Item 1. Financial Statements

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Item 1. Financial Statements

F5, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)


	March 31, 2025		September 30, 2024
ASSETS
Current assets
Cash and cash equivalents	$	1,259,282	$	1,074,602

Accounts receivable, net of allowances of $4,893 and $4,585	379,618		389,024
Inventories	67,880		76,378
Other current assets	629,394		569,467
Total current assets	2,336,174		2,109,471
Property and equipment, net	148,812		150,943
Operating lease right-of-use assets	189,656		178,180
Long-term investments	12,534		8,580
Deferred tax assets	406,690		365,951
Goodwill	2,319,835		2,312,362
Other assets, net	492,876		487,517
Total assets	$	5,906,577	$	5,613,004
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	43,610	$	67,894
Accrued liabilities	279,910		300,076
Deferred revenue	1,200,580		1,121,683
Total current liabilities	1,524,100		1,489,653
Deferred tax liabilities	8,252		7,179
Deferred revenue, long-term	722,019		676,276
Operating lease liabilities, long-term	236,623		215,785
Other long-term liabilities	101,538		94,733
Total long-term liabilities	1,068,432		993,973
Commitments and contingencies (Note 8)
Shareholders' equity
Preferred stock, no par value; 10,000 shares authorized, no shares issued and outstanding	—		—
Common stock, no par value; 200,000 shares authorized, 57,919 and 58,094 shares issued and outstanding	40,252		5,889
Accumulated other comprehensive loss	(22,310)		(20,912)
Retained earnings	3,296,103		3,144,401
Total shareholders' equity	3,314,045		3,129,378
Total liabilities and shareholders' equity	$	5,906,577	$	5,613,004

The accompanying notes are an integral part of these consolidated financial statements.

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F5, INC.

CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except per share data)


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Net revenues
Products	$	337,196	$	300,162	$	705,693	$	606,021
Services	393,927		381,192		791,919		767,930
Total	731,123		681,354		1,497,612		1,373,951
Cost of net revenues
Products	81,287		85,313		164,123		168,021
Services	59,672		55,800		117,346		109,481
Total	140,959		141,113		281,469		277,502
Gross profit	590,164		540,241		1,216,143		1,096,449
Operating expenses
Sales and marketing	218,061		210,800		424,096		409,727
Research and development	136,561		122,207		267,079		241,782
General and administrative	76,645		67,184		149,668		131,902
Restructuring charges	—		90		11,321		8,562
Total	431,267		400,281		852,164		791,973
Income from operations	158,897		139,960		363,979		304,476
Other income, net	12,303		5,974		16,265		15,856
Income before income taxes	171,200		145,934		380,244		320,332
Provision for income taxes	25,670		26,913		68,269		62,929
Net income	$	145,530	$	119,021	$	311,975	$	257,403
Net income per share — basic	$	2.51	$	2.02	$	5.37	$	4.37
Weighted average shares — basic	57,886		58,788		58,098		58,956
Net income per share — diluted	$	2.48	$	2.00	$	5.30	$	4.32
Weighted average shares — diluted	58,764		59,580		58,913		59,617

The accompanying notes are an integral part of these consolidated financial statements.

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F5, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Net income	$	145,530	$	119,021	$	311,975	$	257,403
Other comprehensive income (loss):
Foreign currency translation adjustment	1,889		(386)		(1,398)		2,118
Available-for-sale securities:
Unrealized gains on securities, net of taxes of $0 and $4 for the three months ended March 31, 2025 and 2024, respectively, and $0 and $16 for the six months ended March 31, 2025 and 2024, respectively	—		20		—		69

Net change in unrealized gains on available-for-sale securities, net of tax	—		20		—		69
Total other comprehensive income (loss)	1,889		(366)		(1,398)		2,187
Comprehensive income	$	147,419	$	118,655	$	310,577	$	259,590

The accompanying notes are an integral part of these consolidated financial statements.

