F5, Inc. (FFIV) Risk Analysis

The Cyber Incident may harm our reputation, our customers, employee and partner relations and our operations and business. Customers may in the future defer purchasing or choose to cancel or not renew their agreements or subscriptions with us. We may expend significant costs and expenses related to the Cyber Incident including in connection with our investigations, and to address the damage to our reputation, customer, employee and partner relations. If we are unable to maintain the trust of our current and prospective customers and partners, or our personnel continue to have to devote significant time to the Cyber Incident, our business, market share, results of operations and financial condition could be negatively affected. As a result of the Cyber Incident and market forces beyond our control, the cost of our insurance may increase substantially, and we may not be able to obtain additional or comparable insurance coverage on commercially reasonable terms. In addition, governmental authorities investigating the Cyber Incident may seek to impose undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially increase our software development and related expenses or otherwise require us to alter how we operate our business. Further, any legislative or regulatory changes adopted in reaction to the Cyber Incident could require us to make modifications to the operation of our business that could have an adverse effect or increase or accelerate our compliance costs. We have not seen any evidence of modification to our software supply chain, including our source code and our build release pipelines. We have confirmed that the threat actor exfiltrated files from our BIG-IP product development environment and engineering knowledge management platform. The discovery of new or different information regarding the Cyber Incident, including with respect to its scope and impact on our systems, products or customers, could increase our costs and liabilities related to the Cyber Incident and result in further damage to our business, reputation, intellectual property, results of operations and financial condition. The Cyber Incident also may embolden other threat actors to further target our systems, which could result in additional harm to our business. We cannot ensure that our steps to secure our systems, our product development environments and protect the security and integrity of the products that we deliver will be successful to protect against threat actors or cyberattacks or perceived by existing and prospective customers as sufficient to address the harm caused by the Cyber Incident.

Item 1A.Risk Factors In addition to the other information in this report, the following risk factors should be carefully considered in evaluating our company and operations. Risk Factor Summary Operational and Execution Risks •Security vulnerabilities or control failures in our IT infrastructure or multicloud application delivery and security products and services as well as unforeseen product errors could have a material adverse impact on our business, results of operations, financial condition and reputation;•The Cyber Incident has had and may continue to have an adverse effect on our business, reputation, customer, employee and partner relations, results of operations, financial condition and cash flows;•We are dependent on various information technology systems, and failures of or interruptions to those systems could harm our business;•Our success depends on our key personnel and our ability to hire, retain and motivate qualified executives, sales and marketing, operations, product development and professional services personnel;•Cloud-based and SaaS computing trends present competitive and execution risks;•Our success depends upon our ability to effectively plan and manage our resources and restructure our business;•Our business may be harmed if our contract manufacturers are not able to provide us with adequate supplies of our products or if a single source of hardware assembly is lost or impaired;•Our business could suffer if there are any interruptions or delays in the supply of hardware components from our third-party sources;•It is difficult to predict our future operating results because we have an unpredictable sales cycle;•We may not be able to sustain or develop new distribution relationships, and a reduction or delay in sales to significant distribution partners could hurt our business;•Reliance on fulfillment at the end of the quarter could cause our revenue for the applicable period to fall below expected levels;•Our operating results are exposed to risks associated with international commerce;•The average selling price of our products may decrease and our costs may increase, which may negatively impact revenues and profits; and •Acquisitions present many risks and we may not realize the financial and strategic goals that are contemplated at the time of the transaction. Strategic and Industry Risks •Our success depends on our timely development of new software and systems products and features, market acceptance of new software and systems product offerings and proper management of the timing of the life cycle of our software and systems products;•Our success depends on sales and continued innovation of our application delivery and security product lines;12•Issues related to the development and use of artificial intelligence ("AI") could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business;•Our business could be adversely impacted by conditions affecting the markets in which we compete;•Industry consolidation may result in increased competition;•We may not be able to compete effectively in the application delivery and security market; and•Misuse of our products could harm our reputation. Legal and Regulatory Risks •Our failure to adequately protect personal information could have a material adverse effect on our business;•A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks;•We face litigation risks;•We may not be able to adequately protect our intellectual property, and our products may infringe on the intellectual property rights of third parties;•We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets; and•Changes in governmental regulations could negatively affect our revenues. Financial Risks •We may have exposure to greater than anticipated tax liabilities;•We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations;•Changes in financial accounting standards may cause adverse unexpected revenue fluctuations and affect our reported results of operations; and•If we are unable to maintain effective internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected. Risks Related to our Common Stock •Our quarterly and annual operating results may fluctuate in future periods, which may cause our stock price to fluctuate;•Anti-takeover provisions could make it more difficult for a third party to acquire us;•Our stock price could be volatile, particularly during times of economic uncertainty and volatility in domestic and international stock markets; and•If securities or industry analysts publish inaccurate or unfavorable research about our business, or discontinue publishing research about our business, the price and trading volume of our securities could decline. General Risks •Macroeconomic downturns or uncertainties may harm our industry, business, and results of operations;•We face risks associated with having operations and employees located in Israel;•Our business is subject to the risks of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by man-made problems such as terrorism; and•Climate change and associated regulation may have an impact on our business.

