10-QPeriod: Q1 FY2023

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2022

Filed February 3, 2023For Securities:FFIV

Summary

F5, Inc. reported total net revenues of $700.4 million for the three months ended December 31, 2022, a 1.9% increase year-over-year. This growth was primarily driven by a 4.6% increase in service revenues, reflecting a larger installed product base and the benefits of price increases. Product revenues remained largely flat, with a slight decrease in systems revenue offset by growth in software revenue. The company's net income for the quarter was $72.4 million, or $1.20 per diluted share, compared to $93.6 million, or $1.51 per diluted share, in the prior year. This decrease was influenced by higher cost of product revenues, increased operating expenses particularly in research and development, and a higher effective tax rate. Financially, F5 significantly reduced its debt by voluntarily prepaying its entire $350 million term loan. The company also maintained a strong liquidity position with $609.9 million in cash, cash equivalents, and restricted cash as of December 31, 2022, and an undrawn $350 million revolving credit facility. Shareholder returns were supported by $40 million in share repurchases during the quarter.

Financial Highlights

52 data points
Beta

Revenue

$700.38M

77.9% Gross Margin

Net Income

$72.40M

10.3% Net Margin

EPS (Diluted)

$1.20

Total Assets

$5.09B

Cash & Equivalents

$609.96M

Free Cash Flow

$144.53M

Financial Statements
Beta
Revenue$700.38M
Cost of Revenue$155.01M
Gross Profit$545.37M
R&D Expenses$142.32M
Operating Expenses$454.16M
Operating Income$91.21M
Net Income$72.40M
EPS (Basic)$1.20
EPS (Diluted)$1.20
Shares Outstanding (Basic)60.10M
Shares Outstanding (Diluted)60.39M

Key Highlights

  • 1Total net revenues grew by 1.9% to $700.4 million, driven by a 4.6% increase in services revenue.
  • 2Net income decreased to $72.4 million ($1.20/share) from $93.6 million ($1.51/share) in the prior year.
  • 3The company voluntarily prepaid its entire $350 million term loan facility during the quarter.
  • 4Operating expenses increased due to higher R&D spending and restructuring charges.
  • 5Cash and cash equivalents decreased by $152.3 million sequentially to $605.7 million, largely due to debt prepayment and share repurchases.
  • 6International revenues increased as a percentage of total revenue, reaching 46.4%.
  • 7The company ended the quarter with $350 million in available borrowing capacity under its revolving credit facility and no outstanding borrowings.

Frequently Asked Questions

The primary driver of revenue growth was the increase in service revenue, which grew by 4.6% year-over-year. This was attributed to a larger installed product base and the positive impact of price increases implemented in fiscal year 2022.

Net income decreased due to a combination of factors including higher cost of net product revenues, increased operating expenses (notably in research and development and restructuring charges), and a higher effective tax rate (24.5% in the current quarter versus 16.3% in the prior year).

F5 significantly strengthened its financial position by voluntarily prepaying its entire $350 million term loan facility. The company maintains a strong liquidity position with $609.9 million in cash, cash equivalents, and restricted cash as of December 31, 2022, and has an undrawn $350 million revolving credit facility available.

Management believes that its current cash, cash equivalents, investment balances, anticipated cash flows from operations, and available borrowing capacity are sufficient to meet its liquidity needs. The company continues to monitor macroeconomic conditions that may impact its business.