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F5, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited, in thousands)


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
	Three months ended March 31, 2024
Balances, December 31, 2023	58,797	$	18,348	$	(20,668)	$	2,863,297	$	2,860,977
Exercise of employee stock options	19	680		—		—		680

Issuance of restricted stock	346	—		—		—		—
Repurchase of common stock, including excise taxes	(543)	(53,304)		—		(47,047)		(100,351)
Taxes paid related to net share settlement of equity awards	(10)	(1,836)		—		—		(1,836)
Stock-based compensation	—	55,141		—		—		55,141
Net income	—	—		—		119,021		119,021
Other comprehensive loss	—	—		(366)		—		(366)
Balances, March 31, 2024	58,609	$	19,029	$	(21,034)	$	2,935,271	$	2,933,266

	Three months ended March 31, 2025
Balances, December 31, 2024	58,132	$	9,461	$	(24,199)	$	3,250,489	$	3,235,751
Exercise of employee stock options	6	176		—		—		176

Issuance of restricted stock	271	—		—		—		—
Repurchase of common stock, including excise taxes	(481)	(25,554)		—		(99,916)		(125,470)

Taxes paid related to net share settlement of equity awards	(9)	(2,715)		—		—		(2,715)
Stock-based compensation	—	58,884		—		—		58,884
Net income	—	—		—		145,530		145,530
Other comprehensive income	—	—		1,889		—		1,889
Balances, March 31, 2025	57,919	$	40,252	$	(22,310)	$	3,296,103	$	3,314,045

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	Six months ended March 31, 2024
Balances, September 30, 2023	59,207	$	24,399	$	(23,221)	$	2,799,054	$	2,800,232
Exercise of employee stock options	33	1,088		—		—		1,088
Issuance of stock under employee stock purchase plan	188	21,469		—		—		21,469
Issuance of restricted stock	701	—		—		—		—
Repurchase of common stock, including excise taxes	(1,465)	(130,403)		—		(121,186)		(251,589)

Taxes paid related to net share settlement of equity awards	(55)	(8,667)		—		—		(8,667)
Stock-based compensation	—	111,143		—		—		111,143
Net income	—	—		—		257,403		257,403
Other comprehensive income	—	—		2,187		—		2,187
Balances, March 31, 2024	58,609	$	19,029	$	(21,034)	$	2,935,271	$	2,933,266

	Six months ended March 31, 2025
Balances, September 30, 2024	58,094	$	5,889	$	(20,912)	$	3,144,401	$	3,129,378
Exercise of employee stock options	19	699		—		—		699
Issuance of stock under employee stock purchase plan	163	23,172		—		—		23,172
Issuance of restricted stock	680	—		—		—		—
Repurchase of common stock, including excise taxes	(971)	(90,217)		—		(160,273)		(250,490)

Taxes paid related to net share settlement of equity awards	(66)	(16,083)		—		—		(16,083)
Stock-based compensation	—	116,792		—		—		116,792
Net income	—	—		—		311,975		311,975
Other comprehensive loss	—	—		(1,398)		—		(1,398)
Balances, March 31, 2025	57,919	$	40,252	$	(22,310)	$	3,296,103	$	3,314,045

The accompanying notes are an integral part of these consolidated financial statements.

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F5, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six months ended March 31,
	2025		2024
Operating activities
Net income	$	311,975	$	257,403
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	116,792		111,143
Depreciation and amortization	45,137		57,284
Non-cash operating lease costs	15,792		16,596
Deferred income taxes	(39,212)		(28,935)

Other	3,746		(2,829)
Changes in operating assets and liabilities (excluding effects of the acquisition of businesses):
Accounts receivable	7,275		66,569
Inventories	8,498		(33,886)
Other current assets	(53,457)		(34,398)
Other assets	(28,434)		(16,203)
Accounts payable and accrued liabilities	(33,844)		(20,930)
Deferred revenue	124,640		36,855
Lease liabilities	(19,529)		(21,714)
Net cash provided by operating activities	459,379		386,955
Investing activities
Purchases of investments	(1,900)		(1,000)
Maturities of investments	—		5,420

Acquisition of businesses, net of cash acquired	(10,100)		(32,939)
Purchases of property and equipment	(18,576)		(18,503)
Net cash used in investing activities	(30,576)		(47,022)
Financing activities
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan	23,871		22,557
Payments for repurchase of common stock, including excise taxes	(252,068)		(250,029)
Taxes paid related to net share settlement of equity awards	(16,083)		(8,667)
Net cash used in financing activities	(244,280)		(236,139)
Net increase in cash, cash equivalents and restricted cash	184,523		103,794
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,606)		1,779
Cash, cash equivalents and restricted cash, beginning of period	1,078,340		800,835
Cash, cash equivalents and restricted cash, end of period	$	1,261,257	$	906,408
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of operating lease liabilities	$	22,828	$	26,169
Supplemental disclosures of non-cash activities
Right-of-use assets obtained in exchange for lease obligations	$	36,893	$	7,267

The accompanying notes are an integral part of these consolidated financial statements.

