On this page of StockholderLetter.com we present the latest annual shareholder letter from F5, INC. — ticker symbol FFIV. Reading current and past FFIV letters to shareholders can bring important insights into the investment thesis.
Annual Report
2024
Fran  ois Locoh-Donou
President, CEO, and Director, F5, Inc.
TO OUR SHAREHOLDERS, CUSTOMERS, AND PARTNERS:
In 2024, our world faced substantial challenges including ongoing con   icts and violence in the Middle East
and Ukraine, increasing geopolitical tensions, persistent high interest rates, climate-related disasters, and trade
fragmentation. For our customers   the largest enterprises, service providers, and government entities across the
globe   this environment led to budget uncertainty and extreme spending caution, characteristics that de   ned
F5   s demand environment for 2023 and the start of 2024.
F5   s technology underpins the applications that keep businesses running and enable millions of consumers to
bank, shop, communicate, and manage their day-to-day lives. Our software, hardware, and software-as-a-service
(SaaS) solutions ensure applications worldwide are performant and secure. As a result, we have a    rst-hand view
to the mounting IT infrastructure complexity facing our customers: the number of applications their businesses
depend on is growing, the services required to keep those applications secure and performant are expanding,
and the environments their IT teams operate across are increasing. In addition, cybersecurity risks are escalating
and the power of AI and everything it brings with it, including more infrastructure complexity and security risk, is
upon them.
Individually, any one of these dynamics would be a challenge for our customers    IT teams. The fact that they are
all happening simultaneously means that the status quo is untenable. At F5, we foresaw this mounting complexity,
which we describe as the    Ball of Fire,    and for the last several years, we have been investing and innovating to
ensure we are ready to address it for our customers.
F5 is the only company capable of securing, delivering, and optimizing any application and any API, regardless
of its location or environment   be it in a data center, any one of the public clouds, or at the network edge. With
customers worldwide increasingly leveraging hybrid multicloud strategies   sharing data and applications across
on-premises data centers, private cloud storage, and public cloud platforms   F5   s capabilities stand apart.
Amidst a complex web of environments and solutions, F5 empowers our customers to establish a consistent
security posture across all their applications, enhancing security, streamlining operations, and reducing
costs. Moreover, we are unifying our solutions to provide customers with unprecedented levels of visibility,
manageability, and automation.
Today, F5 is differentiated in three critical areas:
First, in application and API security. F5 delivers the most effective and comprehensive application and API
security platform in the industry. We enable our customers to consolidate point products targeting speci   c
threats onto a single, integrated platform with a suite of best-in-class capabilities. In 2024, several industry
experts acknowledged F5   s leadership including IDC, who recognized F5 as a WAAP (web application    rewall
and API protection) leader, noting F5   s capabilities exceeded all other players in the space. SecureIQLab,
TrustRadius, KuppingerCole, and Gartner also recognized F5   s WAAP capabilities in 2024.
Second, by enabling simpli   cation. F5 enables the hybrid multicloud    exibility our customers    businesses
demand with the simplicity their IT operations require. Only F5 delivers solutions that extend across public
clouds, to the edge, and customers    on-premises environments. Our solutions simplify connecting disparate
infrastructure environments and the applications deployed in and across them.
And third, by delivering standardization and automation. F5   s solutions enable more cost-effective and scalable
IT operations. We streamline customers    operations with consistent policies, comprehensive automation, and
rich analytics. This enables customers to consolidate vendors and toolsets, rationalize operational silos, and
automate lifecycle management of their on-premises deployments.
While we were con   dent that hybrid multicloud environments would become the norm and that our portfolio was
uniquely suited to address our customers    escalating hybrid multicloud challenges, given the macro environment
and customers    persistent spending caution, we guided for    scal year 2024 revenue that was down slightly yearover-year. Over the course of the    scal year, customer budgets and spending began to stabilize. By the end
of the year, customers were moving forward with delayed technology refreshes and modernization projects,
and they were choosing F5 because of our unique value proposition and strong alignment with their hybrid
multicloud strategies.
Proudly, I can say that we delivered $2.8 billion in    scal year 2024 revenue, representing year-over-year growth,
driven by 11% software revenue growth and 4% global services revenue growth which offset 20% systems revenue
declines. In addition, as a result of our revenue performance combined with continued strong operating discipline,
we also achieved    scal year 2024 GAAP net income of $567 million, or $9.55 per share. We delivered non-GAAP
net income of $794 million, or $13.37 per share, representing 14% earnings per share growth from    scal year 2023,
and underscoring our commitment to pro   tability.1
