F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of
$518.2 million for the second quarter of fiscal 2017, up 7.1% from
$483.7 million in the second quarter of fiscal 2016. Growth
compared with the second quarter of fiscal 2016 was driven by solid
execution in the Americas and strong sales of security solutions.
Partially offsetting these positive trends was continued soft
demand in Europe.
GAAP net income for the second quarter of fiscal 2017 was $93.1
million, or $1.43 per diluted share, compared to $75.4 million, or
$1.11 per diluted share in the second quarter of 2016. Non-GAAP net
income for the second quarter of fiscal 2017 was $127.0 million, or
$1.95 per diluted share, compared to $114.0 million, or $1.68 per
diluted share in the second quarter of fiscal 2016.
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.
In the just completed quarter, several new products were
introduced including 40-Gigabit BIG-IP virtual editions, Herculon
SSL Orchestrator and Herculon DDoS Hybrid Defender purpose-built
security products, as well as the latest version of our BIG-IP
operating system, TMOS 13.0. BIG-IP iSeries products continue to be
well received by customers with adoption trends tracking in line
with past major product refresh cycles. The BIG-IP iSeries
appliance family was architected to offer massive performance and
scalability across the entire line, and these programmable,
software-defined hardware platforms include features designed to
simplify private cloud deployments and hybrid cloud build-outs.
Several new products scheduled to begin shipping in the current
quarter are designed to help enable customers to deploy their
applications across a variety of cloud environments. These
solutions include Application Connector 1.0 for connecting public
and private cloud application infrastructures, support for BIG-IP
in the Google Public Cloud, and Container Connector and Application
Services Proxy for microservices environments.
“My early internal and external interactions have reinforced my
enthusiasm for joining the F5 team and my view that the company
offers a compelling platform for growth,” said François
Locoh-Donou, F5 President and Chief Executive Officer. “I am
excited by the new products and services we continue to bring to
market and I look forward to actively engaging with our customers
and key strategic partners around these offerings.
“With a strong culture of technology innovation and a solid
financial foundation, F5 is uniquely positioned to address our
customers' evolving demands around securing and optimizing
performance of their mission-critical business applications.”
For the third quarter of fiscal 2017, ending June 30, the
company has set a revenue goal of $520 million to $530 million with
a GAAP earnings target of $1.47 to $1.50 per diluted share and a
non-GAAP earnings target of $2.01 to $2.04 per diluted share.
A reconciliation of the company’s expected GAAP and non-GAAP
earnings is provided in the following table:
Three months ended June 30, 2017
Reconciliation of Expected Non-GAAP Third Quarter
Earnings Low High Net income $ 94.8
$ 96.8 Stock-based compensation expense $ 44.0 $ 44.0 Amortization
of purchased intangible assets $ 2.8 $ 2.8 Tax effects related to
above items $ (12.1 ) $ (12.1 ) Non-GAAP net income excluding
stock-based compensation expense and amortization of purchased
intangible assets $ 129.5 $ 131.5 Net income per
share - diluted $ 1.47 $ 1.50 Non-GAAP net income per
share - diluted $ 2.01 $ 2.04
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 and 2017.
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.”
About F5
F5 (NASDAQ: FFIV) makes apps go faster, smarter, and safer for
the world’s largest businesses, service providers, governments, and
consumer brands. F5 delivers cloud and security solutions that
enable organizations to embrace the application 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 Networks, Inc. Consolidated Balance Sheets
(unaudited, in thousands)
March 31, September 30, 2017
2016 ASSETS Current assets Cash and cash equivalents
$ 655,773 $ 514,571 Short-term investments 358,851 367,824 Accounts
receivable, net of allowances of $2,005 and $2,062 293,872 268,175
Inventories 32,548 34,051 Deferred tax assets 52,777 51,601 Other
current assets 51,022 52,579 Total current assets
1,444,843 1,288,801 Property and equipment, net
126,705 123,248 Long-term investments 200,253 276,375 Deferred tax
assets 1,992 2,044 Goodwill 555,965 555,965 Other assets, net
58,159 59,890 Total assets $ 2,387,917 $
2,306,323
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities Accounts payable $ 47,289 $ 34,117 Accrued
liabilities 184,234 178,353 Deferred revenue 684,495 631,768
Total current liabilities 916,018 844,238
Other long-term liabilities 37,051 34,138 Deferred revenue,
long-term 245,094 238,473 Deferred tax liabilities 5,149
