F5, Inc 10-Q for FY2021 Q3

F5, Inc. (FFIV)

10-Q 2021-08-05 For: 2021-06-30

Added on April 09, 2026

About this 10-Q

F5, Inc filed this 10-Q on August 5, 2021, covering the quarter ended June 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $651.52M; up 11.7% from $583.25M a year earlier
Net income: $89.6M; up 28.2% from net income of $69.87M a year earlier
Diluted EPS: $1.46; up 28.1% from $1.14 a year earlier

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Washington						91-1714307
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	FFIV	NASDAQ Global Select Market


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)			4
Consolidated Balance Sheets			4
Consolidated Income Statements			5
Consolidated Statements of Comprehensive Income			6
Consolidated Statements of Shareholders' Equity			7
Consolidated Statements of Cash Flows			9
Notes to Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			36
SIGNATURES			37


	June 30, 2021		September 30, 2020
ASSETS
Current assets
Cash and cash equivalents	$	583,811	$	849,556
Short-term investments	184,108		360,333
Accounts receivable, net of allowances of $3,866 and $3,105	382,897		296,183
Inventories	22,649		27,898
Other current assets	293,246		259,506
Total current assets	1,466,711		1,793,476
Property and equipment, net	196,780		229,239
Operating lease right-of-use assets	253,163		300,680
Long-term investments	95,222		102,939
Deferred tax assets	128,809		45,173
Goodwill	2,209,639		1,858,966
Other assets, net	434,797		347,447
Total assets	$	4,785,121	$	4,677,920
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	49,372	$	64,472
Accrued liabilities	334,288		321,398
Deferred revenue	952,029		883,134
Current portion of long-term debt	19,275		19,275
Total current liabilities	1,354,964		1,288,279
Deferred tax liabilities	1,923		602
Deferred revenue, long-term	488,581		389,498
Operating lease liabilities, long-term	308,156		338,715
Long-term debt	354,591		369,047
Other long-term liabilities	84,737		59,511
Total long-term liabilities	1,237,988		1,157,373
Commitments and contingencies (Note 9)
Shareholders' equity
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding	—		—
Common stock, no par value; 200,000 shares authorized, 60,299 and 61,099 shares issued and outstanding	133,994		305,453
Accumulated other comprehensive loss	(18,935)		(18,716)
Retained earnings	2,077,110		1,945,531
Total shareholders' equity	2,192,169		2,232,268
Total liabilities and shareholders' equity	$	4,785,121	$	4,677,920


	Three months ended June 30,				Nine months ended June 30,
	2021		2020		2021		2020
Net revenues
Products	$	309,929	$	253,331	$	907,163	$	747,405
Services	341,586		329,921		1,014,256		988,601
Total	651,515		583,252		1,921,419		1,736,006
Cost of net revenues
Products	68,974		57,437		209,301		152,641
Services	51,930		48,603		155,167		143,279
Total	120,904		106,040		364,468		295,920
Gross profit	530,611		477,212		1,556,951		1,440,086
Operating expenses
Sales and marketing	237,375		211,808		696,829		622,799
Research and development	133,283		115,991		387,927		321,024
General and administrative	63,541		61,792		204,534		194,809
Restructuring charges	—		—		—		7,800
Total	434,199		389,591		1,289,290		1,146,432
Income from operations	96,412		87,621		267,661		293,654
Other (loss) income, net	(2,163)		141		(4,223)		5,220
Income before income taxes	94,249		87,762		263,438		298,874
Provision for income taxes	4,645		17,890		42,915		69,096
Net income	$	89,604	$	69,872	$	220,523	$	229,778
Net income per share — basic	$	1.49	$	1.15	$	3.63	$	3.78
Weighted average shares — basic	60,186		60,978		60,768		60,831
Net income per share — diluted	$	1.46	$	1.14	$	3.55	$	3.76
Weighted average shares — diluted	61,351		61,415		62,064		61,182


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
	(In thousands)
	Three months ended June 30, 2020
Balances, March 31, 2020	60,629	$	223,101	$	(22,903)	$	1,797,996	$	1,998,194
Exercise of employee stock options	41	987		—		—		987
Issuance of stock under employee stock purchase plan	250	29,570		—		—		29,570
Issuance of restricted stock	244	—		—		—		—

Stock-based compensation	—	50,868		—		—		50,868
Net income	—	—		—		69,872		69,872
Other comprehensive income	—	—		4,408		—		4,408
Balances, June 30, 2020	61,164	$	304,526	$	(18,495)	$	1,867,868	$	2,153,899

