Business Wire | Oct 26, 2020 04:06PM EDT

F5 Delivers 5% Revenue Growth in Fiscal Year 2020 on Building Software Momentum

Oct. 26, 2020

SEATTLE--(BUSINESS WIRE)--Oct. 26, 2020--F5 Networks, Inc. (NASDAQ: FFIV) today announced financial results for its fiscal fourth quarter and year ended September 30, 2020.

"F5 is well on its way to becoming a software-led business, with customer demand for our multi-cloud application security and delivery services driving 5% GAAP and non-GAAP annual revenue growth in fiscal year 2020," said Franois Locoh-Donou, president and CEO of F5. "Going forward, we expect continued robust software growth from a more diversified base of subscription and SaaS revenue, a software subscription renewals flywheel that is starting to turn with momentum, and true-forward revenue opportunities on a significant percentage of our long-term software subscription contracts."

"We have prioritized our innovation and investment to focus on solving our customers' most pressing application challenges," continued Locoh-Donou. "New ways of working and higher consumer expectations for application performance along with exploding application growth have created new challenges for customers that F5 is uniquely positioned to address."

Fiscal Year 2020 Performance Summary

Following its acquisition of Shape Security, to provide transparency to what F5 management believes reflects its ongoing business results, during fiscal year 2020, F5 is reporting both GAAP and non-GAAP revenue. Non-GAAP revenue excludes the impact of the purchase accounting write-down on Shape's assumed deferred revenue.

GAAP revenue of $2.35 billion for fiscal year 2020 reflects 5% growth from $2.24 billion in fiscal year 2019.

Non-GAAP revenue for fiscal year 2020 was $2.36 billion, reflecting 5% growth in total revenue and 52% growth in software revenue from the year ago period.

GAAP net income for fiscal year 2020 was $307 million, or $5.01 per diluted share compared to fiscal year 2019 GAAP net income of $428 million, or $7.08 per diluted share.

Non-GAAP net income for fiscal year 2020 was $575 million, or $9.37 per diluted share, compared to $626 million, or $10.36 per diluted share, in fiscal year 2019. Non-GAAP net income for fiscal year 2020 excludes $202 million in stock-based compensation, $56 million in acquisition-related charges, $35 million in amortization of purchased intangible assets, and $17 million in facility-exit costs.

Fourth Quarter Performance Summary

GAAP revenue of $615 million for the fourth quarter of fiscal year 2020 reflects 4% growth from $590 million in the fourth quarter of fiscal year 2019.

Non-GAAP revenue for the fourth quarter of fiscal year 2020 was $617 million, reflecting 4% growth in total revenue and 36% growth in software revenue from the year ago period.

GAAP net income for the fourth quarter of fiscal year 2020 was $78 million, or $1.26 per diluted share compared to fourth quarter fiscal year 2019 GAAP net income of $95 million, or $1.57 per diluted share.

Non-GAAP net income for the fourth quarter of fiscal year 2020 was $150 million, or $2.43 per diluted share, compared to $157 million, or $2.59 per diluted share, in the fourth quarter of fiscal year 2019. Non-GAAP net income for the fourth quarter of fiscal year 2020 excludes $52 million in stock-based compensation, $11 million in acquisition-related charges, $11 million in amortization of purchased intangible assets, and $11 million in facility-exit costs.

A reconciliation of revenue, net income, earnings per share, and other measures on a GAAP to non-GAAP basis is included in the attached Consolidated Income Statements. Additional information about non-GAAP financial information is included in this release.

Business Outlook

For the first quarter of fiscal year 2021 ending December 31, 2020, F5 expects to deliver revenue in the range of $595 million to $615 million with non-GAAP earnings in the range of $2.26 to $2.38 per diluted share.

