10-QPeriod: Q1 FY2008

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2007

Filed February 8, 2008For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported strong revenue growth for the quarter ended December 31, 2007, with total net revenues increasing by 28.5% year-over-year to $154.2 million. This growth was driven by both product and service revenues, with services revenue seeing a particularly significant increase of 57.2%. The company's acquisition of Acopia in September 2007 contributed to the product revenue growth in the quarter. Despite the revenue increase, net income decreased to $17.8 million from $22.4 million in the prior year, resulting in lower diluted earnings per share of $0.21 compared to $0.26. This decline in profitability can be attributed to significant increases in operating expenses, particularly in sales and marketing (up 49.0%) and research and development (up 67.4%), driven by headcount expansion and increased stock-based compensation. The company maintains a strong balance sheet with substantial cash and investments and no long-term debt, and has announced a new $200 million share repurchase program.

Key Highlights

  • 1Total net revenues grew 28.5% to $154.2 million for the quarter ended December 31, 2007.
  • 2Service revenue increased significantly by 57.2%, indicating strong growth in maintenance contracts and support.
  • 3Acquisition of Acopia contributed to product revenue, with $5.8 million in sales from the ARX product line.
  • 4Operating expenses rose significantly, with Sales & Marketing up 49.0% and R&D up 67.4%, impacting net income.
  • 5Net income decreased to $17.8 million, and diluted EPS fell to $0.21 from $0.26 year-over-year.
  • 6The company ended the quarter with a strong cash and investment position of $517.5 million.
  • 7A new share repurchase program of up to $200 million was approved in January 2008.

Frequently Asked Questions

F5 Networks reported a substantial increase in total net revenues, up 28.5% to $154.2 million for the quarter ended December 31, 2007, compared to $120.0 million in the prior year. This growth was driven by both product and service revenues.

Despite revenue growth, net income decreased from $22.4 million to $17.8 million. This was primarily due to significant increases in operating expenses, including a 49.0% rise in sales and marketing costs and a 67.4% increase in research and development expenses, driven by headcount growth and higher stock-based compensation.

The company maintains a strong financial position with $517.5 million in cash and investments and no long-term debt as of December 31, 2007. F5 Networks also announced a new $200 million share repurchase program, indicating a commitment to returning value to shareholders.

The acquisition of Acopia in September 2007 contributed to the product revenue for the quarter, with the ARX product line generating $5.8 million in revenue.