XML 32 R17.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The United States and international components of income before income taxes are as follows (in thousands):
|  | Years Ended September 30,
|  | 2022 |  | 2021 |  | 2020
United States |  | $ | 217,323 |  |  | $ | 189,398 |  |  | $ | 216,409 |
International |  | 168,070 |  |  | 197,539 |  |  | 179,988 |
|  | $ | 385,393 |  |  | $ | 386,937 |  |  | $ | 396,397 |
The provision for income taxes consists of the following (in thousands):
|  | Years Ended September 30,
|  | 2022 |  | 2021 |  | 2020
Current |  |  |  |  |  |
U.S. federal |  | $ | 35,259 |  |  | $ | 53,107 |  |  | $ | 26,978 |
State |  | 14,592 |  |  | 16,686 |  |  | 4,230 |
Foreign |  | 54,079 |  |  | 62,832 |  |  | 50,368 |
Total |  | 103,930 |  |  | 132,625 |  |  | 81,576 |
Deferred |  |  |  |  |  |
U.S. federal |  | (28,721) |  |  | (61,739) |  |  | 10,875 |
State |  | (11,332) |  |  | (15,294) |  |  | (1,121) |
Foreign |  | (644) |  |  | 104 |  |  | (2,374) |
Total |  | (40,697) |  |  | (76,929) |  |  | 7,380 |
|  | $ | 63,233 |  |  | $ | 55,696 |  |  | $ | 88,956 |
The effective tax rate differs from the U.S. federal statutory rate as follows (in thousands):
|  | Years Ended September 30,
|  | 2022 |  | 2021 |  | 2020
Income tax provision at statutory rate |  | $ | 80,933 |  |  | $ | 81,257 |  |  | $ | 83,243 |
State taxes, net of federal benefit |  | 6,012 |  |  | 5,118 |  |  | 4,258 |
Tax impact of foreign operations |  | (21,435) |  |  | (26,881) |  |  | (7,693) |
Research and development and other credits |  | (18,917) |  |  | (18,055) |  |  | (11,843) |
Stock-based and other compensation |  | 15,070 |  |  | 12,740 |  |  | 18,002 |
Other |  | 1,570 |  |  | 1,517 |  |  | 2,989 |
|  | $ | 63,233 |  |  | $ | 55,696 |  |  | $ | 88,956 |
The Company does not maintain an indefinite reinvestment assertion on unremitted foreign earnings and has recorded a deferred tax liability for any estimated foreign, federal, or state tax liabilities associated with a future repatriation of foreign earnings. The Company benefits from tax incentive arrangements in certain foreign jurisdictions, one of which expired in fiscal year 2021 and the rest of which expire in fiscal years 2026 to 2034. The tax incentive agreements are conditional upon meeting certain operational, employment, and investment requirements. These arrangements decreased foreign taxes by $8.5 million, $6.0 million and $8.2 million, and increased diluted earnings per common share by $0.14, $0.10 and $0.13 for the years ended September 30, 2022, 2021 and 2020, respectively. The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities are as follows (in thousands):
|  | Years Ended September 30,
|  | 2022 |  | 2021
Deferred tax assets |  |  |  |
Net operating loss carry-forwards |  | $ | 42,849 |  |  | $ | 41,252 |
Capitalized research and development costs |  | 158,206 |  |  | 95,259 |
Accrued compensation and benefits |  | 14,068 |  |  | 13,207 |
Stock-based compensation |  | 10,389 |  |  | 12,829 |
Deferred revenue |  | 32,244 |  |  | 30,115 |
Lease liabilities |  | 21,572 |  |  | 23,747 |
Other accruals and reserves |  | 18,797 |  |  | 18,450 |
Tax credit carryforwards |  | 28,858 |  |  | 34,187 |
Depreciation |  | 505 |  |  | 580 |
|  | 327,488 |  |  | 269,626 |
Valuation allowance |  | (46,136) |  |  | (40,404) |
|  | 281,352 |  |  | 229,222 |
Deferred tax liabilities |  |  |  |
Purchased intangibles |  | (57,350) |  |  | (57,219) |
Depreciation |  | (22,278) |  |  | (26,516) |
Deferred costs |  | (12,987) |  |  | (13,057) |
Other accruals and reserves |  | (8,153) |  |  | (6,651) |
|  | (100,768) |  |  | (103,443) |
Net deferred tax assets |  | $ | 180,584 |  |  | $ | 125,779 |
