FFIV F5 Inc

F5, Inc. (NASDAQ: FFIV) today announced financial results for its third quarter ended June 30, 2024.

“We delivered third quarter revenue at the top end of our guidance range fueled by software growth and continued growth of our global services offerings,” said François Locoh-Donou, F5’s President and CEO. “In addition, our continued operating discipline enabled us to deliver earnings per share well above the high end of our guidance.”

“F5 is proving itself an invaluable partner as large enterprises across the globe modernize their IT infrastructures and drive IT cost savings,” said Locoh-Donou. “F5 is optimizing application security, delivery, management, and performance across hybrid, multicloud environments with enhanced automation and meaningful operational efficiencies. We are also partnering with several large enterprise customers as they begin to ready their IT infrastructure to leverage AI at scale.”

Third Quarter Performance Summary

Third quarter fiscal year 2024 revenue totaled $695 million, compared with $703 million in the third quarter of fiscal year 2023. Software revenue of $179 million grew 3% from the year-ago period. Systems revenue of $130 million represented a decline of 16% from the prior year. Global services revenue of $387 million grew 3% from the year-ago period.

GAAP gross profit for the third quarter of fiscal year 2024 was $559 million, representing GAAP gross margin of 80.4%. This compares with GAAP gross profit of $561 million in the year-ago period, which represented GAAP gross margin of 79.8%. Non-GAAP gross profit for the third quarter of fiscal year 2024 was $578 million, representing non-GAAP gross margin of 83.1%. This compares with non-GAAP gross profit of $579 million in the year-ago period, which represented non-GAAP gross margin of 82.5%.

GAAP operating profit for the third quarter was $163 million, representing GAAP operating margin of 23.4%. This compares with GAAP operating profit of $104 million in the year-ago period, which represented GAAP operating margin of 14.7%. Non-GAAP operating profit for the period was $233 million, representing non-GAAP operating margin of 33.4%. This compares to non-GAAP operating profit of $233 million in the year-ago period, which represented non-GAAP operating margin of 33.2%.

GAAP net income for the third quarter of fiscal year 2024 was $144 million, or $2.44 per diluted share compared to $89 million, or $1.48 per diluted share, in the third quarter of fiscal year 2023. Non-GAAP net income for the third quarter of fiscal year 2024 was $199 million, or $3.36 per diluted share, compared to $194 million, or $3.21 per diluted share, in the third quarter of fiscal year 2023.

Performance Summary Tables

GAAP Measures Non-GAAP Measures ($ in millions except EPS) Q3 FY2024 Q3 FY2023 ($ in millions except EPS) Q3 FY2024 Q3 FY2023 Revenue

$

695

$

703

Gross profit

$

559

$

561

Gross profit

$

578

$

579

Gross margin

 

80.4%

 

79.8%

Gross margin

 

83.1%

 

82.5%

Operating profit

$

163

$

104

Operating profit

$

233

$

233

Operating margin

 

23.4%

 

14.7%

Operating margin

 

33.4%

 

33.2%

Net income

$

144

$

89

Net income

$

199

$

194

EPS

$

2.44

$

1.48

EPS

$

3.36

$

3.21

A reconciliation of GAAP to non-GAAP measures is included in the attached Consolidated Income Statements. Additional information about non-GAAP financial information is included in this release.

Business Outlook

For the fourth quarter of fiscal year 2024, F5 expects to deliver revenue in the range of $720 million to $740 million, with non-GAAP earnings in the range of $3.38 to $3.50 per diluted share.

“Based on our visibility to strong fourth quarter software demand, we now expect fiscal year 2024 revenue toward the top end of our prior expectations, at approximately $2.8 billion, or roughly flat with last year,” said Locoh-Donou. “As a result of continued operating discipline, and with some tax favorability in our third quarter, we also are raising our earnings growth expectations for the year. We now expect to deliver approximately 12% non-GAAP earnings per share growth compared to fiscal year 2023.”

All forward-looking non-GAAP measures included in the Company’s business outlook exclude estimates for amortization of intangible assets, share-based compensation expenses, significant effects of tax legislation and judicial or administrative interpretation of tax regulations (including the impact of income tax reform), non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of any future acquisitions or divestitures, acquisition-related charges and write-downs, restructuring charges, facility exit costs, or other non-recurring charges that may occur in the period. F5 is unable to provide a reconciliation of non-GAAP earnings guidance measures to corresponding U.S. generally accepted accounting principles or GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically varied and may continue to vary significantly from quarter to quarter.

