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F5, the global leader in multi-cloud application services, announces
the acquisition of NGINX, an open source leader in application
delivery.
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Strategic acquisition and organic investment to secure long-term
revenue and EPS growth.
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Together, F5 and NGINX will enable multi-cloud application services
across all environments, providing the ease-of-use and flexibility
developers require while also delivering the scale, security,
reliability and enterprise readiness network operations teams demand.
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F5 is committed to continued innovation and increasing investment in
the NGINX open source project to empower NGINX’s widespread user
communities.
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F5 will maintain the brand with current NGINX CEO, Gus Robertson, and
founders, Igor Sysoev and Maxim Konovalov, joining F5 to continue to
lead NGINX.
SEATTLE & SAN FRANCISCO--(BUSINESS WIRE)--
F5 Networks, Inc. (NASDAQ: FFIV) and NGINX today announced a definitive
agreement under which F5 will acquire all issued and outstanding shares
of privately held NGINX for a total enterprise value of approximately
$670 million, subject to certain adjustments.
“F5’s acquisition of NGINX strengthens
our growth trajectory by accelerating our software and
multi-cloud transformation,” said François Locoh-Donou, President
& CEO of F5. “By bringing F5’s world-class application security and rich
application services portfolio for improving performance, availability,
and management together with NGINX’s leading software application
delivery and API management solutions, unparalleled credibility and
brand recognition in the DevOps community, and massive open source user
base, we bridge the divide between NetOps and DevOps with consistent
application services across an enterprise’s multi-cloud environment.”
“We believe every organization can benefit from the agility and
flexibility enabled by modern technologies without compromising on
security, manageability, and reliability,” continued Locoh-Donou. “The
combined company will enable every customer—from the app developer to
the network engineer to the security specialist—with the tools they need
to ensure their apps are available and secure across every platform,
from the enterprise data center to private and public clouds.”
F5 will enhance NGINX’s current offerings with F5 security solutions and
will integrate F5 cloud-native innovations with NGINX’s software load
balancing technology, accelerating F5’s time to market of application
services for modern, containerized applications. F5 will also leverage
its global sales force, channel infrastructure, and partner ecosystem to
scale NGINX selling opportunities to the enterprise.
“NGINX and F5 share the same mission and vision. We both believe
applications are at the heart of driving digital transformation. And we
both believe that an end-to-end application infrastructure—one that
spans from code to customer—is needed to deliver apps across a
multi-cloud environment,” said Gus Robertson, CEO of NGINX, Inc. “I’m
excited to continue this journey by adding the power of NGINX’s open
source innovation to F5’s ADC leadership and enterprise reach. F5 gains
depth with solutions designed for DevOps, while NGINX gains breadth with
access to tens of thousands of customers and partners.”
NGINX’s thriving open source community was one of the most attractive
elements of this combination, and F5 recognizes the trust that the user
community has in NGINX’s technology. Open source is a core part of F5’s
multi-cloud strategy and a driver for F5’s next phase of innovation. As
such, F5 is committed to continued innovation and increasing investment
in the NGINX open source project to empower NGINX’s widespread user
communities. F5 expects the combination with NGINX will accelerate its
product integrations with leading open source projects and will enhance
its strong technology partnerships with open source vendors.
Upon closing of the acquisition, F5 will maintain the NGINX brand. Gus
Robertson, along with NGINX founders Igor Sysoev and Maxim Konovalov,
will join F5 and will continue to lead NGINX. Robertson will join F5’s
senior management team, reporting to François Locoh-Donou. F5 will
maintain NGINX’s operations in San Francisco, California and other
locations globally.
Transaction Details
The acquisition of NGINX is expected to increase F5’s software revenue
growth and increase the Company’s software revenue mix in fiscal year
2019. It secures F5’s Horizon 2 (fiscal year 2021 to fiscal year 2022)
objectives of mid-to-high single-digit revenue and double-digit non-GAAP
earnings per share growth. Short-term, the Company expects that the
acquisition and organic investment in new and emerging solutions will
result in modest earnings dilution in fiscal years 2019 and 2020.
