F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of
$525.3 million for the fourth quarter of fiscal year 2016, up 6
percent from $496.5 million in the prior quarter and 5 percent from
$501.3 million in the fourth quarter of fiscal year 2015. For
fiscal year 2016, revenue was $2.0 billion, up 4 percent from $1.92
billion last year.
GAAP net income for the fourth quarter was $108.9 million ($1.64
per diluted share) compared to $91.8 million ($1.37 per diluted
share) in the third quarter of 2016 and $97.0 million ($1.36 per
diluted share) in the fourth quarter a year ago. GAAP net income
for the year was $365.9 million ($5.38 per diluted share) versus
$365.0 million ($5.03 per diluted share) in fiscal year 2015.
Non-GAAP net income for the fourth quarter was $139.9 million
($2.11 per diluted share), compared to $121.7 million ($1.81 per
diluted share) in the prior quarter and $130.7 million ($1.84 per
diluted share) in the fourth quarter of fiscal 2015. For fiscal
year 2016, non-GAAP net income was $496.2 million ($7.30 per
diluted share) versus $480.3 million ($6.62 per diluted share) in
fiscal year 2015.
A reconciliation of net income, earnings per share, and other
measures on a GAAP to non-GAAP basis is included on the attached
Consolidated Income Statements.
"Strengthening product sales in the second half of fiscal 2016
culminated in strong fourth quarter results and record annual
revenue and earnings,” said John McAdam, F5 president and chief
executive officer. “On a regional basis, Americas, APAC and Japan
all delivered solid sequential and year over year sales growth,
while sales in EMEA were down significantly from the fourth quarter
a year ago.
“We believe there are several emerging market conditions that
are driving an increased appeal of our products with our customers.
These include the ability to orchestrate SSL traffic flows,
provision our proxy based security solutions to deploy a consistent
security stack across on-premise, off-premise and public cloud
infrastructures, and customers moving workloads to public and
private cloud architectures. We believe these trends, combined with
our new product offerings will drive our business forward in fiscal
2017 and beyond.
“During the current quarter, we will complete the rollout of our
refreshed BIG-IP appliance family called the iSeries. In addition
to massive performance and scalability across the entire line,
these programmable, software-defined hardware platforms included
features designed to simplify private cloud deployments and
hybrid-cloud build-outs. Although the first BIG-IP iSeries products
only began shipping in mid-September, customer response has been
very positive and we expect to see sales ramp steadily throughout
the year. As we have said previously, we are confident that the
launch of the iSeries and all the other new products we have
introduced in the second half of fiscal 2016 will drive a
re-acceleration of product revenue growth in fiscal 2017.”
For the first quarter of fiscal 2017, ending December 31, the
company has set a revenue target of $510 million to $520 million
with a GAAP earnings target of $1.40 to $1.43 per diluted share.
Excluding stock-based compensation expense and amortization of
purchased intangible assets, the company's non-GAAP earnings target
is $1.92 to $1.95 per diluted share.
A reconciliation of the company’s expected GAAP and non-GAAP
earnings is provided in the following table:
Three months ended December 31, 2016
Reconciliation of Expected Non-GAAP First Quarter Earnings
Low High Net income $ 92.1 $ 94.1 Stock-based
compensation expense $ 43.0 $ 43.0 Amortization of purchased
intangible assets $ 3.5 $ 3.5 Tax effects related to above items $
(12.6 ) $ (12.6 ) Non-GAAP net income excluding stock-based
compensation expense and amortization of purchased intangible
assets $ 126.0 $ 128.0 Net income per share - diluted
$ 1.40 $ 1.43 Non-GAAP net income per share - diluted
$ 1.92 $ 1.95
Analyst/Investor Meeting
F5 will hold a meeting for analysts and investors at the
InterContinental Chicago Magnificent Mile, from 8:00 a.m. to 12:30
p.m. Central Time on Thursday, November 17, 2016.
For more information and to register online, please visit:
https://interact.f5.com/2017Q1S-Analyst-and-Investor-Meeting-NOV17_Landing-Page.html
The meeting will also be webcast live, beginning November 17th
at 8:00 a.m. Central Time, and an archived version will be
available through January 25, 2017. The link for the live webcast
and the archived version is accessible from the Investor Relations
Events page on f5.com.
