- F5 raises revenue outlook, reiterates Horizon 2 non-GAAP
operating and EPS targets, and reaffirms commitment to $1 billion
in share repurchases
- F5 expects first quarter fiscal year 2021 GAAP and non-GAAP
revenue growth of approximately 10% with GAAP and non-GAAP revenue
between $623 to $626 million, and non-GAAP earnings per share above
the top end of its prior guidance range of $2.26 to $2.381
F5 Networks (NASDAQ: FFIV), the leader in application security
and delivery, and Volterra, the first universal edge-as-a-service
platform, today announced a definitive agreement under which F5
will acquire all issued and outstanding shares of privately held
Volterra for approximately $440 million in cash and approximately
$60 million in deferred consideration and assumed unvested
incentive compensation to founders and employees. With the addition
of Volterra’s technology platform, F5 is creating an edge platform
built for enterprises and service providers that will be
security-first and app-driven with unlimited scale.
In connection with the transaction, F5 raised its Horizon 2
(fiscal years 2021 and 2022) and long-term revenue outlook, and
reiterated its Horizon 2 operating targets, including its
commitment to achieving double-digit non-GAAP earnings per share
growth. The company also reiterated its commitment to return $1
billion of capital over the next two years, including the
initiation of a $500 million accelerated share repurchase in fiscal
year 2021. In addition, F5 released a preview of its first quarter
fiscal year 2021 financial results stating it expects GAAP and
non-GAAP revenue in a range of $623 to $626 million, driven in
part, by approximately 68% GAAP, and 70% non-GAAP, software revenue
growth.
“Current edge solutions are simply inadequate for today’s
enterprise customers. It’s time to break out of closed edge systems
that only perpetuate the pain of building, running, and securing
apps,” said François Locoh-Donou, President and CEO, F5. “With
Volterra, we advance our Adaptive Applications vision with an Edge
2.0 platform that solves the complex multi-cloud reality enterprise
customers confront. Our platform will create a SaaS solution that
solves our customers’ biggest pain points. The success of F5’s
software transformation has put us in a position to deliver on the
potential of Edge 2.0 and redefine our competitive position.”
“I am excited to work closely alongside François and the F5 team
to help pioneer the evolution of the edge to deliver more adaptive,
dynamic application experiences for all of our customers,” said
Ankur Singla, Founder and CEO, Volterra. “With our platform, we
will extend F5’s application security leadership to the edge,
thereby expanding our combined reach in the fastest growing segment
of F5’s $28 billion 2023 total addressable market.”
Volterra enables a new Edge 2.0 open edge platform that will
transform F5’s leadership position in enterprise application
security and delivery, addressing the challenges inherent with
first-generation edge solutions. F5’s Edge 2.0 platform will
be:
- Security-first: Delivering industry-leading security
instead of commodity security added to a CDN or cloud.
- App-driven: Providing universal, “build once, deploy
globally” app delivery. This software-defined edge based on
industry standard containers and APIs removes multi-cloud
complexity.
- Unlimited in scale: Edge 2.0 breaks apps out of the “CDN
jail” of closed edge platforms, running all services on any server,
across all clouds and data centers.
The boards of directors of both F5 and Volterra have approved
the transaction, which is subject to regulatory approvals and other
customary closing conditions. The transaction is expected to close
in the first quarter of calendar year 2021.
Upon closing of the transaction, Ankur Singla, and the Volterra
leadership team will join F5 in key management roles. Volterra will
remain located in its current Santa Clara headquarters.
F5 Business Outlook Update
The addition of Volterra accelerates F5’s total revenue growth
expectations. As a result, F5 is updating its Horizon 2 (fiscal
years 2021 and 2022) total revenue growth CAGR to 7% to 8%, from 6%
to 7%, and its long-term revenue growth target to double digits
from 8% to 9%. F5 maintained its commitment to deliver operating
leverage through the “Rule of 40” and its target to achieving
double-digit non-GAAP EPS growth in Horizon 2.
In addition, F5 reiterates its commitment to $1 billion in share
repurchases in the next two years, including a $500 million
accelerated share repurchase in fiscal year 2021.
Preliminary Q1 Fiscal Year 2021 Results
F5 also released a preview of its first quarter fiscal year 2021
financial results. Based on currently available information, the
company estimates the following results for the quarter ended
December 31, 2020.