	Three months ended June 30, 2021
Balances, March 31, 2021	60,052	$	39,507	$	(19,194)	$	1,987,506	$	2,007,819
Exercise of employee stock options	47	1,201		—		—		1,201
Issuance of stock under employee stock purchase plan	312	34,810		—		—		34,810
Issuance of restricted stock	353	—		—		—		—
Repurchase of common stock	(449)	(100,000)		—				(100,000)
Settlement of forward contract under accelerated share repurchase program ("ASR")	—	100,000		—		—		100,000
Taxes paid related to net share settlement of equity awards	(16)	(2,992)		—		—		(2,992)
Stock-based compensation	—	61,468		—		—		61,468
Net income	—	—		—		89,604		89,604
Other comprehensive income	—	—		259		—		259
Balances, June 30, 2021	60,299	$	133,994	$	(18,935)	$	2,077,110	$	2,192,169


	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at June 30, 2021
Cash equivalents	$	36,992	$	8,156	$	—	$	45,148
Short-term investments

Available-for-sale securities — corporate bonds and notes	—		104,938		—		104,938
Available-for-sale securities — municipal bonds and notes	—		8,465		—		8,465
Available-for-sale securities — U.S. government securities	—		64,875		—		64,875
Available-for-sale securities — U.S. government agency securities	—		5,830		—		5,830

Long-term investments
Available-for-sale securities — certificates of deposits	—		257		—		257
Available-for-sale securities — corporate bonds and notes	—		39,293		—		39,293
Available-for-sale securities — municipal bonds and notes	—		6,939		—		6,939
Available-for-sale securities — U.S. government securities	—		25,460		—		25,460
Available-for-sale securities — U.S. government agency securities	—		23,273		—		23,273

Total	$	36,992	$	287,486	$	—	$	324,478


June 30, 2021	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Corporate bonds and notes	$	104,722	$	240	$	(24)	$	104,938
Municipal bonds and notes	8,463		2		—		8,465
U.S. government securities	64,881		1		(7)		64,875
U.S. government agency securities	5,829		1		—		5,830

	$	183,895	$	244	$	(31)	$	184,108


September 30, 2020	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Corporate bonds and notes	$	188,932	$	736	$	(6)	$	189,662
Municipal bonds and notes	6,143		3		—		6,146
U.S. government securities	117,363		14		(3)		117,374
U.S. government agency securities	47,148		3		—		47,151

	$	359,586	$	756	$	(9)	$	360,333


	Less Than 12 Months				12 Months or Greater				Total
June 30, 2021	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate bonds and notes	$	70,533	$	(56)	$	—	$	—	$	70,533	$	(56)
Municipal bonds and notes	8,384		(4)		—		—		8,384		(4)
U.S. government securities	73,820		(14)		—		—		73,820		(14)
U.S. government agency securities	23,440		(13)		—		—		23,440		(13)

Total	$	176,177	$	(87)	$	—	$	—	$	176,177	$	(87)


			Estimated
			Useful Life
Assets acquired
Cash, cash equivalents, and restricted cash	$	14,012
Other tangible assets acquired, at fair value	7,499
Identifiable intangible assets:
Developed technologies	59,500		7 years
Customer relationships	500		1 year
Goodwill	351,417
Total assets acquired	432,928
Liabilities assumed	(5,686)
Net assets acquired	$	427,242


	June 30, 2021		September 30, 2020
Finished goods	$	13,729	$	17,096
Raw materials	8,920		10,802
	$	22,649	$	27,898


	June 30, 2021		September 30, 2020
Contract assets, current	$	176,383	$	138,096
Prepaid expenses	53,274		47,197
Capitalized contract acquisition costs, current	32,859		29,650
Other	30,730		44,563
	$	293,246	$	259,506


	Nine months ended June 30,
	2021		2020
Operating activities
Net income	$	220,523	$	229,778
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	182,757		149,315
Depreciation and amortization	84,985		69,337
Non-cash operating lease costs	28,937		29,731
Deferred income taxes	(78,092)		4,357
Impairment of assets	40,698		—
Other	604		168
Changes in operating assets and liabilities (excluding effects of the acquisition of businesses):
Accounts receivable	(88,685)		38,024
Inventories	5,249		5,575
Other current assets	(32,670)		(33,572)
Other assets	(58,565)		(5,659)
Accounts payable and accrued liabilities	13,586		(1,538)
Deferred revenue	167,199		37,934
Lease liabilities	(38,383)		(38,456)
Net cash provided by operating activities	448,143		484,994
Investing activities
Purchases of investments	(255,259)		(390,696)
Maturities of investments	164,900		322,271
Sales of investments	271,521		309,040
Acquisition of businesses, net of cash acquired	(411,319)		(955,574)
Purchases of property and equipment	(23,534)		(47,857)
Net cash used in investing activities	(253,691)		(762,816)
Financing activities
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan	64,698		51,999
Repurchase of common stock	(500,000)		(50,009)
Proceeds from term debt agreement	—		400,000
Payments on term debt agreement	(15,000)		(5,000)
Payments for debt issuance costs	—		(3,040)
Taxes paid related to net share settlement of equity awards	(10,920)		—
Net cash (used in) provided by financing activities	(461,222)		393,950
Net (decrease) increase in cash, cash equivalents and restricted cash	(266,770)		116,128
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,107		(856)
Cash, cash equivalents and restricted cash, beginning of period	852,826		602,254
Cash, cash equivalents and restricted cash, end of period	$	587,163	$	717,526