At September 30, 2022, the Company had foreign net operating loss carryforwards of approximately $63.4 million that can be carried forward indefinitely, and $0.3 million that will expire in fiscal years 2028 to 2039. The Company had $85.3 million of federal net operating loss carryforwards, of which $52.0 million can be carried forward indefinitely and $33.3 million that will expire in fiscal years 2033 to 2038. The annual utilization of the federal net operating loss carryforwards is limited under Internal Revenue Code Section 382. The Company also had $448.4 million of state net operating loss carryforwards, of which $253.1 million can be carried forward indefinitely and $195.3 million will expire in fiscal years 2029 to 2042. In addition, there are $3.1 million of foreign credit carryforwards that will expire in fiscal years 2023 to 2038, $7.8 million of federal credit carryforwards that will expire in fiscal years 2033 to 2041, $29.5 million of state tax credit carryforwards that can be carried forward indefinitely, and $3.9 million of state tax credit carryforwards that will expire in fiscal years 2031 to 2037. Management believes that it is more likely than not that the benefit from certain foreign net operating loss and credit carryforwards and state tax net operating loss and credit carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance on the deferred tax assets relating to these carryforwards. The net change in the total valuation allowance was an increase of $5.7 million and $7.8 million for years ended September 30, 2022 and 2021, respectively. The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest impact that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits in fiscal years 2022, 2021 and 2020 (in thousands):
|  | 2022 |  | 2021 |  | 2020
Balance, beginning of period |  | $ | 70,814 |  |  | $ | 51,767 |  |  | $ | 42,287 |
Gross increases related to prior period tax positions |  | 4,816 |  |  | 14,867 |  |  | 8,664 |
Gross decreases related to prior period tax positions |  | (10,538) |  |  | — |  |  | (1,051) |
Gross increases related to current period tax positions |  | 10,203 |  |  | 12,595 |  |  | 9,272 |
Decreases relating to settlements with tax authorities |  | — |  |  | (321) |  |  | (3,578) |
Reductions due to lapses of statute of limitations |  | (8,455) |  |  | (8,094) |  |  | (3,827) |
Balance, end of period |  | $ | 66,840 |  |  | $ | 70,814 |  |  | $ | 51,767 |
The total amount of gross unrecognized tax benefits was $66.8 million, $70.8 million, and $51.8 million as of September 30, 2022, 2021, and 2020, respectively, of which, $43.2 million, $39.2 million, and $34.3 million, if recognized, would affect the effective tax rate. There is a reasonable possibility that the Company’s unrecognized tax benefits will change within twelve months due to audit settlements or the expiration of statute of limitations, but the Company does not expect the change to be material to the consolidated financial statements. The Company recognizes interest and, if applicable, penalties (not included in the “unrecognized tax benefits” table above) for any uncertain tax positions. Interest and penalties are recorded as a component of income tax expense. In the years ended September 30, 2022, 2021 and 2020, the Company recorded approximately a $1.5 million decrease, $1.4 million increase and $1.0 million decrease, respectively, of interest and penalty expense related to uncertain tax positions. As of September 30, 2022 and 2021, the Company had a cumulative balance of accrued interest and penalties on unrecognized tax positions of $2.9 million and $4.4 million, respectively. The Company and its subsidiaries are subject to U.S. federal income tax as well as the income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for fiscal years through September 30, 2018. Major jurisdictions where there are wholly owned subsidiaries of F5, Inc. which require income tax filings include the United Kingdom, Singapore, Israel, and India. The earliest periods open for review by local taxing authorities are fiscal years 2020 for the United Kingdom, 2017 for Singapore, 2013 for Israel, and 2019 for India. The Company is currently under audit by various states for fiscal years 2016 through 2021, and by various foreign jurisdictions including Germany for fiscal years 2016 to 2019, India for fiscal years 2019 to 2020, Israel for fiscal years 2013 to 2017, and Saudi Arabia for fiscal years 2015 to 2020. Within the next four fiscal quarters, the statute of limitations will otherwise begin to close on the fiscal year 2019 federal income tax return, fiscal years 2018 and 2019 state income tax returns, and fiscal years 2015 to 2021 foreign income tax returns.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration