EX-99.1 2 d382116dex991.htm PRESS RELEASE Press Release

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 Third Quarter of Fiscal 2012

SEATTLE, WA—July 18, 2012— For the third quarter of fiscal 2012, F5 Networks, Inc. (NASDAQ: FFIV) announced revenue of $352.6 million, up 3.8 percent from $339.6 million in the prior quarter and 21.3 percent from $290.7 million in the third quarter of fiscal 2011.

GAAP net income was $72.3 million ($0.91 per diluted share), compared to $68.6 million ($0.86 per diluted share) in the prior quarter and $62.5 million ($0.77 per diluted share) in the third quarter a year ago.

Excluding the impact of stock-based compensation, amortization of purchased intangible assets and acquisition-related charges and related tax effects, non-GAAP net income for the third quarter was $90.6 million ($1.14 per diluted share), compared to $87.1 million ($1.09 per diluted share) in the prior quarter and $79.4 million ($0.97 per diluted share) in the third quarter of last year.

A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated Statements of Operations.

“During the third quarter, F5’s revenue and earnings continued to grow sequentially and year over year despite a more cautious spending environment,” said John McAdam, F5 president and chief executive officer. “Overall, revenue growth slowed in Q3, but revenue by region was generally consistent with historical patterns; 57 percent for the Americas (primarily the United States) and 43 percent for EMEA and APJ, with EMEA contributing 21 percent of the total.

“As in the prior quarter, our security offerings were a key driver of product sales and accounted for a growing percentage of total revenue. In addition, we saw continued strong uptake of VIPRION 2400 along with increasing adoption of TMOS version 11.

“During the next six to nine months we are on track to deliver several new products, including a refresh of our BIG-IP appliance family, new policy enforcement capability for service providers and an eight-blade VIPRION chassis.

 

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“Meanwhile, we are continuing to strengthen our organization and our financial position. In the third quarter, we added 100 employees, increased deferred revenue to $434 million and generated $113 million in cash from operations. After repurchasing 425,088 shares of our outstanding common stock we ended the quarter with $1.1 billion in cash and investments.”

In light of the cautious spending environment in the current global economy, McAdam said management has set a revenue goal of $360 million to $370 million with a GAAP earnings target of $0.90 to $0.93 per diluted share for the fourth quarter of fiscal 2012, ending September 30. Excluding the impact of stock-based compensation, amortization of purchased intangible assets and acquisition-related charges and related tax effects, the company’s non-GAAP earnings target is $1.16 to $1.19 per diluted share.

A reconciliation of the company’s expected GAAP and non-GAAP earnings is provided in the following table:

 

    

Three months ended

September 30, 2012

 

Reconciliation of Expected Non-GAAP Fourth Quarter Earnings

   Low     High  

Net income

   $ 72.1      $ 74.5   

Stock-based compensation expense

   $ 27.0      $ 27.0   

Amortization of purchased intangible assets

   $ 1.7      $ 1.7   

Acquisition-related charges

   $ —        $ —     

Tax effects related to above items

   $ (8.1   $ (8.1
  

 

 

   

 

 

 

Non-GAAP net income excluding stock-based compensation expense and amortization of purchased intangible assets

   $ 92.7      $ 95.1   
  

 

 

   

 

 

 

Net income per share—diluted

   $ 0.90      $ 0.93   
  

 

 

   

 

 

 

Non-GAAP net income per share—diluted

   $ 1.16      $ 1.19   
  

 

 

   

 

 

 

About F5 Networks

F5 Networks, Inc., the global leader in Application Delivery Networking (ADN), helps the world’s largest enterprises and service providers realize the full value of virtualization, cloud computing, and on-demand IT. F5® solutions help integrate disparate technologies to provide greater control of the infrastructure, improve application delivery and data management, and give users seamless, secure, and accelerated access to applications from their corporate desktops and smart devices. An open architectural framework enables F5 customers to apply business policies at “strategic points of control” across the IT infrastructure and into the public cloud. F5 products give customers the agility they need to align IT with changing business conditions, deploy scalable solutions on demand, and manage mobile access to data and services. Enterprises, service and cloud providers, and leading online companies worldwide rely on F5 to optimize their IT investments and drive business forward. For more information, go to www.f5.com.

