Summary
F5's fiscal third quarter of 2022 revenue rose 3.5% to $674.5 million from $651.5 million in the prior-year quarter. Year-to-date revenue reached $2.00 billion, up 3.9% from $1.92 billion. The top line benefited from a 38% increase in software revenue and a 2% rise in global services revenue. Systems revenue fell 18% because of ongoing semiconductor shortages. Recurring sources accounted for 72% of quarterly revenue, a sign of the subscription shift. Gross profit for the quarter was $543.8 million, up 2.5%, and year-to-date gross profit was $1.60 billion, up 3.0%. Gross margin slipped to 80.6% from 81.4% in the prior-year quarter.
Operating income for the quarter climbed 11.5% to $107.5 million from $96.4 million. Operating margin expanded to 15.9% from 14.8%. Year-to-date operating income rose 10.7% to $296.3 million, with operating margin at 14.8% versus 13.9%. The bottom line moved the other way. Net income fell 7.3% to $83.0 million, and diluted earnings per share declined 6.2% to $1.37 from $1.46. A higher effective tax rate weighed on net income. Year-to-date net income was $232.8 million, up 5.6%, and diluted EPS was $3.80, up 7.0%. Non-GAAP net income was $155 million, or $2.57 per diluted share, compared with $169 million, or $2.76 per diluted share.
Cash generation weakened. Operating cash flow for the quarter was $71.4 million, down 60.8% from $182.3 million. Year-to-date operating cash flow fell 35.7% to $288.3 million from $448.1 million. Management attributed the decline to strong multi-year subscription sales that are billed annually, with the remainder recognized as unbilled assets, and to significant prepayments to a contract manufacturer for hardware components. Capital expenditures were $9.3 million for the quarter, down 1.3%, and $25.1 million year to date, up 6.7%. Deferred revenue rose 13.7% to $1.64 billion from $1.44 billion. Remaining performance obligations grew 14.3% to $1.60 billion from $1.40 billion. Liquidity decreased due to share repurchases and an acquisition, partly offset by operating cash flow. Days sales outstanding was 61 days.
For the fourth quarter of fiscal 2022, F5 guided revenue of $680 million to $700 million and non-GAAP earnings of $2.45 to $2.57 per diluted share. The CEO noted strong demand and a solid fourth-quarter pipeline but acknowledged a more cautious operating environment. The board authorized an additional $1 billion for share repurchases, on top of $272 million remaining. Risks include semiconductor shortages that have already cut systems revenue, supply chain disruptions, higher component and expedite costs, foreign currency losses, and uncertain global economic conditions. The company also faces integration risk from acquisitions like Threat Stack and Shape, plus competition and pricing pressure. Headcount grew in key areas: research and development reached 2,093 from 1,881, general and administrative reached 951 from 802, and professional services reached 1,083 from 997. A restructuring charge from a first-quarter workforce reduction is included in year-to-date results. The effective tax rate may fluctuate based on geographic mix, stock-based compensation, and tax law changes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $674.5M | $634.2M | +6.3% | $651.5M | +3.5% |
| Gross profit | $543.8M | $507.9M | +7.1% | $530.6M | +2.5% |
| Gross margin | 80.6% | 80.1% | +0.5 pp | 81.4% | -0.8 pp |
| Research & development | $138.7M | $135.8M | +2.1% | $133.3M | +4.1% |
| Sales & marketing | $226.7M | $228.8M | -0.9% | $237.4M | -4.5% |
| General & administrative | $70.8M | $68.6M | +3.3% | $63.5M | +11.5% |
| Total operating expenses | $436.3M | $433.2M | +0.7% | $434.2M | +0.5% |
| Operating income (loss) | $107.5M | $74.6M | +44.0% | $96.4M | +11.5% |
| Operating margin | 15.9% | 11.8% | +4.2 pp | 14.8% | +1.1 pp |
| Net income (loss) | $83.0M | $56.2M | +47.6% | $89.6M | -7.3% |
| Net margin | 12.3% | 8.9% | +3.4 pp | 13.8% | -1.4 pp |
| Diluted EPS | $1.37 | $0.92 | +$0.45 | $1.46 | -$0.09 |
Risks
MD&A states near term challenging global supply chain conditions, particularly semiconductor constraints, are expected to cause a shortfall in ability to meet customer demand for hardware-based solutions and impact systems sales. Systems revenue decreased for the three months ended June 30, 2022, and component price increases and expedite fees raised cost of net product revenues.
Gross margin was down 0.8 percentage points in FY2022 Q3 versus FY2021 Q3 and down 0.7 percentage points for the nine months ended June 30, 2022 versus the prior-year period. MD&A attributes pressure to component price increases, expedite fees, and other sourcing-related costs.
Operating cash flow was down 60.8% in FY2022 Q3 versus FY2021 Q3 and down 35.7% for the nine months ended June 30, 2022 versus the prior-year period. MD&A attributes the decline to multi-year subscription sales billed annually and significant prepayments to a contract manufacturer.
Ingram Micro accounted for 20.7% and Synnex 13.4% of total net revenue for the three months ended June 30, 2022, and Ingram Micro represented 18.5% of total receivables at June 30, 2022. Dependence on a small number of distributors could amplify revenue and credit risk.
Other expense, net increased due to foreign currency loss of $3.3 million for the three months ended June 30, 2022 and $4.8 million for the nine months ended June 30, 2022 compared to the prior-year periods. This volatility can pressure net income.
The effective tax rate was 18.0% and 18.5% for the three and nine months ended June 30, 2022, compared to 4.9% and 16.3% for the prior-year periods. Net deferred tax assets include valuation allowances of $46.5 million as of June 30, 2022.
As of June 30, 2022, $355.0 million of principal was outstanding under the Term Loan Facility, which has a financial covenant requiring a leverage ratio. The covenant may result in a higher interest rate on outstanding borrowings depending on performance.
The company has a contractual obligation to purchase inventory components procured by its primary contract manufacturer in accordance with its annual build forecast, and it prepays the manufacturer from time to time. If demand weakens, these commitments could lead to excess or obsolete inventory.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q3 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 2, 2026.