þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
WASHINGTON | 91-1714307 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | þ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Page | |
Item 1. | Financial Statements |
December 31, 2018 | September 30, 2018 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 480,121 | $ | 424,707 | ||||
Short-term investments | 652,475 | 614,705 | ||||||
Accounts receivable, net of allowances of $2,624 and $2,040 | 325,688 | 295,352 | ||||||
Inventories | 31,559 | 30,568 | ||||||
Other current assets | 129,793 | 52,326 | ||||||
Total current assets | 1,619,636 | 1,417,658 | ||||||
Property and equipment, net | 179,224 | 145,042 | ||||||
Long-term investments | 413,690 | 411,184 | ||||||
Deferred tax assets | 23,131 | 33,441 | ||||||
Goodwill | 555,965 | 555,965 | ||||||
Other assets, net | 100,250 | 42,186 | ||||||
Total assets | $ | 2,891,896 | $ | 2,605,476 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 66,859 | $ | 57,757 | ||||
Accrued liabilities | 184,446 | 180,979 | ||||||
Deferred revenue | 796,385 | 715,697 | ||||||
Total current liabilities | 1,047,690 | 954,433 | ||||||
Other long-term liabilities | 81,473 | 65,892 | ||||||
Deferred revenue, long-term | 353,136 | 299,624 | ||||||
Deferred tax liabilities | 409 | 35 | ||||||
Total long-term liabilities | 435,018 | 365,551 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Shareholders’ equity | ||||||||
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding | — | — | ||||||
Common stock, no par value; 200,000 shares authorized, 60,058 and 60,215 shares issued and outstanding | 13,277 | 20,427 | ||||||
Accumulated other comprehensive loss | (21,993 | ) | (22,178 | ) | ||||
Retained earnings | 1,417,904 | 1,287,243 | ||||||
Total shareholders’ equity | 1,409,188 | 1,285,492 | ||||||
Total liabilities and shareholders’ equity | $ | 2,891,896 | $ | 2,605,476 |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
Net revenues | ||||||||
Products | $ | 233,877 | $ | 227,303 | ||||
Services | 309,893 | 295,888 | ||||||
Total | 543,770 | 523,191 | ||||||
Cost of net revenues | ||||||||
Products | 42,410 | 43,265 | ||||||
Services | 44,304 | 44,122 | ||||||
Total | 86,714 | 87,387 | ||||||
Gross profit | 457,056 | 435,804 | ||||||
Operating expenses | ||||||||
Sales and marketing | 164,259 | 167,934 | ||||||
Research and development | 92,038 | 85,889 | ||||||
General and administrative | 42,543 | 39,984 | ||||||
Total | 298,840 | 293,807 | ||||||
Income from operations | 158,216 | 141,997 | ||||||
Other income, net | 7,095 | 2,145 | ||||||
Income before income taxes | 165,311 | 144,142 | ||||||
Provision for income taxes | 34,406 | 55,713 | ||||||
Net income | $ | 130,905 | $ | 88,429 | ||||
Net income per share — basic | $ | 2.17 | $ | 1.42 | ||||
Weighted average shares — basic | 60,216 | 62,195 | ||||||
Net income per share — diluted | $ | 2.16 | $ | 1.41 | ||||
Weighted average shares — diluted | 60,645 | 62,550 |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
Net income | $ | 130,905 | $ | 88,429 | ||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustment | 141 | 161 | ||||||
Available-for-sale securities: | ||||||||
Unrealized gains (losses) on securities, net of taxes of $65 and $(574) for the three months ended December 31, 2018 and 2017, respectively | 44 | (1,650 | ) | |||||
Reclassification adjustment for realized losses included in net income, net of taxes of $0 and $(3) for the three months ended December 31, 2018 and 2017, respectively | — | 9 | ||||||
Net change in unrealized gains (losses) on available-for-sale securities, net of tax | 44 | (1,641 | ) | |||||
Total other comprehensive income (loss) | 185 | (1,480 | ) | |||||
Comprehensive income | $ | 131,090 | $ | 86,949 |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
Operating activities | ||||||||
Net income | $ | 130,905 | $ | 88,429 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Realized loss on disposition of assets and investments | 43 | 49 | ||||||
Stock-based compensation | 38,689 | 40,948 | ||||||
Provisions for doubtful accounts and sales returns | 208 | 593 | ||||||
Depreciation and amortization | 14,001 | 15,180 | ||||||
Deferred income taxes | 2,714 | 14,226 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (28,921 | ) | 238 | |||||
Inventories | (991 | ) | 722 | |||||
Other current assets | (26,777 | ) | 11,517 | |||||
Other assets | (157 | ) | (696 | ) | ||||
Accounts payable and accrued liabilities | 2,022 | (8,216 | ) | |||||
Deferred revenue | 66,122 | 26,967 | ||||||
Net cash provided by operating activities | 197,858 | 189,957 | ||||||
Investing activities | ||||||||
Purchases of investments | (190,884 | ) | (238,632 | ) | ||||
Maturities of investments | 151,537 | 113,771 | ||||||
Sales of investments | — | 9,248 | ||||||
Cash provided by sale of fixed asset | — | 1,000 | ||||||
Purchases of property and equipment | (21,046 | ) | (6,491 | ) | ||||
Net cash used in investing activities | (60,393 | ) | (121,104 | ) | ||||
Financing activities | ||||||||
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan | 18,900 | 19,915 | ||||||
Repurchase of common stock | (101,032 | ) | (150,025 | ) | ||||
Net cash used in financing activities | (82,132 | ) | (130,110 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 55,333 | (61,257 | ) | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 46 | 46 | ||||||
Cash, cash equivalents and restricted cash, beginning of period | 425,894 | 674,452 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 481,273 | $ | 613,241 | ||||
Supplemental disclosures of non-cash activities | ||||||||
Capitalized leasehold improvements paid directly by landlord | $ | 15,384 | $ | — |
• | Identify the contract(s) with a customer. Evidence of a contract generally consists of a purchase order issued pursuant to the terms and conditions of a distributor, reseller or end user agreement. |
• | Identify the performance obligations in the contract. Performance obligations are explicitly identified in the Company's contracts and include hardware-based software, software-only solutions, cloud-based subscription services as well as a broad range of service performance obligations including consulting, training, installation and maintenance. |
• | Determine the transaction price. The purchase price stated in an agreed upon purchase order is generally representative of the transaction price. The Company offers several programs in which customers are eligible for certain levels of rebates if certain conditions are met. When determining the transaction price, the Company considers the effects of any variable consideration. |
• | Allocate the transaction price to the performance obligations in the contract. The transaction price in a contract is allocated based upon the relative standalone selling price of each distinct performance obligation identified in the contract. |
• | Recognize revenue when (or as) the entity satisfies a performance obligation. The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring control of promised products and services to a customer. |
December 31, | September 30, | |||||||
2018 | 2018 | |||||||
Cash and cash equivalents | $ | 480,121 | $ | 424,707 | ||||
Restricted cash included in other assets, net | 1,152 | 1,187 | ||||||
Total cash, cash equivalents and restricted cash | $ | 481,273 | $ | 425,894 |
Grant Date | RSUs Granted | Vesting Schedule | Vesting Period | Date Fully Vested |
November 1, 2018 | 144,066 | Quarterly, Annually1 | 3 years | November 1, 2021 |
November 1, 2017 | 140,135 | Quarterly, Annually1 | 4 years | November 1, 2021 |
November 1, 2016 | 115,347 | Quarterly | 4 years | November 1, 2020 |
November 2, 2015 | 145,508 | Quarterly | 4 years | November 1, 2019 |
(1) | 50% of the annual equity grant vests in equal quarterly increments and 50% is subject to the Company achieving specified annual performance goals. |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
Numerator | ||||||||
Net income | $ | 130,905 | $ | 88,429 | ||||
Denominator | ||||||||
Weighted average shares outstanding — basic | 60,216 | 62,195 | ||||||
Dilutive effect of common shares from stock options and restricted stock units | 429 | 355 | ||||||
Weighted average shares outstanding — diluted | 60,645 | 62,550 | ||||||
Basic net income per share | $ | 2.17 | $ | 1.42 | ||||
Diluted net income per share | $ | 2.16 | $ | 1.41 |
Ending Balance as of September 30, 2018 (ASC 605) | ASC 606 Adjustments | Beginning Balance as of October 1, 2018 (ASC 606) | |||||||||
Assets | |||||||||||
Other current assets1 | $ | 52,326 | $ | 50,558 | $ | 102,884 | |||||
Other assets, net1 | $ | 42,186 | $ | 59,676 | $ | 101,862 | |||||
Deferred tax assets | $ | 33,441 | $ | (7,902 | ) | $ | 25,539 | ||||
Liabilities and Shareholders' Equity | |||||||||||
Deferred revenue | $ | 715,697 | $ | 35,464 | $ | 751,161 | |||||
Deferred revenue, long-term | $ | 299,624 | $ | 32,614 | $ | 332,238 | |||||