About F5 Networks
F5 (NASDAQ: FFIV) provides solutions for an application world.
F5 helps organizations seamlessly scale cloud, data center,
telecommunications, and software defined networking (SDN)
deployments to successfully deliver applications and services to
anyone, anywhere, at any time. F5 solutions broaden the reach of IT
through an open, extensible framework and a rich partner ecosystem
of leading technology and orchestration vendors. This approach lets
customers pursue the infrastructure model that best fits their
needs over time. The world’s largest businesses, service providers,
government entities, and consumer brands rely on F5 to stay ahead
of cloud, security, and mobility trends. 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.
Forward Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding the continuing
strength and momentum of F5's business, future financial
performance, sequential growth, projected revenues including target
revenue and earnings ranges, income, earnings per share, share
amount and share price assumptions, demand for application delivery
networking, application delivery services, security, virtualization
and diameter products, expectations regarding future services and
products, expectations regarding future customers, markets and the
benefits of products, and other statements that are not historical
facts and which are forward-looking statements. These
forward-looking statements are subject to the safe harbor
provisions created by the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from those
projected in the forward-looking statements as a result of certain
risk factors. Such forward-looking statements involve risks and
uncertainties, as well as assumptions and other factors that, if
they do not fully materialize or prove correct, could cause the
actual results, performance or achievements of the company, or
industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to: customer acceptance of our new traffic management,
security, application delivery, optimization, diameter and
virtualization offerings; the timely development, introduction and
acceptance of additional new products and features by F5 or its
competitors; competitive factors, including but not limited to
pricing pressures, industry consolidation, entry of new competitors
into F5’s markets, and new product and marketing initiatives by our
competitors; increased sales discounts; uncertain global economic
conditions which may result in reduced customer demand for our
products and services and changes in customer payment patterns;
global economic conditions and uncertainties in the geopolitical
environment; overall information technology spending; litigation
involving patents, intellectual property, shareholder and other
matters, and governmental investigations; natural catastrophic
events; a pandemic or epidemic; F5's ability to sustain, develop
and effectively utilize distribution relationships; F5's ability to
attract, train and retain qualified product development, marketing,
sales, professional services and customer support personnel; F5's
ability to expand in international markets; the unpredictability of
F5's sales cycle; F5’s share repurchase program; future prices of
F5's common stock; and other risks and uncertainties described more
fully in our documents filed with or furnished to the Securities
and Exchange Commission, including our most recent reports on Form
10-K and Form 10-Q and current reports on Form 8-K that we may file
from time to time, which could cause actual results to vary from
expectations. The financial information contained in this release
should be read in conjunction with the consolidated financial
statements and notes thereto included in F5’s most recent reports
on Forms 10-Q and 10-K as each may be amended from time to time.
All forward-looking statements in this press release are based on
information available as of the date hereof and qualified in their
entirety by this cautionary statement. F5 assumes no obligation to
revise or update these forward-looking statements.
GAAP to non-GAAP Reconciliation
F5’s management evaluates and makes operating decisions using
various operating measures. These measures are generally based on
the revenues of its products, services operations and certain costs
of those operations, such as cost of revenues, research and
development, sales and marketing and general and administrative
expenses. One such measure is net income excluding stock-based
compensation, amortization of purchased intangible assets and
acquisition-related charges, net of taxes, which is a non-GAAP
financial measure under Section 101 of Regulation G under the
Securities Exchange Act of 1934, as amended. This measure consists
of GAAP net income excluding, as applicable, stock-based
compensation, amortization of purchased intangible assets and
acquisition-related charges. This measure of non-GAAP net income is
adjusted by the amount of additional taxes or tax benefit that the
company would accrue if it used non-GAAP results instead of GAAP
results to calculate the company’s tax liability. Stock-based
compensation is a non-cash expense that F5 has accounted for since
July 1, 2005 in accordance with the fair value recognition
provisions of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 718
Compensation—Stock Compensation (“FASB ASC Topic 718”).
Amortization of intangible assets is a non-cash expense. Investors
should note that the use of intangible assets contribute to
revenues earned during the periods presented and will contribute to
revenues in future periods. Acquisition-related expenses consist of
professional services fees incurred in connection with
acquisitions. In addition, expense related to a jury verdict and
other associated costs of that patent litigation have been excluded
from GAAP net income for the purpose of measuring non-GAAP earnings
and earnings per share in fiscal 2016.