	Nine months ended June 30,
	2021		2020
Balance, beginning of period	$	70,396	$	59,446
Additional capitalized contract acquisition costs	30,431		31,759
Amortization of capitalized contract acquisition costs	(25,223)		(24,768)
Balance, end of period	$	75,604	$	66,437


	Nine months ended June 30,
	2021		2020
Balance, beginning of period	$	200,472	$	132,492
Revenue recognized during period but not yet billed	47,891		22,213
Contract asset additions	143,321		80,243
Contract assets acquired through acquisition of businesses	—		6,045
Contract assets reclassified to accounts receivable	(105,605)		(62,523)
Balance, end of period	$	286,079	$	178,470


	Nine months ended June 30,
	2021		2020
Balance, beginning of period	$	1,272,632	$	1,198,116
Amounts added but not recognized as revenues	946,186		740,050
Deferred revenue acquired through acquisition of businesses	779		39,000
Revenues recognized related to the opening balance of deferred revenue	(778,987)		(702,114)
Balance, end of period	$	1,440,610	$	1,275,052


	June 30, 2021		September 30, 2020
Intangible assets, net	$	262,518	$	225,900
Contract assets, net of current	109,696		62,377
Capitalized contract acquisition costs, net of current	42,744		40,746
Other	19,839		18,424
	$	434,797	$	347,447


	June 30, 2021		September 30, 2020
Payroll and benefits	$	165,262	$	169,708
Operating lease liabilities, current	50,136		46,010
Income and other tax accruals	51,357		33,048
Other	67,533		72,632
	$	334,288	$	321,398


	June 30, 2021		September 30, 2020
Income taxes payable	$	75,218	$	49,846

Other	9,519		9,665
	$	84,737	$	59,511


Fiscal Years Ending September 30:	Amount
2021 (remainder)	$	5,000
2022	20,000
2023	350,000
Total	$	375,000


	June 30, 2021			September 30, 2020
Operating lease right-of-use assets, net	$	253,163		$	300,680

Operating lease liabilities, current1	50,136			46,010
Operating lease liabilities, long-term	308,156			338,715
Total operating lease liabilities	$	358,292		$	384,725

Weighted average remaining lease term (in years)	9.8			10.2
Weighted average discount rate	2.59		%	2.58		%


Fiscal Years Ending September 30:	Operating Lease Payments
2021 (remainder)	$	11,680
2022	61,270
2023	48,072
2024	40,734
2025	33,542
2026	26,665
Thereafter	191,194
Total lease payments	413,157
Less: imputed interest	(54,865)
Total lease liabilities	$	358,292


	June 30, 2021		September 30, 2020
United States	$	158,232	$	190,509
EMEA	21,161		20,361
Other countries	17,387		18,369
	$	196,780	$	229,239


	Employee Severance, Benefits and Related Costs
Accrued expenses, October 1, 2019	$	—
Restructuring charges	7,800
Cash payments	(7,613)
Non-cash items	—
Accrued expenses, June 30, 2020	$	187


	June 30, 2021		September 30, 2020
Ingram Micro, Inc.	17.1	%	14.1	%
Arrow ECS	12.8	%	—


Synnex Corporation	12.5	%	11.4	%


	Total Number of Shares Purchased1	Average Price Paid per Share		Total Number of Shares Purchased per the Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan2
April 1, 2021 — April 30, 2021	449,049	$	199.903	449,049	$	772,511
May 1, 2021 — May 31, 2021	15,999	$	183.70	—	$	772,511
June 1, 2021 — June 30, 2021	—		—	—	$	772,511


Exhibit Number		Exhibit Description

31.1*	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*	—	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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101.SCH*	—	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	—	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	—	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*	—	Cover Page Interactive Data File (embedded within the Inline XBRL document)


			F5 NETWORKS, INC.

			By:						/s/ FRANCIS J. PELZER
									Francis J. Pelzer
									Executive Vice President,
									Chief Financial Officer
									(principal financial officer and principal accounting officer)