F5, Inc 10-K for FY2022

F5, Inc. (FFIV)

10-K 2022-11-15 For: 2022-09-30

Added on April 09, 2026

About this 10-K

F5, Inc filed this 10-K on November 15, 2022, covering the fiscal year ended September 30, 2022 (FY2022).

Headline figures

Fiscal year ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.7B; up 3.6% from $2.6B a year earlier
Net income: $322.16M; down 2.7% from net income of $331.24M a year earlier
Diluted EPS: $5.27; down 1.3% from $5.34 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

Item 1.	Business	3
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Mine Safety Disclosures	28

PART II

Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	41
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	79

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	80
Item 11.	Executive Compensation	80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
Item 13.	Certain Relationships and Related Transactions, and Director Independence	80
Item 14.	Principal Accountant Fees and Services	80

PART IV

Item 15.	Exhibits and Financial Statement Schedules	81
Item 16.	Form 10-K Summary	81
SIGNATURES		84


	Fiscal Year 2022				Fiscal Year 2021
	High		Low		High		Low
First Quarter	$	249.00	$	193.50	$	178.09	$	121.77
Second Quarter	$	245.59	$	188.50	$	215.91	$	173.41
Third Quarter	$	215.28	$	147.47	$	216.15	$	174.34
Fourth Quarter	$	174.38	$	141.91	$	215.56	$	181.98


	Years Ended September 30,
	2022			2021			2020
	(in thousands, except percentages)
Net revenues
Products	$	1,317,117		$	1,247,084		$	1,025,856
Services	1,378,728			1,356,332			1,324,966
Total	$	2,695,845		$	2,603,416		$	2,350,822
Percentage of net revenues
Products	48.9		%	47.9		%	43.6		%
Services	51.1			52.1			56.4
Total	100.0		%	100.0		%	100.0		%


☒			ANNUAL 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
			For the transition period from to .


	September 30,
	2022		2021

Ingram Micro, Inc.	12.9	%	12.6	%
Synnex Corporation	12.6	%	11.9	%

Carahsoft Technology	16.2	%	11.5	%


			Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)			43
Consolidated Balance Sheets			45
Consolidated Income Statements			46
Consolidated Statements of Comprehensive Income			47
Consolidated Statements of Shareholders' Equity			48
Consolidated Statements of Cash Flows			49
Notes to Consolidated Financial Statements			51


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount

Balances, September 30, 2019	60,367	$	142,597	$	(19,190)	$	1,638,090	$	1,761,497
Exercise of employee stock options	104	2,596		—		—		2,596
Issuance of stock under employee stock purchase plan	419	50,239		—		—		50,239
Issuance of restricted stock	1,027	—		—		—		—
Repurchase of common stock	(799)	(100,016)		—		—		(100,016)
Taxes paid related to net share settlement of equity awards	(19)	(2,536)		—		—		(2,536)
Stock-based compensation	—	212,573		—		—		212,573
Net income	—	—		—		307,441		307,441
Other comprehensive income	—	—		474		—		474
Balances, September 30, 2020	61,099	$	305,453	$	(18,716)	$	1,945,531	$	2,232,268
Exercise of employee stock options	164	4,864		—		—		4,864
Issuance of stock under employee stock purchase plan	542	60,888		—		—		60,888
Issuance of restricted stock	1,430	—		—		—		—
Repurchase of common stock	(2,501)	(411,056)		—		(88,944)		(500,000)
Taxes paid related to net share settlement of equity awards	(82)	(14,032)		—		—		(14,032)
Stock-based compensation	—	246,341		—		—		246,341
Net income	—	—		—		331,241		331,241
Other comprehensive loss	—	—		(1,357)		—		(1,357)
Balances, September 30, 2021	60,652	$	192,458	$	(20,073)	$	2,187,828	$	2,360,213
Exercise of employee stock options	143	3,613		—		—		3,613
Issuance of stock under employee stock purchase plan	412	60,927		—		—		60,927
Issuance of restricted stock	1,368	—		—		—		—
Repurchase of common stock	(2,611)	(394,141)		—		(105,882)		(500,023)
Taxes paid related to net share settlement of equity awards	(104)	(21,025)		—		—		(21,025)
Stock-based compensation	—	249,216		—		—		249,216
Net income	—	—		—		322,160		322,160
Other comprehensive loss	—	—		(6,103)		—		(6,103)
Balances, September 30, 2022	59,860	$	91,048	$	(26,176)	$	2,404,106	$	2,468,978