4,212 Total long-term liabilities 287,294 276,823
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, 64,111 and 65,315 shares issued and outstanding 19,401
13,191 Accumulated other comprehensive loss (15,469 ) (13,194 )
Retained earnings 1,180,673 1,185,265 Total
shareholders’ equity 1,184,605 1,185,262 Total
liabilities and shareholders’ equity $ 2,387,917 $ 2,306,323
F5 Networks, Inc. Consolidated
Income Statements (unaudited, in thousands, except per share
amounts) Three Months Ended
Six Months Ended March 31, March
31, 2017 2016 2017
2016 Net revenues Products $ 241,080 $ 225,441 $
480,563 $ 460,119 Services 277,168 258,236 553,643
513,044 Total 518,248 483,677 1,034,206
973,163 Cost of net revenues (1)(2) Products 43,928
39,908 85,604 82,559 Services 43,984 42,322 87,570
85,354 Total 87,912 82,230 173,174
167,913 Gross profit 430,336 401,447
861,032 805,250 Operating expenses (1)(2) Sales and
marketing 164,705 156,469 329,219 313,925 Research and development
89,234 86,294 176,284 167,439 General and administrative 38,009
34,803 79,687 69,056 Litigation expense (135 ) 8,948 (135 )
8,948 Total 291,813 286,514 585,055
559,368 Income from operations 138,523 114,933 275,977
245,882 Other income, net 1,302 133 3,945
1,268 Income before income taxes 139,825 115,066 279,922
247,150 Provision for income taxes 46,687 39,651
92,566 82,019 Net income $ 93,138 $ 75,415
$ 187,356 $ 165,131 Net income per
share — basic $ 1.44 $ 1.12 $ 2.89 $ 2.41
Weighted average shares — basic 64,479 67,549
64,841 68,557 Net income per share — diluted $
1.43 $ 1.11 $ 2.87 $ 2.40 Weighted
average shares — diluted 65,028 67,804 65,389
68,881
Non-GAAP Financial Measures Net income
as reported $ 93,138 $ 75,415 $ 187,356 $ 165,131 Stock-based
compensation expense (3) 43,895 41,773 90,506 80,006 Amortization
of purchased intangible assets 3,292 3,519 6,695 6,922 Litigation
expense (135 ) 8,948 (135 ) 8,948 Tax effects related to above
items (13,184 ) (15,649 ) (27,150 ) (26,437 ) Net income excluding
stock-based compensation expense, amortization of purchased
intangible assets and litigation expense (non-GAAP) - diluted $
127,006 $ 114,006 $ 257,272 $ 234,570
Net income per share excluding stock-based compensation
expense, amortization of purchased intangible assets and litigation
expense (non-GAAP) - diluted $ 1.95 $ 1.68 $ 3.93
$ 3.41 Weighted average shares - diluted
65,028 67,804 65,389 68,881 (1)
Includes stock-based compensation expense as follows: Cost of net
revenues $ 5,554 $ 4,851 $ 10,771 $ 9,286 Sales and marketing
18,110 15,957 35,160 30,832 Research and development 13,884 13,784
27,816 26,614 General and administrative 6,347 7,181
16,759 13,274 $ 43,895 $ 41,773 $
90,506 $ 80,006 (2) Includes amortization of
purchased intangible assets as follows: Cost of net revenues $
2,532 $ 2,666 $ 5,317 $ 5,333 Sales and marketing 251 487 503 973
General and administrative 509 366 875 616
$ 3,292 $ 3,519 $ 6,695 $ 6,922
(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)
Six Months Ended March 31, 2017
2016 Operating activities Net income $
187,356 $ 165,131 Adjustments to reconcile net income to net cash
provided by operating activities: Realized (gain) loss on
disposition of assets and investments (7 ) 31 Stock-based
compensation 90,506 80,006 Provisions for doubtful accounts and
sales returns 455 522 Depreciation and amortization 30,278 27,847
Deferred income taxes (214 ) 7,424 Changes in operating assets and
liabilities: Accounts receivable (26,152 ) 12,726 Inventories 1,504
(1,462 ) Other current assets 1,449 (16,302 ) Other assets (942 )
(126 ) Accounts payable and accrued liabilities 21,072 1,844
Deferred revenue 59,347 59,348 Net cash provided by
operating activities 364,652 336,989
Investing
activities Purchases of investments (146,236 ) (138,925 )
Maturities of investments 187,660 173,165 Sales of investments
40,737 47,742 (Increase) decrease in restricted cash (36 ) 8
Acquisition of intangible assets (4,000 ) (3,250 ) Purchases of
property and equipment (23,715 ) (29,793 ) Net cash provided by
investing activities 54,410 48,947
Financing
activities Excess tax benefit from stock-based compensation
5,239 1,378 Proceeds from the exercise of stock options and
purchases of stock under employee stock purchase plan 18,868 18,594
Repurchase of common stock (300,042 ) (400,077 ) Net cash used in
financing activities (275,935 ) (380,105 ) Net increase in cash and
cash equivalents 143,127 5,831 Effect of exchange rate changes on
cash and cash equivalents (1,925 ) 2,034 Cash and cash equivalents,
beginning of period 514,571 390,460 Cash and cash
equivalents, end of period $ 655,773 $ 398,325
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170426006618/en/
F5 Networks, Inc.Investor RelationsJason Willey,
206-272-7908j.willey@f5.comorPublic RelationsNathan Misner,
206-272-7494n.misner@f5.com
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