Live Webcast and Conference Call

F5 will host a live webcast to review its financial results and outlook today, July 29, 2024, at 4:30 pm ET. The live webcast is accessible from the investor relations page of F5.com. To participate in the live call via telephone in the U.S. and Canada, dial +1 (877) 407-0312. Outside the U.S. and Canada, dial +1 (201) 389-0899. Please call at least five minutes prior to the call start time. The webcast replay will be archived on the investor relations portion of F5’s website.

Forward Looking Statements

This press release contains forward-looking statements including, among other things, F5’s role as a partner with large enterprises, F5’s visibility to strong fourth quarter software demand, the Company’s future financial performance including revenue, earnings growth, future customer demand, and the performance and benefits of the Company's products. These, and other statements that are not historical facts, are forward-looking statements. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. Such forward-looking statements involve risks and uncertainties, as well as assumptions and other factors that, if they do not fully materialize or prove correct, could cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: customer acceptance of offerings; continued disruptions to the global supply chain resulting in inability to source required parts for F5’s products or the ability to only do so at greatly increased prices thereby impacting our revenues and/or margins; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; F5’s ability to successfully integrate acquired businesses’ products with F5 technologies; the ability of F5’s sales professionals and distribution partners to sell new solutions and service offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into F5’s markets, and new product and marketing initiatives by our competitors; increased sales discounts; the business impact of the acquisitions and potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement of completion of acquisitions; uncertain global economic conditions which may result in reduced customer demand for our products and services and changes in customer payment patterns; litigation involving patents, intellectual property, shareholder and other matters, and governmental investigations; potential security flaws in the Company’s networks, products or services; cybersecurity attacks on its networks, products or services; natural catastrophic events; a pandemic or epidemic; F5’s ability to sustain, develop and effectively utilize distribution relationships; F5’s ability to attract, train and retain qualified product development, marketing, sales, professional services and customer support personnel; F5’s ability to expand in international markets; the unpredictability of F5’s sales cycle; the ability of F5 to execute on its share repurchase program including the timing of any repurchases; future prices of F5’s common stock; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K and other documents that we may file or furnish from time to time, which could cause actual results to vary from expectations. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in F5’s most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. All forward-looking statements in this press release are based on information available as of the date hereof and qualified in their entirety by this cautionary statement. F5 assumes no obligation to revise or update these forward-looking statements.

GAAP to non-GAAP Reconciliation

F5’s management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its products, services operations, and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is GAAP net income excluding, as applicable, stock-based compensation, amortization, and impairment of purchased intangible assets, facility-exit costs, acquisition-related charges, net of taxes, restructuring charges, and certain non-recurring tax expenses and benefits, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. This measure of non-GAAP net income is adjusted by the amount of additional taxes or tax benefit that the Company would accrue if it used non-GAAP results instead of GAAP results to calculate the Company’s tax liability.

The non-GAAP adjustments, and F5's basis for excluding them from non-GAAP financial measures, are outlined below:

Stock-based compensation. Stock-based compensation consists of expense for stock options, restricted stock, and employee stock purchases through the Company’s Employee Stock Purchase Plan. Although stock-based compensation is an important aspect of the compensation of F5’s employees and executives, management believes it is useful to exclude stock-based compensation expenses to better understand the long-term performance of the Company’s core business and to facilitate comparison of the Company’s results to those of peer companies.

Amortization and impairment of purchased intangible assets. Purchased intangible assets are amortized over their estimated useful lives, and generally cannot be changed or influenced by management after the acquisition. On a non-recurring basis, when certain events or circumstances are present, management may also be required to write down the carrying value of its purchased intangible assets and recognize impairment charges. Management does not believe these charges accurately reflect the performance of the Company’s ongoing operations; therefore, they are not considered by management in making operating decisions. However, investors should note that the use of intangible assets contributed to F5’s revenues earned during the periods presented and will contribute to F5’s future period revenues as well.

Facility-exit costs. F5 has incurred certain non-recurring right-of-use asset impairment charges, and other related recurring costs in connection with the exit of its leased facilities. These charges are not representative of the ongoing activity or costs to the business. As a result, these charges are being excluded to provide investors with a more comparable measure of costs associated with ongoing operations.