			Estimated
			Useful Life
Assets acquired
Deferred tax assets	$	14,036
Other net tangible assets acquired, at fair value	5,481
Cash, cash equivalents, and restricted cash	911
Identifiable intangible assets:
Developed technology	11,400		5 years
Customer relationships	4,400		5 years
Goodwill	43,287
Total assets acquired	$	79,515
Liabilities assumed
Deferred revenue	$	(10,591)
Total liabilities assumed	$	(10,591)
Net assets acquired	$	68,924


				Gross Unrealized						Classification on Balance Sheet
As of September 30, 2022	Fair Value Level	Cost or Amortized Cost		Gains		Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Changes in fair value recorded in other comprehensive income
Money Market Funds	Level 1	$	276,294	$	—	$	—	$	276,294	$	276,294	$	—	$	—

Corporate bonds and notes	Level 2	50,828		—		(950)		49,878		912		44,356		4,610
Municipal bonds and notes	Level 2	5,018		—		(102)		4,916		—		3,812		1,104
U.S. government securities	Level 2	84,734		—		(660)		84,074		10,120		73,954		—
U.S. government agency securities	Level 2	5,825		—		(75)		5,750		606		4,432		712
Total debt investments		$	422,699	$	—	$	(1,787)	$	420,912	$	287,932	$	126,554	$	6,426
Changes in fair value recorded in other net income (expense)
Equity investments	*							$	3,118	$	—	$	—	$	3,118
Total equity investments								3,118		—		—		3,118
Total investments								$	424,030	$	287,932	$	126,554	$	9,544


				Gross Unrealized						Classification on Balance Sheet
As of September 30, 2021	Fair Value Level	Cost or Amortized Cost		Gains		Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Changes in fair value recorded in other comprehensive income
Money Market Funds	Level 1	$	17,150	$	—	$	—	$	17,150	$	17,150	$	—	$	—
Certificates of deposit	Level 2	255		—		—		255		—		255		—
Corporate bonds and notes	Level 2	243,568		129		(86)		243,611		4,397		186,107		53,107
Municipal bonds and notes	Level 2	24,684		2		(9)		24,677		—		13,566		11,111
U.S. government securities	Level 2	162,221		14		(12)		162,223		—		102,615		59,608
U.S. government agency securities	Level 2	36,053		—		(14)		36,039		—		27,087		8,952




Total investments		$	483,931	$	145	$	(121)	$	483,955	$	21,547	$	329,630	$	132,778


Balance, September 30, 2020	$	1,858,966
Acquisition of Volterra, Inc.	351,417
Other	6,170
Balance, September 30, 2021	2,216,553
Acquisition of Threat Stack, Inc.	43,956
Other	(1,227)
Balance, September 30, 2022	$	2,259,282


	September 30, 2022						September 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	319,436	$	(151,332)	$	168,104	$	305,673	$	(111,279)	$	194,394
Customer relationships	46,142		(25,630)		20,512		41,742		(17,865)		23,877
Patents and trademarks	23,504		(19,255)		4,249		20,260		(17,180)		3,080
Trade names	24,973		(17,550)		7,423		24,973		(9,146)		15,827
Non-compete covenants	2,260		(2,260)		—		2,260		(2,260)		—
	$	416,315	$	(216,027)	$	200,288	$	394,908	$	(157,730)	$	237,178


	Years Ended September 30,
	2022			2021			2020
	(in thousands, except percentages)
Cost of net revenues and gross profit
Products	$	319,713		$	286,293		$	215,275
Services	219,914			206,853			192,612
Total	539,627			493,146			407,887
Gross profit	$	2,156,218		$	2,110,270		$	1,942,935
Percentage of net revenues and gross margin (as a percentage of related net revenue)
Products	24.3		%	23.0		%	21.0		%
Services	16.0			15.3			14.5
Total	20.0			18.9			17.4
Gross margin	80.0		%	81.1		%	82.6		%


	Years Ended September 30,
	2022			2021			2020
	(in thousands, except percentages)
Operating expenses
Sales and marketing	$	926,591		$	929,983		$	843,178
Research and development	543,368			512,627			441,324
General and administrative	274,558			273,635			258,366
Restructuring charges	7,909			—			7,800
Total	$	1,752,426		$	1,716,245		$	1,550,668
Operating expenses (as a percentage of net revenue)
Sales and marketing	34.4		%	35.7		%	35.9		%
Research and development	20.1			19.7			18.8
General and administrative	10.2			10.5			11.0
Restructuring charges	0.3			—			0.3
Total	65.0		%	65.9		%	66.0		%


