10-QPeriod: Q3 FY2001

F5, INC. Quarterly Report for Q3 Ended Jun 30, 2001

Filed August 13, 2001For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported its financial results for the quarter and nine months ended June 30, 2001. The company experienced a significant net loss for the nine-month period, largely impacted by a restructuring charge and a provision for excess inventory. Total net revenues showed modest growth year-over-year for the nine months, primarily driven by strong performance in services, while product revenues saw a slight decline in the quarter. Despite the current financial challenges, the company secured a significant strategic investment from Nokia Finance International B.V., which provided substantial cash proceeds and a key OEM and technology development partnership. Key financial shifts include a notable increase in cash and cash equivalents due to the Nokia investment, alongside a reduction in accounts receivable and current liabilities compared to the previous fiscal year-end. However, the rise in cost of revenues, particularly for products, and increased operating expenses in sales & marketing, R&D, and G&A, contributed to the operating losses. Investors should monitor the company's ability to control costs and drive revenue growth, especially in product sales, while leveraging the new Nokia partnership for future expansion.

Key Highlights

  • 1For the nine months ended June 30, 2001, F5 Networks reported a net loss of $19.3 million, a significant shift from a net income of $12.2 million in the prior year period.
  • 2Total net revenues for the nine months increased by 12.2% to $80.8 million, with services revenue growing substantially (64.8%), while product revenue saw a slight increase of 0.3%.
  • 3The company secured a strategic investment of $34.9 million from Nokia Finance International B.V. (NFI) through the sale of common stock and warrants on June 26, 2001.
  • 4A significant restructuring charge of $1.1 million was recorded in Q1 2001, and a provision for excess inventory of $4.9 million was recognized for the nine months ended June 30, 2001.
  • 5Operating expenses, particularly sales and marketing (up 55.4% for nine months) and R&D (up 61.0% for nine months), increased significantly year-over-year, contributing to the net loss.
  • 6Cash and cash equivalents increased to $68.6 million as of June 30, 2001, up from $53.0 million at September 30, 2000, largely due to the Nokia investment.
  • 7The company entered into an OEM Software License Agreement and a Technology Development Agreement with Nokia, allowing Nokia to resell F5 products and collaborate on future technologies.

Frequently Asked Questions

The primary drivers of the net loss were a $1.1 million restructuring charge and a $4.9 million provision for excess inventory, alongside increased operating expenses in sales & marketing, R&D, and general & administrative functions, which outpaced revenue growth for the period.

The investment provided F5 with $34.9 million in net proceeds, significantly boosting its cash and cash equivalents to $68.6 million as of June 30, 2001. This infusion of capital was crucial for maintaining liquidity and supporting ongoing operations.

For the nine months ended June 30, 2001, services revenue saw substantial growth (64.8%), indicating strength in customer support and renewal contracts, while product revenue remained relatively flat. The company expects continued expansion in international markets and is focusing on enhancing its product offerings and developing new technologies.

F5 mentioned the rapidly changing nature of its business, limited operating history, and current economic conditions as factors impacting performance comparability. They also noted potential decreases in average selling prices due to channel mix shifts and increased competition, as well as potential price volatility and limited supply of third-party components, which could negatively impact gross margins.