2012 ANNUAL REPORT MAKING THE CONNECTED WORLD RUN BETTER 20% revenue growth 540 new employees $447M deferred revenue $495M cash flow from operations $1.2B cash and investments at year’s end ABOUT F5 NETWORKS F5 Networks (NASDAQ: FFIV) makes the connected world run better. F5 helps organizations meet the demands and embrace the opportunities that come with the relentless growth of voice, data, and video traffic, mobile workers, and applications—in the data center, the network, and the cloud. The world’s largest businesses, service providers, government entities, and consumer brands rely on F5’s Intelligent Services Platform to deliver and protect their applications and services while ensuring people stay connected. Learn more at www.f5.com. TO OUR SHAREHOLDERS In fiscal 2012 we managed to achieve our 20 percent revenue growth target despite a broad-based slowdown in customer spending during the second half of the year. In addition, we added 540 employees while maintaining non-GAAP operating margins above 38 percent. John McAdam President and Chief Executive Officer Product revenue was slightly below expectations. However, we continued to generate strong services revenue, and deferred revenue, which consists primarily of service maintenance contracts, grew 30 percent to more than $447 million. Cash flow from operations was $495 million, and after acquiring Traffix Systems in February and repurchasing approximately 1.7 million shares of our common stock, we ended the year with $1.2 billion in cash and investments. SELECTED FINANCIAL DATA [in thousands] Net Revenues Gross Profit Operating Expenses Income from Operations Net Income 2008 2009 2010 2011 2012 $ 650,173 $ 653,079 $ 881,972 $ 1,151,834 $ 1,377,247 $ 501,155 $ 510,353 $ 710,020 $ 943,830 $ 1,141,079 $ 401,841 $ 388,429 $ 480,018 $ 593,168 $ 714,776 $ $ 99,314 74,331 $ 121,924 $ 230,002 $ 350,662 $ 426,303 $ 91,535 $ 151,153 $ 241,397 $ 275,186 Cash, Equivalents & Investments $ 451,272 $ 574,422 $ 862,066 $ 1,012,753 $ 1,194,954 Long-Term Debt $ 0 $ 0 $ 0 $ 0 $ 0 Looking out to fiscal 2013, it is difficult to say if or on a single appliance or chassis, leveraging the when the global economic climate will improve. performance of our purpose-built hardware Nevertheless, we believe there are a number of while running different software modules and significant drivers specific to F5 that will enable managing traffic for different applications us to grow sequentially throughout the year and and users. reaccelerate product revenue growth. These include a number of new products and solutions targeting the security market, service providers, and the delivery of cloud services. In early April we introduced new high- performance blades for our current high-end VIPRION chassis. The P300 blades in VIPRION 4480 doubled the performance of VIPRION In mid-October we introduced BIG-IP 4200v, 4400 and contributed to strong VIPRION the first in a series of new hardware platforms sales, which more than doubled in fiscal 2012. that will replace our existing lineup of entry- In the second quarter, we plan to introduce an level and mid-range BIG-IP appliances. In the second quarter we will introduce two entry-level appliances that will be 4–5 times faster than the products they replace, and new high-end appliances that will deliver similar performance enhancements. New mid-range appliances will be introduced later in the year. 8-blade VIPRION, which will incorporate P300 blades and effectively double the performance and scalability of VIPRION 4480. Later in the calendar year we are on track to deliver new blades for VIPRION 2400, doubling the performance of that platform as well. The new appliances are all designed to support Throughout fiscal 2012, attach rates for our Virtual Clustered Multiprocessing software growing array of software modules and sales (vCMP), originally available only on our VIPRION of our virtual edition products continued to gain platforms. vCMP allows customers to run traction and contributed to strong product multiple virtual instances of BIG-IP products gross margins. Around calendar year end, we REVENUE [in $ millions] 12 11 10 09 08 NET INCOME [in $ millions] 12 11 10 09 08 GROSS MARGIN [in %] 1,377.2 1,151.8 2012 83 82 2011 882.0 653.1 650.2 275.2 241.4 151.2 91.5 74.3 77 2008 81 2010 78 2009 OPERATING MARGIN [in %] 2012 31 30 2011 15 2008 19 2009 26 2010 plan to launch Solar, a major upgrade to TMOS, Our new service provider offerings include the which will include new high-performance virtual BIG-IP Carrier-Grade NAT (CGNAT) module editions of our products and new features and and BIG-IP Policy Enforcement Manager (PEM). software modules designed to enhance our security and service provider offerings. Leveraging the scalability and throughput of our high-end hardware platforms, BIG-IP CGNAT delivers industry-leading performance for IPv4/ BIG-IP Advanced Firewall Manager (AFM) is a IPv6 translation. BIG-IP PEM combines deep new module that exposes the network firewall packet inspection (DPI) technology with other functions of our products in a standard, easy- features designed to enhance the capabilities of to-use interface with enhanced management capabilities and extremely high performance. Combined with our application and protocol security modules, BIG-IP AFM provides a fully integrated L3–L7 security solution that delivers unprecedented protection and visibility for critical network and application infrastructure. During the year, focused marketing efforts with partners and customers drove increasing deployment of our products as combined firewall and application delivery platforms. BIG-IP AFM is designed to give our platforms our products as policy enforcement engines in 4G/LTE networks. Later in the first half of calendar 2013 we plan to launch BIG-IQ, a new management platform that will be available as a virtual edition and as a standalone appliance. As the successor to Enterprise Manager, BIG-IQ abstracts Enterprise Manager’s management services, makes them available to plug-in modules designed to manage specific types of devices and applications, and allows users to monitor and manage those applications and devices the look and feel of a standard network firewall through a single, highly intuitive graphical user and is an integral component of our application interface. Like TMOS, BIG-IQ is an extensible delivery firewall platform. architecture designed to support a growing DEFERRED REVENUE [in $ millions] 12 11 10 09 08 447.3 343.3 259.4 183.1 145.0 DSO [in days] 12 11 10 09 08 46 47 40 55 51 CASH FLOW FROM OPERATIONS [in $ millions] CASH, EQUIVALENTS AND INVESTMENTS [in $ millions] 12 11 10 09 08 495.4 416.9 12 11 10 09 08 313.6 202.0 193.7 1,195.0 1,012.8 862.1 574.4 451.3 array of centralized management modules for As a new fiscal year gets underway, we are specific applications. The first module, BIG-IQ excited about our prospects and believe our new Security, will be released with BIG-IQ and will products, product roadmap, leadership in existing give customers a single management interface markets, and expanding market opportunities for all their security devices and applications will enable us reaccelerate the growth of product within and across their data centers. BIG-IQ revenue and deliver sequential revenue growth Cloud, also targeted for the first half of the throughout fiscal 2013. To that end, and to ensure calendar year, will be released in conjunction that we remain on the cutting edge of technology with BIG-IP Cloud Connector, a new product and maintain the highest level of customer module that will enable customers to deploy service, we will continue to invest in hiring highly and manage applications in public clouds. talented and motivated people in sales, service, and product development. In addition to our new products, we believe the Diameter signaling and routing products On behalf of F5’s Board of Directors, I want we acquired with Israel-based Traffix Systems to thank all or our customers, partners, and will be key growth drivers in fiscal 2013. As employees who contributed to our growth in the de facto signaling protocol for 4G/LTE fiscal 2012. John McAdam President and Chief Executive Officer F5 Networks networks, Diameter is synergistic with the policy enforcement capabilities of our products within these all-packet-based networks. During the second half of fiscal 2012 we participated in a large number of proof-of-concept trials, and in October we won our first multi-million-dollar Traffix deal at a large U.S. service provider. Along with the new market opportunities afforded by Traffix, the release of Solar, BIG-IQ, and our new hardware platforms will further expand our addressable market and strengthen our competitive position in multiple market segments. In addition, Cisco’s recently announced decision to abandon the application delivery market has opened up new opportunities to sell our products into their installed base. Although we have replaced hundreds of Cisco products over the past decade, this opens the door to large enterprises where Cisco’s pervasive presence has made it difficult to penetrate the account. BOARD OF DIRECTORS SHAREHOLDERS’ INFORMATION Annual Shareholders Meeting March 13, 2013 11:00 a.m. Location: 351 Elliott Ave West Seattle, WA 98119 Parking: Corporate Headquarters Corporate Headquarters 401 Elliott Ave West Seattle, WA 98119 206.272.5555 NASDAQ Listing NASDAQ Symbol – FFIV Investor Relations 206.272.6677 info@f5.com www.f5.com Independent Auditor PricewaterhouseCoopers LLP Seattle, WA Transfer Agent American Stock Transfer 800.937.5449 Gary Ames Retired President and Chief Executive Officer, MediaOne International Sandra Bergeron Chairman of the Board, Trace Security, Inc. Deborah Bevier Principal, DL Bevier Consulting LLC Jonathan Chadwick Executive Vice President and Chief Financial Officer, VMware Michael Dreyer Global Head of Technology, Visa, Inc. Alan Higginson Board Chair Former Chairman, Hubspan, Inc. John McAdam President and Chief Executive Officer, F5 Networks, Inc. Stephen M. Smith Chief Executive Officer and President, Equinix, Inc. CORPORATE OFFICERS John McAdam President and Chief Executive Officer Jeff Christianson Executive Vice President and General Counsel Julian Eames Executive Vice President of Business Operations Dave Feringa Executive Vice President of Worldwide Sales Dan Matte Executive Vice President of Marketing and Business Development Andy Reinland Executive Vice President and Chief Financial Officer Manuel Rivelo Executive Vice President of Security and Strategic Solutions John Rodriguez Senior Vice President and Corporate Compliance Officer Karl Triebes Executive Vice President of Product Development and Chief Technical Officer F5 Networks, Inc. 401 Elliott Avenue West Seattle, WA 98119 888.882.4447 www.f5.com The statements contained in this report that are not purely historical are forward-looking statements. These statements include, but are not limited to, statements about our plans, objectives, expectations, strategies, intentions or other characterizations of future events or circumstances. These statements are generally identified by the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions. These forward-looking statements are based on current information and expectations and are subject to a number of risks and uncertainties. Our actual results could differ materially and adversely from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” in the company’s Form 10-K for fiscal year 2012 and in other documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to revise or update any such forward-looking statements. ©2013 F5 Networks, Inc. All rights reserved. F5, F5 Networks, and the F5 logo are trademarks of F5 Networks, Inc. in the U.S. and in certain other countries. Other F5 trademarks are identified at f5.com. 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