We also delivered very strong cash    ow from operations of $792 million, up from $653 million in    scal year 2023.
Furthermore, we returned 66% of our annual free cash    ow to shareholders via share repurchases, surpassing our
50% minimum pledge.
Our    scal year 2024 results speak to the power of F5   s solutions and the relevancy of our growing role in our
customers    evolving IT infrastructures, the strength of our operating model, and the resilience of our business.
They also offer irrefutable evidence that we have successfully reshaped F5 from a hardware-centric, singleproduct company into a security and software leader for today   s hybrid multicloud world.
The magnitude of our transformation is evident across several measures. Consider that in    scal year 2017,
software contributed $122 million, or just 13% of our product revenue. In contrast, in    scal year 2024, software
totaled $735 million and represented 58% of our product revenue. In addition, in    scal year 2017, subscriptions
represented just $24 million, or 20%, of our software revenue. In    scal year 2024, subscription revenue totaled
$624 million, and 85% of our software revenue.
We have transformed F5 and rede   ned our role beyond the data center, increasing our value to customers,
diversifying our revenue, and expanding our total addressable market. In 2018, our total addressable market was
approximately $2 billion. With our expanded portfolio, we estimate that by 2028, our total addressable market will
approach $34 billion.
1 Fiscal year 2024 non-GAAP net income and net income per share excludes $219 million in stock-based compensation, $51 million in
amortization and impairment of purchased intangible assets, $9 million in restructuring charges, $4 million in acquisition-related charges,
and $4 million in facility-exit costs.
The combination of our unique position, our strong alignment with hybrid multicloud demands, and improving
customer spending and demand trends, led us to forecast accelerating revenue growth in    scal year 2025,
guiding for 4% to 5% total revenue growth on our October 2024 earnings call. We expect to continue to invest and
innovate to ensure we are well positioned to capture hybrid multicloud and AI-driven growth while also delivering
on our commitment to pro   tability. In line with that philosophy, we also guided for    scal year 2025 non-GAAP
earnings per share growth that, on a tax neutral basis to    scal year 2024, re   ects 10% growth at the midpoint.
I will use the remainder of this letter to speak to our AI opportunity, our efforts to create a global and diverse F5
team that is both human    rst and high performance, and to highlight our continued environmental, social and
governance programs.
F5   s AI Opportunity
In what feels like a very short period of time, enterprises across the globe have embraced AI and are working
to determine how and where they can leverage it to the greatest advantage. In our 2024 State of Application
Strategy Report, 75% of respondents indicated that AI was a core business focus, up from just 17% in 2020.
Today, AI-enabled tools are enhancing developer productivity by automating routine coding tasks, advancing
customer support with AI-driven chatbots and virtual assistants and streamlining office work   ows by optimizing
scheduling, managing data entry, and facilitating decision-making processes with advanced analytics. Embracing
AI is not merely a trend but a strategic imperative.
We expect that within three years, 80% of applications will be infused with generative AI creating new compliance,
networking, security, and operation challenges for our customers. In short, AI adoption is poised to exacerbate
our customers    already signi   cant    Ball of Fire    challenges. F5 stands ready to address these new challenges.
We are not just adapting to the AI revolution   we are actively shaping it; providing the critical infrastructure that
enables our customers to harness the full potential of AI safely and efficiently.
It is very early days, but AI also is creating net-new opportunities for F5. Today, F5   s high-performance
traffic management capabilities are being deployed to facilitate AI data ingestion for AI model training and
retrieval-augmented generation, or    RAG,    and to optimize the performance and scalability of large-scale AI
factories. Customers also are using F5   s web application    rewall and API protection capabilities to ensure
secure AI inferencing.
Of these early AI-related opportunities, we believe AI inferencing is likely to represent the largest potential
opportunity for F5. We expect the opportunity will emerge more signi   cantly as customers begin to leverage
AI in production and at scale, likely over the next 18 months.
F5 is Creating a Global and Diverse Team that is Both Human-First and
High-Performance
At F5, we strive to be both a human-   rst and high-performing team equipped with the tools and expertise to
deliver extraordinary impact on what matters most to F5, our customers, and our partners. This commitment is
delivered through our culture and engagement, our investment in employees    growth and development, our
focus on diversity and inclusion, and our compensation, bene   ts, and wellbeing offerings.
 • shareholder letter icon 1/27/2025 Letter Continued (Full PDF)
 • stockholder letter icon 1/25/2023 FFIV Stockholder Letter
 • stockholder letter icon 1/26/2024 FFIV Stockholder Letter
 • stockholder letter icon More "Information Technology Services" Category Stockholder Letters
 • Benford's Law Stocks icon FFIV Benford's Law Stock Score = 86


FFIV Shareholder/Stockholder Letter Transcript:

Annual Report
2024


Fran  ois Locoh-Donou
President, CEO, and Director, F5, Inc.
TO OUR SHAREHOLDERS, CUSTOMERS, AND PARTNERS:
In 2024, our world faced substantial challenges including ongoing con   icts and violence in the Middle East
and Ukraine, increasing geopolitical tensions, persistent high interest rates, climate-related disasters, and trade
fragmentation. For our customers   the largest enterprises, service providers, and government entities across the
globe   this environment led to budget uncertainty and extreme spending caution, characteristics that de   ned
F5   s demand environment for 2023 and the start of 2024.
F5   s technology underpins the applications that keep businesses running and enable millions of consumers to
bank, shop, communicate, and manage their day-to-day lives. Our software, hardware, and software-as-a-service
(SaaS) solutions ensure applications worldwide are performant and secure. As a result, we have a    rst-hand view
to the mounting IT infrastructure complexity facing our customers: the number of applications their businesses
depend on is growing, the services required to keep those applications secure and performant are expanding,
and the environments their IT teams operate across are increasing. In addition, cybersecurity risks are escalating
and the power of AI and everything it brings with it, including more infrastructure complexity and security risk, is
upon them.
Individually, any one of these dynamics would be a challenge for our customers    IT teams. The fact that they are
all happening simultaneously means that the status quo is untenable. At F5, we foresaw this mounting complexity,
which we describe as the    Ball of Fire,    and for the last several years, we have been investing and innovating to
ensure we are ready to address it for our customers.
F5 is the only company capable of securing, delivering, and optimizing any application and any API, regardless
of its location or environment   be it in a data center, any one of the public clouds, or at the network edge. With
customers worldwide increasingly leveraging hybrid multicloud strategies   sharing data and applications across
on-premises data centers, private cloud storage, and public cloud platforms   F5   s capabilities stand apart.
Amidst a complex web of environments and solutions, F5 empowers our customers to establish a consistent
security posture across all their applications, enhancing security, streamlining operations, and reducing
costs. Moreover, we are unifying our solutions to provide customers with unprecedented levels of visibility,
manageability, and automation.
Today, F5 is differentiated in three critical areas:
First, in application and API security. F5 delivers the most effective and comprehensive application and API
security platform in the industry. We enable our customers to consolidate point products targeting speci   c
threats onto a single, integrated platform with a suite of best-in-class capabilities. In 2024, several industry
experts acknowledged F5   s leadership including IDC, who recognized F5 as a WAAP (web application    rewall
and API protection) leader, noting F5   s capabilities exceeded all other players in the space. SecureIQLab,
TrustRadius, KuppingerCole, and Gartner also recognized F5   s WAAP capabilities in 2024.

