Summary
F5 closed fiscal 2021 with fourth-quarter revenue of $682.0 million, up 10.9% from the prior-year quarter. Full-year revenue was $2.60 billion, up 10.7% from fiscal 2020. The product mix continued to shift toward software. Software represented 45% of product revenue in the fourth quarter, and 80% of that software revenue came from subscriptions. On a non-GAAP basis, fourth-quarter product revenue growth was 21%, with software revenue up 35% and systems revenue up 12%. Global services revenue grew 2%. Management described demand as strong across on-premises, cloud, and multi-cloud deployments. F5 sells application security and delivery offerings through indirect channels in the Americas, EMEA, and APAC. Enterprise and government customers make up a large part of the base.
Profitability improved in the quarter. Gross profit was $553.3 million, up 10.0%, even as gross margin slipped to 81.1% from 81.8% a year earlier. Operating income rose 28.1% to $126.4 million, and operating margin expanded to 18.5% from 16.0%. That margin gain came despite the lower gross margin. Net income was $110.7 million, up 42.6% from the prior-year quarter. For the full year, net income was $331.2 million, up 7.7%, and diluted earnings per share were $5.34, up 6.6% from $5.01. Non-GAAP net income was $185 million, or $3.01 per diluted share, in the fourth quarter. For the full year, non-GAAP net income was $671 million, or $10.81 per diluted share. The quarter's non-GAAP results exclude items such as stock-based compensation, amortization of purchased intangible assets, and acquisition-related charges.
Cash generation was mixed. Fourth-quarter operating cash flow was $197.1 million, up 12.0% from the prior-year quarter. Full-year operating cash flow was $645.2 million, down 2.4%. Capital expenditures fell to $7.1 million in the quarter, down 41.1%, and to $30.7 million for the full year, down 48.9%. Deferred revenue ended the year at $1.49 billion, up 17.1%, while remaining performance obligations were $1.50 billion, up 15.4%. Days sales outstanding for the fourth quarter was 45. Management pointed to subscription growth as a driver of deferred revenue, and the company continued to invest in its software-led model. The company also repurchased shares and completed acquisitions during fiscal 2021, which reduced cash and investments.
Guidance points to continued growth. For the first quarter of fiscal 2022 ending December 31, 2021, F5 expects revenue of $665 million to $685 million and non-GAAP earnings of $2.71 to $2.83 per diluted share. For fiscal 2022, management expects revenue growth of 8% to 9%, including software revenue growth of 35% to 40%. The outlook depends on several risks. Management flagged global supply chain constraints and increasing lead times for critical components, which could limit hardware assembly and shipments. COVID-19 remains an unknown for operations and customer demand. The company also faces integration risk from acquisitions such as Volterra, competitive pricing pressure, and cybersecurity threats to its networks and products. F5 also faces the risk that customers may not accept new offerings or that competitors may introduce new products.
Competition in application security and delivery remains intense. Customers can delay purchases or shift spending, and F5 must keep adding features to its software and subscription offerings. The company's ability to attract and retain product development, sales, and support personnel is another factor. For the full year, operating income was $394.0 million, flat from fiscal 2020. The mix shift toward software and subscriptions is the central story, and the fiscal 2022 guidance assumes that shift continues. The company's transformation has made software a larger part of product revenue, but services still provide a large share of total revenue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $682.0M | $651.5M | +4.7% | $614.8M | +10.9% |
| Gross profit | $553.3M | $530.6M | +4.3% | $502.8M | +10.0% |
| Gross margin | 81.1% | 81.4% | -0.3 pp | 81.8% | -0.7 pp |
| Research & development | $124.7M | $133.3M | -6.4% | $120.3M | +3.7% |
| Sales & marketing | $233.2M | $237.4M | -1.8% | $220.4M | +5.8% |
| General & administrative | $69.1M | $63.5M | +8.8% | $63.6M | +8.7% |
| Total operating expenses | $427.0M | $434.2M | -1.7% | $404.2M | +5.6% |
| Operating income (loss) | $126.4M | $96.4M | +31.1% | $98.6M | +28.1% |
| Operating margin | 18.5% | 14.8% | +3.7 pp | 16.0% | +2.5 pp |
| Net income (loss) | $110.7M | $89.6M | +23.6% | $77.7M | +42.6% |
| Net margin | 16.2% | 13.8% | +2.5 pp | 12.6% | +3.6 pp |
| Diluted EPS | $1.78 | $1.46 | +$0.32 | $1.27 | +$0.51 |
Risks
Global supply chain constraints in the wake of COVID-19 continue to decrease visibility into component availability and lead times are increasing for critical components necessary for hardware assembly. MD&A states unavailability of components may limit ability to fulfill sales.