Acquisition-related charges, net. F5 does not acquire businesses on a predictable cycle and the terms and scope of each transaction can vary significantly and are unique to each transaction. F5 excludes acquisition-related charges from its non-GAAP financial measures to provide a useful comparison of the Company’s operating results to prior periods and to its peer companies. Acquisition-related charges consist of planning, execution and integration costs incurred directly as a result of an acquisition.

Restructuring charges. F5 has incurred restructuring charges that are included in its GAAP financial statements, primarily related to workforce reductions and costs associated with exiting facility-lease commitments. F5 excludes these items from its non-GAAP financial measures when evaluating its continuing business performance as such items vary significantly based on the magnitude of the restructuring action and do not reflect expected future operating expenses. In addition, these charges do not necessarily provide meaningful insight into the fundamentals of current or past operations of its business.

Management believes that non-GAAP net income per share provides useful supplemental information to management and investors regarding the performance of the Company’s core business operations and facilitates comparisons to the Company’s historical operating results. Although F5’s management finds this non-GAAP measure to be useful in evaluating the performance of the core business, management’s reliance on this measure is limited because items excluded from such measures could have a material effect on F5’s earnings and earnings per share calculated in accordance with GAAP. Therefore, F5’s management will use its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations when evaluating the performance of the Company’s core business. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures in accordance with GAAP.

F5 believes that presenting its non-GAAP measures of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the Company’s core business and is used by management in its own evaluation of the Company’s performance. Investors are encouraged to look at GAAP results as the best measure of financial performance. However, while the GAAP results are more complete, the Company provides investors these supplemental measures since, with reconciliation to GAAP, it may provide additional insight into the Company’s operational performance and financial results.

For reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section in our attached Condensed Consolidated Income Statements entitled “Non-GAAP Financial Measures.”

About F5

F5 is a multicloud application security and delivery company committed to bringing a better digital world to life.​​​​​​​ F5 partners with the world’s largest, most advanced organizations to secure every app — on premises, in the cloud, or at the edge. F5 enables businesses to continuously stay ahead of threats while delivering exceptional, secure digital experiences for their customers. For more information, go to f5.com. (NASDAQ: FFIV)

You can also follow @F5 on X (Twitter) or visit us on LinkedIn and Facebook for more information about F5, its partners, and technologies. F5 is a trademark, service mark, or tradename of F5, Inc., in the U.S. and other countries. All other product and company names herein may be trademarks of their respective owners.

SOURCE: F5, Inc.

F5, Inc. Consolidated Balance Sheets (unaudited, in thousands)     June 30, September 30,

2024

2023

  Assets Current assets Cash and cash equivalents

$

934,809

 

$

797,163

 

Short-term investments

 

812

 

 

6,160

 

Accounts receivable, net of allowances of $3,685 and $3,561

 

419,986

 

 

454,832

 

Inventories

 

78,537

 

 

35,874

 

Other current assets

 

552,023

 

 

554,744

 

Total current assets

 

1,986,167

 

 

1,848,773

 

  Property and equipment, net

 

154,238

 

 

170,422

 

Operating lease right-of-use assets

 

185,253

 

 

195,471

 

Long-term investments

 

7,298

 

 

5,068

 

Deferred tax assets

 

343,611

 

 

295,308

 

Goodwill

 

2,312,362

 

 

2,288,678

 

Other assets, net

 

425,521

 

 

444,613

 

Total assets

$

5,414,450

 

$

5,248,333

 

  Liabilities and Shareholders’ Equity Current liabilities Accounts payable

$

53,618

 

$

63,315

 

Accrued liabilities

 

259,874

 

 

282,890

 

Deferred revenue

 

1,142,090

 

 

1,126,576

 

Total current liabilities

 

1,455,582

 

 

1,472,781

 

  Deferred tax liabilities

 

6,146

 

 

4,637

 

Deferred revenue, long-term

 

630,494

 

 

648,545

 

Operating lease liabilities, long-term

 

222,486

 

 

239,565

 

Other long-term liabilities

 

88,997

 

 

82,573

 

Total long-term liabilities

 

948,123

 

 

975,320

 

  Commitments and contingencies   Shareholders’ equity Preferred stock, no par value; 10,000 shares authorized, no shares outstanding

 

-

 

 

-

 

Common stock, no par value; 200,000 shares authorized, 58,284 and 59,207 shares issued and outstanding

 

17,898

 

 

24,399

 

Accumulated other comprehensive loss

 

(22,257

)

 

(23,221

)

