognized tax benefits and stock-based compensation tax impact115 Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, including sources and uses of funds and capital structure - Cash and cash equivalents, short-term investments, and long-term investments increased by $358.8 million to $1.44 billion as of June 30, 2025, from $1.08 billion as of September 30, 2024118 - Cash provided by operating activities for the first nine months of fiscal year 2025 was $741.6 million, an increase from the prior year, driven by higher cash receipts from customers and increased deferred revenue118119 - Cash used for common stock repurchases, including excise taxes, was $377.1 million for the nine months ended June 30, 2025118 - The $350.0 million Revolving Credit Facility expired on January 31, 2025, with no outstanding borrowings123 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section assesses the company's exposure to market risks, including interest rate, inflation, and foreign currency, noting no material changes or significant financial impact - An immediate 10% change in interest rates is not expected to materially affect the fair market value of the investment portfolio or operating results/cash flows129 - Inflation has not had a material effect on the business, financial condition, or results of operations to date, but the company is actively monitoring the macroeconomic inflationary environment130 - Foreign currency transaction gains or losses have not been significant, as the majority of transactions are in U.S. dollars, but may become significant with international expansion131 Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The company's disclosure controls and procedures were effective as of June 30, 2025134 - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025135 PART II. OTHER INFORMATION This part provides additional disclosures not included in the financial statements, covering legal, equity, and other relevant information Item 1. Legal Proceedings This section refers to Note 8 of the financial statements for detailed information regarding the company's legal proceedings - Information regarding legal proceedings is provided in Note 8 - Commitments and Contingencies of the Notes to Financial Statements136 Item 1A. Risk Factors This section states no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors from those described in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024137 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section updates the common stock share repurchase program, detailing a $1.0 billion authorization increase and shares repurchased during the quarter - The Board of Directors authorized an additional $1.0 billion for the common stock share repurchase program on October 25, 2024138 - As of June 30, 2025, $1,047.4 million remained authorized for share repurchases138 | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | | :----- | :-------------------------------------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 487.84 | $256.23 | Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable141 Item 5. Other Information This section discloses Rule 10b5-1 and non-Rule 10b5-1 trading arrangements adopted by certain officers and directors during the fiscal quarter - Chad Whalen, EVP, Chief Revenue Officer, adopted a Rule 10b5-1 plan on April 30, 2025, for the sale of 16,265 Company shares142 - Lyra Schramm, EVP, Chief People Officer, adopted a Rule 10b5-1 plan on June 9, 2025, for the sale of 15,753 Company shares143 - Thomas Fountain, EVP, Chief Operating Officer, adopted a Rule 10b5-1 plan on June 13, 2025, for the sale of 33,951 Company shares143 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various certifications and XBRL documents - Exhibits include Certifications Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and various Inline XBRL Taxonomy Extension Documents144 SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the financial report - The report was signed on August 6, 2025, by Edward C. Werner, Executive Vice President, Chief Financial Officer of F5, Inc.147149