10-QPeriod: Q3 FY2002

F5, INC. Quarterly Report for Q3 Ended Jun 30, 2002

Filed August 14, 2002For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported its quarterly results for the period ending June 30, 2002. The company experienced a decrease in total net revenues for the three-month period compared to the prior year, driven by lower product revenues, although year-to-date product revenues showed an increase. Service revenues declined significantly year-over-year for both the quarter and the nine-month period. The company continued to operate at a loss from operations and a net loss for the quarter and year-to-date periods, though the net loss narrowed considerably for the nine months ended June 30, 2002, compared to the same period in the prior year. A significant restructuring charge was recorded in the third fiscal quarter of 2002 related to exiting the cache appliance business, which impacted operating expenses and the net loss. Despite the revenue decline in the current quarter, the company highlighted improvements in its product cost of revenues and a reduction in overall operating expenses as a percentage of revenue, excluding the restructuring charge. Cash flow from operations turned positive for the nine-month period, a notable improvement from the prior year. Management expressed confidence that existing cash balances and cash from operations will be sufficient to meet anticipated working capital and capital expenditure needs.

Key Highlights

  • 1Total net revenues for the three months ended June 30, 2002, decreased to $27.1 million from $29.0 million in the prior year's quarter.
  • 2The company recorded a net loss of $4.3 million ($0.17 per share) for the three months ended June 30, 2002, compared to a net loss of $1.6 million ($0.07 per share) in the same period last year.
  • 3For the nine months ended June 30, 2002, net revenues were $81.2 million, a slight increase from $80.8 million in the prior year period. The net loss for this period improved significantly to $8.2 million ($0.32 per share) from $19.3 million ($0.88 per share) in the prior year.
  • 4A restructuring charge of $2.8 million was recognized in the third fiscal quarter of 2002 related to exiting the cache appliance business and associated employee terminations.
  • 5Cost of product revenues significantly improved, decreasing as a percentage of product revenues to 24.5% from 36.2% year-over-year for the quarter, and from 48.4% to 26.0% for the nine-month period.
  • 6Cash provided by operating activities was $8.0 million for the nine months ended June 30, 2002, a substantial improvement from cash used of $14.0 million in the comparable prior year period.
  • 7The company reported $18.5 million in cash and cash equivalents as of June 30, 2002, a decrease from $45.3 million in the prior year, primarily due to the transfer of cash to short-term investments.

Frequently Asked Questions

For the three months ended June 30, 2002, total net revenues decreased to $27.1 million from $29.0 million in the prior year's quarter. However, for the nine months ended June 30, 2002, total net revenues were $81.2 million, a slight increase from $80.8 million in the comparable prior year period. Product revenues saw a slight decline in the quarter but an increase year-to-date, while service revenues declined for both periods.

F5 Networks continued to report net losses. For the three months ended June 30, 2002, the net loss was $4.3 million, or $0.17 per share, widening from $1.6 million, or $0.07 per share, in the prior year. However, the nine-month net loss improved significantly to $8.2 million ($0.32 per share) from $19.3 million ($0.88 per share) in the prior year, indicating progress in reducing overall losses.

The company recorded a significant restructuring charge of $2.8 million in the third fiscal quarter of 2002 due to its decision to exit the cache appliance business. This charge contributed to the operating loss and net loss for the period. While it negatively impacted the current quarter's results, it reflects a strategic move to streamline operations.

As of June 30, 2002, F5 Networks had $18.5 million in cash and cash equivalents. Cash flow from operations was positive for the nine months ended June 30, 2002, generating $8.0 million, a significant turnaround from a negative $14.0 million in the same period last year. Management indicated that existing cash and cash from operations are expected to be sufficient for foreseeable needs.