Retained earnings2 | $ | 1,287,243 | $ | 36,048 | $ | 1,323,291 | |||||
(1) | Upon the adoption of ASC 606, contract assets and unbilled accounts receivable are reported as part of other current assets and other assets, net. |
(2) | The net increase to retained earnings of $36.0 million was primarily related to the capitalization of contract acquisition costs of $54.6 million, partially offset by a decrease of $8.8 million due to changes in deferred revenue and a decrease of $7.9 million from the impact on deferred income taxes. |
Balance, September 30, 2018 | $ | — | |
Impacts from adoption of ASC 606 | $ | 54,608 | |
Additional capitalized contract acquisition costs deferred | $ | 6,157 | |
Amortization of capitalized contract acquisition costs | $ | (7,261 | ) |
Balance, December 31, 2018 | $ | 53,504 |
2019 | 2020 | Thereafter | Total | ||||||||||||
Revenue expected to be recognized on remaining performance obligations | $ | 679,633 | $ | 292,714 | $ | 177,174 | $ | 1,149,521 |
Balance, September 30, 2018 | $ | — | |
Impacts from adoption of ASC 606 | $ | 57,499 | |
Revenue recognized during period but not yet billed | $ | 947 | |
Contract asset net additions | $ | 18,459 | |
Contract assets reclassified to accounts receivable | $ | (7,263 | ) |
Balance, December 31, 2018 | $ | 69,642 |
Balance, September 30, 2018 | $ | 1,015,321 | |
Impacts from adoption of ASC 606 | $ | 68,078 | |
Amounts billed but not recognized as revenues | $ | 347,611 | |
Revenues recognized related to the opening balance of deferred revenue | $ | (281,489 | ) |
Balance, December 31, 2018 | $ | 1,149,521 |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value at December 31, 2018 | |||||||||||||
Cash equivalents | $ | 61,411 | $ | 109,107 | $ | — | $ | 170,518 | ||||||||
Short-term investments | ||||||||||||||||
Available-for-sale securities — certificates of deposits | — | 2,970 | — | 2,970 | ||||||||||||
Available-for-sale securities — corporate bonds and notes | — | 471,015 | — | 471,015 | ||||||||||||
Available-for-sale securities — municipal bonds and notes | — | 24,085 | — | 24,085 | ||||||||||||
Available-for-sale securities — U.S. government securities | — | 117,624 | — | 117,624 | ||||||||||||
Available-for-sale securities — U.S. government agency securities | — | 36,781 | — | 36,781 | ||||||||||||
Long-term investments | ||||||||||||||||
Available-for-sale securities — corporate bonds and notes | — | 383,337 | — | 383,337 | ||||||||||||
Available-for-sale securities — municipal bonds and notes | — | 16,944 | — | 16,944 | ||||||||||||
Available-for-sale securities — U.S. government securities | — | 2,953 | — | 2,953 | ||||||||||||
Available-for-sale securities — U.S. government agency securities | — | 10,456 | — | 10,456 | ||||||||||||
Total | $ | 61,411 | $ | 1,175,272 | $ | — | $ | 1,236,683 |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value at September 30, 2018 | |||||||||||||
Cash equivalents | $ | 41,468 | $ | 13,118 | $ | — | $ | 54,586 | ||||||||
Short-term investments | ||||||||||||||||
Available-for-sale securities — certificates of deposits | — | 2,970 | — | 2,970 | ||||||||||||
Available-for-sale securities — corporate bonds and notes | — | 393,750 | — | 393,750 | ||||||||||||
Available-for-sale securities — municipal bonds and notes | — | 22,524 | — | 22,524 | ||||||||||||
Available-for-sale securities — U.S. government securities | — | 120,078 | — | 120,078 | ||||||||||||
Available-for-sale securities — U.S. government agency securities | — | 75,383 | — | 75,383 | ||||||||||||
Long-term investments | ||||||||||||||||
Available-for-sale securities — corporate bonds and notes | — | 367,710 | — | 367,710 | ||||||||||||
Available-for-sale securities — municipal bonds and notes | — | 24,286 | — | 24,286 | ||||||||||||
Available-for-sale securities — U.S. government securities | — | 12,771 | — | 12,771 | ||||||||||||
Available-for-sale securities — U.S. government agency securities | — | 6,417 | — | 6,417 | ||||||||||||
Total | $ | 41,468 | $ | 1,039,007 | $ | — | $ | 1,080,475 |
December 31, 2018 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Certificates of deposits | $ | 2,970 | $ | — | $ | — | $ | 2,970 | ||||||||
Corporate bonds and notes | 472,370 | 2 | (1,357 | ) | 471,015 | |||||||||||
Municipal bonds and notes | 24,156 | 1 | (72 | ) | 24,085 | |||||||||||
U.S. government securities | 117,806 | 1 | (183 | ) | 117,624 | |||||||||||
U.S. government agency securities | 36,898 | — | (117 | ) | 36,781 | |||||||||||
$ | 654,200 | $ | 4 | $ | (1,729 | ) | $ | 652,475 |
September 30, 2018 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Certificates of deposits | $ | 2,970 | $ | — | $ | — | $ | 2,970 | ||||||||
Corporate bonds and notes | 394,684 | 9 | (943 | ) | 393,750 | |||||||||||
Municipal bonds and notes | 22,588 | 1 | (65 | ) | 22,524 | |||||||||||
U.S. government securities | 120,283 | — | (205 | ) | 120,078 | |||||||||||
U.S. government agency securities | 75,587 | — | (204 | ) | 75,383 | |||||||||||
$ | 616,112 | $ | 10 | $ | (1,417 | ) | $ | 614,705 |
December 31, 2018 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Corporate bonds and notes | $ | 385,864 | $ | 174 | $ | (2,701 | ) | $ | 383,337 | |||||||
Municipal bonds and notes | 17,012 | 10 | (78 | ) | 16,944 | |||||||||||
U.S. government securities | 2,997 | — | (44 | ) | 2,953 | |||||||||||
U.S. government agency securities | 10,502 | — | (46 | ) | 10,456 | |||||||||||
$ | 416,375 | $ | 184 | $ | (2,869 | ) | $ | 413,690 |
September 30, 2018 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Corporate bonds and notes | $ | 370,377 | $ | 25 | $ | (2,692 | ) | $ | 367,710 | |||||||
Municipal bonds and notes | 24,468 | — | (182 | ) | 24,286 | |||||||||||
U.S. government securities | 12,956 | — | (185 | ) | 12,771 | |||||||||||
U.S. government agency securities | 6,500 | — | (83 | ) | 6,417 | |||||||||||
$ | 414,301 | $ | 25 | $ | (3,142 | ) | $ | 411,184 |
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
December 31, 2018 | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
Corporate bonds and notes | $ | 518,538 | $ | (1,501 | ) | $ | 250,159 | $ | (2,557 | ) | $ | 768,697 | $ | (4,058 | ) | |||||||||
Municipal bonds and notes | 8,515 | (23 | ) | 23,165 | (127 | ) | 31,680 | (150 | ) | |||||||||||||||
U.S. government securities | 79,846 | (37 | ) | 30,766 | (190 | ) | 110,612 | (227 | ) | |||||||||||||||
U.S. government agency securities | 31,872 | (28 | ) | 15,365 | (135 | ) | 47,237 | (163 | ) | |||||||||||||||
Total | $ | 638,771 | $ | (1,589 | ) | $ | 319,455 | $ | (3,009 | ) | $ | 958,226 | $ | (4,598 | ) |
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
September 30, 2018 | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
Corporate bonds and notes | $ | 543,729 | $ | (1,800 | ) | $ | 152,097 | $ | (1,835 | ) | $ | 695,826 | $ | (3,635 | ) | |||||||||
Municipal bonds and notes | 26,846 | (123 | ) | 14,363 | (124 | ) | 41,209 | (247 | ) | |||||||||||||||
U.S. government securities | 103,470 | (281 | ) | 29,379 | (109 | ) | 132,849 | (390 | ) | |||||||||||||||
U.S. government agency securities | 44,812 | (110 | ) | 36,987 | (177 | ) | 81,799 | (287 | ) | |||||||||||||||
Total | $ | 718,857 | $ | (2,314 | ) | $ | 232,826 | $ | (2,245 | ) | $ | 951,683 | $ | (4,559 | ) |
December 31, 2018 | September 30, 2018 | |||||||
Finished goods | $ | 21,379 | $ | 21,339 | ||||
Raw materials | 10,180 | 9,229 | ||||||
$ | 31,559 | $ | 30,568 |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
Americas: | ||||||||
United States | $ | 264,751 | $ | 264,143 | ||||
Other | 26,893 | 27,368 | ||||||
Total Americas | 291,644 | 291,511 | ||||||
EMEA | 148,984 | 138,988 | ||||||
Asia Pacific1 | 103,142 | 92,692 | ||||||
$ | 543,770 | $ | 523,191 |
(1) | Beginning with the first quarter of fiscal 2019, revenue from Japan is now included with the APAC region. This change has been applied to all periods presented for comparability purposes. |
Three months ended December 31, | ||||||
2018 | 2017 | |||||
Ingram Micro, Inc. | 16.8 | % | 15.3 | % | ||
Tech Data | — | 12.3 | % | |||
Arrow ECS | 10.9 | % | 11.5 | % | ||
Synnex Corporation | — | 10.9 | % | |||
Westcon Group, Inc. | 11.3 | % | 10.1 | % | ||
December 31, 2018 | September 30, 2018 | |||||||
United States | $ | 159,227 | $ | 126,790 | ||||
EMEA | 12,147 | 12,538 | ||||||
Other countries | 7,850 | 5,714 | ||||||
