Fifth annual State of Application Services report reveals need for consistent security within applications, despite ample opportunities for Asia Pacific organisations through digitisation
- F5, the global leader in multi-cloud application services, announces the acquisition of NGINX, an open source leader in application delivery.
- Strategic acquisition and organic investment to secure long-term revenue and EPS growth.
- 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.
- F5 is committed to continued innovation and increasing investment in the NGINX open source project to empower NGINX’s widespread user communities.
- 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.
F5 Networks and NGINX have 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 organisation 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, containerised 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 recognises 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:
| Analyst and Investor Meeting Horizon1 (FY19-FY20) Outlook, March 2018 |
Post-NGINX Acquisition Horizon1 (FY19-FY20) Guidance |
|
| Total Revenue Growth | Low-to-mid single-digit growth | Mid single-digit growth |
| Software1 Revenue Growth | 30%-35%+ growth | 35%-40%+ growth |
| Software1 as a % of Product Revenue | Mid 20s% | 25%-30% |
| Non-GAAP Gross Margin | ~85% | ~85% |
| Non-GAAP Operating Margin | 35%-37% | 33%-35% |
| Non-GAAP EPS | Mid-to-high single-digit growth | Low single-digit growth |
1 Software includes standalone Virtual Editions, including subscriptions & utility, and as a Service offerings
All forward-looking non-GAAP measures included in the outlook exclude estimates for amortisation 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 amortisation 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.
Additional Information
- Letter to F5 Employees from CEO François Locoh-Donou Announcing NGINX Acquisition – F5 Newsroom Blog Post
- NGINX Joins F5 – Blog Post from NGINX CEO Gus Robertson
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 organisations 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.
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.
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 modernise 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.