- GAAP and non-GAAP revenue between $623 and $626 million,
representing growth of approximately 10% over the prior year
period2
- GAAP and non-GAAP software revenue growth of approximately 68%
and 70%, respectively3
- Systems revenue growth of approximately 5%
- GAAP and non-GAAP product revenue growth between approximately
22% to 23%2
- Global services revenue growth slightly better than flat
- Non-GAAP EPS above the top end of its prior guidance of $2.26
to $2.381
“We are on track to deliver our best quarterly results since we
embarked on our transformation, with approximately 10% revenue
growth fueled by continued strong software demand along with
resilience in our systems business,” added Locoh-Donou.
F5 Live Conference Call & Webcast Details
F5 will host a live webcast and conference call to discuss the
transaction and its preliminary first quarter fiscal year 2021
results with investors and analysts beginning at 5:15 p.m. ET, or
2:15 p.m. PT, today, January 7, 2021. The live webcast link can be
accessed from the investor relations portion of f5.com. The
audio-only version of the live call can be accessed by dialing
(833) 714-0927 for callers in the U.S. and Canada or +1 (778)
560-2886 for listeners from other countries. Please use Meeting ID:
8879455.
The webcast and call will be recorded, and replays will be
available as follows:
Replay Via Webcast: Access via the investor
relations portion of F5’s website.
Replay Via Phone: (800) 585-8367 (US &
Canada) or +1 (416) 621-4642 (outside of the U.S. and Canada)
available January 7, 2021 through January 8, 2021. Use Meeting ID:
8879455.
Transaction Advisors
Foros acted as financial advisor to F5. Skadden, Arps, Slate,
Meagher & Flom LLP acted as legal advisor to F5, and Goodwin
Procter LLP acted as legal advisor to Volterra.
Footnotes
1 F5 is currently working through the accounting close process
for the quarter ended December 31, 2020 and an estimate of GAAP
earnings per share is not yet available. The company expects to
provide GAAP earnings per share for the quarter ended December 31,
2020 with its final results announcement, expected on January 26,
2021.
2 F5 is currently working through the accounting close process
for the quarter ended December 31, 2020 and therefore a
reconciliation of revenue on a GAAP to non-GAAP basis is not yet
available. This reconciliation is expected to be available and
provided with the company’s final results announcement, expected on
January 26, 2021.
3 Following its acquisition of Shape Security, to provide
transparency to what F5 management believes reflects its ongoing
business results, for the four quarters following the acquisition,
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.
Additional Information
- Enabling the Edge 2.0 Revolution – Blog Post from F5’s EVP of
Security, Haiyan Song
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.
About Volterra
Based in Santa Clara, CA, Volterra provides a distributed cloud
services platform to deploy, network and secure applications across
multi-cloud and the edge. Small businesses to Fortune 100 companies
and global Telco's are using Volterra to deploy and operate
distributed applications through a consistent set of cloud
services, end-to-end visibility, and control. DevOps teams can
manage large sets of applications and infrastructure with less
complexity. NetOps teams can simplify app-to-app networking and
security across clouds.
F5 Forward-Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding the completion
and timing of the Volterra acquisition, continuing strength and
momentum of F5’s and Volterra’s business, past and future financial
performance including revenue and operating targets, sequential
growth, preliminary and projected revenue information including
revenue, earnings and earnings per share ranges share repurchases
and programs, demand for application delivery networking,
application delivery services, security, SaaS, edge services 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: customer acceptance of Volterra and F5 offerings;
potential disruptions to F5’s business and distraction of
management as F5 integrates Volterra’s business, team, and
technology; F5’s ability to successfully integrate Volterra’s
products with F5 technologies; the ability of F5’s sales
professionals and distribution partners to sell Volterra’s product
and service offerings; the completion of F5’s review and audit of
its first quarter financial results, condition and cash flows,
including finalization of the related financial information and
guidance; 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
acquisition of Volterra and potential adverse reactions or changes
to business or employee relationships, including those resulting
from the announcement or completion of the acquisition;
uncertainties as to the timing, including receipt of applicable
regulatory approvals, of the Volterra transaction; uncertain global
economic conditions 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; 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 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.
F5 is currently working through the accounting close process for
the quarter ended December 31, 2020 and therefore an estimate of
GAAP earnings, as well as a reconciliation of revenue, net income,
and earnings per share on a GAAP to non-GAAP basis is not yet
available. The company expects to provide this reconciliation for
the quarter ended December 31, 2020 with its final results
announcement, expected on January 26, 2021.
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210107005851/en/
Rob Gruening Director, Corporate Communications F5 (206)
272-6208 r.gruening@f5.com
Suzanne DuLong VP, Investor Relations F5 (206) 272-7049
s.dulong@f5.com
Holly Lancaster WE Communications (415) 547-7054
hluka@we-worldwide.com
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