(Source: Business Wire)
F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of $175.1
million for the fourth quarter of fiscal year 2009, up 11 percent from
$158.2 million in the prior quarter and 2 percent from $171.3 million in
the fourth quarter of fiscal year 2008. For fiscal year 2009, revenue
was $653.1 million, up slightly from $650.2 million in fiscal year 2008.
GAAP net income for the fourth quarter was $28.4 million ($0.36 per
diluted share) compared to $22.8 million ($0.29 per diluted share) in
the third quarter of 2009 and $19.7 million ($0.24 per diluted share) in
the fourth quarter a year ago. GAAP net income for the year was $91.5
million ($1.14 per diluted share) versus $74.3 million ($0.89 per
diluted share) in fiscal year 2008.
Excluding the impact of stock-based compensation, non-GAAP net income
for the fourth quarter was $40.0 million ($0.50 per diluted share),
compared to $31.9 million ($0.40 per diluted share) in the prior quarter
and $33.4 million ($0.41 per diluted share) in the fourth quarter of
fiscal 2008 (which also excluded a non-recurring loss on facility exit
and sublease). For fiscal year 2009, non-GAAP net income was $134.6
million ($1.68 per diluted share) versus $121.3 million ($1.45 per
diluted share) in fiscal year 2008.
A reconciliation of GAAP net income to non-GAAP net income is included
on the attached Consolidated Statements of Operations.
F5 president and chief executive officer John McAdam said the rebound in
revenue growth during the quarter reflected a continuation of the trend
toward more normal customer spending patterns that the company
experienced in the prior quarter. "Bookings were up across all
geographic regions, especially in North America, as customers began
purchasing equipment for new projects and moving forward with projects
they had put on hold during the first half of the year. In addition,
growing awareness of the performance and functionality of TMOS version
10 helped drive strong demand for our new family of BIG-IP application
delivery controllers and the growth of product revenue, which increased
nearly 14 percent from Q3.
"During Q4, a slight increase in gross margins combined with strong
revenue growth to drive our non-GAAP operating margin to just under 32
percent. As a result, earnings on both a GAAP and non-GAAP basis came in
well above our guidance for the quarter.
"We also saw continued improvement on our balance sheet. Deferred
revenue grew 7.8 percent to $183.1 million from the prior quarter and
cash flow from operations was $58.6 million. Cash flow for the full year
was $202 million, and after repurchasing 3.3 million shares of F5 common
stock for $87.4 million in fiscal year 2009 we ended the year with $574
million in cash and investments.
"In general, Q4 was a strong finish to a challenging year. While it is
still too early to rule out the possibility of another broad economic
setback, the strength of our current business and our growing pipeline
are encouraging signs that the positive trends we saw in the last two
quarters will continue through fiscal 2010."
For the first quarter of fiscal 2010, ending December 31, the company
has set a revenue target of $182 million to $187 million and a GAAP
earnings target of $0.31 to $0.33 per diluted share. Excluding
stock-based compensation expense, the company's non-GAAP earnings target
is $0.47 to $0.49 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, 2009
Reconciliation of Expected Non-GAAP First Quarter Earnings Low High
Net income $ 24.8 $ 26.4
Stock-based compensation expense, net of tax 12.6 12.6
Non-GAAP net income excluding stock-based compensation expense $ 37.4 $ 39.0
Net income per share - diluted $ 0.31 $ 0.33
Non-GAAP net income per share - diluted $ 0.47 $ 0.49
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Analyst/Investor Meeting
F5 will hold a meeting for analysts and investors at the Hilton Hotel in
New York City, from 8:00 a.m. to noon Eastern Time on Tuesday, November
3, 2009.
To register online for this event go to: http://www.f5.com/analyst-meeting/
For more information contact Darlene Henderson (206.272.6170) or email 2009analystmeeting@f5.com.
The meeting will also be webcast live and an archived version will be
available through December 3, 2009. The link for the live webcast and
the archived version is posted on the Investor Relations page of the F5
website at http://www.f5.com/about/investor-relations/events-calendar.html.