 

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You can also follow @f5networks on Twitter or visit us on Facebook for more information about F5, its partners, and technology. For a complete listing of F5 community sites, please visit www.f5.com/news-press-events/web-media/community.html.

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.

Use of non-GAAP Financial Information

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

 

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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.

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 Condensed Consolidated Statement of Operations entitled “GAAP to Non-GAAP Reconciliation.”

###

 

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F5 Networks, Inc.

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

 

     June  30,
2012
    September  30,
2011
 
    
Assets     

Current assets

    

Cash and cash equivalents

   $ 195,607      $ 216,784   

Short-term investments

     324,050        325,766   

Accounts receivable, net of allowances of $3,016 and $2,898

     193,705        165,676   

Inventories

     17,038        17,149   

Deferred tax assets

     8,702        8,391   

Other current assets

     43,785        29,907   
  

 

 

   

 

 

 

Total current assets

     782,887        763,673   
  

 

 

   

 

 

 

Property and equipment, net

     54,257        47,998   

Long-term investments

     587,342        470,203   

Deferred tax assets

     34,942        34,762   

Goodwill

     347,901        234,691   

Other assets, net

     30,737        17,222   
  

 

 

   

 

 

 

Total assets

   $ 1,838,066      $ 1,568,549   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities

    

Accounts payable

   $ 32,007      $ 33,525   

Accrued liabilities

     69,708        67,902   

Deferred revenue

     344,925        270,880   
  

 

 

   

 

 

 

Total current liabilities

     446,640        372,307   
  

 

 

   

 

 

 

Other long-term liabilities

     20,314        18,388   

Deferred revenue, long-term

     88,944        72,418   
  

 

 

   

 

 

 

Total long-term liabilities

     109,258        90,806   
  

 

 

   

 

 

 

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 79,013 and 79,145 shares issued and outstanding

     349,411        380,737   

Accumulated other comprehensive loss

     (5,833     (6,422

Retained earnings

     938,590        731,121   
  

 

 

   

 

 

 

Total shareholders' equity

     1,282,168        1,105,436   
  

 

 

   

 

 

 

Total liabilities and shareholders' equity

   $ 1,838,066      $ 1,568,549   
  

 

 

   

 

 

 


F5 Networks, Inc.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

 

     Three Months Ended
June 30,
    Nine Months Ended
June 30,
 
   2012     2011     2012     2011  

Net revenues

        

Products

   $ 207,118      $ 179,327      $ 608,837      $ 524,529   

Services

     145,516        111,386        405,851        312,690   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     352,634        290,713        1,014,688        837,219   

Cost of net revenues (1)(2)

        

Products

     34,482        31,803        101,350        94,840   

Services

     25,805        20,645        72,137        57,244   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     60,287        52,448        173,487        152,084   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     292,347        238,265        841,201        685,135   

Operating expenses (1)(2)(3)

        

Sales and marketing

     112,064        93,633        329,297        269,790   

Research and development

     46,985        35,245        129,675        102,358   

General and administrative

     23,298        21,126        67,760        61,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     182,347        150,004        526,732        433,804   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     110,000        88,261        314,469        251,331   

Other income, net

     1,713        1,889        5,002        6,002   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     111,713        90,150        319,471        257,333   

Provision for income taxes

     39,377        27,601        112,002        83,546   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 72,336      $ 62,549      $ 207,469      $ 173,787   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share—basic

   $ 0.91      $ 0.77      $ 2.62      $ 2.15   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares—basic

     79,135        80,866        79,188        80,773   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share—diluted