$ | 179,224 | $ | 145,042 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Revenues. The majority of our revenues are derived from sales of our application delivery controller (ADC) products including our BIG-IP appliances and high end VIPRION chassis and related software modules and our software-only Virtual Editions; Local Traffic Manager (LTM), DNS Services (formerly Global Traffic Manager); Advanced Firewall Manager (AFM) and Policy Enforcement Manager (PEM), that leverage the unique performance characteristics of our hardware and software architecture; and products that incorporate acquired technology, including Application Security Manager (ASM) and Access Policy Manager (APM); and the WebSafe, MobileSafe, Secure Web Gateway and Silverline DDoS and Application security offerings which are sold to customers on a subscription basis. We also derive revenues from the sales of services including annual maintenance contracts, training and consulting services. We carefully monitor the sales mix of our revenues within each reporting period. We believe customer acceptance rates of our new products and feature enhancements are indicators of future trends. We also consider overall revenue concentration by customer and by geographic region as additional indicators of current and future trends. |
• | Cost of revenues and gross margins. We strive to control our cost of revenues and thereby maintain our gross margins. Significant items impacting cost of revenues are hardware costs paid to our contract manufacturers, third-party software license fees, Silverline infrastructure, amortization of developed technology and personnel and overhead expenses. Our margins have remained relatively stable; however, factors such as sales price, product and services mix, inventory obsolescence, returns, component price increases and warranty costs could significantly impact our gross margins from quarter to quarter and represent significant indicators we monitor on a regular basis. |
• | Operating expenses. Operating expenses are substantially driven by personnel and related overhead expenses. Existing headcount and future hiring plans are the predominant factors in analyzing and forecasting future operating expense trends. Other significant operating expenses that we monitor include marketing and promotions, travel, professional fees, computer costs related to the development of new products and provision of services, facilities and depreciation expenses. |
• | Liquidity and cash flows. Our financial condition remains strong with significant cash and investments and no long term debt. The increase in cash and investments for the first three months of fiscal year 2019 was primarily due to cash provided by operating activities of $197.9 million, partially offset by $101.0 million of cash used to repurchase outstanding common stock under our stock repurchase program. Going forward, we believe the primary driver of cash flows will be net income from operations. Capital expenditures of $21.0 million for the first three months of fiscal year 2019 were primarily related to the expansion of our facilities to support our operations worldwide as well as investments in information technology infrastructure and equipment purchases to support our core business activities. We will continue to evaluate possible acquisitions of, or investments in businesses, products, or technologies that we believe are strategic, which may require the use of cash. |
• | Balance sheet. We view cash, short-term and long-term investments, deferred revenue, accounts receivable balances and days sales outstanding as important indicators of our financial health. Deferred revenues increased in the first quarter of fiscal year 2019 primarily due to growth in the amount of annual maintenance contracts purchased on new products and maintenance renewal contracts related to our existing product installation base. Our days sales outstanding for the first quarter of fiscal year 2019 was 54. |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
(in thousands, except percentages) | ||||||||
Net Revenues | ||||||||
Products | $ | 233,877 | $ | 227,303 | ||||
Services | 309,893 | 295,888 | ||||||
Total | $ | 543,770 | $ | 523,191 | ||||
Percentage of net revenues | ||||||||
Products | 43.0 | % | 43.4 | % | ||||
Services | 57.0 | 56.6 | ||||||
Total | 100.0 | % | 100.0 | % |
Three months ended December 31, | ||||||
2018 | 2017 | |||||
Ingram Micro, Inc. | 16.8 | % | 15.3 | % | ||
Tech Data | — | 12.3 | % | |||
Arrow ECS | 10.9 | % | 11.5 | % | ||
Synnex Corporation | — | 10.9 | % | |||
Westcon Group, Inc. | 11.3 | % | 10.1 | % | ||
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||
Ingram Micro, Inc. | 16.4 | % | 16.6 | % | 12.9 | % | ||
Westcon Group, Inc. | 11.1 | % | — | 12.0 | % | |||
Arrow ECS | 12.8 | % | — | 11.6 | % | |||
Synnex Corporation | — | 10.3 | % | 10.3 | % | |||
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
(in thousands, except percentages) | ||||||||
Cost of net revenues and Gross Margin | ||||||||
Products | $ | 42,410 | $ | 43,265 | ||||
Services | 44,304 | 44,122 | ||||||
Total | 86,714 | 87,387 | ||||||
Gross profit | $ | 457,056 | $ | 435,804 | ||||
Percentage of net revenues and Gross Margin (as a percentage of related net revenue) | ||||||||
Products | 18.1 | % | 19.0 | % | ||||
Services | 14.3 | 14.9 | ||||||
Total | 15.9 | 16.7 | ||||||
Gross profit | 84.1 | % | 83.3 | % |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
(in thousands, except percentages) | ||||||||
Operating expenses | ||||||||
Sales and marketing | $ | 164,259 | $ | 167,934 | ||||
Research and development | 92,038 | 85,889 | ||||||
General and administrative | 42,543 | 39,984 | ||||||
Total | $ | 298,840 | $ | 293,807 | ||||
Operating expenses (as a percentage of net revenue) | ||||||||
Sales and marketing | 30.2 | % | 32.1 | % | ||||
Research and development | 16.9 | 16.4 | ||||||
General and administrative | 7.8 | 7.6 | ||||||
Total | 54.9 | % | 56.1 | % |
Three months ended December 31, | ||||||||
2018 | 2017 | |||||||
(in thousands, except percentages) | ||||||||
Other income and income taxes | ||||||||
Income from operations | $ | 158,216 | $ | 141,997 | ||||
Other income, net | 7,095 | 2,145 | ||||||
Income before income taxes | 165,311 | 144,142 | ||||||
Provision for income taxes | 34,406 | 55,713 | ||||||
Net income | $ | 130,905 | $ | 88,429 | ||||
Other income and income taxes (as percentage of net revenue) | ||||||||
Income from operations | 29.1 | % | 27.1 | % | ||||
Other income, net | 1.3 | 0.4 | ||||||
Income before income taxes | 30.4 | 27.5 | ||||||
Provision for income taxes | 6.3 | 10.6 | ||||||
Net income | 24.1 | % | 16.9 | % |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased per the Publicly Announced Plan | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan | |||||||||||
October 1, 2018 — October 31, 2018 | — | $ | — | — | $ | 1,573,571 | ||||||||
November 1, 2018 — November 30, 2018 | 561,951 | $ | 177.97 | 561,951 | $ | 1,473,560 | ||||||||
December 1, 2018 — December 31, 2018 | 6,807 | $ | 150.01 | 6,807 | $ | 1,472,539 |
Item 6. | Exhibits |
Exhibit Number | Exhibit Description | ||
31.1* | — | ||
31.2* | — | ||
32.1* | — | ||
101.INS* | — | XBRL Instance Document | |
101.SCH* | — | XBRL Taxonomy Extension Schema Document | |
101.CAL* | — | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | — | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | — | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | — | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
F5 NETWORKS, INC. | |||
By: | /s/ FRANCIS J. PELZER | ||
Francis J. Pelzer | |||
Executive Vice President, | |||
Chief Financial Officer | |||
(principal financial officer and principal accounting officer) |
1) | I have reviewed this Quarterly Report on Form 10-Q of F5 Networks, Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and |
5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 1, 2019 |
/s/ FRANÇOIS LOCOH-DONOU | |
François Locoh-Donou | |
Chief Executive Officer and President |
1) | I have reviewed this Quarterly Report on Form 10-Q of F5 Networks, Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and |
5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 1, 2019 |
/s/ FRANCIS J. PELZER | |
Francis J. Pelzer | |
Executive Vice President, | |
Chief Financial Officer | |
(principal financial officer and principal accounting officer) |
Date: | February 1, 2019 |
/s/ FRANÇOIS LOCOH-DONOU | |
François Locoh-Donou | |
Chief Executive Officer and President | |
/s/ FRANCIS J. PELZER | |
Francis J. Pelzer | |
Executive Vice President and Chief Financial Officer | |
(principal financial officer and principal accounting officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Jan. 28, 2019 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | F5 NETWORKS INC | |
Entity Central Index Key | 0001048695 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2018 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 59,441,333 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Sep. 30, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 2,624 | $ 2,040 |
Preferred stock, par value (dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 60,058,000 | 60,215,000 |
Common stock, shares outstanding | 60,058,000 | 60,215,000 |
Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 130,905 | $ 88,429 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment | 141 | 161 |
Available-for-sale securities: | ||
Unrealized gains (losses) on securities, net of taxes of $65 and $(574) for the three months ended December 31, 2018 and 2017, respectively | 44 | (1,650) |
Reclassification adjustment for realized losses included in net income, net of taxes of $0 and $(3) for the three months ended December 31, 2018 and 2017, respectively | 0 | 9 |
Net change in unrealized gains (losses) on available-for-sale securities, net of tax | 44 | (1,641) |
Total other comprehensive income (loss) | 185 | (1,480) |
Comprehensive income | $ 131,090 | $ 86,949 |
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Tax effect of unrealized gain (loss) on securities | $ 65 | $ (574) |
Tax effect of reclassification adjustment for realized (gains) losses | $ 0 | $ (3) |
Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Description of Business F5 Networks, Inc. (the “Company”) is the leading developer and provider of application services. The Company’s core technology is a full-proxy, programmable, highly-scalable software platform called TMOS, which supports a broad array of features and functions designed to ensure that applications delivered over Internet Protocol (IP) networks are secure, fast and available. The Company’s offerings include software products for local and global traffic management, network and application security, access management, web acceleration and a number of other network and application services. F5 offerings are available via software that can run individually or as part of an integrated solution on the Company’s high-performance, scalable, purpose-built BIG-IP appliances and VIPRION chassis-based hardware, as software-only Virtual Editions, or as software-based services available through a number of leading cloud marketplaces. The Company also offers distributed denial-of-service (DDoS) protection, application security and other application services by subscription on its cloud-based Silverline platform. In connection with its products, the Company offers a broad range of support and managed services including consulting, training, installation and maintenance. 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. 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. 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, 2018. There have been no material changes to our significant accounting policies as of and for the three months ended December 31, 2018, except for the accounting policies for revenue recognition, trade receivables and deferred contract costs that were updated as a result of adopting Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). For more information, refer to the "Revenue Recognition" and "Recently Adopted Accounting Standards" sections of Note 1 and Note 2 - Revenue from Contracts with Customers. Revenue Recognition On October 1, 2018, the Company adopted the new revenue recognition standard by applying the modified retrospective approach to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under the new revenue recognition standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods. The Company sells products through distributors, resellers, and directly to end users. Revenue related to the Company's contracts with customers is recognized by following a five-step process:
The following is a description of the principal activities from which the Company generates revenue: Product Revenue from the sale of the Company's hardware and perpetual software products is generally recognized at a point in time when the product has been delivered and the customer is obligated to pay for the product. When rights of return are present and the Company cannot estimate returns, revenue is recognized when such rights of return lapse. Payment terms to domestic customers are generally net 30 days to net 45 days. Payment terms to international customers range from net 30 days to net 120 days based on normal and customary trade practices in the individual markets. Subscription The Company also offers several products by subscription, either through term-based license agreements or as a service through its cloud-based Silverline platform. Revenue for term-based license agreements is recognized at a point in time, when the Company delivers the software license to the customer and the subscription term has commenced. For the Company's software-as-a-service Silverline offerings, revenue is recognized ratably as the services are provided. Support and professional services Revenues for post-contract customer support (PCS) are recognized on a straight-line basis over the service contract term. PCS includes a limited period of telephone support, updates, repair or replacement of any failed product or component that fails during the term of the agreement, bug fixes and rights to upgrades, when and if available. Consulting services are customarily billed at fixed hourly rates, plus out-of-pocket expenses, and revenues are recognized as the consulting is completed. Similarly, training revenue is recognized as the training is completed. Contract acquisition costs Sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial service contracts and subscription offerings are deferred and then amortized as an expense on a straight-line basis over the period of benefit which management has determined to be 4.5 years and 3 years, respectively. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the standalone selling price (SSP) for each distinct performance obligation. The Company sells post-contract customer support (PCS), subscriptions and professional services on a standalone basis and can therefore use a population of historical standalone sales to determine fair value. For distinct performance obligations that the Company does not generally sell on a standalone basis (hardware and perpetual software), a combination of the adjusted market assessment approach and the expected cost plus a margin approach are used to estimate the SSP. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash and cash equivalents in deposits with five major financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents. Amounts included in restricted cash represent those required to be set aside by a contractual agreement. 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):
Goodwill and Acquired Intangible Assets Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is written down when impaired. Goodwill was recorded in connection with various acquisitions in prior years. For its annual goodwill impairment test in all periods to date, the Company has operated under one reporting unit and the fair value of its reporting unit has been determined by the Company’s enterprise value. The Company performs its annual goodwill impairment test during the second fiscal quarter. As part of the annual goodwill impairment test, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary. Examples of events and circumstances that might indicate that the reporting unit’s fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel; or other events such as a sustained decrease in the stock price on either an absolute basis or relative to peers. If, as a result of its qualitative assessment, it is more-likely-than-not (i.e. greater than 50% chance) that the fair value of the Company’s reporting unit is less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required. If the Company chooses to bypass the qualitative assessment, it completes a quantitative assessment in performing its annual impairment test. For its annual impairment test performed in the second quarter of fiscal 2018, the Company completed a quantitative assessment and determined that there was no impairment of goodwill. The Company also considered potential impairment indicators of goodwill at December 31, 2018 and noted no indicators of impairment. The Company's intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives, ranging from three to ten years. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. The Company considered potential impairment indicators of acquired intangible assets at December 31, 2018 and noted no indicators of impairment. Software Development Costs The authoritative guidance requires certain internal software development costs related to software to be sold to be capitalized upon the establishment of technological feasibility. The Company's software development costs incurred subsequent to achieving technological feasibility have not been significant, and all software development costs have been expensed as research and development activities as incurred. Internal Use Software In accordance with the authoritative guidance, the Company capitalizes application development stage costs associated with the development of internal-use software and software developed related to its SaaS-based product offerings. The capitalized costs are then amortized over the estimated useful life of the software, which is generally three to five years, and are included in property and equipment in the accompanying consolidated balance sheets. Stock-Based Compensation The Company accounts for stock-based compensation using the straight-line attribution method for recognizing compensation expense. The Company recognized $38.7 million and $40.9 million of stock-based compensation expense for the three months ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $204.3 million of total unrecognized stock-based compensation cost, the majority of which will be recognized over the next two years. Going forward, stock-based compensation expenses may increase as the Company issues additional equity-based awards to continue to attract and retain key employees. The Company issues incentive awards to its employees through stock-based compensation consisting of restricted stock units (RSUs). On October 31, 2018, the Company’s Board of Directors and Compensation Committee approved 774,313 RSUs to employees and executive officers pursuant to the Company’s annual equity awards program. The value of RSUs is determined using the fair value method, which in this case, is based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant. The Company recognizes compensation expense for only the portion of restricted stock units that are expected to vest. Therefore, the Company applies estimated forfeiture rates that are derived from historical employee termination behavior. Based on historical differences with forfeitures of stock-based awards granted to the Company’s executive officers and Board of Directors versus grants awarded to all other employees, the Company has developed separate forfeiture expectations for these two groups. In determining the fair value of shares issued under the Employee Stock Purchase Plan (ESPP), the Company uses the Black-Scholes option pricing model. Compensation expense related to the shares issued pursuant to the ESPP is recognized on a straight-line basis over the offering period. The Company issues incentive awards to certain current executive officers as part of its annual equity awards program. Fifty percent of the aggregate number of RSUs issued to executive officers vest in equal quarterly increments, and 50% are subject to the Company achieving specified performance goals. For performance stock awards granted prior to fiscal 2018, attainment is based on the Company achieving specific quarterly revenue and EBITDA targets. In each case, 70% of the quarterly performance stock grant is based on achieving at least 80% of the quarterly revenue goal set by the Company's Board of Directors, and the other 30% is based on achieving at least 80% of the quarterly EBITDA goal set by the Company's Board of Directors. The quarterly performance stock grant is paid linearly over 80% of the targeted goals. At least 100% of both goals must be attained in order for the quarterly performance stock grant to be awarded over 100%. Each goal is evaluated individually and subject to the 80% achievement threshold and the 100% over-achievement threshold. Each goal is also capped at achievement of 200% above target. For the fiscal 2018 and 2019 performance stock awards, the Company's Compensation Committee adopted a new set of metrics that are differentiated from the quarterly revenue and EBITDA measures, including (1) 50% of the annual performance stock grant is based on achieving 80% of the annual revenue goal set by the Company’s Board of Directors; (2) 25% of the annual performance stock grant is based on achieving at least a 18% increase in annual software revenue compared to the prior year; and (3) 25% of the annual performance stock grant is based on relative total shareholder return benchmarked to the S&P 500 index. In each case, no vesting or payment with respect to a performance goal shall occur unless a minimum threshold is met for the applicable goal. Vesting and payment with respect to the performance goal is linear above the threshold of the applicable goal and is capped at achievement of 200% above target. As of December 31, 2018, the following annual equity grants for executive officers or a portion thereof are outstanding:
The Company recognizes compensation costs for awards with performance conditions when it concludes it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment. Common Stock Repurchase On October 31, 2018, the Company announced that its Board of Directors authorized an additional $1.0 billion for its common stock share repurchase program. This new authorization is incremental to the existing $4.4 billion program, initially approved in October 2010 and expanded in each fiscal year. Acquisitions for the share repurchase programs will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The programs can be terminated at any time. For the three months ended December 31, 2018, the Company repurchased and retired 568,758 shares at an average price of $177.64 per share and the Company had $1.5 billion remaining authorized to purchase shares at December 31, 2018. Earnings 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 awards and 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):
Anti-dilutive stock-based awards excluded from the calculations of diluted earnings per share were immaterial for the three months ended December 31, 2018 and 2017. Comprehensive Income Comprehensive income includes certain changes in equity that are excluded from net income. Specifically, unrealized gains or losses on securities and foreign currency translation adjustments are included in accumulated other comprehensive income or loss. Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 and the related amendments outline a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company adopted this new accounting standard and the related amendments on October 1, 2018 using the modified retrospective method. See Note 2 - Revenue from Contracts with Customers for further details. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires a company’s cash flow statement to explain the changes during a reporting period of the totals for cash, cash equivalents, restricted cash and restricted cash equivalents. Additionally, amounts for restricted cash and restricted cash equivalents are to be included with cash and cash equivalents if the cash flow statement includes a reconciliation of the total cash balances for a reporting period. The Company adopted this new accounting standard on October 1, 2018, which resulted in an immaterial reclassification of beginning and ending cash, cash equivalents and restricted cash for the periods presented within the statement of cash flows. Upon adoption of this new standard, restricted cash activity is no longer separately presented within the investing activities in the statement of cash flows. The overall adoption of the standard did not have a material impact to the consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which provides a more robust framework to use in determining when a set of assets and activities is considered a business. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (ASU 2017-09), which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a corresponding lease liability for all leases with terms greater than twelve months. The Company’s leases consist of operating leases for its office and lab spaces. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Adoption of the new lease standard requires measurement of leases at the beginning of the earliest period presented on a modified retrospective basis. The new standard will be effective for the Company beginning October 1, 2019. The Company anticipates that its long-term leases for office space will be recognized as lease liabilities and corresponding right-of-use assets, and will accordingly have a material impact on its consolidated balance sheets upon adoption. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) (ASU 2018-11), which provides an optional transition method to adopt ASU 2016-02, Leases (Topic 842) by allowing lessees to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Comparative periods will still be presented under current GAAP (ASC 840), along with the applicable Topic 840 disclosures for those comparative periods. The new standard is effective at the same time as adoption of ASU 2016-02, Leases (Topic 842), which the Company is planning to adopt in the first quarter of fiscal year 2020. The Company plans to adopt the transitional provisions allowed under ASU 2018-11. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, and hosting arrangements that include an internal use software license. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. |
Revenue from Contracts with Customers (Notes) |
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Revenue from Contracts with Customers | Revenue from Contracts with Customers The following table summarizes the impact of adopting ASC 606 on the Company's consolidated balance sheet as of the date of adoption, October 1, 2018. This table does not represent the full consolidated balance sheet as it only reflects the accounts impacted by the adoption of ASC 606.