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F5, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Summary of Significant Accounting Policies

Description of Business

F5, Inc. (the "Company") is a global leader in application delivery and security solutions which enables its customers to deploy, operate, secure, optimize, and govern every application and API across any architecture - on-premises, in the cloud, or at the edge. The Company's cloud, software, and hardware solutions enable its customers to deliver fast, available, and secure digital experiences to their customers at scale. The Company's enterprise-grade application services are available as hardware, software, and software-as-a-service solutions optimized for hybrid, multicloud environments, with modules that can run independently, or as part of an integrated solution on its high-performance appliances. In connection with its solutions, the Company offers a broad range of professional services, including consulting, training, maintenance, and other technical support services.

Basis of Presentation

The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for their fair statement in conformity with accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

There have been no changes to the Company's significant accounting policies as of and for the three and six months ended March 31, 2025, except for the accounting policies for investments and fair value of financial instruments, which have been updated to include equity investments with no readily determinable fair value.

Investments

The Company classifies its debt investments as available-for-sale. Debt investments, consisting of money market funds, corporate and municipal bonds and notes, and the United States government and agency securities, are reported at fair value with the related unrealized gains and losses included as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses, credit allowances and impairments due to credit losses are included in other income (expense) in the Company’s consolidated income statements. Debt investments with maturities of less than one year or where management’s intent is to use the investments to fund current operations are classified as short-term investments. Debt investments with maturities of greater than one year are classified as long-term investments.

Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments, or measured using net asset value as a practical expedient to fair value and are classified as long-term investments on the Company's consolidated balance sheets. The Company performs a qualitative assessment on a periodic basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense) in the Company's consolidated income statements.

Fair Value of Financial Instruments

Short-term and long-term debt investments are recorded at fair value as the underlying securities are classified as available-for-sale with any unrealized gains or losses being recorded to other comprehensive income (loss). The fair value for securities held is determined using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

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New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This ASU expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures in the consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures in the consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). This ASU requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. In addition, in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date of ASU 2024-03. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures in the consolidated financial statements.

2. Revenue from Contracts with Customers

Capitalized Contract Acquisition Costs

The table below shows significant movements in capitalized contract acquisition costs (current and noncurrent) for the six months ended March 31, 2025 and 2024 (in thousands):


	Six months ended March 31,
	2025		2024
Balance, beginning of period	$	66,258	$	66,468
Additional capitalized contract acquisition costs	21,529		13,851
Amortization of capitalized contract acquisition costs	(18,676)		(18,015)
Balance, end of period	$	69,111	$	62,304

Amortization of capitalized contract acquisition costs was $9.6 million and $8.9 million for the three months ended March 31, 2025 and 2024, respectively, and $18.7 million and $18.0 million for the six months ended March 31, 2025 and 2024, respectively, and is recorded in Sales and Marketing expense in the accompanying consolidated income statements. There was no impairment of any capitalized contract acquisition costs during any period presented.

Contract Balances

Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to the Company's contracts with customers. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations, or for contracts with customers that contain the Company's unconditional rights to consideration, for which the customer has not been billed. These liabilities are classified as current and non-current deferred revenue.

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The table below shows significant movements in the deferred revenue balances (current and noncurrent) for the six months ended March 31, 2025 and 2024 (in thousands):


	Six months ended March 31,
	2025		2024
Balance, beginning of period	$	1,797,959	$	1,775,121
Amounts added but not recognized as revenues	850,788		768,890

Revenues recognized related to the opening balance of deferred revenue	(726,148)		(732,035)
Balance, end of period	$	1,922,599	$	1,811,976

Remaining Performance Obligations

Remaining performance obligations represent the amount of the transaction price under contracts with customers that are attributable to performance obligations that are unsatisfied or partially satisfied at the reporting date. The composition of unsatisfied performance obligations consists mainly of deferred service revenue, and to a lesser extent, deferred product revenue, for which the Company has an obligation to perform, and has not yet recognized as revenue in the consolidated financial statements. As of March 31, 2025, the total non-cancelable remaining performance obligations under the Company's contracts with customers was $1.9 billion and the Company expects to recognize revenues on 62.4% of these remaining performance obligations over the next 12 months, 22.9% in year two, and the remaining balance thereafter.