F5 subcontracts manufacturing to a single contract manufacturer with no long-term contract. If that arrangement is terminated or impaired and a replacement is not engaged timely, business and results could be adversely affected.
Customers are transitioning to hybrid cloud, and large cloud providers such as AWS, Microsoft Azure, and VMware offer competing application security and delivery functionality, while new players like Apogee and Kong target container-based use cases. F5 devotes significant resources to cloud services but success is uncertain and costs may reduce operating margins.
Two worldwide distributors accounted for 30.3% of total net revenue for fiscal year 2021, with Ingram Micro at 19.2% and Synnex at 11.1%. A substantial reduction or delay in sales to these partners could harm business, operating results, and financial condition.
As F5 focuses on security solutions, it becomes a bigger target for malicious hackers, including nation-state actors. Its IT systems and products have experienced breaches or disruptions and may be vulnerable, with potential liability, remediation costs, and reputational harm.
Products have a lengthy sales cycle of approximately two to three months, and a majority of sales have historically been realized near the end of a quarter. A delay in an anticipated sale past quarter-end, even from one account, may negatively impact results for that quarter or fiscal year.
F5 recently announced a restructuring and reduction in force, which could lead to increased attrition among employees not directly affected. Competition for skilled developers, sales, and support personnel is intense in Silicon Valley and Seattle, and recent senior leadership changes may be disruptive.
A substantial portion of business depends on IT demand by large enterprise customers and service providers, and product purchases are often discretionary. Recessionary cycles or a protracted economic slowdown could reduce demand for application delivery products and services.
Gross margin declined 1.6 percentage points in fiscal year 2021 to 81.1%, and operating margin declined 1.6 percentage points to 15.1%. Cloud infrastructure and software-as-a-service costs may reduce operating margins previously achieved.
F5 completed the Volterra acquisition for $427.2 million in January 2021, following prior Shape and NGINX deals. Integration difficulties, failure to retain key personnel, or future impairment charges could adversely affect revenues, gross margins, and expenses.
Evolving data protection and privacy laws, including challenges to safe-harbor exemptions for data transfers, may require significant management attention and financial resources. Failure to comply could result in fines, imprisonment of company officials, and reputational harm.
F5 has offices and employees in Israel, and political, economic, and military conditions there directly affect operations. Increased hostilities and reserve duty obligations could disrupt operations and prevent full capacity.
Sales to U.S. and foreign government entities account for a significant portion of revenues and are subject to certification requirements, public sector budgetary cycles, audits, and termination rights. Unfavorable audits or funding delays could reduce revenue or lead to fines.
While COVID-19 did not have a significant impact on results of operations for fiscal year 2021, future impacts on customer demand, supply chain, collections, and operations remain unknown.
The effective tax rate decreased to 14.4% in fiscal year 2021 from 22.4% in fiscal year 2020 and may fluctuate due to changes in tax laws, transfer pricing, or examinations. Greater than anticipated tax liabilities could affect results and cash flows.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from F5, INC.'s SEC filings for Q4 FY2021 (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.