F5, Inc 10-Q for FY2023 Q3

F5, Inc. (FFIV)

10-Q 2023-08-04 For: 2023-06-30

Added on April 09, 2026

About this 10-Q

F5, Inc filed this 10-Q on August 4, 2023, covering the quarter ended June 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $702.64M; up 4.2% from $674.49M a year earlier
Net income: $88.98M; up 7.2% from net income of $83.02M a year earlier
Diluted EPS: $1.48; up 8.0% from $1.37 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			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 4. Mine Safety Disclosures			32
Item 5. Other Information			32
Item 6. Exhibits			32
SIGNATURES			33


	June 30, 2023		September 30, 2022
ASSETS
Current assets
Cash and cash equivalents	$	677,498	$	758,012
Short-term investments	13,109		126,554
Accounts receivable, net of allowances of $5,172 and $6,020	439,518		469,979
Inventories	46,102		68,365
Other current assets	537,557		489,314
Total current assets	1,713,784		1,912,224
Property and equipment, net	171,147		168,182
Operating lease right-of-use assets	204,196		227,475
Long-term investments	5,887		9,544
Deferred tax assets	271,171		183,365
Goodwill	2,288,678		2,259,282
Other assets, net	464,293		516,122
Total assets	$	5,119,156	$	5,276,194
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	65,499	$	113,178
Accrued liabilities	274,255		309,819
Deferred revenue	1,149,787		1,067,182
Current portion of long-term debt	—		349,772
Total current liabilities	1,489,541		1,839,951
Deferred tax liabilities	3,883		2,781
Deferred revenue, long-term	641,647		624,398
Operating lease liabilities, long-term	250,077		272,376
Other long-term liabilities	76,505		67,710
Total long-term liabilities	972,112		967,265
Commitments and contingencies (Note 8)
Shareholders' equity
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding	—		—
Common stock, no par value; 200,000 shares authorized, 59,296 and 59,860 shares issued and outstanding	32,519		91,048
Accumulated other comprehensive loss	(21,936)		(26,176)
Retained earnings	2,646,920		2,404,106
Total shareholders' equity	2,657,503		2,468,978
Total liabilities and shareholders' equity	$	5,119,156	$	5,276,194


	Three months ended June 30,				Nine months ended June 30,
	2023		2022		2023		2022
Net revenues
Products	$	328,175	$	326,482	$	1,009,314	$	967,149
Services	374,467		348,006		1,096,881		1,028,663
Total	702,642		674,488		2,106,195		1,995,812
Cost of net revenues
Products	87,940		73,558		286,590		226,454
Services	53,743		57,175		165,754		165,711
Total	141,683		130,733		452,344		392,165
Gross profit	560,959		543,755		1,653,851		1,603,647
Operating expenses
Sales and marketing	207,202		226,731		673,383		689,592
Research and development	128,765		138,737		412,451		404,846
General and administrative	64,775		70,823		201,802		205,038
Restructuring charges	56,648		—		65,388		7,909
Total	457,390		436,291		1,353,024		1,307,385
Income from operations	103,569		107,464		300,827		296,262
Other income (expense), net	2,896		(6,221)		10,335		(10,586)
Income before income taxes	106,465		101,243		311,162		285,676
Provision for income taxes	17,489		18,224		68,348		52,862
Net income	$	88,976	$	83,019	$	242,814	$	232,814
Net income per share — basic	$	1.48	$	1.38	$	4.04	$	3.85
Weighted average shares — basic	59,977		59,965		60,133		60,450
Net income per share — diluted	$	1.48	$	1.37	$	4.02	$	3.80
Weighted average shares — diluted	60,314		60,460		60,463		61,345