See Note 12, Segment Information, for disaggregated revenue by significant customer and geographic region, as well as disaggregated product revenue by systems and software.

3. Fair Value Measurements

In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.

The levels of fair value hierarchy are:

Level 1: Quoted prices in active markets for identical assets and liabilities at the measurement date that the Company has the ability to access.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Unobservable inputs for which there is little or no market data available. These inputs reflect management's assumptions of what market participants would use in pricing the asset or liability.

Level 1 investments are valued based on quoted market prices in active markets and include the Company's cash equivalent investments. Level 2 investments, which include investments that are valued based on quoted prices in markets that are not active, broker or dealer quotations, actual trade data, benchmark yields or alternative pricing sources with reasonable levels of price transparency, include the Company's certificates of deposit, corporate bonds and notes, municipal bonds and notes, U.S. government securities, U.S. government agency securities and international government securities. Fair values for the Company's level 2 investments are based on similar assets without applying significant judgments. In addition, all of the Company's level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

A financial instrument's level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or

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updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The Company's financial assets measured at fair value on a recurring basis subject to the disclosure requirements at March 31, 2025 and September 30, 2024, were as follows (in thousands):


				Gross Unrealized						Classification on Balance Sheet
March 31, 2025	Fair Value Level	Cost or Amortized Cost		Gains		Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Changes in fair value recorded in other comprehensive income (loss)
Money Market Funds	Level 1	$	624,080	$	—	$	—	$	624,080	$	624,080	$	—	$	—





Total debt investments		$	624,080	$	—	$	—	$	624,080	$	624,080	$	—	$	—
Changes in fair value recorded in other net income (expense)
Equity investments	*							$	12,534	$	—	$	—	$	12,534
Total equity investments								12,534		—		—		12,534
Total investments								$	636,614	$	624,080	$	—	$	12,534

Equity investments presented in the table above include investments without readily determinable fair values that are measured at fair value using net asset value ("NAV") as a practical expedient, or are measured at cost with adjustments for observable changes in price or impairments. The equity investments are not classified within the fair value hierarchy.


				Gross Unrealized						Classification on Balance Sheet
September 30, 2024	Fair Value Level	Cost or Amortized Cost		Gains		Losses		Aggregate Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Changes in fair value recorded in other comprehensive income (loss)
Money Market Funds	Level 1	$	437,273	$	—	$	—	$	437,273	$	437,273	$	—	$	—





Total debt investments		$	437,273	$	—	$	—	$	437,273	$	437,273	$	—	$	—
Changes in fair value recorded in other net income (expense)
Equity investments	**							$	8,580	$	—	$	—	$	8,580
Total equity investments								8,580		—		—		8,580
Total investments								$	445,853	$	437,273	$	—	$	8,580

** The fair value of this equity investment is measured at NAV which approximates fair value and is not classified within the fair value hierarchy.

The Company uses the fair value hierarchy for financial assets and liabilities. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value due to their short-term nature.

Interest income from cash, cash equivalents, and investments was $9.3 million and $8.3 million for the three months ended March 31, 2025 and 2024, respectively, and $19.6 million and $16.1 million for the six months ended March 31, 2025 and 2024, respectively. Interest income is included in other income (expense), net on the Company's consolidated income statements. Unrealized losses on investments held for a period greater than 12 months at March 31, 2025 and September 30, 2024 were not material.

The Company invests in debt securities that are rated investment grade. The Company reviews the individual debt securities in its portfolio to determine whether a credit loss exists by comparing the extent to which the fair value is less than the amortized cost and considering any changes to ratings of a debt security by a ratings agency. The Company determined that as of March 31, 2025, there were no credit losses on any investments within its portfolio.

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Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

The Company's non-financial long-lived assets, which include goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis. These non-financial assets are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. The Company reviews goodwill for impairment annually, during the second quarter of each fiscal year, or as circumstances indicate the possibility of impairment. The Company monitors the carrying value of tangible and intangible long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable.

Impairment charges related to non-financial long-lived assets for the three and six months ended March 31, 2025 and 2024 were not material.

4. Business Combinations

Fiscal Year 2025 Acquisition

During the second quarter of fiscal 2025, the Company completed one acquisition. The acquired assets and assumed liabilities of the acquisition were not material and the Company recorded $7.5 million of goodwill as a result of the acquisition. The acquisition did not have a material impact to the Company's operating results.

