10-QPeriod: Q3 FY2021

F5, INC. Quarterly Report for Q3 Ended Jun 30, 2021

Filed August 5, 2021For Securities:FFIV

Summary

F5, Inc. (FFIV) reported solid revenue growth in its fiscal third quarter ended June 30, 2021, with total net revenues increasing by 11.7% year-over-year to $651.5 million. This growth was primarily driven by a significant 22.3% increase in net product revenues, especially from software sales, indicating a positive shift in their product mix. While gross margin saw a slight decrease to 81.4% from 81.8% in the prior year's comparable quarter, operating expenses also grew, impacting income from operations which rose by 9.9% to $96.4 million. The company also saw a notable reduction in its effective tax rate, contributing to a higher net income of $89.6 million, a 28.2% increase year-over-year. The company's balance sheet reflects strategic acquisitions, with goodwill increasing significantly due to the acquisition of Volterra, Inc. in January 2021. Cash and investments decreased due to this acquisition and share repurchases, but the company maintains a strong liquidity position with substantial available borrowing capacity. Despite ongoing legal proceedings, F5 demonstrated resilience in its financial performance, with continued investment in research and development and sales and marketing to support future growth.

Financial Highlights

55 data points
Beta

Revenue

$651.51M

81.4% Gross Margin

Net Income

$89.60M

13.8% Net Margin

EPS (Diluted)

$1.46

Total Assets

$4.79B

Cash & Equivalents

$587.16M

Free Cash Flow

$172.86M

Financial Statements
Beta
Revenue$651.51M
Cost of Revenue$120.90M
Gross Profit$530.61M
R&D Expenses$133.28M
Operating Expenses$434.20M
Operating Income$96.41M
Net Income$89.60M
EPS (Basic)$1.49
EPS (Diluted)$1.46
Shares Outstanding (Basic)60.19M
Shares Outstanding (Diluted)61.35M

Key Highlights

  • 1Total net revenues grew 11.7% year-over-year to $651.5 million for the third quarter of fiscal 2021.
  • 2Net product revenues surged by 22.3%, driven by strong software sales, indicating a favorable shift in the product mix.
  • 3Net income increased by 28.2% to $89.6 million compared to the same period last year.
  • 4The effective tax rate decreased significantly to 4.9% for the quarter, boosting net income.
  • 5Goodwill on the balance sheet increased substantially due to the acquisition of Volterra, Inc. for $427.2 million in January 2021.
  • 6The company repurchased $500 million of its common stock under Accelerated Share Repurchase agreements in the first half of 2021.
  • 7F5 maintains a strong liquidity position with $863.1 million in cash, cash equivalents, and investments, and $350 million in available borrowing capacity.

Frequently Asked Questions

The primary driver of F5's revenue growth in the third quarter of fiscal 2021 was a significant increase in net product revenues, which rose by 22.3% year-over-year. This growth was particularly strong in software sales, indicating a positive shift in the company's product mix towards higher-margin software solutions.

The acquisition of Volterra, Inc. on January 22, 2021, for approximately $427.2 million, significantly increased F5's goodwill on the balance sheet by $351.4 million. The results of Volterra's operations have been included in F5's consolidated financial statements since the acquisition date. The company also saw an increase in deferred revenue related to subscription services from the acquisition.

F5 reported a decrease in total cash and investments primarily due to the Volterra acquisition and share repurchases. However, the company maintains a strong liquidity position, with $863.1 million in cash, cash equivalents, and investments as of June 30, 2021. They also have $350 million in available borrowing capacity under their revolving credit facility and anticipate that current cash, operating cash flows, and borrowing capacity will be sufficient to meet their liquidity needs.

F5 is involved in several legal proceedings, including a significant intellectual property dispute with Lynwood Investment CY Limited related to NGINX software and multiple patent infringement lawsuits filed by Proven Networks LLC. While F5 believes it has strong defenses in these cases and has not accrued any loss contingencies for them, the company acknowledges that these matters could lead to costly litigation or substantial settlement charges that might materially impact its business, financial condition, results of operations, and cash flows.