Summary
F5 reported fiscal second quarter revenue of $634.2 million, down 1.7% from the prior-year quarter. Gross profit was $507.9 million, down 1.7%. Gross margin was 80.1%, flat with the prior-year quarter. Operating income rose 39.5% to $74.6 million. Operating margin was 11.8%, up 3.5 percentage points. Net income was $56.2 million, up 30.1%. Diluted EPS was $0.92, up 31.4%. The quarter showed a clear split: revenue declined slightly, but profitability improved sharply. Lower operating expenses helped operating income and net income grow much faster than revenue. For the first six months, revenue rose 4.0% to $1.32 billion. Year-to-date gross profit rose 3.3% to $1.06 billion. Year-to-date operating income rose 10.2% to $188.8 million. Year-to-date net income rose 14.4% to $149.8 million. Year-to-date diluted EPS rose 15.7% to $2.43. Year-to-date gross margin was 80.2%, down 0.6 percentage points. Year-to-date operating margin was 14.3%, up 0.8 percentage points. The year-to-date figures show that the first half was stronger than the second quarter alone.
Management said software demand was strong, but systems shipments remained constrained by semiconductor component shortages. Deferred revenue was $1.60 billion, up 17.0% from the prior-year quarter. Remaining performance obligations were $1.60 billion, up 14.3%. Those backlog measures suggest customers are still committing to multi-year subscriptions. Operating cash flow was $126.5 million, down 1.5%. Year-to-date operating cash flow was $216.9 million, down 18.4%. The decline in year-to-date operating cash flow reflects the timing of multi-year subscription billings and prepayments to contract manufacturers. Capital expenditures were $5.2 million, down 44.3%. Year-to-date capital expenditures were $15.8 million, up 12.1%. The company continued to invest in its software and subscription offerings while managing supply chain challenges.
For fiscal 2022, management expects revenue growth of 1.5% to 4%, down from its prior outlook of 4.5% to 8%. It continues to expect fiscal 2022 software revenue growth near the top end of its previously provided 35% to 40% range. For the fiscal third quarter, the company expects revenue of $660 million to $680 million. Management said it has clear visibility to strong demand drivers across its software and systems portfolio. Near term, the ability to ship systems is gated by ongoing component shortages. Non-GAAP net income was $131 million, or $2.13 per diluted share, compared with $155 million, or $2.50 per diluted share in the prior-year quarter. Non-GAAP measures exclude amortization of intangible assets, share-based compensation, and other items. The guidance cut is entirely about supply, not demand.
The main risk is the semiconductor component shortage, which is limiting systems shipments and increasing lead times. The company also faces component price increases, expedite fees, and other sourcing-related costs. Gross margin could be affected by sales price, product and services mix, inventory obsolescence, returns, component price increases, warranty costs, and global supply chain constraints. A small number of distributors account for a large share of revenue, which adds concentration risk. The company also noted risks from global economic conditions, cybersecurity attacks, and the COVID-19 pandemic. Management believes its cash, investments, and borrowing capacity are sufficient to meet liquidity needs.
F5's software momentum is the bright spot. The company is working to expand supply availability to match demand. The guidance cut reflects the near-term supply constraints rather than a demand problem. Investors will watch whether component availability improves in the coming quarters. The company's deferred revenue and RPO growth suggest a healthy subscription backlog. Operating cash flow declined year to date, but capital expenditures remained modest. The balance sheet remains strong, with no outstanding borrowings under the revolving credit facility. The company's ability to convert backlog into revenue will depend on supply chain improvements.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $634.2M | $687.1M | -7.7% | $645.3M | -1.7% |
| Gross profit | $507.9M | $552.0M | -8.0% | $516.7M | -1.7% |
| Gross margin | 80.1% | 80.3% | -0.3 pp | 80.1% | +0.0 pp |
| Research & development | $135.8M | $130.3M | +4.3% | $140.5M | -3.3% |
| Sales & marketing | $228.8M | $234.0M | -2.2% | $244.9M | -6.6% |
| General & administrative | $68.6M | $65.7M | +4.4% | $77.8M | -11.9% |
| Total operating expenses | $433.2M | $437.9M | -1.1% | $463.2M | -6.5% |
| Operating income (loss) | $74.6M | $114.2M | -34.6% | $53.5M | +39.5% |
| Operating margin | 11.8% | 16.6% | -4.8 pp | 8.3% | +3.5 pp |
| Net income (loss) | $56.2M | $93.6M | -39.9% | $43.2M | +30.1% |
| Net margin | 8.9% | 13.6% | -4.8 pp | 6.7% | +2.2 pp |
| Diluted EPS | $0.92 | $1.51 | -$0.59 | $0.70 | +$0.22 |
Risks
MD&A states near-term challenging global supply chain conditions, particularly semiconductor constraints, are expected to result in a shortfall in the ability to meet customer demand for hardware-based solutions and impact systems sales. It also says global supply chain constraints continue to reduce visibility into component availability and lead times are increasing, delaying fulfillment of some hardware orders.
For the three months ended March 31, 2022, Ingram Micro accounted for 20.3% and Synnex accounted for 14.3% of total net revenue. As of March 31, 2022, Synnex represented 15.7% and Ingram Micro 14.1% of total receivables, concentrating credit and revenue exposure in a small number of distributors.
Gross margin for the six months ended March 31, 2022 decreased to 80.2% from 80.8% in the prior-year period, down 0.6 pp. MD&A attributes cost pressure to component price increases, expedite fees, and other sourcing-related costs in the first half of fiscal 2022.
MD&A highlights continued uncertainty related to the global COVID-19 pandemic, including substantial modifications to employee travel, work locations, and virtualization or cancellation of sales and marketing events. It states the potential effects on business, customers, prospects, and financial results remain unclear.
Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.