Fiscal Year 2024 Acquisitions

During the second quarter of fiscal 2024, the Company completed two acquisitions. The acquired assets and assumed liabilities of the acquisitions were not material and the Company recorded $23.6 million of goodwill as a result of the acquisitions. The measurement period for the two acquisitions lapsed during the second quarter of fiscal 2025. The Company recorded an immaterial adjustment to consideration exchanged for the purchase of the acquired companies within the post-close measurement period. The acquisitions did not have a material impact to the Company's operating results. 

5. Balance Sheet Details

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of the Company's cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash shown in the Company's consolidated statements of cash flows for the periods presented (in thousands):


	March 31, 2025		September 30, 2024
Cash and cash equivalents	$	1,259,282	$	1,074,602
Restricted cash included in other assets, net	1,975		3,738
Total cash, cash equivalents and restricted cash	$	1,261,257	$	1,078,340

Inventories

Inventories consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Finished goods	$	27,378	$	27,922
Raw materials	40,502		48,456
	$	67,880	$	76,378

Other Current Assets

Other current assets consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Unbilled receivables	$	427,951	$	401,104
Prepaid expenses	98,583		93,467
Capitalized contract acquisition costs	33,892		32,681
Other	68,968		42,215
	$	629,394	$	569,467

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Other Assets, Net

Other assets, net consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Intangible assets	$	92,651	$	111,576
Unbilled receivables	296,864		277,965
Capitalized contract acquisition costs	35,218		33,577
Other	68,143		64,399
	$	492,876	$	487,517

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Payroll and benefits	$	173,046	$	171,571
Operating lease liabilities, current	30,195		33,779
Income and other tax accruals	32,474		45,247
Other	44,195		49,479
	$	279,910	$	300,076

Other Long-term Liabilities

Other long-term liabilities consist of the following (in thousands):


	March 31, 2025		September 30, 2024
Income taxes payable	$	92,197	$	85,461

Other	9,341		9,272
	$	101,538	$	94,733

6. Debt Facilities

Revolving Credit Agreement

On January 31, 2020, the Company entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") that provides for a senior unsecured revolving credit facility in an aggregate principal amount of $350.0 million (the "Revolving Credit Facility"). The Company has the option to increase commitments under the Revolving Credit Facility from time to time, subject to certain conditions, by up to $150.0 million. Historically, borrowings under the Revolving Credit Facility bore interest at a rate equal to, at the Company's option, (a) LIBOR, adjusted for customary statutory reserves, plus an applicable margin of 1.125% to 1.75% depending on the Company's leverage ratio, or (b) an alternate base rate determined in accordance with the Revolving Credit Agreement, plus an applicable margin of 0.125% to 0.750% depending on the Company's leverage ratio. On May 26, 2023, the Company amended the Revolving Credit Agreement as a result of the cessation of the LIBOR borrowing reference rate. The amendment modified and directly replaced the LIBOR borrowing reference rate within the Revolving Credit Agreement to the Secured Overnight Financing Rate (SOFR). After the amendment, borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company's option, (a) SOFR plus 0.10%, plus an applicable margin of 1.125% to 1.75% depending on the Company's leverage ratio, or (b) an alternate base rate determined in accordance with the Revolving Credit Agreement, plus an applicable margin of 0.125% to 0.750% depending on the Company's leverage ratio. The Revolving Credit Agreement also requires payment of a commitment fee calculated at a rate per annum of 0.125% to 0.300% depending on the Company's leverage ratio on the undrawn portion of the Revolving Credit Facility. Commitment fees incurred during the three and six months ended March 31, 2025 were not material.

On January 31, 2025, the Company's Revolving Credit Facility, with an aggregate principal amount of $350.0 million, expired. At the time of expiration, there were no outstanding borrowings under the Revolving Credit Facility.

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7. Leases

The majority of the Company's operating lease payments relate to its corporate headquarters in Seattle, Washington, which includes approximately 515,000 square feet of office space. The lease commenced in April 2019 and expires in 2033 with an option for renewal. The Company also leases additional office and lab space for product development and sales and support personnel in the United States and internationally. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of the Company's operating lease expenses for the three and six months ended March 31, 2025 and 2024 were as follows (in thousands):


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Operating lease expense	$	10,043	$	10,167	$	20,050	$	20,493
Short-term lease expense	691		671		1,510		1,366
Variable lease expense	5,922		5,941		11,514		11,975
Total lease expense	$	16,656	$	16,779	$	33,074	$	33,834

Variable lease expense primarily consists of common area maintenance, real estate taxes and parking expenses.