☑			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
	Three months ended June 30, 2022
Balances, March 31, 2022	60,465	$	82,133	$	(22,628)	$	2,337,623	$	2,397,128
Exercise of employee stock options	19	450		—		—		450
Issuance of stock under employee stock purchase plan	243	34,602		—		—		34,602
Issuance of restricted stock	305	—		—		—		—
Repurchase of common stock	(1,463)	(144,118)		—		(105,882)		(250,000)
Taxes paid related to net share settlement of equity awards	(13)	(2,091)		—		—		(2,091)
Stock-based compensation	—	61,875		—		—		61,875
Net income	—	—		—		83,019		83,019
Other comprehensive loss	—	—		(1,998)		—		(1,998)
Balances, June 30, 2022	59,556	$	32,851	$	(24,626)	$	2,314,760	$	2,322,985

	Three months ended June 30, 2023
Balances, March 31, 2023	60,465	$	190,592	$	(22,977)	$	2,557,944	$	2,725,559
Exercise of employee stock options	13	313		—		—		313
Issuance of stock under employee stock purchase plan	321	36,723		—		—		36,723
Issuance of restricted stock	320	—		—		—		—
Repurchase of common stock	(1,812)	(250,036)		—		—		(250,036)

Taxes paid related to net share settlement of equity awards	(11)	(1,545)		—		—		(1,545)
Stock-based compensation	—	56,472		—		—		56,472
Net income	—	—		—		88,976		88,976
Other comprehensive income	—	—		1,041		—		1,041
Balances, June 30, 2023	59,296	$	32,519	$	(21,936)	$	2,646,920	$	2,657,503



	Nine months ended June 30, 2022
Balances, September 30, 2021	60,652	$	192,458	$	(20,073)	$	2,187,828	$	2,360,213
Exercise of employee stock options	115	2,753		—		—		2,753
Issuance of stock under employee stock purchase plan	412	60,927		—		—		60,927
Issuance of restricted stock	1,080	—		—		—		—
Repurchase of common stock	(2,611)	(394,141)		—		(105,882)		(500,023)

Taxes paid related to net share settlement of equity awards	(92)	(18,907)		—		—		(18,907)
Stock-based compensation	—	189,761		—		—		189,761
Net income	—	—		—		232,814		232,814
Other comprehensive loss	—	—		(4,553)		—		(4,553)
Balances, June 30, 2022	59,556	$	32,851	$	(24,626)	$	2,314,760	$	2,322,985

	Nine months ended June 30, 2023
Balances, September 30, 2022	59,860	$	91,048	$	(26,176)	$	2,404,106	$	2,468,978
Exercise of employee stock options	39	1,029		—		—		1,029
Issuance of stock under employee stock purchase plan	500	58,468		—		—		58,468
Issuance of restricted stock	1,051	—		—		—		—
Repurchase of common stock	(2,075)	(290,041)		—		—		(290,041)

Taxes paid related to net share settlement of equity awards	(79)	(11,369)		—		—		(11,369)
Stock-based compensation	—	183,384		—		—		183,384
Net income	—	—		—		242,814		242,814
Other comprehensive income	—	—		4,240		—		4,240
Balances, June 30, 2023	59,296	$	32,519	$	(21,936)	$	2,646,920	$	2,657,503


				Gross Unrealized						Classification on Balance Sheet
As of June 30, 2023	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 (loss)
Money Market Funds	Level 1	$	186,499	$	—	$	—	$	186,499	$	186,499	$	—	$	—

Corporate bonds and notes	Level 2	7,271		—		(144)		7,127		—		6,354		773
Municipal bonds and notes	Level 2	2,156		—		(31)		2,125		—		2,125		—
U.S. government securities	Level 2	2,899		—		(34)		2,865		—		2,865		—
U.S. government agency securities	Level 2	1,785		—		(20)		1,765		—		1,765		—
Total debt investments		$	200,610	$	—	$	(229)	$	200,381	$	186,499	$	13,109	$	773
Changes in fair value recorded in other net income (expense)
Equity investments	*							$	5,114	$	—	$	—	$	5,114
Total equity investments								5,114		—		—		5,114
Total investments								$	205,495	$	186,499	$	13,109	$	5,887


				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 (loss)
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


