01—Abstract
Summary
Summary of the 10-K filed November 16, 2021. Cited figures are marked; the original filing is the authoritative source.
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%a 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.
02—Key points
Key Highlights
- Total net revenues increased by 10.7% to $2.60 billion in fiscal year 2021, driven by robust growth in product revenue.
- Product 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.
- The 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.
- F5 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.
- F5 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.
- Despite overall growth, the company faces competitive pressures and evolving customer demands towards subscription-based models, which it is actively addressing.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, F5, Inc. kept $0.13.
- Revenue$2.60B100.0%
- Cost of revenue−$493.1M18.9%
- Gross profit$2.11B81.1%
- Operating costs−$1.72B65.9%
- Operating income$394.0M15.1%
- Interest, other & tax−$62.8M2.4%
- Net income$331.2M12.7%
Where FY2021 revenue went
$2.60B- Other operating costs: $1.20B, 46% of revenue
- R&D: $512.6M, 20% of revenue
- Cost of revenue: $493.1M, 19% of revenue
- Net income: $331.2M, 13% of revenue
- Interest, other & tax: $62.8M, 2.4% of revenue
Kept 13% as net incomeNet income $331.2M · 13%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed November 16, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.60B$2.35B | +10.7% |
| Cost of Revenue | $493.15M$407.89M | +20.9% |
| Gross Profit | $2.11B$1.94B | +8.6% |
| R&D Expenses | $512.63M$441.32M | +16.2% |
| Operating Expenses | $1.72B$1.55B | +10.7% |
| Operating Income | $394.02M$392.27M | +0.4% |
| Net Income | $331.24M$307.44M | +7.7% |
| EPS (Basic) | $5.46$5.05 | +8.1% |
| EPS (Diluted) | $5.34$5.01 | +6.6% |
| Shares Outstanding (Basic) | 60.71M60.91M | −0.3% |
| Shares Outstanding (Diluted) | 62.06M61.38M | +1.1% |
05—Questions
Frequently Asked Questions
What is F5's primary business strategy as outlined in the filing?
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.
How is F5's revenue evolving, particularly with its focus on software and SaaS?
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.
What impact did the Volterra acquisition have on F5's business and strategy?
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.
What are the main risks F5 identifies for its business going forward?
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.
06—Continue