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Stock-Based Compensation | 12 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement, Noncash Expense [Abstract] |
Stock-Based Compensation | Stock-based Compensation The Company recognized $249.2 million, $243.3 million and $201.9 million of stock-based compensation expense for the fiscal years ended September 30, 2022, 2021 and 2020, respectively. The income tax benefit recognized on stock-based compensation within income tax expense was $47.3 million, $44.1 million and $37.6 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively. As of September 30, 2022, there was $196.5 million of total unrecognized stock-based compensation cost, the majority of which will be recognized over approximately 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. On October 31, 2022, the Company’s Board of Directors and Talent and Compensation Committee approved 1,321,304 RSUs to employees and executive officers pursuant to the Company’s annual equity awards program. Company has adopted a number of stock-based compensation plans as discussed below. 2011 Employee Stock Purchase Plan. In April 2012, the Board of Directors amended and restated the Company’s 1999 Employee Stock Purchase Plan, or the Employee Stock Purchase Plan. A total of 10,000,000 shares of common stock have been reserved for issuance under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible employees to acquire shares of the Company’s common stock through periodic payroll deductions of up to 15% of base compensation. No employee may purchase more than 10,000 shares during an offering period. In addition, no employee may purchase more than $25,000 worth of stock, determined by the fair market value of the shares at the time such option is granted, in one calendar year. The Employee Stock Purchase Plan has been implemented in a series of offering periods, each 6 months in duration. The price at which the common stock may be purchased is 85% of the lesser of the fair market value of the Company’s common stock on the first day of the applicable offering period or on the last day of the respective purchase period. As of September 30, 2022 there were 945,136 shares available for awards under the Employee Stock Purchase Plan. In determining the fair value of the right to purchase under the Employee Stock Purchase Plan, the Company uses the Black-Scholes option pricing model that employs the following key assumptions:
|  | Employee Stock Purchase Plan Years Ended September 30,
|  | 2022 |  | 2021 |  | 2020
Risk-free interest rate |  | 0.05% - 0.62% |  | 0.07% - 0.13% |  | 1.10% - 1.97%
Expected dividend |  | — |  |  | — |  |  | — |
Expected term |  | 0.5 years |  | 0.5 years |  | 0.5 years
Expected volatility |  | 26.34% - 31.57% |  | 29.67% - 37.22% |  | 26.32% - 41.94%
Acquisition Related Incentive Plans. In May 2019, the Company adopted the Nginx Acquisition Equity Incentive Plan, or the Nginx Acquisition Plan. The Nginx Acquisition Plan provided for discretionary grants of stock options and stock units for employees, directors and consultants of Nginx, Inc. to whom the Company offered employment in connection with the Company’s acquisition of Nginx. A total of 183,061 shares of common stock were reserved for issuance under the Nginx Acquisition Plan. Upon certain changes in control of the Company, the surviving entity will either assume or substitute all outstanding stock awards under the Nginx Acquisition Plan or the vesting of 50% of the stock awards shall be accelerated. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Nginx Acquisition Plan. As of September 30, 2022, there were no options outstanding and 20,923 stock units outstanding. The Company terminated the Nginx Acquisition Plan effective October 31, 2019 and no additional shares may be issued from the Nginx Acquisition Plan. In connection with the Company’s acquisition of Nginx, Inc. in the third quarter of fiscal year 2019, the Company assumed the Nginx Inc. 2011 Share Plan, or the Nginx Plan. Unvested options to acquire Nginx's common stock and unvested stock units with respect to Nginx’s common stock were converted into options to acquire the Company’s common stock and stock units with respect to the Company’s stock in connection with the acquisition. A total of 302,634 shares of common stock were reserved for issuance under the Nginx Plan (including converted options and stock units). The Nginx Plan provided for grants of stock options, stock awards and stock units to persons who were employees, officers, directors and consultants to Nginx, Inc. prior to May 8, 2019. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Nginx Plan. As of September 30, 2022, there were options to purchase 16,295 shares outstanding and 2,997 stock units outstanding. The Company terminated the Nginx Plan effective October 31, 2019 and no additional shares may be issued from the Nginx Plan. In January 2020, the Company adopted the Shape Acquisition Equity Incentive Plan, or the Shape Acquisition Plan. The Shape Acquisition Plan provided for discretionary grants of stock options and stock units for employees, directors and consultants of Shape Security, Inc. to whom the Company offered employment in connection with the Company’s acquisition of Shape. A total of 450,000 shares of common stock were reserved for issuance under the Shape Acquisition Plan. Upon certain changes in control of the Company, the surviving entity will either assume or substitute all outstanding stock awards under the Shape Acquisition Plan or the vesting of 50% of the stock awards shall be accelerated. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Shape Acquisition Plan. As of September 30, 2022, there were no options outstanding and 83,164 stock units outstanding. The Company terminated the Shape Acquisition Plan effective December 28, 2020 and no additional shares may be issued from the Shape Acquisition Plan. In connection with the Company’s acquisition of Shape Security, Inc. in the second quarter of fiscal year 2020, the Company assumed the Shape 2011 Stock Plan, or the Shape Plan. Unvested options to acquire Shape’s common stock and unvested stock units with respect to Shape’s common stock were converted into options to acquire the Company’s common stock and stock units with respect to the Company’s stock in connection with the acquisition. A total of 501,085 shares of common stock were reserved for issuance under the Shape Plan (including converted options and stock units). The Shape Plan provided for grants of stock options, stock awards and stock units to persons who were employees, officers, directors and consultants to Shape Security, Inc. prior to January 24, 2020. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Shape Plan. As of September 30, 2022, there were options to purchase 79,508 shares outstanding and 1,443 stock units outstanding. The Company terminated the Shape Plan effective December 28, 2020 and no additional shares may be issued from the Shape Plan. In January 2021, the Company adopted the Volterra Acquisition Equity Incentive Plan, or the Volterra Acquisition Plan. The Volterra Acquisition Plan provided for discretionary grants of stock options and stock units for employees, directors and consultants of Volterra, Inc. to whom the Company offered employment in connection with the Company’s acquisition of Volterra. A total of 140,000 shares of common stock were reserved for issuance under the Volterra Acquisition Plan. Upon certain changes in control of the Company, the surviving entity will either assume or substitute all outstanding stock awards under the Volterra Acquisition Plan or the vesting of 50% of the stock awards shall be accelerated. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Volterra Acquisition Plan. As of September 30, 2022, there were no options outstanding and 103,880 stock units outstanding. The Company terminated the Volterra Acquisition Plan effective October 29, 2021 and no additional shares may be issued from the Volterra Acquisition Plan. In connection with the Company’s acquisition of Volterra, Inc. in the second quarter of fiscal year 2021, the Company assumed the Volterra 2017 Stock Plan, or the Volterra Plan. Unvested options to acquire Volterra’s common stock and unvested stock units with respect to Volterra’s common stock were converted into options to acquire the Company’s common stock and stock units with respect to the Company’s stock in connection with the acquisition. A total of 261,696 shares of common stock were reserved for issuance under the Volterra Plan (including converted options and stock units). The Volterra Plan provided for grants of stock options, stock awards and stock units to persons who were employees, officers, directors and consultants to Volterra, Inc. prior to January 22, 2021. During the fiscal year 2022, the Company issued no stock options or restricted stock units under the Volterra Plan. As of September 30, 2022, there were options to purchase 68,993 shares outstanding and 17,934 stock units outstanding. The Company terminated the Volterra Plan effective October 29, 2021 and no additional shares may be issued from the Volterra Plan. In November 2021, the Company adopted the Threat Stack Acquisition Equity Incentive Plan, or the Threat Stack Acquisition Plan. The Threat Stack Acquisition Plan provided for discretionary grants of stock options and stock units for employees, directors and consultants of Threat Stack to whom the Company offered employment in connection with the Company’s acquisition of Threat Stack. A total of 35,000 shares of common stock were reserved for issuance under the Threat Stack Acquisition Plan. Upon certain changes in control of the Company, the surviving entity will either assume or substitute all outstanding stock awards under the Threat Stack Acquisition Plan or the vesting of 50% of the stock awards shall be accelerated. During the fiscal year 2022, the Company issued 25,838 stock units under the Threat Stack Acquisition Plan. As of September 30, 2022, there were 23,534 stock units outstanding. F5, Inc. Incentive Plan. In March 2022, the Company adopted the F5, Inc. Incentive Plan, or the Plan, which amended and restated the 2014 Incentive Plan. The Plan provides for discretionary grants of stock options, stock units and other equity and cash-based awards for employees, including officers, directors and consultants. A total of 23,380,000 shares of common stock have been reserved for issuance under the Plan. Upon certain changes in control of the Company, all outstanding and unvested options or stock awards under the Plan will vest at the rate of 50%, unless assumed or substituted by the acquiring entity. During the fiscal year 2022, the Company issued no stock options, 111,283 performance stock units and 1,118,854 restricted stock units under the Plan. As of September 30, 2022, there were no options outstanding, 208,116 performance stock units outstanding, 1,137,619 restricted stock units outstanding and 2,072,778 shares available for new awards under the Plan. A summary of restricted stock unit activity under the Plan is as follows:
|  | Performance Stock Units |  | Restricted Stock Units
|  | Outstanding Performance Stock Units |  | Weighted Average Grant Date Fair Value |  | Outstanding Restricted Stock Units |  | Weighted Average Grant Date Fair Value
Balance, September 30, 2021 |  | 230,926 |  |  | $ | 136.47 |  |  | 1,340,548 |  |  | $ | 141.90 |
Units granted |  | 111,283 |  |  | 200.74 |  |  | 1,118,854 |  |  | 206.45 |
Units vested |  | (119,889) |  |  | 215.12 |  |  | (1,122,583) |  |  | 188.04 |
Units cancelled |  | (14,204) |  |  | 151.07 |  |  | (199,200) |  |  | 170.35 |
Balance, September 30, 2022 |  | 208,116 |  |  | $ | 169.99 |  |  | 1,137,619 |  |  | $ | 184.59 |
A majority of the restricted stock units the Company grants to its employees vest quarterly over a two-year period. The performance stock units, restricted stock units and stock options under all plans were granted during fiscal years 2022, 2021 and 2020 with a per-share weighted average fair value of $206.13, $145.89 and $137.84, respectively. The fair value of performance stock units and restricted stock units vested during fiscal years 2022, 2021 and 2020 was $262.4 million, $261.9 million and $138.4 million, respectively. In determining the fair value of the portion of the performance awards based on Total Shareholder Return, the Company uses a Monte Carlo simulation model that employs the following key assumptions:
|  |  |  |  |  |  |  | Expected Volatility |  |
|  | Fair Value |  | Expected Term |  | Risk-Free |  |  |  | Index |  | Expected
Grant Date |  | per Share |  | (in years) |  | Interest Rate |  | F5 |  | Members |  | Dividend
November 1, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Tranche 1 |  | $ | 283.35 |  |  | 0.91 |  | 0.13 | % |  | 26.21 | % |  | 27.27 | % |  | — |
Tranche 2 |  | $ | 302.53 |  |  | 1.91 |  | 0.47 | % |  | 35.13 | % |  | 42.87 | % |  | — |
Tranche 3 |  | $ | 308.76 |  |  | 2.91 |  | 0.76 | % |  | 32.54 | % |  | 38.24 | % |  | — |
As of September 30, 2022, the following annual equity grants for executive officers or a portion thereof are outstanding:
Grant Date | RSUs Granted | Vesting Schedule | Vesting Period | Date Fully Vested
November 1, 2021 | 160,384 | Quarterly, Annually 1,2 | 3 years | November 1, 2024
November 2, 2020 | 257,568 | Quarterly, Annually 1 | 3 years | November 1, 2023
November 1, 2019 | 228,616 | Quarterly, Annually 1 | 3 years | November 1, 2022
November 1, 2018 | 144,066 | Quarterly, Annually 1 | 3 years | November 1, 2021
(1)50% of the annual equity grant vests in equal quarterly increments and 50% is subject to the Company achieving specified annual performance goals. (2)For the Company's Chief Executive Officer, 40% of the annual equity grant vests in equal quarterly increments and 60% is subject to the Company achieving specified annual performance goals. A summary of stock option activity under all of the Company’s plans is as follows:
|  | Options Outstanding
|  | Number of Shares |  | Weighted Average Exercise Price per Share
Balance, September 30, 2021 |  | 324,624 |  |  | $ | 30.83 |
Options granted |  | — |  |  | — |
Options exercised |  | (143,128) |  |  | 25.24 |
Options cancelled |  | (16,700) |  |  | 53.98 |
Balance, September 30, 2022 |  | 164,796 |  |  | $ | 33.34 |
There were no stock options granted in fiscal year 2022. All stock options granted in fiscal years 2021 and 2020 were replacement awards of those assumed as part of the acquisitions of Volterra and Shape, respectively. The total intrinsic value of options exercised during fiscal 2022, 2021 and 2020 was $25.6 million, $25.6 million and $11.4 million, respectively. A summary of options outstanding that are exercisable and that have vested and are expected to vest as of September 30, 2022 is as follows:
|  | Number of Shares |  | Weighted Average Remaining Contractual Life (in Years) |  | Weighted Average Exercise Price per Share |  | Aggregate Intrinsic Value(1)
|  |  |  |  |  |  |  | (In thousands)
Stock options outstanding |  | 164,796 |  |  | 6.45 |  | $ | 33.34 |  |  | $ | 18,357 |
Exercisable |  | 127,072 |  |  | 6.20 |  | $ | 30.76 |  |  | $ | 14,482 |
Vested and expected to vest |  | 162,713 |  |  | 6.42 |  | $ | 33.20 |  |  | $ | 18,147 |
(1)Aggregate intrinsic value represents the difference between the fair value of the Company’s common stock underlying these options at September 30, 2022 and the related exercise prices. As of September 30, 2022, equity based awards (including stock options and restricted stock units) are available for future issuance as follows:
|  | Awards Available for Grant
Balance, September 30, 2021 | 1,988,410 |
Granted | (1,255,975) |
Cancelled | 327,201 |
Additional shares reserved (terminated), net | 1,013,142 |
Balance, September 30, 2022 | 2,072,778 |

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