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8-K - FORM 8-K - F5 NETWORKS, INC. | v57993e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT:
|
Investor Relations | |
John Eldridge | ||
(206) 272-6571 | ||
j.eldridge@f5.com | ||
Public Relations | ||
Alane Moran | ||
(206) 272-6850 | ||
a.moran@f5.com |
F5 Networks Announces Results for First Quarter of Fiscal 2011
Revenue growth, up 41 percent year-over-year, driven by solid performance across all geographic regions
SEATTLE, WAJanuary 19, 2011 For the first quarter of fiscal 2011, F5 Networks, Inc.
(NASDAQ: FFIV) announced revenue of $268.9 million, up 5.8 percent from $254.3 million in the prior
quarter and 40.7 percent from $191.2 million in the first quarter of fiscal 2010.
GAAP net income was $55.7 million ($0.68 per diluted share), compared to $48.2 million ($0.59 per
diluted share) in the prior quarter and $29.3 million ($0.36 per diluted share) in the first
quarter a year ago.
Excluding the impact of stock-based compensation net of tax, non-GAAP net income was $72.2 million
($0.88 per diluted share), compared to $63.9 million ($0.79 per diluted share) in the prior quarter
and $41.4 million ($0.52 per diluted share) in the first quarter of fiscal 2010.
Both GAAP and non-GAAP results reflect reinstatement of the R&D tax credit passed by Congress in
December. A reconciliation of GAAP net income to non-GAAP net income is included on the attached
Consolidated Statements of Operations.
Coming off a very strong fourth quarter, the company achieved solid revenue and earnings
growth in the first quarter of fiscal 2011, said John McAdam, F5 president and chief executive
officer. Product revenue was up nearly 44 percent from the first quarter of fiscal 2010, and
service revenue grew more than 35 percent during the same period. On a regional basis, all
geographies delivered sequential and year-over-year gains, led by Asia Pacific where revenue was up
11 percent from the prior quarter and 62 percent from the first quarter a year ago. Underpinning
the continued strength in our service business, deferred revenue grew 10.9 percent to $287.8
million from the previous quarter.
Solid revenue growth, stable gross margins and disciplined execution enabled us to achieve a
non-GAAP operating margin of just over 38 percent. Consistent with our policy of hiring behind
revenue, we added 120 new employees, approximately half of them in sales and sales support, McAdam
said.
During the first quarter F5 generated $103 million in cash from operations, and after repurchasing
197,644 shares of its outstanding common stock, the company ended the quarter with $952 million in
cash and investments.
For the current quarter, ending March 31, management has set a revenue goal of $275 million to $280
million with a GAAP earnings target of $0.65 to $0.67 per diluted share. Excluding stock-based
compensation expense, the companys non-GAAP earnings target is $0.84 to $0.86 per diluted share.
A reconciliation of the companys expected GAAP and non-GAAP earnings is provided in the following
table:
Three months ended | ||||||||
March 31, 2011 | ||||||||
Reconciliation of Expected Non-GAAP Second Quarter Earnings | Low | High | ||||||
Net income |
$ | 53.3 | $ | 54.9 | ||||
Stock-based compensation expense, net of tax |
$ | 15.7 | $ | 15.7 | ||||
Non-GAAP net income excluding stock-based compensation expense |
$ | 69.0 | $ | 70.6 | ||||
Net income per share diluted |
$ | 0.65 | $ | 0.67 | ||||
Non-GAAP net income per share diluted |
$ | 0.84 | $ | 0.86 | ||||
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. F5s flexible architectural framework enables
community-driven innovation that helps organizations enhance IT agility and dynamically deliver
services that generate true business value. F5s 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 F5s 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; F5s ability to sustain, develop and effectively utilize
distribution relationships; F5s ability to attract, train and retain qualified product
development, marketing, sales, professional services and customer support personnel; F5s ability
to expand in international markets; the unpredictability of F5s sales cycle; the share repurchase
program; future prices of F5s 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
F5s 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 companys 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).
Management believes that net income excluding stock-based compensation (non-GAAP) provides useful
supplemental information to management and investors regarding the performance of the companys
business operations and facilitates comparisons to the
companys historical operating results. Although F5s management finds this non-GAAP measure to be
useful in evaluating the performance of the business, managements reliance on this measure is
limited because items excluded from such measures could have a material effect on F5s earnings and
earnings per share calculated in accordance with GAAP. Therefore, F5s 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 companys
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 companys business and
which management uses in its own evaluation of the companys 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)
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
December 31, | September 30, | |||||||
2010 | 2010 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 168,133 | $ | 168,754 | ||||
Short-term investments |
317,439 | 259,742 | ||||||
Accounts receivable, net of allowances of $3,444 and $4,319 |
141,986 | 112,132 | ||||||
Inventories |
18,184 | 18,815 | ||||||
Deferred tax assets |
8,657 | 8,767 | ||||||
Other current assets |
30,140 | 37,745 | ||||||
Total current assets |
684,539 | 605,955 | ||||||
Property and equipment, net |
35,520 | 34,157 | ||||||
Long-term investments |
466,702 | 433,570 | ||||||
Deferred tax assets |
39,327 | 37,864 | ||||||
Goodwill |
234,700 | 234,700 | ||||||
Other assets, net |
15,049 | 15,946 | ||||||
Total assets |
$ | 1,475,837 | $ | 1,362,192 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 31,254 | $ | 21,180 | ||||
Accrued liabilities |
64,096 | 61,768 | ||||||
Deferred revenue |
232,516 | 204,137 | ||||||
Total current liabilities |
327,866 | 287,085 | ||||||
Other long-term liabilities |
17,601 | 16,153 | ||||||
Deferred revenue, long-term |
55,271 | 55,256 | ||||||
Total long-term liabilities |
72,872 | 71,409 | ||||||
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 80,732 and 80,355
shares issued and outstanding |
534,194 | 517,215 | ||||||
Accumulated other comprehensive loss |
(4,482 | ) | (3,241 | ) | ||||
Retained earnings |
545,387 | 489,724 | ||||||
Total shareholders equity |
1,075,099 | 1,003,698 | ||||||
Total liabilities and shareholders equity |
$ | 1,475,837 | $ | 1,362,192 | ||||
F5 Networks, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Three months ended | Three months ended | Three months ended | ||||||||||
December 31, | September 30, | December 31, | ||||||||||
2010 | 2010 | 2009 | ||||||||||
Net revenues |
||||||||||||
Products |
$ | 171,492 | $ | 164,972 | $ | 119,218 | ||||||
Services |
97,442 | 89,302 | 71,938 | |||||||||
Total |
268,934 | 254,274 | 191,156 | |||||||||
Cost of net revenues (1) |
||||||||||||
Products |
31,614 | 31,045 | 26,042 | |||||||||
Services |
17,349 | 15,783 | 13,087 | |||||||||
Total |
48,963 | 46,828 | 39,129 | |||||||||
Gross Profit |
219,971 | 207,446 | 152,027 | |||||||||
Operating expenses (1) |
||||||||||||
Sales and marketing |
86,825 | 80,696 | 65,642 | |||||||||
Research and development |
32,606 | 31,571 | 26,720 | |||||||||
General and administrative |
20,684 | 18,876 | 15,953 | |||||||||
Total |
140,115 | 131,143 | 108,315 | |||||||||
Income from operations |
79,856 | 76,303 | 43,712 | |||||||||
Other income, net |
2,545 | 68 | 1,705 | |||||||||
Income before income taxes |
82,401 | 76,371 | 45,417 | |||||||||
Provision for income taxes (1) |
26,738 | 28,136 | 16,138 | |||||||||
Net Income |
$ | 55,663 | $ | 48,235 | $ | 29,279 | ||||||
Net income per share basic |