Supplemental balance sheet information related to the Company's operating leases was as follows (in thousands, except lease term and discount rate):


	March 31, 2025			September 30, 2024
Operating lease right-of-use assets, net	$	189,656		$	178,180

Operating lease liabilities, current1	30,195			33,779
Operating lease liabilities, long-term	236,623			215,785
Total operating lease liabilities	$	266,818		$	249,564

Weighted average remaining lease term (in years)	8.0			7.9
Weighted average discount rate	3.15		%	2.94		%

(1)Current portion of operating lease liabilities is included in accrued liabilities on the Company's consolidated balance sheets.

As of March 31, 2025, the future operating lease payments for each of the next five years and thereafter is as follows (in thousands):


Fiscal Years Ending September 30:	Operating Lease Payments
2025 (remainder)	$	18,309
2026	40,210
2027	39,339
2028	34,690
2029	32,015
2030	31,554
Thereafter	109,346
Total lease payments	305,463
Less: imputed interest	(38,645)
Total lease liabilities	$	266,818

Operating lease liabilities above do not include sublease income. As of March 31, 2025, the Company expects to receive sublease income of $9.5 million, which consists of $1.9 million to be received for the remainder of fiscal 2025 and $7.6 million to be received over the eight fiscal years thereafter.

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As of March 31, 2025, the Company had no significant operating leases that were executed but not yet commenced.

8. Commitments and Contingencies

Guarantees and Product Warranties

In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, resellers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. The Company has entered into indemnification agreements with its officers and directors and certain other employees, and the Company's bylaws contain similar indemnification obligations to the Company's agents. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.

The Company offers warranties of one year for its systems product offerings. Additional warranty coverage can be purchased by customers through service maintenance agreements in yearly increments. The Company accrues for warranty costs as part of its cost of sales based on associated material product costs and technical support labor costs. Accrued warranty costs as of March 31, 2025 and September 30, 2024 were not material.

Commitments

In October 2022, the Company entered into an unconditional purchase commitment with one of its suppliers for the delivery of systems components. Under the terms of the agreement, the Company is obligated to purchase $10.0 million of component inventory annually, with a total committed amount of $40.0 million over a four-year term. As of March 31, 2025, the Company had no remaining purchase commitments under the third year of the agreement. The Company's total non-cancelable long-term purchase commitments outstanding as of March 31, 2025 was $10.0 million.

The Company leases its facilities under operating leases that expire at various dates through 2036. There have been no material changes in the Company's lease obligations compared to those discussed in Note 7 to its annual consolidated financial statements.

Legal Proceedings

Lynwood Investment CY Limited v. F5 Networks et al.

On June 8, 2020, Lynwood Investment CY Limited ("Lynwood") filed a lawsuit in the United States District Court for the Northern District of California ("District Court") against the Company and certain affiliates, along with other defendants. In its complaint, Lynwood claims to be the assignee of all rights and interests of Rambler Internet Holding LLC ("Rambler"), and alleges that the intellectual property in the NGINX software originally released by the co-founder of NGINX in 2004 belongs to Rambler (and therefore Lynwood, by assignment) because the software was created and developed while the co-founder was employed by Rambler. Lynwood asserted 26 causes of action against the various defendants, including copyright infringement, violation of trademark law, tortious interference, conspiracy, and fraud. The complaint sought damages, disgorgement of profits, declarations of copyright and trademark ownership, trademark cancellations, and injunctive relief. Lynwood also initiated several trademark opposition and cancellation proceedings before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office, which have all since been suspended.

In August and October 2020, the Company and the other defendants filed motions to dismiss Lynwood’s case. On March 25 and 30, 2021, the District Court granted the Company’s and the other defendants’ motions to dismiss with leave to amend. Lynwood filed its amended complaint on April 29, 2021, seeking the same relief against the Company and other defendants. On May 27, 2021, the Company and other defendants filed a consolidated motion to dismiss.

The District Court granted the consolidated motion to dismiss without leave to amend on August 16, 2022 and entered final judgment against Lynwood on September 9, 2022. Following the District Court’s order granting the consolidated motion to dismiss and final judgment in the Company’s favor, the District Court subsequently granted the Company attorneys' fees of over $0.8 million, which Lynwood appealed to the Ninth Circuit Court of Appeals. The dismissal appeal and the fees appeal were heard by the Ninth Circuit Court of Appeals ("Court of Appeals") on December 7, 2023. On November 7, 2024, the Court of Appeals partially affirmed the dismissal by affirming dismissal of the state law claims and remanding a portion of the copyright claim to the District Court. The Court of Appeals also vacated the fees award because of the remand.