All forward-looking non-GAAP measures included in the 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 and conference call to review its financial results and outlook today, October 26, 2020, at 4:30 pm ET. The live webcast can be accessed from the investor relations portion of F5.com. To participate in the live call via telephone in the U.S. and Canada, dial (833) 714-0927. Outside the U.S. and Canada, dial +1 (778) 560-2886. Reference Meeting ID 6055259. Please call at least 5 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, statements regarding the continuing strength and momentum of F5's business, future financial performance, projected and target revenue and earnings ranges, income, earnings per share, share amounts and share price assumptions, share repurchases, demand for application delivery networking, application delivery services, security, and software products, expectations regarding future services and products, expectations regarding future customers, markets and the benefits of products, and other statements that are not historical facts and which 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: the impact of the COVID-19 global pandemic including but not limited to the advantages of incumbency in an uncertain environment, caution in spending patterns in the most severely impacted verticals, delays in orders in some impacted regions due to COVID-19 impacts; prolonged face-to-face sales engagement delaying some new strategic projects; customer acceptance of our new security, application delivery, optimization, and software and SaaS offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; F5 may not realize the financial and strategic goals that are contemplated through its acquisitions, including Shape and NGINX, and F5 may not successfully operate and integrate newly-acquired businesses appropriately or as expected; 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; uncertain global economic conditions, including those related to COVID-19, which may result in reduced customer demand for our products and services and changes in customer payment patterns; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; litigation involving patents, intellectual property, shareholder and other matters, and governmental investigations; natural catastrophic events; 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; F5's share repurchase program; 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, performance or achievements to vary from expectations. The financial information contained in this presentation 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 presentation 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 of purchased intangible assets, acquisition-related charges, net of taxes, restructuring charges, facility-exit costs, significant litigation and other contingencies 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:

Acquisition-related write-downs of assumed deferred revenue. Included in its GAAP financial statements, F5 records acquisition-related write-downs of assumed deferred revenue to fair value, which results in lower recognized revenue over the term of the contract. F5 includes revenue associated with acquisition-related write-downs of assumed deferred revenue in its non-GAAP financial measures as management believes it provides a more accurate depiction of revenue arising from our strategic acquisitions.

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 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. 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. In fiscal year 2019, F5 relocated its headquarters in Seattle, Washington, and recorded charges in connection with this facility exit as well as other non-recurring lease activity. These charges are not representative of ongoing costs to the business and are not expected to recur. 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.

Impairment charges. In fiscal year 2019, F5 recorded impairment of capitalized software development costs reflecting strategy changes in certain product development initiatives. These charges are not representative of ongoing costs to the business and are not expected to recur. As a result, these charges are being excluded to provide investors with a more comparable measure of costs associated with ongoing operations

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 (NASDAQ: FFIV) is a multi-cloud application security and delivery company that enables our customers-which include the world's largest enterprises, financial institutions, service providers, and governments-to bring extraordinary digital experiences to life. For more information, go to f5.com. You can also follow @F5 on Twitter or visit us on LinkedIn and Facebook for more information about F5, its partners, and technologies.

F5 is a trademark or service mark of F5 Networks, Inc., in the U.S. and other countries. All other product and company names herein may be trademarks of their respective owners.

Source: F5 Networks

F5 Networks, IncConsolidated Balance Sheets(unaudited, in thousands) September 30, September 30,

2020 2019

AssetsCurrent assetsCash and cash equivalents $ 849,556 $ 599,219

Short-term investments 360,333 373,063

Accounts receivable, net of allowances of 296,183 322,029 $3,105 and $3,259Inventories 27,898 34,401

Other current assets 259,506 182,874

Total current assets 1,793,476 1,511,586

Property and equipment, net 229,239 223,426

Operating lease right-of-use assets 300,680 -

Long-term investments 102,939 358,402

Deferred tax assets 45,173 27,701

Goodwill 1,858,966 1,065,379

Other assets, net 347,447 203,781

Total assets $ 4,677,920 $ 3,390,275

Liabilities and Shareholders' EquityCurrent liabilitiesAccounts payable $ 64,472 $ 62,627

Accrued liabilities 321,398 235,869

Deferred revenue 883,134 807,030

Current portion of long-term debt 19,275 -

Total current liabilities 1,288,279 1,105,526

Deferred tax liabilities 602 313

Deferred revenue, long-term 389,498 391,086

Operating lease liabilities, long-term 338,715 -

Long-term debt 369,047 -

Other long-term liabilities 59,511 131,853

Total long-term liabilities 1,157,373 523,252

Commitments and contingencies Shareholders' equityPreferred stock, no par value; 10,000 shares - - authorized, no shares outstandingCommon stock, no par value; 200,000 sharesauthorized, 61,099 and 60,367 shares issued 305,453 142,597and outstandingAccumulated other comprehensive loss (18,716 ) (19,190 )

