10-QPeriod: Q3 FY2000

F5, INC. Quarterly Report for Q3 Ended Jun 30, 2000

Filed August 10, 2000For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported significant growth for the nine months ended June 30, 2000, with total net revenues reaching $71.998 million, a substantial increase from $14.062 million in the prior year period. This growth was driven by both product and service revenues, with product revenue increasing by over 390% and service revenue by over 500%. The company has successfully transitioned from a net loss to profitability, posting a net income of $12.234 million for the nine-month period, compared to a net loss of $6.678 million in the same period last year. This turnaround is further evidenced by a positive income from operations of $11.128 million, a significant improvement from a loss of $6.864 million. Financially, F5 Networks demonstrates a strong balance sheet position with total assets more than doubling to $106.126 million from $42.846 million at the end of the prior fiscal year. Cash and cash equivalents saw a substantial surge, growing to $56.225 million from $24.797 million, primarily due to proceeds from public offerings and strong operating cash flow. The company is effectively managing its expenses, with operating expenses growing at a slower rate than revenue, leading to improved operating margins. Despite continued investment in sales, marketing, and R&D, F5 Networks appears to be on a strong growth trajectory, supported by increasing market demand for its internet traffic and content management solutions.

Key Highlights

  • 1Total net revenues for the nine months ended June 30, 2000, surged to $71.998 million, a 412% increase from $14.062 million in the prior year.
  • 2The company achieved profitability, reporting a net income of $12.234 million for the nine months ended June 30, 2000, a significant turnaround from a net loss of $6.678 million in the prior year period.
  • 3Cash and cash equivalents significantly increased to $56.225 million as of June 30, 2000, up from $24.797 million at September 30, 1999, bolstered by proceeds from public offerings and operating cash flow.
  • 4Operating expenses as a percentage of net revenues decreased significantly, with Sales and Marketing dropping from 64.8% to 34.4% and R&D from 27.1% to 11.7% for the nine-month periods.
  • 5Gross margin remained strong at 71.1% for the nine months ended June 30, 2000.
  • 6International revenues represented a growing portion of total net revenues, reaching 17% for the nine months ended June 30, 2000, up from 7% in the prior year period.
  • 7The company successfully managed its transition from a development stage enterprise to a profitable, growing entity, with its core BIG-IP product driving a significant portion of revenue.

Frequently Asked Questions

The primary driver of F5 Networks' recent revenue growth is the substantial increase in sales of its products, particularly the BIG-IP Local Traffic Controller, which accounts for a significant portion of its revenue. This growth is also supported by an increasing installed base and renewals of service contracts, contributing to higher service revenues.

F5 Networks has shown a dramatic improvement in profitability. For the nine months ended June 30, 2000, the company reported a net income of $12.234 million, a substantial turnaround from a net loss of $6.678 million in the same period of the previous year. This shift is attributed to significant revenue growth outpacing the increase in operating expenses.

F5 Networks' cash position has strengthened considerably, with cash and cash equivalents reaching $56.225 million as of June 30, 2000. This increase is a result of funds raised from initial and secondary public offerings in 1999, alongside positive cash flow from operations. These funds have been used for working capital expenditures, investing in property and equipment for expansion, and lease obligations for new corporate headquarters.

Yes, the company noted that a single customer accounted for 17% of net revenues for the nine months ended June 30, 2000, and 6% of its accounts receivable at June 30, 2000. While this indicates some customer concentration, it is a decrease from the prior year when that same customer accounted for 29% of receivables. The company also faces market risks common to its industry, including market acceptance of its products, competition, and the need for continuous product development.