About F5 Networks
F5 Networks is the global leader in Application Delivery Networking
(ADN), focused on ensuring the secure, reliable, and fast delivery of
applications. F5's flexible architectural framework enables
community-driven innovation that helps organizations enhance IT agility
and dynamically deliver services that generate true business value. F5's
vision of unified application and data delivery offers customers an
unprecedented level of choice in how they deploy ADN solutions. It
redefines the management of application, server, storage, and network
resources, streamlining application delivery and reducing costs. Global
enterprise organizations, service and cloud providers, and Web 2.0
content providers trust F5 to keep their business moving forward. For
more information, go to www.f5.com.
Forward Looking Statements
Statements in this press release concerning the continuing strength of
F5's business, sequential growth, the target revenue and earnings range,
share amount and share price assumptions, demand for application
delivery networking and storage virtualization products and other
statements that are not historical facts are forward-looking statements.
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, WAN optimization and storage
virtualization offerings; the timely development, introduction and
acceptance of additional new products and features by F5 or its
competitors; competitive pricing pressures; 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; 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; the
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. 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, 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. Net income
excluding stock-based compensation (non-GAAP) 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 accounted
for in accordance with the fair value recognition provisions of the
Equity Topic of the Accounting Standards Codification.
The reconciliation of the company's GAAP and non-GAAP annual earnings
also excludes a restructuring charge related to a loss on facility exit
and workforce reduction and a legal settlement charge, both of which
were incurred during the second quarter. This restructuring charge was
incurred in connection with a reduction in the company's workforce and
the consolidation of certain of the company's office space.
Management believes that net income excluding stock-based compensation
(non-GAAP) provides useful supplemental information to management and
investors regarding the performance of the company's 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 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 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 business, 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. For example, stock-based compensation is an obligation of
the Company that should be considered and each line item is important to
financial performance generally. 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 its operational performance and financial results.
F5 Networks, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
September 30, September 30,
2009 2008
Assets
Current assets
Cash and cash equivalents $ 110,837 $ 78,303
Short-term investments 206,291 111,883
Accounts receivable, net of allowances of $4,748 and $4,348 106,973 97,057
Inventories 13,819 10,148
Deferred tax assets 8,010 5,910
Other current assets 22,252 20,068
Total current assets 468,182 323,369
Restricted cash 2,729 2,748
Property and equipment, net 39,371 47,557
Long-term investments 257,294 261,086
Deferred tax assets 49,018 46,917
Goodwill 231,883 231,892
Other assets, net 20,168 25,654
Total assets $ 1,068,645 $ 939,223
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 18,891 $ 13,092
Accrued liabilities 53,232 48,051
Deferred revenue 150,891 125,678
Total current liabilities 223,014 186,821
Other long-term liabilities 14,373 14,822
Deferred revenue, long-term 32,238 19,321
Total long-term liabilities 46,611 34,143
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 78,325 and 79,094 shares issued and outstanding
462,786 477,299
Accumulated other comprehensive loss (2,337 ) (6,076 )
Retained earnings 338,571 247,036
Total shareholders' equity 799,020 718,259
Total liabilities and shareholders' equity $ 1,068,645 $ 939,223
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F5 Networks, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Three months ended Twelve months ended
September 30, September 30,
2009 2008 2009 2008
Net revenues
Products $ 108,880 $ 115,790 $ 406,529 $ 452,929
Services 66,250 55,473 246,550 197,244
Total 175,130 171,263 653,079 650,173