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On December 2, 2024, the Court of Appeals issued its mandate returning the matter to the District Court for further proceedings on the remaining portion of the copyright claim. Following a case management conference on March 7, 2025, the District Court ordered phased discovery with a first phase focused on whether any NGINX Plus code was written by certain defendants or other former Rambler employees while employed by Rambler before the end of 2011. The first phase discovery cutoff is March 19, 2026. Additionally, the defendants may file a summary judgment motion by April 20, 2026, for a hearing on May 26, 2026. If the case survives summary judgment, the District Court set trial for November 1, 2027. On April 7, 2025, Lynwood filed a second amended complaint limited to the remaining portion of the copyright claim. The defendants’ response to the second amended complaint is due May 19, 2025. The Company intends to continue vigorously defending the litigation.

In addition to the above matters, the Company is subject to a variety of legal proceedings, claims, investigations, and litigation arising in the ordinary course of business, including intellectual property litigation. Management believes that the Company has meritorious defenses to the allegations made in its pending cases and intends to vigorously defend these lawsuits; however, the Company is unable to currently determine if an unfavorable outcome is probable or estimate any potential amount or range of possible loss of these or similar matters. There are many uncertainties associated with any litigation and these actions or other third-party claims against the Company may cause it to incur costly litigation and/or substantial settlement charges that could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.

The Company records an accrual for loss contingencies for legal proceedings when it believes that an unfavorable outcome is both (a) probable and (b) the amount or range of any possible loss is reasonably estimable. The Company has not recorded any accrual for loss contingencies associated with such legal proceedings or the investigations discussed above.

9. Income Taxes

The Company's tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items in the related period.

The effective tax rate was 15.0% and 18.0% for the three and six months ended March 31, 2025, respectively, compared to 18.4% and 19.6% for the three and six months ended March 31, 2024, respectively. The decrease in the effective tax rate for the three and six months ended March 31, 2025 as compared to the three and six months ended March 31, 2024 is primarily due to the tax impact of non-recurring benefits recorded in the quarter related to foreign operations and stock-based compensation.

At March 31, 2025, the Company had $90.9 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. It is anticipated that the Company’s existing liabilities for unrecognized tax benefits will change within the next twelve months due to audit settlements or the expiration of statutes of limitations. The Company does not expect these changes to be material to the consolidated financial statements. The Company recognizes interest and, if applicable, penalties for any uncertain tax positions as a component of income tax expense.

The Company and its subsidiaries are subject to U.S. federal income tax as well as the income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for fiscal years through September 30, 2018. Major jurisdictions where there are wholly owned subsidiaries of F5, Inc. which require income tax filings include the United Kingdom, Singapore, Israel, and India. The earliest periods open for review by local taxing authorities are fiscal years 2022 for the United Kingdom, 2019 for Singapore, 2019 for Israel, and 2018 for India. The Company is under audit by the Internal Revenue Service for fiscal year 2019, by various states for fiscal years 2018 through 2023, and by various foreign jurisdictions including India for fiscal years 2018 to 2024, Israel for fiscal years 2019 to 2022, Saudi Arabia for fiscal years 2015 to 2020, and Singapore for fiscal years 2019 to 2022.

10. Shareholders' Equity

Common Stock Repurchase

On October 25, 2024, the Company announced that its Board of Directors authorized an additional $1.0 billion for its common stock share repurchase program. This authorization is incremental to the existing $6.4 billion program, initially approved in October 2010 and expanded in subsequent fiscal years. Acquisitions for the share repurchase programs will be made from time to time in private transactions, accelerated share repurchase programs, or open market purchases as permitted by securities laws and other legal requirements. The programs can be terminated at any time.

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The following table summarizes the Company's repurchases and retirements of its common stock under its Stock Repurchase Program (in thousands, except per share data):


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Shares repurchased	481		543		971		1,465
Average price per share	$	259.46	$	184.07	$	257.37	$	170.59
Amount repurchased	$	125,009	$	100,011	$	250,019	$	250,029

As of March 31, 2025, the Company had $1,172.4 million remaining authorized to purchase shares under its share repurchase program.

11. Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. The Company's nonvested restricted stock units do not have nonforfeitable rights to dividends or dividend equivalents and are not considered participating securities that should be included in the computation of earnings per share under the two-class method.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Numerator
Net income	$	145,530	$	119,021	$	311,975	$	257,403
Denominator
Weighted average shares outstanding — basic	57,886		58,788		58,098		58,956
Dilutive effect of common shares from stock options and restricted stock units	878		792		815		661
Weighted average shares outstanding — diluted	58,764		59,580		58,913		59,617
Basic net income per share	$	2.51	$	2.02	$	5.37	$	4.37
Diluted net income per share	$	2.48	$	2.00	$	5.30	$	4.32

Anti-dilutive stock-based awards excluded from the calculations of diluted earnings per share were not material for the three and six months ended March 31, 2025 and 2024.

12. Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Management has determined that the Company is organized as, and operates in, one reportable operating segment.

Revenues by Geographic Location and Other Information

The Company does business in three main geographic regions: the Americas (primarily the United States); Europe, the Middle East, and Africa (EMEA); and the Asia Pacific region (APAC). The Company's chief operating decision-maker reviews financial information presented on a consolidated basis accompanied by information about net product revenues and revenues by geographic region. The Company's foreign offices conduct sales, marketing, research and development, and support activities. Revenues are attributed by geographic location based on the location of the end user customer.

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The following presents revenues by geographic region (in thousands):


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Americas:
United States	$	373,789	$	363,847	$	781,177	$	713,922
Other	22,337		21,718		46,922		48,033
Total Americas	396,126		385,565		828,099		761,955
EMEA	213,971		178,386		418,358		371,749
APAC	121,026		117,403		251,155		240,247
	$	731,123	$	681,354	$	1,497,612	$	1,373,951

The Company continues to offer its products through a range of consumption models, from physical systems to software solutions and managed services. The following presents net product revenues by systems and software (in thousands):


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Net product revenues
Systems revenue	$	179,405	$	141,654	$	339,113	$	277,028
Software revenue	157,791		158,508		366,580		328,993
Total net product revenue	$	337,196	$	300,162	$	705,693	$	606,021

The following customers accounted for more than 10% of total net revenue:


	Three months ended March 31,				Six months ended March 31,
	2025		2024		2025		2024
Ingram Micro, Inc.	16.9	%	18.6	%	16.5	%	17.0	%



Synnex Corporation	17.4	%	16.5	%	17.1	%	16.0	%

The Company tracks assets by physical location. Long-lived assets consist of property and equipment, net, and are shown below (in thousands):


	March 31, 2025		September 30, 2024
Americas:
United States	$	110,525	$	112,420
Other	1,471		1,773
Total Americas	111,996		114,193
EMEA	19,960		21,970
APAC	16,856		14,780
	$	148,812	$	150,943

13. Restructuring Charges

In the first quarters of fiscal 2025 and 2024, the Company initiated restructuring plans to match strategic and financial objectives and optimize resources for long term growth, including reduction in force programs. For the three months ended December 31, 2024 and 2023, the Company recorded restructuring charges of $11.3 million and $9.8 million, respectively. The Company did not record any significant subsequent charges related to the first quarter of fiscal 2025 and 2024 restructuring plans.

In the third quarter of fiscal 2023, the Company initiated a restructuring plan to better align strategic and financial objectives, optimize operations, and drive efficiencies for long-term growth and profitability, including a reduction in force affecting approximately 620 employees, or approximately 9% of the Company’s global workforce as of April 19, 2023. This included $53.2 million in severance benefits costs and related employer payroll taxes, and $3.5 million in charges related to the

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reduction of its leased facility space. The Company incurred $56.7 million in restructuring costs and did not record any significant subsequent charges related to the third quarter of fiscal 2023 restructuring plan.

During the six months ended March 31, 2025 and 2024, the following activity was recorded (in thousands):


	Six months ended March 31,
	2025		2024
Employee Severance, Benefits and Related Costs
Accrued expenses, beginning of period	$	—	$	3,496
Restructuring charges1	11,321		8,562
Cash payments	(11,156)		(11,501)
Accrued expenses, end of period	$	165	$	557

(1) Includes restructuring charges and adjustments for in period relief of unused benefits and foreign currency fluctuations.

Charges related to employee severance, benefits, and related costs are reflected in the restructuring charges line item on the Company's consolidated income statements.

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