10-QPeriod: Q2 FY2021

F5, INC. Quarterly Report for Q2 Ended Mar 31, 2021

Filed May 6, 2021For Securities:FFIV

Summary

F5, Inc. (FFIV) reported its fiscal second-quarter 2021 results, showing year-over-year revenue growth driven by strong performance in software products. Total net revenues increased by 10.6% to $645.3 million for the quarter, with product revenues growing 19.1% and service revenues up 3.8%. This growth was primarily fueled by an increase in software product sales and an expanding installed base of products. The company's profitability saw a decline, with net income decreasing from $61.4 million in the prior year's quarter to $43.2 million. This was largely impacted by increased operating expenses, particularly in sales and marketing and research and development, as well as impairment charges related to facility exits. Despite these pressures, F5 continues to invest in its growth areas and manage its balance sheet, evidenced by ongoing share repurchase programs and a strong cash position, though temporarily reduced by recent acquisitions.

Financial Highlights

55 data points
Beta

Revenue

$645.29M

80.1% Gross Margin

Net Income

$43.24M

6.7% Net Margin

EPS (Diluted)

$0.70

Total Assets

$4.52B

Cash & Equivalents

$535.48M

Free Cash Flow

$119.08M

Financial Statements
Beta
Revenue$645.29M
Cost of Revenue$128.59M
Gross Profit$516.70M
R&D Expenses$140.45M
Operating Expenses$463.20M
Operating Income$53.50M
Net Income$43.24M
EPS (Basic)$0.71
EPS (Diluted)$0.70
Shares Outstanding (Basic)60.67M
Shares Outstanding (Diluted)62.16M

Key Highlights

  • 1Total net revenues increased 10.6% year-over-year to $645.3 million for the three months ended March 31, 2021.
  • 2Product revenues saw a significant increase of 19.1%, driven by strong software product sales.
  • 3Software revenue as a percentage of total product revenue grew to 35.0%, up from 34.0% in the prior year's quarter.
  • 4Net income for the quarter decreased to $43.2 million from $61.4 million in the prior year, impacted by higher operating expenses.
  • 5Operating expenses increased by 17.0% to $463.2 million, largely due to higher sales & marketing and R&D spending, along with impairment charges.
  • 6The company completed the acquisition of Volterra, Inc. for approximately $427.2 million in cash during the quarter.
  • 7F5 repurchased $400 million of its common stock during the quarter under its share repurchase program, including Accelerated Share Repurchase (ASR) agreements.

Frequently Asked Questions

The primary driver of revenue growth was an increase in software product sales, reflecting strong customer adoption of F5's subscription-based software offerings. Services revenue also contributed positively due to an expanding installed base of products.

Net income decreased primarily due to a significant increase in operating expenses. Sales and marketing expenses, and research and development expenses saw substantial growth, partly due to investments in personnel and facility-related impairment charges. This increase in expenses outpaced the revenue growth, leading to lower net income.

The acquisition of Volterra, Inc. on January 22, 2021, for approximately $427.2 million in cash, impacted the cash flows used in investing activities. Goodwill of $351.4 million was recognized as part of this acquisition. The results of Volterra have been included in F5's consolidated financial statements since the acquisition date, contributing to revenue growth, though integration costs and amortization of acquired intangibles may affect profitability.

F5 continues to actively repurchase its common stock, with $400 million repurchased during the quarter, including under Accelerated Share Repurchase (ASR) agreements. As of March 31, 2021, the company had $873 million remaining authorization for share repurchases, indicating a commitment to returning capital to shareholders and managing its capital structure.