Management believes that non-GAAP net income per share provides
useful supplemental information to management and investors
regarding the performance of the company’s core business operations
and facilitates comparisons to the company’s historical operating
results. Although F5’s management finds this non-GAAP measure to be
useful in evaluating the performance of the core business,
management’s reliance on this measure is limited because items
excluded from such measures could have a material effect on F5’s
earnings and earnings per share calculated in accordance with GAAP.
Therefore, F5’s management will use its non-GAAP earnings and
earnings per share measures, in conjunction with GAAP earnings and
earnings per share measures, to address these limitations when
evaluating the performance of the company’s core business.
Investors should consider these non-GAAP measures in addition to,
and not as a substitute for, financial performance measures in
accordance with GAAP.
F5 believes that presenting its non-GAAP measure of earnings and
earnings per share provides investors with an additional tool for
evaluating the performance of the company’s core business and which
management uses in its own evaluation of the company’s performance.
Investors are encouraged to look at GAAP results as the best
measure of financial performance. However, while the GAAP results
are more complete, the company provides investors this supplemental
measure since, with reconciliation to GAAP, it may provide
additional insight into the company’s operational performance and
financial results.
For reconciliation of this non-GAAP financial measure to the
most directly comparable GAAP financial measure, please see the
section in our Consolidated Income Statements entitled “Non-GAAP
Financial Measures.”
F5 Networks, Inc. Consolidated Balance
Sheets (unaudited, in thousands)
September 30, September 30, 2016
2015 Assets Current assets Cash
and cash equivalents $ 514,571 $ 390,460 Short-term investments
367,824 383,882 Accounts receivable, net of allowances of $2,062
and $1,979 268,175 279,434 Inventories 34,051 33,717 Deferred tax
assets 51,601 50,128 Other current assets 52,579
50,519 Total current assets 1,288,801
1,188,140 Property and equipment, net 123,248
95,909 Long-term investments 276,375 397,656 Deferred tax assets
2,044 6,492 Goodwill 555,965 555,965 Other assets, net
59,890 68,128 Total assets $ 2,306,323
$ 2,312,290
Liabilities and Shareholders’
Equity Current liabilities Accounts payable $ 34,117 $ 50,814
Accrued liabilities 178,353 130,401 Deferred revenue 631,768
573,908 Total current liabilities
844,238 755,123 Other long-term
liabilities 34,138 30,136 Deferred revenue, long-term 238,473
209,402 Deferred tax liabilities 4,212 901
Total long-term liabilities 276,823
240,439 Commitments and contingencies
Shareholders’ equity Preferred stock, no par value; 10,000 shares
authorized, no shares outstanding - - Common stock, no par value;
200,000 shares authorized, 65,315 and 70,138 shares issued and
outstanding 13,191 10,159 Accumulated other comprehensive loss
(13,194 ) (15,288 ) Retained earnings 1,185,265
1,321,857
Total shareholders' equity
1,185,262 1,316,728 Total liabilities
and shareholders' equity $ 2,306,323 $ 2,312,290
F5 Networks, Inc.