The adoption of ASC 606 had an immaterial impact to the Company's consolidated income statements and statements of cash flows for the three months ended December 31, 2018. Capitalized Contract Acquisition Costs The table below shows significant movements in capitalized contract acquisition costs (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
Amortization of capitalized contract acquisition costs is recorded in Sales and Marketing expense in the accompanying consolidated income statements. There was no impairment loss in relation to costs capitalized. 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 Company expects to recognize this amount as revenue over the following time periods (in thousands):
Contract Balances Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. We record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected, in addition to contracts that have started, but not yet been fully billed. These assets are recorded as contract assets rather than receivables when receipt of the consideration is conditional on something other than the passage of time. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current and non-current deferred revenue. The table below shows significant movements in contract assets (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
As of December 31, 2018, contract assets that are expected to be reclassified to receivables within the next 12 months are included in other current assets, with those expected to be transferred to receivables in more than 12 months included in other assets. There were no impairments of contract assets during the three months ended December 31, 2018. The impacts to deferred revenue from the adoption of ASC 606 are primarily related to unbilled accounts receivable now being capitalized and included as contract assets on the balance sheet. The table below shows significant movements in the deferred revenue balances (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
Our contract assets and liabilities are reported in a net position on a contract by contract basis at the end of each reporting period. See Note 8, Geographic Sales and Significant Customers, for disaggregated revenue by significant customer and geographic region. |
Fair Value Measurements |
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Fair Value Measurements | 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 updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements at December 31, 2018, were as follows (in thousands):
The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2018, were as follows (in thousands):
The Company uses the fair value hierarchy for financial assets and liabilities. The Company’s non-financial assets and liabilities, which include goodwill, intangible assets, and long-lived assets, are not required to be carried at fair value on a recurring basis. These non-financial assets and liabilities 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 and intangible assets 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 long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable. During the three months ended December 31, 2018 and 2017, the Company did not recognize any impairment charges related to goodwill, intangible assets, or long-lived assets. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value due to their short-term nature. |
Short-Term and Long-Term Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term and Long-Term Investments | Short-Term and Long-Term Investments Short-term investments consist of the following (in thousands):
Long-term investments consist of the following (in thousands):
The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of December 31, 2018 (in thousands):
The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of September 30, 2018 (in thousands):
The Company invests in securities that are rated investment grade or better. The Company reviews the individual securities in its portfolio to determine whether a decline in a security's fair value below the amortized cost basis is other-than-temporary. The Company determined that as of December 31, 2018, there were no investments in its portfolio that were other-than-temporarily impaired. |
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Inventories | Inventories The Company outsources the manufacturing of its pre-configured hardware platforms to contract manufacturers, who assemble each product to the Company’s specifications. As protection against component shortages and to provide replacement parts for its service teams, the Company also stocks limited supplies of certain key product components. The Company reduces inventory to net realizable value based on excess and obsolete inventories determined primarily by historical usage and forecasted demand. Inventories consist of hardware and related component parts and are recorded at the lower of cost and net realizable value (as determined by the first-in, first-out method). Inventories consist of the following (in thousands):
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Commitments and Contingencies |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 generally offers warranties of one year for hardware for those customers without service contracts, with the option of purchasing additional warranty coverage 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 December 31, 2018 and September 30, 2018 were not considered material. Commitments As of December 31, 2018, the Company’s principal commitments consisted of obligations outstanding under operating leases. The Company leases its facilities under operating leases that expire at various dates through 2033. 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. The Company currently has arrangements with contract manufacturers and other suppliers for the manufacturing of its products. The arrangement with the primary contract manufacturer allows them to procure component inventory on the Company’s behalf based on a rolling production forecast provided by the Company. The Company is obligated to the purchase of component inventory that the contract manufacturer procures in accordance with the forecast, unless it gives notice of order cancellation in advance of applicable lead times. There have been no material changes in the Company's inventory purchase obligations compared to those discussed in Note 7 to its annual consolidated financial statements. Legal Proceedings On April 4, 2016, the Company sued Radware, Inc. in the United States District Court for the Western District of Washington (the case was subsequently moved to the Northern District of California) accusing Radware of infringing three Company patents. The Company’s complaint seeks a jury trial and an unspecified amount of monetary damages, as well as interest, costs, and injunctive relief. Radware moved to dismiss the allegations of one patent, but the motion was denied. Radware filed inter partes review (IPR) petitions on all of the asserted Company patents, but the US Patent Office dismissed all of the petitions. Radware also filed a counterclaim asserting that the Company infringed one of its now-expired patents. The Company filed an IPR petition against Radware’s counterclaim patent that resulted in cancellation of all but four of the patent’s claims by the Patent Office. The Court then recently held that F5 does not infringe the four remaining claims. Accordingly, the case will proceed solely on F5's infringement claims against Radware. The Court has entered a schedule for trial in November of 2019. In addition to the above referenced matters, the Company is subject to other legal proceedings, claims, and litigation arising in the ordinary course of business. 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 currently to determine the ultimate outcome of these or similar matters or the potential exposure to loss, if any. 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 an accrual for loss contingencies associated with the legal proceedings or the investigations discussed above. |
Income Taxes |
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Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective tax rate was 20.8% and 38.7% for the three months ended December 31, 2018 and 2017, respectively. The effective tax rate for the three months ended December 31, 2018 and December 31, 2017 includes various impacts from the Tax Cuts and Jobs Act enacted on December 22, 2017. Significant impacts for the three months ended December 31, 2018 include a further reduction in the U.S. federal income tax rate to 21%, a deduction for foreign derived intangible income, a tax on global intangible low taxed income, and repeal of the deduction for income attributable to domestic production activities. The three months ended December 31, 2017 included one-time charges for the deemed repatriation of undistributed foreign earnings, and for the remeasurement of the Company’s net deferred tax assets to reflect the change in the U.S. federal income tax rate when temporary differences are expected to reverse. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 118, the Company recorded a provisional tax expense of $7.0 million related to the deemed repatriation of undistributed foreign earnings in the period ended December 31, 2017. SAB No. 118 provided a one-year measurement period to complete the accounting. During the period ended December 31, 2018, the Company finalized the computations for the deemed repatriation of undistributed foreign earnings and did not record any adjustments to the provisional amounts previously recorded. At December 31, 2018, the Company had $33.5 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, 2014. The Company is currently under audit by the IRS for fiscal year 2016 and by various states for fiscal years 2014 through 2017. Major jurisdictions where there are wholly owned subsidiaries of F5 Networks, Inc. which require income tax filings include the United Kingdom, Japan, Singapore, and Australia. The earliest periods open for review by local taxing authorities are fiscal years 2017 for the United Kingdom, 2013 for Japan, 2014 for Singapore, and 2014 for Australia. Within the next four fiscal quarters, the statute of limitations will begin to close on the fiscal year 2015 federal income tax return, fiscal years 2014 and 2015 state income tax returns, and fiscal years 2013 to 2017 foreign income tax returns. |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic Sales and Significant Customers | Geographic Sales and Significant Customers 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: the development, marketing and sale of application services that optimize the security, performance and availability of network applications, servers and storage systems. 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 revenues by geographic region. The Company’s foreign offices conduct sales, marketing and support activities. Revenues are attributed by geographic location based on the location of the customer. The following presents revenues by geographic region (in thousands):
The following distributors of the Company's products accounted for more than 10% of total net revenue:
The Company tracks assets by physical location. Long-lived assets consist of property and equipment, net, and are shown below (in thousands):
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Summary of Significant Accounting Policies (Policy) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash and cash equivalents in deposits with five major financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents. Amounts included in restricted cash represent those required to be set aside by a contractual agreement. |