Cost of net revenues (1)
Products 24,294 26,584 95,209 102,400
Services 12,162 12,329 47,517 46,618
Total 36,456 38,913 142,726 149,018
Gross Profit 138,674 132,350 510,353 501,155
Operating expenses (1)
Sales and marketing 58,395 60,461 225,193 237,175
Research and development 25,515 26,367 103,664 103,394
General and administrative 14,619 14,632 55,243 56,001
Loss on facility exit and sublease - 5,271 - 5,271
Restructuring charges - - 4,329 -
Total 98,529 106,731 388,429 401,841
Income from operations 40,145 25,619 121,924 99,314
Other income, net 1,682 3,513 9,724 18,950
Income before income taxes 41,827 29,132 131,648 118,264
Provision for income taxes (1) 13,477 9,431 40,113 43,933
Net Income $ 28,350 $ 19,701 $ 91,535 $ 74,331
Net income per share - basic $ 0.36 $ 0.25 $ 1.16 $ 0.90
Weighted average shares - basic 78,499 79,754 78,842 82,290
Net income per share - diluted $ 0.36 $ 0.24 $ 1.14 $ 0.89
Weighted average shares - diluted 79,613 80,785 80,073 83,428
Non-GAAP Financial Measures
Net income as reported $ 28,350 $ 19,701 $ 91,535 $ 74,331
Stock-based compensation expense, net of tax (5) 11,696 10,328 39,190 43,638
Loss on facility exit and sublease, net of tax (2) - 3,321 - 3,321
Restructuring charges, net of tax (3) - - 2,957 -
Legal settlement, net of tax (4) - - 913 -
Net income excluding stock-based compensation, loss on facility exit and sublease, restructuring charges & legal settlement (Non-GAAP) $ 40,046 $ 33,350 $ 134,595 $ 121,290
Net income per share excluding stock-based compensation,loss on facility exit and sublease, restructuring charges & legal settlement (Non-GAAP) - diluted $ 0.50 $ 0.41 $ 1.68 $ 1.45
Weighted average shares - diluted 79,613 80,785 80,073 83,428
(1) Includes stock-based compensation as follows:
Cost of net revenues $ 1,472 $ 1,175 $ 5,152 $ 4,345
Sales and marketing 6,125 5,623 22,644 24,061
Research and development 4,468 4,106 16,666 16,326
General and administrative 3,272 3,858 11,602 15,850
Tax effect of stock based compensation (3,641 ) (4,434 ) (16,874 ) (16,944 )
$ 11,696 $ 10,328 $ 39,190 $ 43,638
(2) Includes loss on facility exit and sublease as follows:
Loss on facility exit and sublease $ - $ 5,271 $ - $ 5,271
Tax effect of loss on facility exit and sublease - (1,950 ) - (1,950 )
$ - $ 3,321 $ - $ 3,321
(3) Includes restructuring charges as follows:
Loss on facility exit $ - $ - $ 2,194 $ -
Restructuring charges - - 2,135 -
Tax effect of loss on facility exit and restructuring charges - - (1,372 ) -
$ - $ - $ 2,957 $ -
(4) Includes legal settlement as follows:
Legal settlement $ - $ - $ 1,337 $ -
Tax effect of legal settlement - - (424 ) -
$ - $ - $ 913 $ -
(5) Stock-based compensation is accounted for in accordance with the fair value recognition provisions of the Equity Topic of the Accounting Standards Codification.
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F5 Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Years ended
September 30,
2009 2008
Operating activities
Net income $ 91,535 $ 74,331
Adjustments to reconcile net income to net cash provided by operating activities:
Realized (gain) loss on disposition of assets and investments (9 ) 58
Stock-based compensation 56,064 60,582
Provisions for doubtful accounts and sales returns 2,638 2,749
Depreciation and amortization 26,407 23,623
Deferred income taxes (6,057 ) (5,606 )
Gain on auction rate securities put option (3,901 ) -
Loss on trading auction rate securities 3,901 -
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable (12,555 ) (7,940 )
Inventories (3,671 ) 523
Other current assets (523 ) 428
Other assets (226 ) (3,544 )
Accounts payable and accrued liabilities 10,248 4,006
Deferred revenue 38,130 44,482
Net cash provided by operating activities 201,981 193,692
Investing activities
Purchases of investments (414,857 ) (494,082 )
Maturities of investments 328,110 535,494
Investment of restricted cash 13 1,216
Acquisition of intangible assets (706 ) -
Acquisition of businesses, net of cash acquired - (995 )
Purchases of property and equipment (11,669 ) (27,923 )
Net cash (used in) provided by investing activities (99,109 ) 13,710
Financing activities
Tax expense from nonqualified stock options (1,958 ) (221 )
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan 18,688 18,502
Repurchase of common stock (87,436 ) (200,000 )
Net cash used in financing activities (70,706 ) (181,719 )
Net increase in cash and cash equivalents 32,166 25,683
Effect of exchange rate changes on cash and cash equivalents 368 (1,676 )
Cash and cash equivalents, beginning of period 78,303 54,296
Cash and cash equivalents, end of period $ 110,837 $ 78,303
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