Consolidated Income Statements (unaudited, in thousands,
except per share amounts) Three Months
Ended Twelve Months Ended September 30,
September 30, 2016 2015
2016 2015
Net revenues Products $ 252,984 $ 257,719 $ 944,469 $ 991,539
Services 272,365 243,582
1,050,565
928,284 Total 525,349 501,301 1,995,034
1,919,823 Cost of net revenues (1)(2) Products 43,591 44,505
166,624 174,225 Services 41,358 40,153
170,581 158,036 Total 84,949
84,658 337,205 332,261
Gross Profit 440,400 416,643 1,657,829 1,587,562
Operating expenses (1)(2) Sales and marketing 158,198 151,653
628,743 602,540 Research and development 83,746 77,665 334,227
296,583 General and administrative 35,193 39,726 138,431 135,540
Litigation expense 630 - 9,051
- Total 277,767 269,044
1,110,452 1,034,663
Income from operations 162,633 147,599 547,377 552,899 Other
income, net 268 1,865 2,514
8,445 Income before income taxes 162,901
149,464 549,891 561,344 Provision for income taxes 53,966
52,427 184,036 196,330
Net Income $ 108,935 $ 97,037 $ 365,855
$ 365,014 Net income per share - basic $ 1.66
$ 1.37 $ 5.43 $ 5.07 Weighted average
shares - basic 65,772 70,679
67,433 71,944 Net income per share -
diluted $ 1.64 $ 1.36 $ 5.38 $ 5.03
Weighted average shares - diluted 66,262
71,098 67,984 72,547
Non-GAAP Financial Measures Net income as
reported $ 108,935 $ 97,037 $ 365,855 $ 365,014 Stock-based
compensation expense (3) 38,317 41,634 156,760 145,553 Amortization
of purchased intangible assets 3,462 3,409 13,902 13,231 Litigation
expense 630 - 9,051 - Tax effects related to above items (11,433 )
(11,414 ) (49,385 ) (43,461 ) Net income excluding stock-based
compensation expense, amortization of
purchased intangible assets and litigation expense (non-GAAP) -
diluted $ 139,911 $ 130,666 $ 496,183 $
480,337 Net income per share excluding stock-based
compensation expense, amortization of purchased intangible assets
and litigation expense (non-GAAP) - diluted $ 2.11 $ 1.84
$ 7.30 $ 6.62 Weighted average shares -
diluted 66,262 71,098 67,984
72,547 (1) Includes stock-based
compensation as follows: Cost of net revenues $ 4,601 $ 3,723 $
18,530 $ 14,220 Sales and marketing 15,203 13,992 61,165 56,754
Research and development 12,949 11,629 52,550 46,129 General and
administrative 5,564 12,290
24,515 28,450 $ 38,317 $ 41,634
$ 156,760 $ 145,553 (2) Includes amortization
of purchased intangible assets as follows: Cost of net revenues $
2,706 $ 2,682 $ 10,705 $ 10,650 Sales and marketing 391 487 1,850
1,946 General and administrative 365 240
1,347 635 $ 3,462 $ 3,409
$ 13,902 $ 13,231 (3) Stock-based
compensation is accounted for in accordance with the fair value
recognition provisions of Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 718,
Compensation – Stock Compensation (“FASB ASC Topic 718”)
F5 Networks, Inc. Consolidated Statements
of Cash Flows (unaudited, in thousands)
Years Ended September 30, 2016
2015 Operating activities Net
income $ 365,855 $ 365,014 Adjustments to reconcile net income to
net cash provided by operating activities: Realized loss on
disposition of assets and investments 693 282 Stock-based
compensation 156,760 145,553 Provisions for doubtful accounts and
sales returns 1,526 1,488 Depreciation and amortization 56,776
52,583 Deferred income taxes 2,967 (12,571 ) Changes in operating
assets and liabilities: Accounts receivable 9,732 (38,680 )
Inventories (334 ) (9,246 ) Other current assets (1,876 ) (6,533 )
Other assets (712 ) 569 Accounts payable and accrued liabilities
33,217 39,521 Deferred revenue 86,931 146,561
Net cash provided by operating activities 711,535
684,541
Investing activities
Purchases of investments (354,708 ) (609,875 ) Maturities of
investments 418,821 461,327 Sales of investments 66,848 205,292
Increase in restricted cash (3 ) (357 ) Acquisition of intangible
assets (4,750 ) (6,779 ) Purchases of property and equipment
(63,488 ) (60,307 ) Net cash provided by (used in) investing
activities 62,720 (10,699 )
Financing activities Excess tax benefit from stock-based
compensation 2,608 9,517 Proceeds from the exercise of stock
options and purchases of stock under employee stock purchase plan
44,869 40,439 Repurchase of common stock (700,124 )
(606,858 ) Net cash used in financing activities (652,647 )
(556,902 ) Net increase in cash and cash equivalents
121,608 116,940 Effect of exchange rate changes on cash and cash
equivalents 2,503 (7,982 ) Cash and cash equivalents, beginning of
period 390,460 281,502 Cash and cash
equivalents, end of period $ 514,571 $ 390,460
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161026006746/en/
F5 Networks, Inc.Investor RelationsJohn Eldridge,
206-272-6571j.eldridge@f5.comorPublic
RelationsNathan Misner, 206-272-7494n.misner@f5.com
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