			Estimated
			Useful Life
Assets acquired
Deferred tax assets	$	14,041
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	43,282
Total assets acquired	$	79,515
Liabilities assumed
Deferred revenue	$	(10,591)
Total liabilities assumed	$	(10,591)
Net assets acquired	$	68,924


	June 30, 2023		September 30, 2022
Finished goods	$	10,115	$	10,164
Raw materials	35,987		58,201
	$	46,102	$	68,365


	June 30, 2023		September 30, 2022
Unbilled receivables	$	366,511	$	319,707
Prepaid expenses	76,678		57,340
Capitalized contract acquisition costs	31,992		34,658
Other1	62,376		77,609
	$	537,557	$	489,314


	June 30, 2023		September 30, 2022
Intangible assets	$	163,995	$	200,288
Unbilled receivables	212,749		224,780
Capitalized contract acquisition costs	36,098		42,561
Other	51,451		48,493
	$	464,293	$	516,122


	Nine months ended June 30,
	2023		2022
Balance, beginning of period	$	77,220	$	77,836
Additional capitalized contract acquisition costs	19,384		27,620
Amortization of capitalized contract acquisition costs	(28,514)		(28,782)
Balance, end of period	$	68,090	$	76,674


	Nine months ended June 30,
	2023		2022
Balance, beginning of period	$	1,691,580	$	1,489,841
Amounts added but not recognized as revenues	1,012,441		973,673
Deferred revenue acquired through acquisition of businesses	1,800		10,591
Revenues recognized related to the opening balance of deferred revenue	(914,387)		(836,800)
Balance, end of period	$	1,791,434	$	1,637,305


	Three months ended June 30,				Nine months ended June 30,
	2023		2022		2023		2022
Operating lease expense	$	11,801	$	11,810	$	36,498	$	35,594
Short-term lease expense	872		683		2,271		1,858
Variable lease expense	5,895		5,208		16,881		17,486
Total lease expense	$	18,568	$	17,701	$	55,650	$	54,938


Fiscal Years Ending September 30:	Operating Lease Payments
2023 (remainder)	$	12,364
2024	49,024
2025	41,307
2026	31,727
2027	30,530
2028	28,396
Thereafter	138,797
Total lease payments	332,145
Less: imputed interest	(39,913)
Total lease liabilities	$	292,232


	June 30, 2023		September 30, 2022
Payroll and benefits	$	136,462	$	165,437
Operating lease liabilities, current	42,155		42,523
Income and other tax accruals	36,510		41,217
Other	59,128		60,642
	$	274,255	$	309,819


	June 30, 2023		September 30, 2022
Income taxes payable	$	68,001	$	59,553

Other	8,504		8,157
	$	76,505	$	67,710


	June 30, 2023			September 30, 2022
Operating lease right-of-use assets, net	$	204,196		$	227,475

Operating lease liabilities, current1	42,155			42,523
Operating lease liabilities, long-term	250,077			272,376
Total operating lease liabilities	$	292,232		$	314,899

Weighted average remaining lease term (in years)	8.7			9.2
Weighted average discount rate	2.75		%	2.66		%


	June 30, 2023		September 30, 2022
Americas:
United States	$	126,155	$	134,699
Other	2,951		1,773
Total Americas	129,106		136,472
EMEA	24,626		17,376
APAC	17,415		14,334
	$	171,147	$	168,182


	June 30, 2023		September 30, 2022
Ingram Micro, Inc.	11.5	%	12.9	%

Synnex Corporation	15.4	%	12.6	%
Carahsoft Technology Corporation	10.7	%	16.2	%


	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, 2023 — April 30, 2023	76,271	$	131.13	76,271	$	1,222,481
May 1, 2023 — May 31, 2023	1,611,454	$	137.48	1,599,964	$	1,002,479
June 1, 2023 — June 30, 2023	135,811	$	147.50	135,811	$	982,447


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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			F5, INC.

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


Date:			August 4, 2023

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