$ | 0.69 | $ | 0.60 | $ | 0.37 | ||||||
Weighted average shares basic |
80,644 | 80,268 | 78,906 | |||||||||
Net income per share diluted |
$ | 0.68 | $ | 0.59 | $ | 0.36 | ||||||
Weighted average shares diluted |
81,648 | 81,253 | 80,333 | |||||||||
Non-GAAP Financial Measures |
||||||||||||
Net income as reported |
$ | 55,663 | $ | 48,235 | $ | 29,279 | ||||||
Stock-based compensation expense, net of tax (3) |
16,536 | 14,702 | 12,130 | |||||||||
Legal settlement, net of tax (2) |
| 950 | | |||||||||
Net income excluding stock-based compensation expense
& legal settlement (non-GAAP) |
$ | 72,199 | $ | 63,887 | $ | 41,409 | ||||||
Net income per share excluding stock-based compensation expense
& legal settlement (non-GAAP) diluted |
$ | 0.88 | $ | 0.79 | $ | 0.52 | ||||||
Weighted average shares diluted |
81,648 | 81,253 | 80,333 | |||||||||
(1) Includes stock-based compensation as follows: |
||||||||||||
Cost of net revenues |
$ | 2,228 | $ | 2,002 | $ | 1,599 | ||||||
Sales and marketing |
8,733 | 7,565 | 6,717 | |||||||||
Research and development |
5,888 | 5,224 | 4,869 | |||||||||
General and administrative |
6,091 | 4,991 | 3,879 | |||||||||
Tax effect of stock-based compensation |
(6,404 | ) | (5,080 | ) | (4,934 | ) | ||||||
$ | 16,536 | $ | 14,702 | $ | 12,130 | |||||||
(2) Includes legal settlement as follows: |
||||||||||||
Legal settlement |
$ | | $ | 1,500 | $ | | ||||||
Tax effect of legal settlement |
| (550 | ) | | ||||||||
$ | | $ | 950 | $ | | |||||||
(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.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three months ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
Operating activities |
||||||||
Net income |
$ | 55,663 | $ | 29,279 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Realized (gain) loss on disposition of assets and investments |
(212 | ) | 1 | |||||
Stock-based compensation |
22,940 | 17,064 | ||||||
Provisions for doubtful accounts and sales returns |
228 | 949 | ||||||
Depreciation and amortization |
5,250 | 5,994 | ||||||
Deferred income taxes |
(888 | ) | 6,533 | |||||
Loss on auction rate securities put option |
| 519 | ||||||
Gain on trading auction rate securities |
| (519 | ) | |||||
Changes in operating assets and liabilities, net of amounts acquired: |
||||||||
Accounts receivable |
(30,082 | ) | (2,633 | ) | ||||
Inventories |
632 | (1,000 | ) | |||||
Other current assets |
7,771 | (1,323 | ) | |||||
Other assets |
(213 | ) | (2,298 | ) | ||||
Accounts payable and accrued liabilities |
13,657 | (6,871 | ) | |||||
Deferred revenue |
28,393 | 28,297 | ||||||
Net cash provided by operating activities |
103,139 | 73,992 | ||||||
Investing activities |
||||||||
Purchases of investments |
(251,499 | ) | (119,672 | ) | ||||
Sales and maturities of investments |
159,850 | 82,323 | ||||||
Investment of restricted cash |
(39 | ) | (1 | ) | ||||
Purchases of property and equipment |
(5,491 | ) | (3,648 | ) | ||||
Net cash used in investing activities |
(97,179 | ) | (40,998 | ) | ||||
Financing activities |
||||||||
Excess tax benefits from stock-based compensation |
10,130 | 4,685 | ||||||
Proceeds from the exercise of stock options and
purchases of stock under employee stock purchase plan |
8,842 | 13,727 | ||||||
Repurchase of common stock |
(24,998 | ) | (15,000 | ) | ||||
Net cash (used in) provided by financing activities |
(6,026 | ) | 3,412 | |||||
Net (decrease) increase in cash and cash equivalents |
(66 | ) | 36,406 | |||||
Effect of exchange rate changes on cash and cash equivalents |
(555 | ) | 42 | |||||
Cash and cash equivalents, beginning of period |
168,754 | 110,837 | ||||||
Cash and cash equivalents, end of period |
$ | 168,133 | $ | 147,285 | ||||