EX-99.1 2 v13719exv99w1.htm EXHIBIT 99.1 exv99w1
 

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 Fourth Quarter and Fiscal 2005 Results
Quarterly revenue up 61 percent year over year
SEATTLE, WA — October 25, 2005 — F5 Networks, Inc . (NASDAQ: FFIV) today announced revenue of $80.6 million for the fourth quarter of fiscal 2005, up 10 percent from $73.1 million in the prior quarter and 61 percent from $50.2 million in the fourth quarter of fiscal 2004. Fourth quarter net income was $15.7 million ($0.39 per diluted share) compared to net income of $15.8 million ($.43 per diluted share) in the fourth quarter a year ago. For fiscal 2005, the company reported record annual revenue of $281.4 million, up 64 percent from $171.1 million in fiscal 2004. Net income for the year was $51.7 million ($1.34 per diluted share) compared to net income of $32.9 million ($0.92 per diluted share) in fiscal 2004.
During the fourth quarter of fiscal 2005, the company began expensing stock-based compensation. During the fourth quarter of fiscal 2004, F5 became subject to income taxes on U.S. income and also reversed the valuation allowance on U.S. deferred tax assets. The company is presenting pro forma annual and fourth quarter net income for fiscal years 2004 and 2005 to eliminate the impact of these items and report net income on a comparable basis.
On a pro forma basis, net income for the fourth quarter of fiscal 2005 was $19.0 million ($0.47 per diluted share) compared to net income of $14.0 million ($0.35 per diluted share) in the third quarter and $7.3 million ($0.20 per diluted share) for the fourth quarter of fiscal 2004, and net income for fiscal 2005 was $55.1 million ($1.42 per diluted share) compared to $18.9 million ($0.52 per diluted share) for fiscal 2004.
A reconciliation of reported net income to pro forma net income is included on the attached Consolidated Statements of Operations.
F5 president and chief executive officer John McAdam said the company’s second consecutive year of strong revenue growth resulted from growing demand for application delivery networking products that enhance the security, performance and availability of Web-based applications. “In addition, the

 

 

introduction of our new TMOS-based products in September 2004 has enabled us to leverage this growing demand by delivering integrated application delivery networking solutions that are demonstrably superior in functionality and performance. Both increasing awareness of the F5 brand and accelerating demand for the new products drove our growth throughout the year and propelled the company to a strong finish, with Q4 product revenue up 67 percent year-over-year.”
“With solid sequential revenue growth and gross margin steady at 77 percent, we continued to see further improvements in our operating results during the fourth quarter. Excluding stock-based compensation expense, which we began expensing in Q4, we achieved an operating margin of 31 percent, compared to 27 percent in the prior quarter and 20 percent in the fourth quarter a year ago. On the balance sheet, $32.7 million in cash flow from operations during the quarter helped boost cash and investments to $365 million at year end.”
As a result of the growing demand for application delivery networking solutions, coupled with the strength of the company’s current offerings and plans for the delivery and integration of new technology, McAdam said he expects the company’s growth to continue in fiscal 2006. “Earlier this month, we completed our acquisition of Swan Labs, rounding out our capabilities in application acceleration and WAN optimization. During the current quarter, we expect Swan’s products — Web Accelerator and WANJet — to begin contributing to our top-line growth, and over the next 12 months, we plan to migrate both products to TMOS. Also this month, we announced the availability of TrafficShield, our application firewall, as an application security module on BIG-IP, and early customer response to this tightly integrated solution has been very positive.”
“Moving ahead into the first quarter of fiscal 2006, I believe F5’s technology leadership, strong partnerships, channel leverage, and sound business model will further strengthen our competitive position and enable us to deliver continued sequential growth.” For the first quarter of fiscal 2006, McAdam said the company’s revenue target is $85 million to $87 million. Earnings for the first quarter are expected to be $0.33 to $0.34 per diluted share, including the charge for stock-based compensation. Excluding the compensation charge, the anticipated earnings range would have been $0.44 to $0.45 per diluted share. A reconciliation of the company’s expected reported and pro forma earnings is provided in the following table:
                 
    Three months ended  
    December 31, 2005
  
 
Reconciliation of Expected Pro Forma First Quarter Earnings   Low     High  
             
 
                
Net income
   $ 13,400     $ 13,900  
Stock-based compensation expense, net of tax
     4,400       4,400  
 
            
Pro forma net income excluding stock-based compensation expense
   $ 17,800     $ 18,300  
 
            
 
                
Net income per share — diluted
   $ 0.33     $ 0.34  
 
            
Pro forma net income per share — diluted
   $ 0.44     $ 0.45  
 
            

 

 

Analyst/Investor Meeting
On Tuesday, November 1, F5 Networks will hold a meeting for analysts and investors at the Omni Berkshire Place in New York from 8:00am to noon. To register for this meeting, contact Carolyn Burkhardt (206.272.6590) or send email to analystmeeting2005@f5.com. The meeting will also be webcast live and an archived version will be available through Friday, November 18. The link for the live webcast and the archived version is http://www.f5.com/f5/ir/analystswebcast.html.
About F5 Networks
F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that make applications secure, fast and available for everyone, helping organizations get the most out of their investment. By adding intelligence and manageability into the network to offload applications, F5 optimizes applications and allows them to work faster and consume fewer resources. F5’s extensible architecture intelligently integrates application optimization, protection for the application and the network, and delivers application reliability — all on one universal platform. The company is headquartered in Seattle, Washington, with offices worldwide. For more information go to www.f5.com.
Forward Looking Statements
Statements in this press release concerning revenue and earnings targets and expected stock-based compensation expense for the first quarter of fiscal 2006 and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may 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, among others: customer acceptance of our new traffic management, security, application delivery and WAN optimization offerings, the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; 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; and the unpredictability of F5’s sales cycle. F5 has no duty to update any guidance provided or other matters discussed in this press release. More information about potential risk factors that could affect F5’s business and financial results is included in the company’s annual report on Form 10-K for the fiscal year ended September 30, 2004, and other public filings with the Securities and Exchange Commission.
# # # #