	Years Ended September 30,
	2022		2021		2020
	(in thousands)
Liquidity and Capital Resources
Cash and cash equivalents and investments	$	894,110	$	1,043,385	$	1,312,828
Cash provided by operating activities	442,631		645,196		660,898
Cash provided by (used in) investing activities	218,116		(445,335)		(747,002)
Cash (used in) provided by financing activities	(476,508)		(468,280)		337,243


	September 30,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	758,012	$	580,977
Short-term investments	126,554		329,630
Accounts receivable, net of allowances of $6,020 and $3,696	469,979		340,536
Inventories	68,365		22,055
Other current assets	489,314		337,902
Total current assets	1,912,224		1,611,100
Property and equipment, net	168,182		191,164
Operating lease right-of-use assets	227,475		244,934
Long-term investments	9,544		132,778
Deferred tax assets	183,365		128,193
Goodwill	2,259,282		2,216,553
Other assets, net	516,122		472,558
Total assets	$	5,276,194	$	4,997,280
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	113,178	$	62,096
Accrued liabilities	309,819		341,487
Deferred revenue	1,067,182		968,669
Current portion of long-term debt	349,772		19,275
Total current liabilities	1,839,951		1,391,527
Deferred tax liabilities	2,781		2,414
Deferred revenue, long-term	624,398		521,173
Operating lease liabilities, long-term	272,376		296,945
Long-term debt	—		349,772
Other long-term liabilities	67,710		75,236
Total long-term liabilities	967,265		1,245,540
Commitments and contingencies (Note 12)
Shareholders’ equity
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding	—		—
Common stock, no par value; 200,000 shares authorized, 59,860 and 60,652 shares issued and outstanding	91,048		192,458
Accumulated other comprehensive loss	(26,176)		(20,073)
Retained earnings	2,404,106		2,187,828
Total shareholders’ equity	2,468,978		2,360,213
Total liabilities and shareholders’ equity	$	5,276,194	$	4,997,280


	Fiscal year ended September 30,
	2022		2021		2020
Operating lease expense	$	47,302	$	47,993	$	49,925
Short-term lease expense	2,465		2,953		3,563
Variable lease expense	23,209		25,200		21,980
Total lease expense	$	72,976	$	76,146	$	75,468


Fiscal Years Ending September 30:	Operating Lease Payments
2023	$	50,427
2024	46,288
2025	38,793
2026	29,241
2027	28,592
Thereafter	166,585
Total lease payments	359,926
Less: imputed interest	(45,027)
Total lease liabilities	$	314,899


	Employee Stock Purchase Plan Years Ended September 30,
	2022	2021	2020
Risk-free interest rate	0.05% - 0.62%	0.07% - 0.13%	1.10% - 1.97%
Expected dividend	—	—	—
Expected term	0.5 years	0.5 years	0.5 years
Expected volatility	26.34% - 31.57%	29.67% - 37.22%	26.32% - 41.94%


	Performance Stock Units			Restricted Stock Units
	Outstanding Performance Stock Units	Weighted Average Grant Date Fair Value		Outstanding Restricted Stock Units	Weighted Average Grant Date Fair Value
Balance, September 30, 2021	230,926	$	136.47	1,340,548	$	141.90
Units granted	111,283	200.74		1,118,854	206.45
Units vested	(119,889)	215.12		(1,122,583)	188.04
Units cancelled	(14,204)	151.07		(199,200)	170.35
Balance, September 30, 2022	208,116	$	169.99	1,137,619	$	184.59


						Expected Volatility
	Fair Value		Expected Term	Risk-Free				Index		Expected
Grant Date	per Share		(in years)	Interest Rate		F5		Members		Dividend
November 1, 2021
Tranche 1	$	283.35	0.91	0.13	%	26.21	%	27.27	%	—
Tranche 2	$	302.53	1.91	0.47	%	35.13	%	42.87	%	—
Tranche 3	$	308.76	2.91	0.76	%	32.54	%	38.24	%	—


	Options Outstanding
	Number of Shares	Weighted Average Exercise Price per Share
Balance, September 30, 2021	324,624	$	30.83
Options granted	—	—
Options exercised	(143,128)	25.24
Options cancelled	(16,700)	53.98
Balance, September 30, 2022	164,796	$	33.34


