F5 Networks buys Volterra for $500M

F5 Networks said it will purchase Volterra for around $500 million in a move the company said would create an 'edge platform built for enterprises and service providers that will be security-first and app-driven with unlimited scale.'

January 7, 2021

4 Min Read

SEATTLE – F5 Networks, the leader in application security and delivery, and Volterra, the first universal edge-as-a-service platform, today announced a definitive agreement under which F5 will acquire all issued and outstanding shares of privately held Volterra for approximately $440 million in cash and approximately $60 million in deferred consideration and assumed unvested incentive compensation to founders and employees. With the addition of Volterra's technology platform, F5 is creating an edge platform built for enterprises and service providers that will be security-first and app-driven with unlimited scale.

In connection with the transaction, F5 raised its Horizon 2 (fiscal years 2021 and 2022) and long-term revenue outlook, and reiterated its Horizon 2 operating targets, including its commitment to achieving double-digit non-GAAP earnings per share growth. The company also reiterated its commitment to return $1 billion of capital over the next two years, including the initiation of a $500 million accelerated share repurchase in fiscal year 2021. In addition, F5 released a preview of its first quarter fiscal year 2021 financial results stating it expects GAAP and non-GAAP revenue in a range of $623 to $626 million, driven in part, by approximately 68% GAAP, and 70% non-GAAP, software revenue growth.

"Current edge solutions are simply inadequate for today's enterprise customers. It's time to break out of closed edge systems that only perpetuate the pain of building, running, and securing apps," said François Locoh-Donou, President and CEO, F5. "With Volterra, we advance our Adaptive Applications vision with an Edge 2.0 platform that solves the complex multi-cloud reality enterprise customers confront. Our platform will create a SaaS solution that solves our customers' biggest pain points. The success of F5's software transformation has put us in a position to deliver on the potential of Edge 2.0 and redefine our competitive position."

"I am excited to work closely alongside François and the F5 team to help pioneer the evolution of the edge to deliver more adaptive, dynamic application experiences for all of our customers," said Ankur Singla, Founder and CEO, Volterra. "With our platform, we will extend F5's application security leadership to the edge, thereby expanding our combined reach in the fastest growing segment of F5's $28 billion 2023 total addressable market."

Volterra enables a new Edge 2.0 open edge platform that will transform F5's leadership position in enterprise application security and delivery, addressing the challenges inherent with first-generation edge solutions. F5's Edge 2.0 platform will be:

  • Security-first: Delivering industry-leading security instead of commodity security added to a CDN or cloud.

  • App-driven: Providing universal, "build once, deploy globally" app delivery. This software-defined edge based on industry standard containers and APIs removes multi-cloud complexity.

  • Unlimited in scale: Edge 2.0 breaks apps out of the "CDN jail" of closed edge platforms, running all services on any server, across all clouds and data centers.

The boards of directors of both F5 and Volterra have approved the transaction, which is subject to regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of calendar year 2021.

Upon closing of the transaction, Ankur Singla, and the Volterra leadership team will join F5 in key management roles. Volterra will remain located in its current Santa Clara headquarters.

F5 Business Outlook Update

The addition of Volterra accelerates F5's total revenue growth expectations. As a result, F5 is updating its Horizon 2 (fiscal years 2021 and 2022) total revenue growth CAGR to 7% to 8%, from 6% to 7%, and its long-term revenue growth target to double digits from 8% to 9%. F5 maintained its commitment to deliver operating leverage through the "Rule of 40" and its target to achieving double-digit non-GAAP EPS growth in Horizon 2.

In addition, F5 reiterates its commitment to $1 billion in share repurchases in the next two years, including a $500 million accelerated share repurchase in fiscal year 2021.

Preliminary Q1 Fiscal Year 2021 Results

F5 also released a preview of its first quarter fiscal year 2021 financial results. Based on currently available information, the company estimates the following results for the quarter ended December 31, 2020.

  • GAAP and non-GAAP revenue between $623 and $626 million, representing growth of approximately 10% over the prior year period2

  • GAAP and non-GAAP software revenue growth of approximately 68% and 70%, respectively3

  • Systems revenue growth of approximately 5%

  • GAAP and non-GAAP product revenue growth between approximately 22% to 23%2

  • Global services revenue growth slightly better than flat

  • Non-GAAP EPS above the top end of its prior guidance of $2.26 to $2.381

"We are on track to deliver our best quarterly results since we embarked on our transformation, with approximately 10% revenue growth fueled by continued strong software demand along with resilience in our systems business," added Locoh-Donou.


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