10-KPeriod: FY2021

F5, INC. Annual Report, Year Ended Sep 30, 2021

Filed November 16, 2021For Securities:FFIV

Summary

F5, Inc. reported solid revenue growth in fiscal year 2021, driven by strong performance in its product segment, particularly software. The company is actively transitioning to a software and SaaS-driven business, with software revenue increasing by 40% and now representing 40% of product revenue. This shift is supported by strategic acquisitions like Volterra, which aims to bolster F5's edge-as-a-service capabilities with a security-first approach. F5 continues to focus on bringing its 'adaptive applications' vision to life by offering a comprehensive suite of security and delivery technologies for both traditional and modern application architectures across multi-cloud environments. The company is also transforming its customer experience by simplifying procurement and management, alongside enhancing its digital sales and SaaS capabilities. F5 demonstrated commitment to shareholder value through significant share repurchases in fiscal year 2021. Despite strong revenue growth, investors should note ongoing investments in R&D and sales and marketing to support its strategic transformation and competitive positioning in the evolving technology landscape.

Financial Highlights

55 data points
Beta

Revenue

$2.60B

81.1% Gross Margin

Net Income

$331.24M

12.7% Net Margin

EPS (Diluted)

$5.34

Total Assets

$5.00B

Cash & Equivalents

$584.33M

Free Cash Flow

$614.54M

Financial Statements
Beta
Revenue$2.60B
Cost of Revenue$493.15M
Gross Profit$2.11B
R&D Expenses$512.63M
Operating Expenses$1.72B
Operating Income$394.02M
Net Income$331.24M
EPS (Basic)$5.46
EPS (Diluted)$5.34
Shares Outstanding (Basic)60.71M
Shares Outstanding (Diluted)62.06M

Key Highlights

  • 1Total net revenues increased by 10.7% to $2.60 billion in fiscal year 2021, driven by robust growth in product revenue.
  • 2Product revenue saw a significant increase of 21.6% to $1.25 billion, with software revenue growing 40% and constituting 40% of total product revenue, indicating a successful shift towards software and SaaS.
  • 3The company completed the acquisition of Volterra for $427.2 million, enhancing its edge-as-a-service platform and expanding its multi-cloud security and delivery offerings.
  • 4F5 is strategically investing in Research and Development (R&D) and Sales and Marketing, with R&D up 16.2% and Sales & Marketing up 10.3% year-over-year, to support innovation and market expansion.
  • 5F5 repurchased approximately 2.5 million shares of its common stock for $500 million in fiscal year 2021, demonstrating a commitment to returning capital to shareholders.
  • 6Despite overall growth, the company faces competitive pressures and evolving customer demands towards subscription-based models, which it is actively addressing.
  • 7The company generated $645.2 million in cash from operating activities, maintaining strong liquidity with $1.04 billion in cash and investments as of September 30, 2021.

Frequently Asked Questions

F5's core strategy is to be a leading multi-cloud application security and delivery company. This involves enabling customers' applications to adapt to changing environments through intelligent automation, scalability, and robust security across diverse infrastructure, including on-premises and multi-cloud. Key components include bringing their 'adaptive applications' vision to life through organic investment and acquisitions (like NGINX, Shape Security, and Volterra), transforming customer experience with new consumption models and digital capabilities, and capturing growth in security and software offerings.

F5 is actively transitioning from a hardware-centric model to a software and SaaS-driven business. In fiscal year 2021, product revenue increased significantly, with software revenue growing by 40% and making up 40% of total product revenue. This indicates a strong shift towards recurring revenue streams and a successful integration of acquired software technologies, positioning the company for growth in modern application architectures.

The acquisition of Volterra, completed in January 2021, is a key strategic move for F5. Volterra provides an edge-as-a-service platform, and its integration is designed to create a security-first, app-driven edge platform with unlimited scale. This acquisition enhances F5's ability to address complex multi-cloud challenges and strengthens its comprehensive portfolio of application security and delivery solutions.

F5 identifies several key risks, including adverse impacts from conditions affecting the IT market and economic downturns. Cloud computing trends present both opportunities and execution risks as competitors emerge and pricing models evolve. Industry consolidation, the need for continuous product innovation and market acceptance, security vulnerabilities in their systems and products, and reliance on key personnel are also significant concerns. The company also highlights the risks associated with changing customer buying patterns towards subscription models and supply chain constraints impacting hardware component availability.