F5 provided the following regarding its Horizon 1 (fiscal year 2019 to
fiscal year 2020) outlook, following the completion of the NGINX
acquisition:
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Analyst and Investor Meeting
Horizon
1 (FY19-FY20) Outlook, March 2018
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Post-NGINX Acquisition
Horizon
1 (FY19-FY20) Guidance
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Total Revenue Growth
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Low-to-mid single-digit growth
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Mid-single-digit growth
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Software1 Revenue Growth
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30%-35%+ growth
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35%-40%+ growth
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Software1 as a % of Product Revenue
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Mid 20s%
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25%-30%
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Non-GAAP Gross Margin
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~85%
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~85%
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Non-GAAP Operating Margin
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35%-37%
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33%-35%
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Non-GAAP EPS
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Mid-to-high single-digit growth
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Low single-digit growth
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1
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Software includes standalone Virtual Editions, including
subscriptions & utility, and as a Service offerings
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All forward-looking non-GAAP measures included in the outlook exclude
estimates for amortization of intangible assets, share-based
compensation expenses, significant effects of tax legislation and
judicial or administrative interpretation of tax regulations, including
the impact of income tax reform, non-recurring income tax adjustments,
valuation allowance on deferred tax assets, and the income tax effect of
non-GAAP exclusions, and do not include the impact of any restructuring
charges, facility exit costs, or other non-recurring charges that may
occur in the period. F5 is unable to provide a reconciliation of
non-GAAP guidance measures to corresponding U.S. generally accepted
accounting principles or GAAP measures on a forward-looking basis
without unreasonable effort due to the overall high variability and low
visibility of most of the foregoing items that have been excluded.
Material changes to any one of these items could have a significant
effect on our guidance and future GAAP results. Certain exclusions, such
as amortization of intangible assets and share-based compensation
expenses, are generally incurred each quarter, but the amounts have
historically varied and may continue to vary significantly from quarter
to quarter.
F5 intends to fund the transaction through cash on its balance sheet. In
conjunction with the transaction, the Company is suspending its common
stock share repurchase program. The Company will continue to evaluate
market conditions and other factors including F5’s capital requirements
in determining when and whether to continue such program and the levels
of such program. The program does not require the purchase of any
minimum number of shares and the program may be modified, suspended, or
discontinued at any time.
The acquisition has been approved by the boards of directors of both F5
and NGINX and, following execution of the definitive agreement, received
the requisite shareholder approval of NGINX. It is subject to regulatory
approvals and other customary closing conditions and is expected to
close in the second calendar quarter of 2019.
Foros acted as financial advisor and Wilson Sonsini Goodrich & Rosati
provided legal counsel to F5 on this transaction. Qatalyst Partners
served as financial advisor to NGINX.
Investor Conference Call Details
F5 will host a live webcast and conference call to discuss the
transaction beginning at 5:30 p.m. ET, today, March 11, 2019. The live
webcast can be accessed at: https://www.f5.com/company/investor-relations.
To participate in the live call via telephone in the U.S., dial
800-593-9913. Outside the U.S., dial +1-212-287-1824. Please call 10
minutes prior to the call start time. The webcast replay will be
archived on F5’s website.
Additional Information
About F5
F5 (NASDAQ: FFIV)
gives the world’s largest businesses, service providers, governments,
and consumer brands the freedom to securely deliver every app,
anywhere—with confidence. F5 delivers cloud and security application
services that enable organizations to embrace the infrastructure they
choose without sacrificing speed and control. For more information, go
to f5.com.
You can also follow @f5networks on
Twitter or visit us on LinkedIn and Facebook for
more information about F5, its partners, and technologies.
About NGINX
NGINX, Inc. is the company behind the popular open source project
trusted by more than 375 million sites. We offer a suite of technologies
for developing and delivering modern applications. The NGINX Application
Platform enables enterprises undergoing digital transformation to
modernize legacy, monolithic applications as well as deliver new,
microservices-based applications. Companies like Netflix, Starbucks, and
McDonalds rely on NGINX to reduce costs, improve resiliency, and speed
innovation. NGINX investors include Blue Cloud Ventures, e.ventures,
Goldman Sachs, Index Ventures, MSD Capital, NEA, Runa Capital, and
Telstra Ventures.
F5 is a trademark or service mark of F5 Networks, Inc., in the U.S. and
other countries. All other product and company names herein may be
trademarks of their respective owners.
F5 Forward-Looking Statements
This press release contains forward-looking statements including, among
other things, statements regarding the continuing strength and momentum
of F5's business, future financial performance, sequential growth,
projected revenues including target revenue and earnings ranges, income,
earnings per share, share amount and share price assumptions, share
repurchases, demand for application delivery networking, application
delivery services, security, and software products, expectations
regarding future services and products, expectations regarding future
customers, markets and the benefits of products, and other statements
that are not historical facts and which are forward-looking statements.