Retained earnings

 

3,015,104

 

 

2,799,054

 

Total shareholders' equity

 

3,010,745

 

 

2,800,232

 

Total liabilities and shareholders' equity

$

5,414,450

 

$

5,248,333

 

F5, Inc. Consolidated Income Statements (unaudited, in thousands, except per share amounts)     Three Months Ended Nine Months Ended June 30, June 30,

2024

2023

2024

2023

  Net revenues Products

$

308,489

 

$

328,175

 

$

914,510

 

$

1,009,314

 

Services

 

387,006

 

 

374,467

 

 

1,154,936

 

 

1,096,881

 

Total

 

695,495

 

 

702,642

 

 

2,069,446

 

 

2,106,195

 

  Cost of net revenues (1)(2)(3)(4) Products

 

80,813

 

 

87,940

 

 

248,834

 

 

286,590

 

Services

 

55,612

 

 

53,743

 

 

165,093

 

 

165,754

 

Total

 

136,425

 

 

141,683

 

 

413,927

 

 

452,344

 

Gross profit

 

559,070

 

 

560,959

 

 

1,655,519

 

 

1,653,851

 

  Operating expenses (1)(2)(3)(4) Sales and marketing

 

205,550

 

 

207,202

 

 

615,277

 

 

673,383

 

Research and development

 

124,387

 

 

128,765

 

 

366,169

 

 

412,451

 

General and administrative

 

65,950

 

 

64,775

 

 

197,852

 

 

201,802

 

Restructuring charges

 

93

 

 

56,648

 

 

8,655

 

 

65,388

 

Total

 

395,980

 

 

457,390

 

 

1,187,953

 

 

1,353,024

 

  Income from operations

 

163,090

 

 

103,569

 

 

467,566

 

 

300,827

 

Other income, net

 

8,529

 

 

2,896

 

 

24,385

 

 

10,335

 

Income before income taxes

 

171,619

 

 

106,465

 

 

491,951

 

 

311,162

 

Provision for income taxes

 

27,540

 

 

17,489

 

 

90,469

 

 

68,348

 

Net income

$

144,079

 

$

88,976

 

$

401,482

 

$

242,814

 

    Net income per share - basic

$

2.46

 

$

1.48

 

$

6.82

 

$

4.04

 

Weighted average shares - basic

 

58,584

 

 

59,977

 

 

58,832

 

 

60,133

 

  Net income per share - diluted

$

2.44

 

$

1.48

 

$

6.75

 

$

4.02

 

Weighted average shares - diluted

 

59,147

 

 

60,314

 

 

59,461

 

 

60,463

 

    Non-GAAP Financial Measures   Net income as reported

$

144,079

 

$

88,976

 

$

401,482

 

$

242,814

 

Stock-based compensation expense

 

54,206

 

 

56,472

 

 

165,349

 

 

183,385

 

Amortization and impairment of purchased intangible assets

 

13,250

 

 

13,876

 

 

41,187

 

 

39,130

 

Facility-exit costs

 

1,264

 

 

1,527

 

 

2,070

 

 

5,066

 

Acquisiton-related charges

 

656

 

 

1,327

 

 

3,847

 

 

16,109

 

Restructuring charges

 

93

 

 

56,648

 

 

8,655

 

 

65,388

 

Tax effects related to above items

 

(14,709

)

 

(25,173

)

 

(45,861

)

 

(55,337

)

Net income excluding stock-based compensation expense, amortization and impairment of purchased intangible assets, facility-exit costs, acquisition-related charges, and restructuring charges, net of tax effects (non-GAAP) - diluted

$

198,839

 

$

193,653

 

$

576,729

 

$

496,555

 

  Net income per share excluding stock-based compensation expense, amortization and impairment of purchased intangible assets, facility-exit costs, acquisition-related charges, and restructuring charges, net of tax effects (non-GAAP) - diluted

$

3.36

 

$

3.21

 

$

9.70

 

$

8.21

 

  Weighted average shares - diluted

 

59,147

 

 

60,314

 

 

59,461

 

 

60,463

 

  (1) Includes stock-based compensation expense as follows: Cost of net revenues

$

7,189

 

$

7,297

 

$

22,320

 

$

22,516

 

Sales and marketing

 

20,783

 

 

22,561

 

 

63,800

 

 

75,171

 

Research and development

 

14,752

 

 

16,297

 

 

46,283

 

 

53,528

 