 

 

FM Networks, Inc.
Consolidated Balance Sheets
(unaudited, in thousands)
                 
    September 30,     September 30,  
    2005     2004  
 
                
Assets
                
 
                
Current assets
                
Cash and cash equivalents
   $ 51,867     $ 24,901  
Short-term investments
     184,314       115,600  
Accounts receivable, net of allowances of $2,969 and $3,161
     41,703       22,665  
Inventories
     2,699       1,696  
Deferred tax assets
     3,935       2,934  
Other current assets
     9,906       5,776  
 
            
Total current assets
     294,424       173,572  
 
            
 
                
Restricted cash
     3,871       6,243  
Property and equipment, net
     16,158       11,954  
Long-term investments
     128,834       81,792  
Deferred tax assets, long-term
     36,212       28,446  
Goodwill
     49,677       50,067  
Other assets, net
     8,323       8,279  
 
            
Total assets
   $ 537,499     $ 360,353  
 
            
 
            
 
                
Liabilities and Shareholders’ Equity
                
 
                
Current liabilities
                
Accounts payable
   $ 7,668     $ 4,840  
Accrued liabilities
     19,648       15,948  
Deferred revenue
     36,009       25,692  
 
            
Total current liabilities
     63,325       46,480  
 
            
 
                
Other long-term liabilities
     6,650       3,856  
Deferred revenue, long-term
     3,314       2,372  
 
            
Total long-term liabilities
     9,964       6,228  
 
            
 
                
 
                
Commitments and contingencies
                
 
                
Shareholders’ equity
                
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding
     —       —  
Common stock, no par value; 100,000 shares authorized 38,593 and 34,772 shares issued and outstanding
     412,419       306,655  
Accumulated other comprehensive loss
     (1,430 )     (498 )
Retained earnings
     53,221       1,488  
 
            
Total shareholders’ equity
     464,210       307,645  
 
            
Total liabilities and shareholders’ equity
   $ 537,499     $ 360,353  
 
            
 
            

 

F5 Networks, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
                                 
    Three months ended     Twelve months ended  
    September 30,     September 30,  
         
    2005     2004     2005     2004  
 
                                
Net revenues
                                
Products
   $ 62,762     $ 37,536     $ 219,603     $ 126,169  
Services
     17,845       12,683       61,807       45,021  
 
                        
Total
     80,607       50,219       281,410       171,190  
 
                        
 
                                
Cost of net revenues (1)
                                
Products
     13,886       8,489       48,985       28,404  
Services
     4,572       3,055       16,172       10,975  
 
                        
Total
     18,458       11,544       65,157       39,379  
 
                        
Gross profit
     62,149       38,675       216,253       131,811  
 
                        
 
                                
Operating expenses (1)
                                
Sales and marketing
     25,521       17,597       89,253       65,378  
Research and development
     9,039       6,764       31,349       24,361  
General and administrative
     7,067       4,463       23,760       15,744  
 
                        
Total
     41,627       28,824       144,362       105,483  
 
                        
 
                                
Income from operations
     20,522       9,851       71,891       26,328  
Other income, net
     2,925       891       8,076       2,731  
 
                        
Income before income taxes
     23,447       10,742       79,967       29,059  
Provision (benefit) for income taxes (1)
     7,796       (5,039 )     28,234       (3,894 )
 
                        
Net income
   $ 15,651     $ 15,781     $ 51,733     $ 32,953  
 
                        
 
                        
 
                                
Net income per share — basic
   $ 0.41     $ 0.46     $ 1.39     $ 0.99  
 
                        
 
                        
Weighted average shares — basic
     38,479       34,593       37,220       33,221  
 
                        
 
                        
Net income per share — diluted
   $ 0.39     $ 0.43     $ 1.34     $ 0.92  
 
                        
 
                        
Weighted average shares — diluted
     40,015       36,779       38,733       35,992  
 
                        
 
                        
 
                                
Reconciliation to pro forma results
                                
Net income as reported
   $ 15,651     $ 15,781     $ 51,733       $32,953  
Benefit for income taxes as reported
     —       (5,039 )     —       (3,894 )
 
                        
Income before income taxes
     15,651       10,742       51,733       29,059  
Stock-based compensation expense, net of income taxes (1)
     3,328       —       3,328       —  
Pro forma 32% and 35% provision for income taxes, respectively
     —       3,437       —       10,171  
 
                        
Pro forma net income
   $ 18,979     $ 7,305     $ 55,061     $ 18,888  
 
                        
 
                        
 
                                
Pro forma net income per share — diluted
   $ 0.47     $ 0.20     $ 1.42     $ 0.52  
 
                        
 
                        
Pro forma weighted average shares — diluted
     40,015       36,779       38,733       35,992  
 
                        
 
                        
 
                                 
(1) Includes stock-based compensation as follows:
                                
Cost of net revenues
   $ 315             $ 315          
Sales and marketing
     1,850               1,850          
Research and development
     1,345               1,345          
General and administrative
     1,063               1,063          
Tax effect of stock based compensation
     (1,245 )             (1,245 )        
 
                            
 
   $ 3,328             $ 3,328