Retained earnings 1,945,531 1,638,090

Total shareholders' equity 2,232,268 1,761,497

Total liabilities and shareholders' equity $ 4,677,920 $ 3,390,275

F5 Networks, IncConsolidated Income Statements(unaudited, in thousands, except per share amounts)Three Months Ended

Years Ended

September 30,

September 30,

2020

2019

2020

2019

Net revenuesProducts (1)$

278,451

$

264,926

$

1,025,856

$

985,591

Services336,365

325,462

1,324,966

1,256,856

Total614,816

590,388

2,350,822

2,242,447

Cost of net revenues (2)(3)(4)(5)Products62,634

44,693

215,275

174,986

Services49,333

46,225

192,612

181,591

Total111,967

90,918

407,887

356,577

Gross profit502,849

499,470

1,942,935

1,885,870

Operating expenses (2)(3)(4)(5)(6)Sales and marketing220,379

217,554

843,178

748,619

Research and development120,300

102,812

441,324

408,058

General and administrative63,557

64,390

258,366

210,730

Restructuring charges-

-

7,800

-

Total404,236

384,756

1,550,668

1,367,407

Income from operations98,613

114,714

392,267

518,463

Other income, net(1,090

)

3,397

4,130

22,648

Income before income taxes97,523

118,111

396,397

541,111

Provision for income taxes19,860

23,274

88,956

113,377

Net income$

77,663

$

94,837

$

307,441

$

427,734

Net income per share - basic$

1.27

$

1.57

$

5.05

$

7.12

Weighted average shares - basic61,149

60,283

60,911

60,044

Net income per share - diluted$

1.26

$

1.57

$

5.01

$

7.08

Weighted average shares - diluted61,636

60,448

61,378

60,456

Non-GAAP Financial MeasuresNet income as reported$

77,663

$

94,837

$

307,441

$

427,734

Acquisition-related write-downs of assumed deferred revenue1,963

-

6,824

-

Stock-based compensation expense52,198

43,732

201,949

162,914

Amortization of purchased intangible assets10,720

4,586

34,604

11,846

Facility-exit costs11,045

15,048

16,601

28,800

Acquisiton-related charges11,321

8,079

56,483

41,742

Impairment charges-

6,273

-

6,273

Restructuring charges-

-

7,800

-

Tax effects related to above items(15,276

)

(15,807

)

(56,726

)

(53,048

)

Net income excluding acquisition-related write-downs of assumed deferred revenue, stock-based compensation expense, amortization of purchased intangible assets, facility-exit costs, acquisition-related charges, impairment charges, restructuring charges and non-recurring tax expenses and benefits (non-GAAP) - diluted$

149,634

$

156,748

$

574,976

$

626,261

Net income per share excluding acquisition-related write-downs of assumed deferred revenue, stock-based compensation expense, amortization of purchased intangible assets, facility-exit costs, acquisition-related charges, impairment charges, restructuring charges and non-recurring tax expenses and benefits (non-GAAP) - diluted$

2.43

$

2.59

$

9.37

$

10.36

Weighted average shares - diluted61,636

60,448

61,378

60,456

(1) GAAP net product revenues$

278,451

$

264,926

$

1,025,856

$

985,591

Acquisition-related write-downs of assumed deferred revenue1,963

-

6,824

-

Non-GAAP net product revenues280,414

264,926

1,032,680

985,591

GAAP net service revenues336,365

325,462

1,324,966

1,256,856

Acquisition-related write-downs of assumed deferred revenue-

-

-

-

Non-GAAP net service revenues336,365

325,462

1,324,966

1,256,856

Total non-GAAP net revenues$

616,779

$

590,388

$

2,357,646

$

2,242,447

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

6,776

$

5,233

$

25,470

$

20,385

Sales and marketing22,258

19,832

88,446

69,477

Research and development13,367

10,288

50,271

40,886

General and administrative9,797

8,379

37,762

32,166

$

52,198

$

43,732

$

201,949

$

162,914

(3) Includes amortization of purchased intangible assets as follows:Cost of net revenues$