Second, by enabling simpli   cation. F5 enables the hybrid multicloud    exibility our customers    businesses
demand with the simplicity their IT operations require. Only F5 delivers solutions that extend across public
clouds, to the edge, and customers    on-premises environments. Our solutions simplify connecting disparate
infrastructure environments and the applications deployed in and across them.
And third, by delivering standardization and automation. F5   s solutions enable more cost-effective and scalable
IT operations. We streamline customers    operations with consistent policies, comprehensive automation, and
rich analytics. This enables customers to consolidate vendors and toolsets, rationalize operational silos, and
automate lifecycle management of their on-premises deployments.
While we were con   dent that hybrid multicloud environments would become the norm and that our portfolio was
uniquely suited to address our customers    escalating hybrid multicloud challenges, given the macro environment
and customers    persistent spending caution, we guided for    scal year 2024 revenue that was down slightly yearover-year. Over the course of the    scal year, customer budgets and spending began to stabilize. By the end
of the year, customers were moving forward with delayed technology refreshes and modernization projects,
and they were choosing F5 because of our unique value proposition and strong alignment with their hybrid
multicloud strategies.
Proudly, I can say that we delivered $2.8 billion in    scal year 2024 revenue, representing year-over-year growth,
driven by 11% software revenue growth and 4% global services revenue growth which offset 20% systems revenue
declines. In addition, as a result of our revenue performance combined with continued strong operating discipline,
we also achieved    scal year 2024 GAAP net income of $567 million, or $9.55 per share. We delivered non-GAAP
net income of $794 million, or $13.37 per share, representing 14% earnings per share growth from    scal year 2023,
and underscoring our commitment to pro   tability.1
We also delivered very strong cash    ow from operations of $792 million, up from $653 million in    scal year 2023.
Furthermore, we returned 66% of our annual free cash    ow to shareholders via share repurchases, surpassing our
50% minimum pledge.
Our    scal year 2024 results speak to the power of F5   s solutions and the relevancy of our growing role in our
customers    evolving IT infrastructures, the strength of our operating model, and the resilience of our business.
They also offer irrefutable evidence that we have successfully reshaped F5 from a hardware-centric, singleproduct company into a security and software leader for today   s hybrid multicloud world.
The magnitude of our transformation is evident across several measures. Consider that in    scal year 2017,
software contributed $122 million, or just 13% of our product revenue. In contrast, in    scal year 2024, software
totaled $735 million and represented 58% of our product revenue. In addition, in    scal year 2017, subscriptions
represented just $24 million, or 20%, of our software revenue. In    scal year 2024, subscription revenue totaled
$624 million, and 85% of our software revenue.
We have transformed F5 and rede   ned our role beyond the data center, increasing our value to customers,
diversifying our revenue, and expanding our total addressable market. In 2018, our total addressable market was
approximately $2 billion. With our expanded portfolio, we estimate that by 2028, our total addressable market will
approach $34 billion.
1 Fiscal year 2024 non-GAAP net income and net income per share excludes $219 million in stock-based compensation, $51 million in
amortization and impairment of purchased intangible assets, $9 million in restructuring charges, $4 million in acquisition-related charges,
and $4 million in facility-exit costs.

The combination of our unique position, our strong alignment with hybrid multicloud demands, and improving
customer spending and demand trends, led us to forecast accelerating revenue growth in    scal year 2025,
guiding for 4% to 5% total revenue growth on our October 2024 earnings call. We expect to continue to invest and
innovate to ensure we are well positioned to capture hybrid multicloud and AI-driven growth while also delivering
on our commitment to pro   tability. In line with that philosophy, we also guided for    scal year 2025 non-GAAP
earnings per share growth that, on a tax neutral basis to    scal year 2024, re   ects 10% growth at the midpoint.
I will use the remainder of this letter to speak to our AI opportunity, our efforts to create a global and diverse F5
team that is both human    rst and high performance, and to highlight our continued environmental, social and
governance programs.
F5   s AI Opportunity
In what feels like a very short period of time, enterprises across the globe have embraced AI and are working
to determine how and where they can leverage it to the greatest advantage. In our 2024 State of Application
Strategy Report, 75% of respondents indicated that AI was a core business focus, up from just 17% in 2020.
Today, AI-enabled tools are enhancing developer productivity by automating routine coding tasks, advancing
customer support with AI-driven chatbots and virtual assistants and streamlining office work   ows by optimizing
scheduling, managing data entry, and facilitating decision-making processes with advanced analytics. Embracing
AI is not merely a trend but a strategic imperative.
We expect that within three years, 80% of applications will be infused with generative AI creating new compliance,
networking, security, and operation challenges for our customers. In short, AI adoption is poised to exacerbate
our customers    already signi   cant    Ball of Fire    challenges. F5 stands ready to address these new challenges.
We are not just adapting to the AI revolution   we are actively shaping it; providing the critical infrastructure that
enables our customers to harness the full potential of AI safely and efficiently.
It is very early days, but AI also is creating net-new opportunities for F5. Today, F5   s high-performance
traffic management capabilities are being deployed to facilitate AI data ingestion for AI model training and
retrieval-augmented generation, or    RAG,    and to optimize the performance and scalability of large-scale AI
factories. Customers also are using F5   s web application    rewall and API protection capabilities to ensure
secure AI inferencing.
Of these early AI-related opportunities, we believe AI inferencing is likely to represent the largest potential
opportunity for F5. We expect the opportunity will emerge more signi   cantly as customers begin to leverage
AI in production and at scale, likely over the next 18 months.
F5 is Creating a Global and Diverse Team that is Both Human-First and
High-Performance
At F5, we strive to be both a human-   rst and high-performing team equipped with the tools and expertise to
deliver extraordinary impact on what matters most to F5, our customers, and our partners. This commitment is
delivered through our culture and engagement, our investment in employees    growth and development, our
focus on diversity and inclusion, and our compensation, bene   ts, and wellbeing offerings.



shareholder letter icon 1/27/2025 Letter Continued (Full PDF)
 

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