Many of our products are subject to various regulations promulgated by the United States and various foreign governments including, but not limited to, environmental regulations and regulations implementing export license requirements and restrictions on the import or export of some technologies, especially encryption technology. Changes in governmental regulation and our inability or failure to obtain required approvals, permits or registrations could harm our international and domestic sales and adversely affect our revenues, business and operations. The SEC requires us, as a public company that uses certain raw materials considered to be "conflict minerals" in our products, to report publicly on the extent to which "conflict minerals" are in our supply chain. As a provider of hardware end-products, we are several steps removed from the mining, smelting, or refining of any conflict minerals. Accordingly, our ability to determine with certainty the origin and chain of custody of these raw materials is limited. Our relationships with customers, suppliers, and investors could suffer if we are unable to describe our products as "conflict-free." We may also face increased costs in complying with conflict minerals disclosure requirements.

The markets we serve are rapidly evolving and highly competitive, and we expect competition to persist and intensify in the future. As we expand our reach and role into a broader set of multicloud solutions, the companies that we consider competitors evolves as well. In addition to server load balancing, traffic management, and other functions normally associated with application delivery, our suite of solutions has expanded our addressable market into security, and policy management, where we compete with a number of companies focused on niche areas of application security. Similarly, as we continue building AI functionality into our offerings, we expect competition to increase in the future, from established competitors and new market entrants, as AI technologies are integrated into the markets in which we compete. We expect to continue to face additional competition as new participants enter our markets. As we continue to expand globally, we may see new competitors in different geographic regions. In addition, larger companies with significant resources, brand recognition, and sales channels may form alliances with or acquire competing application services solutions from other companies and emerge as significant competitors. Potential competitors may bundle their products or incorporate an Internet traffic management or security component into existing products in a manner that discourages users from purchasing our products. Any of these circumstances may limit our opportunities for growth and negatively impact our financial performance.

Some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer a more comprehensive solution than they had previously offered. We have also entered into large, strategic partnerships to enhance our competitive position in the marketplace. As technology companies attempt to strengthen or maintain their market positions in the evolving application delivery, mobility, cloud networking and cloud platform markets, these companies continue to seek to deliver comprehensive solutions to end users and combine enterprise-level hardware and software solutions that may compete with our solutions and which could negatively impact our partnerships. These consolidators or potential consolidators may have significantly greater financial, technical and other resources than we do and may be better positioned to acquire and offer complementary products and services. The companies resulting from these possible combinations may create more compelling product and service offerings and be able to offer greater pricing flexibility or sales and marketing support for such offerings than we can. These heightened competitive pressures could result in a loss of customers or a reduction in our revenues or revenue growth rates, all of which could adversely affect our business, results of operations and financial condition.