7,382

$

3,096

$

23,814

$

7,653

Sales and marketing2,749

961

8,612

2,083

General and administrative589

529

2,178

2,110

$

10,720

$

4,586

$

34,604

$

11,846

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

1,457

$

1,806

$

2,300

$

3,520

Sales and marketing3,272

3,838

5,100

7,470

Research and development3,328

4,403

5,257

9,994

General and administrative2,988

5,001

3,944

7,816

$

11,045

$

15,048

$

16,601

$

28,800

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

114

$

-

$

127

$

-

Sales and marketing4,255

445

13,703

6,551

Research and development1,511

205

2,838

16,321

General and administrative5,441

7,429

39,815

18,870

$

11,321

$

8,079

$

56,483

$

41,742

(6) Includes impairment charges as follows:General and administrative$

-

$

6,273

$

-

$

6,273

$

-

$

6,273

$

-

$

6,273

F5 Networks, IncConsolidated Income Statements(unaudited, in thousands, except per share amounts) Three Months Ended Years Ended

September 30, September 30,

2020 2019 2020 2019

Net revenuesProducts (1) $ 278,451 $ 264,926 $ 1,025,856 $ 985,591

Services 336,365 325,462 1,324,966 1,256,856

Total 614,816 590,388 2,350,822 2,242,447

Cost of net revenues(2)(3)(4)(5)Products 62,634 44,693 215,275 174,986

Services 49,333 46,225 192,612 181,591

Total 111,967 90,918 407,887 356,577

Gross profit 502,849 499,470 1,942,935 1,885,870

Operating expenses(2)(3)(4)(5)(6)Sales and marketing 220,379 217,554 843,178 748,619

Research and 120,300 102,812 441,324 408,058 developmentGeneral and 63,557 64,390 258,366 210,730 administrativeRestructuring charges - - 7,800 -

Total 404,236 384,756 1,550,668 1,367,407

Income from 98,613 114,714 392,267 518,463 operationsOther income, net (1,090 ) 3,397 4,130 22,648

Income before income 97,523 118,111 396,397 541,111 taxesProvision for income 19,860 23,274 88,956 113,377 taxesNet income $ 77,663 $ 94,837 $ 307,441 $ 427,734

Net income per share $ 1.27 $ 1.57 $ 5.05 $ 7.12 - basicWeighted average 61,149 60,283 60,911 60,044 shares - basic Net income per share $ 1.26 $ 1.57 $ 5.01 $ 7.08 - dilutedWeighted average 61,636 60,448 61,378 60,456 shares - diluted Non-GAAP FinancialMeasures Net income as $ 77,663 $ 94,837 $ 307,441 $ 427,734 reportedAcquisition-relatedwrite-downs of 1,963 - 6,824 - assumed deferredrevenueStock-based 52,198 43,732 201,949 162,914 compensation expenseAmortization of 10,720 4,586 34,604 11,846 purchased intangibleassetsFacility-exit costs 11,045 15,048 16,601 28,800

Acquisiton-related 11,321 8,079 56,483 41,742 chargesImpairment charges - 6,273 - 6,273

Restructuring charges - - 7,800 -

Tax effects related (15,276 ) (15,807 ) (56,726 ) (53,048 )to above itemsNet income excludingacquisition-relatedwrite-downs ofassumed deferredrevenue, stock-basedcompensation expense,amortization ofpurchased intangible $ 149,634 $ 156,748 $ 574,976 $ 626,261assets, facility-exitcosts,acquisition-relatedcharges, impairmentcharges,restructuring chargesand non-recurring taxexpenses and benefits(non-GAAP) - diluted Net income per shareexcludingacquisition-relatedwrite-downs ofassumed deferredrevenue, stock-basedcompensation expense,amortization ofpurchased intangible $ 2.43 $ 2.59 $ 9.37 $ 10.36assets, facility-exitcosts,acquisition-relatedcharges, impairmentcharges,restructuring chargesand non-recurring taxexpenses and benefits(non-GAAP) - diluted Weighted average 61,636 60,448 61,378 60,456 shares - diluted (1) GAAP net product $ 278,451 $ 264,926 $ 1,025,856 $ 985,591 revenuesAcquisition-relatedwrite-downs of 1,963 - 6,824 - assumed deferredrevenueNon-GAAP net product 280,414 264,926 1,032,680 985,591 revenuesGAAP net service 336,365 325,462 1,324,966 1,256,856 revenuesAcquisition-relatedwrite-downs of - - - - assumed deferredrevenueNon-GAAP net service 336,365 325,462 1,324,966 1,256,856 revenuesTotal non-GAAP net $ 616,779 $ 590,388 $ 2,357,646 $ 2,242,447 revenues (2) Includesstock-basedcompensation expenseas follows:Cost of net revenues $ 6,776 $ 5,233 $ 25,470 $ 20,385