These forward-looking statements are subject to the safe harbor
provisions created by the Private Securities Litigation Reform Act of
1995. Actual results could differ materially from those projected in the
forward-looking statements as a result of certain risk factors. Such
forward-looking statements involve risks and uncertainties, as well as
assumptions and other factors that, if they do not fully materialize or
prove correct, could cause the actual results, performance or
achievements of the company, or industry results, to be materially
different from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors include, but
are not limited to: customer acceptance of our new traffic management,
security, application delivery, optimization, and software and F5aaS
offerings; the timely development, introduction and acceptance of
additional new products and features by F5 or its competitors;
competitive factors, including but not limited to pricing pressures,
industry consolidation, entry of new competitors into F5's markets, and
new product and marketing initiatives by our competitors; increased
sales discounts; the business impact of the acquisition of NGINX and
potential adverse reactions or changes to business or employee
relationships, including those resulting from the announcement or
completion of the acquisition; uncertainties as to the timing of the
transaction; uncertain global economic conditions which may result in
reduced customer demand for our products and services and changes in
customer payment patterns; global economic conditions and uncertainties
in the geopolitical environment; overall information technology
spending; litigation involving patents, intellectual property,
shareholder and other matters, and governmental investigations; natural
catastrophic events; a pandemic or epidemic; F5's ability to sustain,
develop and effectively utilize distribution relationships; F5's ability
to attract, train and retain qualified product development, marketing,
sales, professional services and customer support personnel; F5's
ability to expand in international markets; the unpredictability of F5's
sales cycle; F5's common stock repurchase program and activities
thereunder and differences may result from, among other things, actions
taken by the Company or its management or Board regarding operations or
strategy, and activities and conditions relating to pricing, trading,
capital requirement and repurchasing of shares of F5 common stock
including continued suspension or modification or discontinuation of the
common stock repurchase program; future prices of F5's common stock; and
other risks and uncertainties described more fully in our documents
filed with or furnished to the Securities and Exchange Commission,
including our most recent reports on Form 10-K and Form 10-Q and current
reports on Form 8-K and other documents that we may file or furnish from
time to time, which could cause actual results to vary from
expectations. The financial information contained in this release should
be read in conjunction with the consolidated financial statements and
notes thereto included in F5's most recent reports on Forms 10-Q and
10-K as each may be amended from time to time. All forward-looking
statements in this press release are based on information available as
of the date hereof and qualified in their entirety by this cautionary
statement. F5 assumes no obligation to revise or update these
forward-looking statements.
GAAP to non-GAAP Reconciliation
F5’s management evaluates and makes operating decisions using various
operating measures. These measures are generally based on the revenues
of its products, services operations and certain costs of those
operations, such as cost of revenues, research and development, sales
and marketing and general and administrative expenses. One such measure
is net income excluding stock-based compensation, amortization of
purchased intangible assets, acquisition-related charges, net of taxes,
and certain non-recurring tax expenses and benefits, which is a non-GAAP
financial measure under Section 101 of Regulation G under the Securities
Exchange Act of 1934, as amended. This measure consists of GAAP net
income excluding, as applicable, stock-based compensation, amortization
of purchased intangible assets, litigation expense, restructuring
charges, facility exit costs, gain on sale of patents, non-recurring tax
expenses and benefits, and acquisition-related charges. This measure of
non-GAAP net income is adjusted by the amount of additional taxes or tax
benefit that the company would accrue if it used non-GAAP results
instead of GAAP results to calculate the company's tax liability.
Stock-based compensation is a non-cash expense that F5 has accounted for
since July 1, 2005 in accordance with the fair value recognition
provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification ("ASC") Topic 718 Compensation—Stock Compensation
(“FASB ASC Topic 718”). Amortization of intangible assets is a non-cash
expense. Investors should note that the use of intangible assets
contribute to revenues earned during the periods presented and will
contribute to revenues in future periods. Acquisition-related expenses
consist of professional services fees incurred in connection with
acquisitions. In addition, non-recurring costs associated with the
relocation of the company's corporate headquarters have been excluded
from GAAP net income for the purpose of measuring non-GAAP earnings and
earnings per share in the first quarter of fiscal year 2019.
Management believes that non-GAAP net income per share provides useful
supplemental information to management and investors regarding the
performance of the company’s core business operations and facilitates
comparisons to the company's historical operating results. Although F5’s
management finds this non-GAAP measure to be useful in evaluating the
performance of the core business, management's reliance on this measure
is limited because items excluded from such measures could have a
material effect on F5's earnings and earnings per share calculated in
accordance with GAAP. Therefore, F5's management will use its non-GAAP
earnings and earnings per share measures, in conjunction with GAAP
earnings and earnings per share measures, to address these limitations
when evaluating the performance of the company's core business.
Investors should consider these non-GAAP measures in addition to, and
not as a substitute for, financial performance measures in accordance
with GAAP.
F5 believes that presenting its non-GAAP measures of earnings and
earnings per share provides investors with an additional tool for
evaluating the performance of the company's core business and is used by
management in its own evaluation of the company's performance. Investors
are encouraged to look at GAAP results as the best measure of financial
performance. However, while the GAAP results are more complete, the
company provides investors these supplemental measures since, with
reconciliation to GAAP, it may provide additional insight into the
company's operational performance and financial results.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190311005806/en/
Nathan Misner
F5 Networks
Global Communications
(206)
272-7494
n.misner@f5.com
Suzanne DuLong
F5 Networks
Investor Relations
(206)
272-7049
s.dulong@f5.com
Jesica Church
NGINX, Inc.
Marketing
(415) 706-1804
NGINX@pancomm.com
Source: F5 Networks, Inc.