	Number of Shares	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value(1)
					(In thousands)
Stock options outstanding	164,796	6.45	$	33.34	$	18,357
Exercisable	127,072	6.20	$	30.76	$	14,482
Vested and expected to vest	162,713	6.42	$	33.20	$	18,147


						Awards Available for Grant
Balance, September 30, 2021						1,988,410
Granted						(1,255,975)
Cancelled						327,201
Additional shares reserved (terminated), net						1,013,142
Balance, September 30, 2022						2,072,778


Exhibit Number			Exhibit Description
2.1		—	Merger Agreement, dated December 19, 2019, by and among F5 Networks, Inc., Silhouette Merger Sub, Inc., Shape Security, Inc., and Shareholder Representative Services LLC(1 )+
2.2		—	Merger Agreement dated as of January 5, 2021, by and among the Registrant, Voyager Merger Sub Corporation, Volterra, Inc., and Shareholder Representative Services LLC(2 )+
3.1		—	Fourth Amended and Restated Articles of Incorporation of the Registrant(3 )
3.2		—	Eighth Amended and Restated Bylaws adopted November 12, 2021(4 )
4.1	*	—	Description of the Registrant's Securities
4.2		—	Specimen Common Stock Certificate(5 )
10.1		—	Term Credit Agreement, dated as of January 24, 2020, among F5 Networks, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent(6 )
10.2		—	Revolving Credit Agreement dated as of January 31, 2020, among F5 Networks, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent(7 )
10.3		—	Office Lease Agreement between the Registrant and Fifth & Columbia Investors, LLC dated May 3, 2017(8 )
10.4		—	Form of Indemnification Agreement between the Registrant and each of its directors and certain of its officers(9 ) §
10.5		—	F5 Networks, Inc. 2011 Employee Stock Purchase Plan (Amended and Restated effective March 14, 2019)(1 0 ) §
10.6		—	Form of Change of Control Agreement between the Registrant and the executive officers(1 1 ) §
10.7		—	F5 Networks, Inc. 2014 Incentive Plan, as amended and restated(1 2 ) §
10.8		—	Nginx, Inc. 2011 Share Plan(1 3 ) §
10.9		—	Nginx, Inc. Acquisition Equity Incentive Plan(1 3 ) §
10.10		—	Nginx, Inc. Acquisition Equity Incentive Plan Award Agreement(1 4 ) §
10.11		—	F5 Networks, Inc. Assumed Shape 2011 Stock Plan(1 5 ) §
10.12		—	F5 Networks, Inc. Shape Acquisition Equity Incentive Plan(1 5 ) §
10.13		—	Form of 2014 Incentive Plan Award Agreement (Accelerated Vesting) as revised October 2017(1 6 ) §
10.14		—	Form of 2014 Incentive Plan Award Agreement (Accelerated Vesting) as revised November 2019(1 7 ) §
10.15		—	F5 Networks, Inc. Assumed Volterra, Inc. Amended and Restated 2017 Stock Plan(1 8 ) §
10.16		—	F5 Networks, Inc. Volterra Acquisition Equity Incentive Plan(1 8 ) §
10.17		—	F5 Networks, Inc. Assumed Volterra, Inc. 2019 Restricted Stock Unit Sub-Plan France (sub-plan to the F5 Networks, Inc. Assumed Volterra, Inc. Amended and Restated 2017 Stock Plan)(1 8 ) §
10.18		—	F5 Networks, Inc. Threat Stack Acquisition Equity Incentive Plan(19 ) §
10.19		—	F5, Inc. Incentive Plan, as amended and restated(2 0 ) §
10.20		—	Offer Letter from the Registrant to François Locoh-Donou(2 1 ) §
21.1	*	—	Subsidiaries of the Registrant
23.1	*	—	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
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
101.INS	*	—	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
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


Exhibit Number			Exhibit Description
101.PRE	*	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	—	Cover Page Interactive Data File (embedded within the Inline XBRL document)


			F5, INC.

			By:						/s/ FRANÇOIS LOCOH-DONOU
									François Locoh-Donou
									Chief Executive Officer and President


Name			Jurisdiction of Organization
Traffix Communication Systems, Ltd.			Israel
Versafe, Ltd.			Israel
F5 Networks Singapore Pte Ltd.			Singapore
F5 Networks Ltd.			United Kingdom
F5 Government Solutions LLC			Virginia, U.S.A.

* All other subsidiaries would not in the aggregate constitute a “significant subsidiary” as defined in Regulation S-X.


/s/ FRANÇOIS LOCOH-DONOU
François Locoh-Donou Chief Executive Officer and President


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