   $ 0.91      $ 0.77      $ 2.60      $ 2.13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares—diluted

     79,655        81,497        79,834        81,655   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Financial Measures

        

Net income as reported

   $ 72,336      $ 62,549      $ 207,469      $ 173,787   

Stock-based compensation expense (4)

     23,537        22,907        69,005        67,613   

Amortization of purchased intangible assets (5)

     1,894        —          3,233        —     

Acquisition-related charges (5)

     —          —          750        —     

Tax effects related to above items

     (7,191     (6,078     (20,530     (18,336
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income excluding stock-based compensation, amortization of purchased intangible assets and acquisition-related charges (non-GAAP)—diluted

   $ 90,576      $ 79,378      $ 259,927      $ 223,064   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share excluding stock-based compensation, amortization of purchased intangible assets and acquisition-related charges (non-GAAP)—diluted

   $ 1.14      $ 0.97      $ 3.26      $ 2.73   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares—diluted

     79,655        81,497        79,834        81,655   
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)    Includes stock-based compensation as follows:

        

Cost of net revenues

   $ 2,706      $ 2,398      $ 7,828      $ 6,793   

Sales and marketing

     8,537        8,834        26,945        25,926   

Research and development

     7,504        5,922        19,840        17,399   

General and administrative

     4,790        5,753        14,392        17,495   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 23,537      $ 22,907      $ 69,005      $ 67,613   
  

 

 

   

 

 

   

 

 

   

 

 

 

(2)    Includes amortization of purchased intangible assets as follows:

        

Cost of net revenues

   $ 1,704      $ —        $ 2,903      $ —     

Sales and marketing

     190        —          330        —     
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,894      $ —        $ 3,233      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

(3)    Includes acquisition-related charges as follows:

        

General and administrative

   $ —        $ —        $ 750      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ —        $ —        $ 750      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(4) 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”)
(5) Beginning with the second quarter of fiscal 2012, the company will exclude amortization of purchased intangible assets and acquisition-related charges in addition to stock-based compensation expense as a non-GAAP financial measure


F5 Networks, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

     Nine Months Ended
June 30,
 
   2012     2011  

Operating activities

    

Net income

   $ 207,469      $ 173,787   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Realized loss (gain) on disposition of assets and investments

     552        (203

Stock-based compensation

     69,005        67,613   

Provisions for doubtful accounts and sales returns

     1,061        453   

Depreciation and amortization

     24,987        15,715   

Deferred income taxes

     (1,057     (387

Changes in operating assets and liabilities, net of amounts acquired:

    

Accounts receivable

     (28,229     (43,062

Inventories

     111        874   

Other current assets

     (13,852     8,452   

Other assets

     (244     (365

Accounts payable and accrued liabilities

     (3,089     10,086   

Deferred revenue

     90,168        62,481   
  

 

 

   

 

 

 

Net cash provided by operating activities

     346,882        295,444   
  

 

 

   

 

 

 

Investing activities

    

Purchases of investments

     (780,493     (692,812

Maturities of investments

     636,010        548,789   

Sales of investments

     24,519        80,977   

Increase in restricted cash

     (30     (406

Acquisition of intangible assets

     (250     (80

Acquisition of businesses, net of cash acquired

     (128,335     —     

Purchases of property and equipment

     (18,544     (20,544
  

 

 

   

 

 

 

Net cash used in investing activities

     (267,123     (84,076
  

 

 

   

 

 

 

Financing activities

    

Excess tax benefit from stock-based compensation

     9,426        20,221   

Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan

     24,942        21,131   

Repurchase of common stock

     (134,776     (121,526
  

 

 

   

 

 

 

Net cash used in financing activities

     (100,408     (80,174
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (20,649     131,194   

Effect of exchange rate changes on cash and cash equivalents

     (528     (144

Cash and cash equivalents, beginning of period

     216,784        168,754   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 195,607      $ 299,804