Skip to content
AnalystLens

F5, INC. Annual Report, Year Ended Sep 30, 1999

Filing Date
Filed December 28, 1999
Period End
September 30, 1999
Security
FFIV
In the record · 2016–202610-K1010-Q338-K108

FFIV filed 10 annual reports (10-K), 33 quarterly reports (10-Q) and 108 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · Nov ’17Nov ’17
  2. Deal closed8-K · Jan ’20Jan ’20
  3. Leadership change8-K · Jan ’22Jan ’22
  4. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed December 28, 1999. Cited figures are marked; the original filing is the authoritative source.

F5 Networks (FFIV) reported fiscal 1999 (year ended September 30, 1999) results that marked a turning point: revenue rose sharply to $27.8 milliona from $4.9 million in fiscal 1998, a gain of roughly 470%, and the company posted its first quarterly profit in the quarter ended September 30, 1999, with net income of $2.3 million.

For the full year, however, F5 still recorded a net loss of $4.3 millionb, or $0.42 per share, versus a $3.7 million loss in 1998. Gross margin improved to 74.1% from 71.3%, but operating expenses ballooned to 91.6% of revenue, driven by sales and marketing spending that rose 248% and amortization of unearned stock compensation. Management explicitly expects operating expenses to keep rising significantly and warns that period-to-period comparisons are not meaningful given the company's limited operating history.

The balance sheet was transformed by the June 1999 IPO, which raised about $25.5 millionc net at $10.00 per share. Cash and cash equivalents reached $24.8 million, shareholders' equity was $32.0 million, and the company carries no long-term debt, though it has substantial lease commitments totaling about $34.8 million, including a new 12-year Seattle headquarters lease. A subsequent secondary offering in October 1999 raised roughly $31.5 million net, which is not reflected in these statements.

The stock traded at $135.50d in December 1999, a dramatic run-up from the $10 IPO price, which signals very high market expectations. For investors, the key considerations are concentration and execution risk. Exodus Communications accounted for 22% of fiscal 1999 revenue, BIG/ip generates about 73% of revenue, and the company holds no issued patents, with only six applications pending.

The company competes against Cisco, which holds the dominant market share and has far greater resources. The business is promising and growing fast, but it remains unproven, with a short profitability record and a heavy investment phase ahead.

02—Key points

Key Highlights

  1. Revenue grew to $27.8 million in fiscal 1999, up from $4.9 million in fiscal 1998, with product revenue at $23.4 million and services at $4.4 million.
  2. F5 posted its first profitable quarter (September 1999 quarter, net income of $2.3 million), but still reported a full-year fiscal 1999 net loss of $4.3 million, or $0.42 per share.
  3. Gross margin improved to 74.1% from 71.3%, though operating expenses were 91.6% of revenue, and management expects these expenses to increase significantly.
  4. The June 1999 IPO raised about $25.5 million net, and a October 1999 secondary offering raised roughly $31.5 million net, leaving the company with $24.8 million in cash and no long-term debt at fiscal year-end.
  5. Customer concentration is significant: Exodus Communications accounted for 22% of net revenue and 16% of accounts receivable, and BIG/ip represented about 73% of revenue.
  6. Competition is intense, with Cisco holding the dominant market share and far greater financial and sales resources, and F5 holds no issued patents (six applications pending).
  7. Operating lease commitments total approximately $34.8 million, including a 12-year Seattle headquarters lease expected to commence in mid-2000.

03—Questions

Frequently Asked Questions

  1. Is F5 Networks profitable?

    Not for the full fiscal year. F5 reported a net loss of $4.3 million ($0.42 per share) for fiscal 1999. However, it achieved its first profitable quarter, the three months ended September 30, 1999, with net income of $2.3 million. Management cautions that it may not sustain profitability because it plans to increase operating expenses substantially.

  2. How concentrated is F5's customer base and revenue?

    Concentration is high. Exodus Communications, a reseller, accounted for 22% of fiscal 1999 net revenue, and BIG/ip accounts for about 73% of revenue. Most indirect sales go through Exodus and Frontier GlobalCenter, and the channel agreements are non-exclusive with terms of one to two years and no renewal obligation.

  3. What did the IPO and secondary offering mean for the company's finances?

    The June 1999 IPO sold 2.86 million shares at $10.00, netting about $25.5 million. The October 1999 secondary offering of 500,000 shares at $67.00 added roughly $31.5 million net, which is not included in the fiscal year-end balance sheet. Management says existing cash and operating cash flow should be sufficient for the foreseeable future.

  4. What are the main risks to investors?

    The main risks are a limited operating history that makes forecasting difficult, volatile quarterly results driven by large and delayed orders, dependence on the BIG/ip product line, intense competition from Cisco and others, reliance on three contract manufacturers and limited component sources, and weak intellectual property protection because no patents have been issued. The company also has high lease commitments and expects heavy spending ahead.

04—Continue

← View all 10-K filings