Sales and marketing 22,258 19,832 88,446 69,477

Research and 13,367 10,288 50,271 40,886 developmentGeneral and 9,797 8,379 37,762 32,166 administrative $ 52,198 $ 43,732 $ 201,949 $ 162,914

(3) Includesamortization ofpurchased intangibleassets as follows:Cost of net revenues $ 7,382 $ 3,096 $ 23,814 $ 7,653

Sales and marketing 2,749 961 8,612 2,083

General and 589 529 2,178 2,110 administrative $ 10,720 $ 4,586 $ 34,604 $ 11,846

(4) Includesfacility-exit costsas follows:Cost of net revenues $ 1,457 $ 1,806 $ 2,300 $ 3,520

Sales and marketing 3,272 3,838 5,100 7,470

Research and 3,328 4,403 5,257 9,994 developmentGeneral and 2,988 5,001 3,944 7,816 administrative $ 11,045 $ 15,048 $ 16,601 $ 28,800

(5) Includesacquisition-relatedcharges as follows:Cost of net revenues $ 114 $ - $ 127 $ -

Sales and marketing 4,255 445 13,703 6,551

Research and 1,511 205 2,838 16,321 developmentGeneral and 5,441 7,429 39,815 18,870 administrative $ 11,321 $ 8,079 $ 56,483 $ 41,742

(6) Includesimpairment charges asfollows:General and $ - $ 6,273 $ - $ 6,273 administrative $ - $ 6,273 $ - $ 6,273

F5 Networks, IncConsolidated Statements of Cash Flows(unaudited, in thousands)Years EndedSeptember 30,2020

2019

Operating activitiesNet income$

307,441

$

427,734

Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation201,948

162,914

Depreciation and amortization95,857

68,507

Non-cash operating lease costs39,139

Other2,122

1,662

Deferred income taxes7,293

7,440

Impairment of assets9,673

6,273

Non-cash provisions for exit costs-

8,211

Changes in operating assets and liabilities:Accounts receivable46,502

(18,305

)

Inventories6,503

(3,832

)

Other current assets(49,895

)

(75,449

)

Other assets(25,690

)

(22,742

)

Accounts payable and accrued liabilities34,742

74,710

Deferred revenue35,514

110,718

Lease liabilities(50,251

)

-

Net cash provided by operating activities660,898

747,841

Investing activitiesPurchases of investments(584,240

)

(602,987

)

Maturities of investments543,065

625,201

Sales of investments309,687

278,244

Acquisition of businesses, net of cash acquired(955,574

)

(611,550

)

Purchases of property and equipment(59,940

)

(103,542

)

Net cash used in investing activities(747,002

)

(414,634

)

Financing activitiesProceeds from the exercise of stock options and purchases of stock under employee stock purchase plan52,835

45,598

Repurchase of common stock(100,016

)

(201,045

)

Proceeds from term debt agreement400,000

-

Payments on term debt agreement(10,000

)

-

Payments for debt issuance costs(3,040

)

-

Taxes paid related to net share settlement of equity awards(2,536

)

-

Net cash provided by (used in) financing activities337,243

(155,447

)

Net increase in cash, cash equivalents and restricted cash251,139

177,760

Effect of exchange rate changes on cash, cash equivalents and restricted cash(567

)

(1,400

)

Cash, cash equivalents and restricted cash, beginning of period602,254

425,894

Cash, cash equivalents and restricted cash, end of period$

852,826

$

602,254

Supplemental disclosures of cash flow informationCash paid for taxes, net of refunds$

80,236

$

100,569

Cash paid for amounts included in the measurement of lease liabilities60,564

-

Cash paid for interest on long-term debt6,568

-

Supplemental disclosures of non-cash activitiesRight-of-use assets obtained in exchange for lease obligations$

402,007

$

-

Capitalized leasehold improvements paid directly by landlord-

34,948

View source version on businesswire.com: https://www.businesswire.com/news/home/20201026005842/en/

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CONTACT: Investor Relations Suzanne DuLong (206) 272-7049 s.dulong@f5.com

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