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Description of Business | Description of Business F5 Networks, Inc. (the “Company”) is the leading developer and provider of application services. The Company’s core technology is a full-proxy, programmable, highly-scalable software platform called TMOS, which supports a broad array of features and functions designed to ensure that applications delivered over Internet Protocol (IP) networks are secure, fast and available. The Company’s offerings include software products for local and global traffic management, network and application security, access management, web acceleration and a number of other network and application services. F5 offerings are available via software that can run individually or as part of an integrated solution on the Company’s high-performance, scalable, purpose-built BIG-IP appliances and VIPRION chassis-based hardware, as software-only Virtual Editions, or as software-based services available through a number of leading cloud marketplaces. The Company also offers distributed denial-of-service (DDoS) protection, application security and other application services by subscription on its cloud-based Silverline platform. In connection with its products, the Company offers a broad range of support and managed services including consulting, training, installation and maintenance. |
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Basis of Presentation | 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. 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. 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, 2018. There have been no material changes to our significant accounting policies as of and for the three months ended December 31, 2018, except for the accounting policies for revenue recognition, trade receivables and deferred contract costs that were updated as a result of adopting Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). For more information, refer to the "Revenue Recognition" and "Recently Adopted Accounting Standards" sections of Note 1 and Note 2 - Revenue from Contracts with Customers. |
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Revenue Recognition | Revenue Recognition On October 1, 2018, the Company adopted the new revenue recognition standard by applying the modified retrospective approach to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under the new revenue recognition standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods. The Company sells products through distributors, resellers, and directly to end users. Revenue related to the Company's contracts with customers is recognized by following a five-step process:
The following is a description of the principal activities from which the Company generates revenue: Product Revenue from the sale of the Company's hardware and perpetual software products is generally recognized at a point in time when the product has been delivered and the customer is obligated to pay for the product. When rights of return are present and the Company cannot estimate returns, revenue is recognized when such rights of return lapse. Payment terms to domestic customers are generally net 30 days to net 45 days. Payment terms to international customers range from net 30 days to net 120 days based on normal and customary trade practices in the individual markets. Subscription The Company also offers several products by subscription, either through term-based license agreements or as a service through its cloud-based Silverline platform. Revenue for term-based license agreements is recognized at a point in time, when the Company delivers the software license to the customer and the subscription term has commenced. For the Company's software-as-a-service Silverline offerings, revenue is recognized ratably as the services are provided. Support and professional services Revenues for post-contract customer support (PCS) are recognized on a straight-line basis over the service contract term. PCS includes a limited period of telephone support, updates, repair or replacement of any failed product or component that fails during the term of the agreement, bug fixes and rights to upgrades, when and if available. Consulting services are customarily billed at fixed hourly rates, plus out-of-pocket expenses, and revenues are recognized as the consulting is completed. Similarly, training revenue is recognized as the training is completed. Contract acquisition costs Sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial service contracts and subscription offerings are deferred and then amortized as an expense on a straight-line basis over the period of benefit which management has determined to be 4.5 years and 3 years, respectively. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the standalone selling price (SSP) for each distinct performance obligation. The Company sells post-contract customer support (PCS), subscriptions and professional services on a standalone basis and can therefore use a population of historical standalone sales to determine fair value. For distinct performance obligations that the Company does not generally sell on a standalone basis (hardware and perpetual software), a combination of the adjusted market assessment approach and the expected cost plus a margin approach are used to estimate the SSP. |
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Goodwill and Acquired Intangible Assets | Goodwill and Acquired Intangible Assets Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is written down when impaired. Goodwill was recorded in connection with various acquisitions in prior years. For its annual goodwill impairment test in all periods to date, the Company has operated under one reporting unit and the fair value of its reporting unit has been determined by the Company’s enterprise value. The Company performs its annual goodwill impairment test during the second fiscal quarter. As part of the annual goodwill impairment test, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary. Examples of events and circumstances that might indicate that the reporting unit’s fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel; or other events such as a sustained decrease in the stock price on either an absolute basis or relative to peers. If, as a result of its qualitative assessment, it is more-likely-than-not (i.e. greater than 50% chance) that the fair value of the Company’s reporting unit is less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required. If the Company chooses to bypass the qualitative assessment, it completes a quantitative assessment in performing its annual impairment test. For its annual impairment test performed in the second quarter of fiscal 2018, the Company completed a quantitative assessment and determined that there was no impairment of goodwill. The Company also considered potential impairment indicators of goodwill at December 31, 2018 and noted no indicators of impairment. The Company's intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives, ranging from three to ten years. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. The Company considered potential impairment indicators of acquired intangible assets at December 31, 2018 and noted no indicators of impairment. |
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Software Development Costs | Software Development Costs The authoritative guidance requires certain internal software development costs related to software to be sold to be capitalized upon the establishment of technological feasibility. The Company's software development costs incurred subsequent to achieving technological feasibility have not been significant, and all software development costs have been expensed as research and development activities as incurred. |
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Internal Use Software | Internal Use Software In accordance with the authoritative guidance, the Company capitalizes application development stage costs associated with the development of internal-use software and software developed related to its SaaS-based product offerings. The capitalized costs are then amortized over the estimated useful life of the software, which is generally three to five years, and are included in property and equipment in the accompanying consolidated balance sheets. |
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Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation using the straight-line attribution method for recognizing compensation expense. The Company recognized $38.7 million and $40.9 million of stock-based compensation expense for the three months ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $204.3 million of total unrecognized stock-based compensation cost, the majority of which will be recognized over the next two years. Going forward, stock-based compensation expenses may increase as the Company issues additional equity-based awards to continue to attract and retain key employees. The Company issues incentive awards to its employees through stock-based compensation consisting of restricted stock units (RSUs). On October 31, 2018, the Company’s Board of Directors and Compensation Committee approved 774,313 RSUs to employees and executive officers pursuant to the Company’s annual equity awards program. The value of RSUs is determined using the fair value method, which in this case, is based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant. The Company recognizes compensation expense for only the portion of restricted stock units that are expected to vest. Therefore, the Company applies estimated forfeiture rates that are derived from historical employee termination behavior. Based on historical differences with forfeitures of stock-based awards granted to the Company’s executive officers and Board of Directors versus grants awarded to all other employees, the Company has developed separate forfeiture expectations for these two groups. In determining the fair value of shares issued under the Employee Stock Purchase Plan (ESPP), the Company uses the Black-Scholes option pricing model. Compensation expense related to the shares issued pursuant to the ESPP is recognized on a straight-line basis over the offering period. The Company issues incentive awards to certain current executive officers as part of its annual equity awards program. Fifty percent of the aggregate number of RSUs issued to executive officers vest in equal quarterly increments, and 50% are subject to the Company achieving specified performance goals. For performance stock awards granted prior to fiscal 2018, attainment is based on the Company achieving specific quarterly revenue and EBITDA targets. In each case, 70% of the quarterly performance stock grant is based on achieving at least 80% of the quarterly revenue goal set by the Company's Board of Directors, and the other 30% is based on achieving at least 80% of the quarterly EBITDA goal set by the Company's Board of Directors. The quarterly performance stock grant is paid linearly over 80% of the targeted goals. At least 100% of both goals must be attained in order for the quarterly performance stock grant to be awarded over 100%. Each goal is evaluated individually and subject to the 80% achievement threshold and the 100% over-achievement threshold. Each goal is also capped at achievement of 200% above target. For the fiscal 2018 and 2019 performance stock awards, the Company's Compensation Committee adopted a new set of metrics that are differentiated from the quarterly revenue and EBITDA measures, including (1) 50% of the annual performance stock grant is based on achieving 80% of the annual revenue goal set by the Company’s Board of Directors; (2) 25% of the annual performance stock grant is based on achieving at least a 18% increase in annual software revenue compared to the prior year; and (3) 25% of the annual performance stock grant is based on relative total shareholder return benchmarked to the S&P 500 index. In each case, no vesting or payment with respect to a performance goal shall occur unless a minimum threshold is met for the applicable goal. Vesting and payment with respect to the performance goal is linear above the threshold of the applicable goal and is capped at achievement of 200% above target. As of December 31, 2018, the following annual equity grants for executive officers or a portion thereof are outstanding:
The Company recognizes compensation costs for awards with performance conditions when it concludes it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment. |
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Common Stock Repurchase | Common Stock Repurchase On October 31, 2018, the Company announced that its Board of Directors authorized an additional $1.0 billion for its common stock share repurchase program. This new authorization is incremental to the existing $4.4 billion program, initially approved in October 2010 and expanded in each fiscal year. Acquisitions for the share repurchase programs will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The programs can be terminated at any time. For the three months ended December 31, 2018, the Company repurchased and retired 568,758 shares at an average price of $177.64 per share and the Company had $1.5 billion remaining authorized to purchase shares at December 31, 2018. |
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Earnings Per Share | Earnings 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 awards and 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. |
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Comprehensive Income | Comprehensive Income Comprehensive income includes certain changes in equity that are excluded from net income. Specifically, unrealized gains or losses on securities and foreign currency translation adjustments are included in accumulated other comprehensive income or loss. |
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Recent Accounting Pronouncements | Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 and the related amendments outline a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company adopted this new accounting standard and the related amendments on October 1, 2018 using the modified retrospective method. See Note 2 - Revenue from Contracts with Customers for further details. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires a company’s cash flow statement to explain the changes during a reporting period of the totals for cash, cash equivalents, restricted cash and restricted cash equivalents. Additionally, amounts for restricted cash and restricted cash equivalents are to be included with cash and cash equivalents if the cash flow statement includes a reconciliation of the total cash balances for a reporting period. The Company adopted this new accounting standard on October 1, 2018, which resulted in an immaterial reclassification of beginning and ending cash, cash equivalents and restricted cash for the periods presented within the statement of cash flows. Upon adoption of this new standard, restricted cash activity is no longer separately presented within the investing activities in the statement of cash flows. The overall adoption of the standard did not have a material impact to the consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which provides a more robust framework to use in determining when a set of assets and activities is considered a business. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (ASU 2017-09), which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. The Company adopted this new accounting standard on October 1, 2018. The adoption did not have an impact on the Company's condensed consolidated financial statements. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a corresponding lease liability for all leases with terms greater than twelve months. The Company’s leases consist of operating leases for its office and lab spaces. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Adoption of the new lease standard requires measurement of leases at the beginning of the earliest period presented on a modified retrospective basis. The new standard will be effective for the Company beginning October 1, 2019. The Company anticipates that its long-term leases for office space will be recognized as lease liabilities and corresponding right-of-use assets, and will accordingly have a material impact on its consolidated balance sheets upon adoption. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) (ASU 2018-11), which provides an optional transition method to adopt ASU 2016-02, Leases (Topic 842) by allowing lessees to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Comparative periods will still be presented under current GAAP (ASC 840), along with the applicable Topic 840 disclosures for those comparative periods. The new standard is effective at the same time as adoption of ASU 2016-02, Leases (Topic 842), which the Company is planning to adopt in the first quarter of fiscal year 2020. The Company plans to adopt the transitional provisions allowed under ASU 2018-11. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, and hosting arrangements that include an internal use software license. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Schedule of Cash and Cash Equivalents | 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):
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Restrictions on Cash and Cash Equivalents | 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):
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Schedule of Nonvested Restricted Stock Units Activity | As of December 31, 2018, the following annual equity grants for executive officers or a portion thereof are outstanding:
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Schedule of Computation of Basic and Diluted Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
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Revenue from Contracts with Customers (Tables) |
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table summarizes the impact of adopting ASC 606 on the Company's consolidated balance sheet as of the date of adoption, October 1, 2018. This table does not represent the full consolidated balance sheet as it only reflects the accounts impacted by the adoption of ASC 606.
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Capitalized Contract Cost | The table below shows significant movements in capitalized contract acquisition costs (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | 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 Company expects to recognize this amount as revenue over the following time periods (in thousands):
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Contract with Customer, Asset and Liability | The table below shows significant movements in contract assets (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
The table below shows significant movements in the deferred revenue balances (current and noncurrent) for the three months ended December 31, 2018 (in thousands):
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets Measured 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 December 31, 2018, were as follows (in thousands):
The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2018, were as follows (in thousands):
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Short-Term and Long-Term Investments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investments [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Short-Term and Long-Term Investments | Short-term investments consist of the following (in thousands):
Long-term investments consist of the following (in thousands):
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Schedule of Investments That Have Been in a Continuous Unrealized Loss Position | The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of December 31, 2018 (in thousands):
The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of September 30, 2018 (in thousands):
|
Inventories (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Inventories | Inventories consist of the following (in thousands):
|
Geographic Sales and Significant Customers (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenues by Geographic Region | The following presents revenues by geographic region (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by Major Customers by Reporting Segments | The following distributors of the Company's products accounted for more than 10% of total net revenue:
|
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Long-lived Assets by Geographic Areas | The Company tracks assets by physical location. Long-lived assets consist of property and equipment, net, and are shown below (in thousands):
|
Summary of Significant Accounting Policies (Schedule Of Computation Of Basic And Diluted Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Numerator | ||
Net income | $ 130,905 | $ 88,429 |
Denominator | ||
Weighted average shares outstanding - basic | 60,216 | 62,195 |
Dilutive effect of common shares from stock options and restricted stock units | 429 | 355 |
Weighted average shares outstanding - diluted | 60,645 | 62,550 |
Basic net income per share (dollars per share) | $ 2.17 | $ 1.42 |
Diluted net income per share (dollars per share) | $ 2.16 | $ 1.41 |
Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Oct. 01, 2018 |
Sep. 30, 2018 |
---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Other current assets | $ 129,793 | $ 102,884 | $ 52,326 |
Other assets, net | 100,250 | 101,862 | 42,186 |
Deferred tax assets | 23,131 | 25,539 | 33,441 |
Deferred revenue | 796,385 | 751,161 | 715,697 |
Deferred revenue, long-term | 353,136 | 332,238 | 299,624 |
Retained earnings | 1,417,904 | 1,323,291 | 1,287,243 |
Capitalized contract cost, net | 53,504 | 0 | |
Deferred revenue | $ 1,149,521 | $ 1,015,321 | |
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Other current assets | 50,558 | ||
Other assets, net | 59,676 | ||
Deferred tax assets | (7,902) | ||
Deferred revenue | 35,464 | ||
Deferred revenue, long-term | 32,614 | ||
Retained earnings | 36,048 | ||
Capitalized contract cost, net | 54,600 | ||
Deferred revenue | $ (8,800) |
Revenue from Contracts with Customers - Capitalized contract acquisition costs (Details) $ in Thousands |
3 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Changes In Capitalized Contract Cost [Roll Forward] | |
Balance, September 30, 2018 | $ 0 |
Impacts from adoption of ASC 606 | 54,608 |
Additional capitalized contract acquisition costs deferred | 6,157 |
Amortization of capitalized contract acquisition costs | (7,261) |
Balance, December 31, 2018 | $ 53,504 |
Revenue from Contracts with Customers - Contract Assets and Liabilities (Details) $ in Thousands |
3 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Change in Contract with Customer, Asset [Roll Forward] | |
Balance, September 30, 2018 | $ 0 |
Impacts from adoption of ASC 606 | 57,499 |
Revenue recognized during period but not yet billed | 947 |
Contract asset net additions | 18,459 |
Contract assets reclassified to accounts receivable | (7,263) |
Balance, December 31, 2018 | 69,642 |
Change in Contract with Customer, Liability [Roll Forward] | |
Balance, September 30, 2018 | 1,015,321 |
Impacts from adoption of ASC 606 | 68,078 |
Amounts billed but not recognized as revenues | 347,611 |
Revenues recognized related to the opening balance of deferred revenue | (281,489) |
Balance, December 31, 2018 | $ 1,149,521 |
Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Sep. 30, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 21,379 | $ 21,339 |
Raw materials | 10,180 | 9,229 |
Inventories, total | $ 31,559 | $ 30,568 |
Commitments And Contingencies (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Dec. 31, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
|
|
Loss Contingencies [Line Items] | ||
Standard product warranty accrual | $ 0 | $ 0 |
Product warranty period | 1 year | |
F5 Counterclaim of Radware, Ltd. and Radware, Inc. Patent Infringement Complaint [Member] | Pending Litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Gain contingency, patents allegedly infringed upon, number | 3 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 20.80% | 38.70% |
Provisional tax expense for the deemed repatriation of undistributed foreign earnings | $ 7.0 | |
Unrecognized tax benefit | $ 33.5 |
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