General and administrative

 

11,482

 

 

10,317

 

 

32,946

 

 

32,170

 

$

54,206

 

$

56,472

 

$

165,349

 

$

183,385

 

  (2) Includes amortization and impairment of purchased intangible assets as follows: Cost of net revenues

$

11,699

 

$

10,984

 

$

34,565

 

$

30,902

 

Sales and marketing

 

1,405

 

 

2,672

 

 

6,032

 

 

7,451

 

Research and development

 

94

 

 

-

 

 

282

 

 

-

 

General and administrative

 

52

 

 

220

 

 

308

 

 

777

 

$

13,250

 

$

13,876

 

$

41,187

 

$

39,130

 

  (3) Includes facility-exit costs as follows: Cost of net revenues

$

125

 

$

150

 

$

231

 

$

501

 

Sales and marketing

 

397

 

 

481

 

 

991

 

 

1,630

 

Research and development

 

447

 

 

542

 

 

(37

)

 

1,720

 

General and administrative

 

295

 

 

354

 

 

885

 

 

1,215

 

$

1,264

 

$

1,527

 

$

2,070

 

$

5,066

 

  (4) Includes acquisition-related charges as follows: Cost of net revenues

$

-

 

$

45

 

$

20

 

$

212

 

Sales and marketing

 

29

 

 

349

 

 

72

 

 

2,513

 

Research and development

 

501

 

 

330

 

 

828

 

 

5,331

 

General and administrative

 

126

 

 

603

 

 

2,927

 

 

8,053

 

$

656

 

$

1,327

 

$

3,847

 

$

16,109

 

F5, Inc. Consolidated Statements of Cash Flows (unaudited, in thousands)     Nine months ended June 30,

2024

2023

  Operating activities Net income

$

401,482

 

$

242,814

 

Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation

 

165,349

 

 

183,384

 

Depreciation and amortization

 

84,062

 

 

83,173

 

Non-cash operating lease costs

 

24,776

 

 

29,977

 

Deferred income taxes

 

(47,237

)

 

(85,091

)

Impairment of assets

 

-

 

 

3,455

 

Other

 

(3,059

)

 

2,137

 

Changes in operating assets and liabilities (excluding effects of the acquisition of businesses): Accounts receivable

 

34,700

 

 

31,507

 

Inventories

 

(42,663

)

 

22,263

 

Other current assets

 

3,246

 

 

(47,488

)

Other assets

 

(17,513

)

 

13,231

 

Accounts payable and accrued liabilities

 

(22,353

)

 

(79,608

)

Deferred revenue

 

(2,537

)

 

98,054

 

Lease liabilities

 

(32,339

)

 

(34,200

)

Net cash provided by operating activities

 

545,914

 

 

463,608

 

  Investing activities Purchases of investments

 

(1,600

)

 

(1,789

)

Maturities of investments

 

5,420

 

 

103,513

 

Sales of investments

 

-

 

 

16,085

 

Acquisition of businesses, net of cash acquired

 

(32,939

)

 

(35,049

)

Purchases of property and equipment

 

(24,352

)

 

(38,802

)

Net cash (used in) provided by investing activities

 

(53,471

)

 

43,958

 

  Financing activities Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan

 

54,868

 

 

59,497

 

Payments for repurchase of common stock

 

(400,047

)

 

(290,041

)

Payments on term debt agreement

 

-

 

 

(350,000

)

Taxes paid related to net share settlement of equity awards

 

(9,952

)

 

(11,369

)

Net cash used in financing activities

 

(355,131

)

 

(591,913

)

  Net increase (decrease) in cash, cash equivalents and restricted cash

 

137,312

 

 

(84,347

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

376

 

 

3,729

 

Cash, cash equivalents and restricted cash, beginning of period

 

800,835

 

 

762,207

 

Cash, cash equivalents and restricted cash, end of period

$

938,523

 

$

681,589

 

  Supplemental disclosures of cash flow information Cash paid for amounts included in the measurement of lease liabilities

$

38,193

 

$

40,619

 

Cash paid for interest on long-term debt

 

-

 

 

2,970

 

Supplemental disclosures of non-cash activities Right-of-use assets obtained in exchange for lease obligations

$

11,772

 

$

10,544

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729735046/en/

Investors Suzanne DuLong +1 (206) 272-7049 s.dulong@f5.com

Media Dan Sorensen +1 (650) 228-4842 d.sorensen@f5.com