10-QPeriod: Q1 FY2010

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2009

Filed February 5, 2010For Securities:FFIV

Summary

F5, Inc. (FFIV) reported a strong performance for the quarter ended December 31, 2009, demonstrating significant year-over-year revenue growth driven by both product and service segments. The company's robust top-line expansion translated into substantial profit improvement, with net income increasing by over 36%. This quarter marks a positive trajectory for F5, showcasing resilience and growth in its market amidst evolving economic conditions. Key financial indicators highlight F5's healthy operational execution. Gross profit margin improved, and operating expenses were managed effectively, leading to increased operating income. The company's balance sheet remains strong, with substantial cash and investments, and no long-term debt. Management expresses confidence in its ability to meet future operating requirements, underscoring a sound financial position and a positive outlook for continued growth.

Financial Highlights

28 data points
Beta

Revenue

$191.16M

79.5% Gross Margin

Net Income

$29.28M

15.3% Net Margin

EPS (Diluted)

$0.36

Cash & Equivalents

$147.28M

Free Cash Flow

$70.34M

Financial Statements
Beta
Revenue$191.16M
Cost of Revenue$39.13M
Gross Profit$152.03M
R&D Expenses$26.72M
Operating Expenses$108.31M
Operating Income$43.71M
Net Income$29.28M
EPS (Basic)$0.37
EPS (Diluted)$0.36
Shares Outstanding (Basic)78.91M
Shares Outstanding (Diluted)80.33M

Key Highlights

  • 1Total net revenues increased by 15.5% year-over-year to $191.2 million, driven by strong growth in both product (+10.5%) and service (+24.7%) revenues.
  • 2Net income saw a significant increase of 36.7% to $29.3 million, or $0.36 per diluted share, up from $21.4 million, or $0.27 per diluted share, in the prior year.
  • 3Gross profit margin improved to 79.5% from 78.2% in the prior year's comparable quarter, indicating better cost management and pricing power.
  • 4Operating expenses as a percentage of net revenue decreased to 56.7% from 61.8% in the prior year, demonstrating operating leverage and improved efficiency.
  • 5The company maintained a strong balance sheet with $646.9 million in cash and investments and no long-term debt as of December 31, 2009.
  • 6Deferred revenue increased significantly, indicating strong future revenue potential from maintenance contracts and renewals.
  • 7F5 repurchased approximately $95.9 million worth of its common stock under its $200 million repurchase program during the quarter, signaling confidence in its value and commitment to shareholder returns.

Frequently Asked Questions

F5's revenue growth was primarily driven by an increase in both product and service revenues. Product revenues rose due to higher sales of Application Delivery Networking (ADN) and ARX storage virtualization products, while service revenues benefited from increased maintenance contract purchases and renewals, reflecting a growing installed base.

F5 demonstrated effective expense management. While sales and marketing expenses increased to support sales growth, research and development and general and administrative expenses remained relatively stable. Crucially, operating expenses as a percentage of net revenue decreased significantly, showcasing operating leverage. This, combined with improved gross margins, led to a substantial increase in net income and earnings per share.

F5's financial health appears strong. The company reported a significant increase in cash and cash equivalents, substantial investments, and notably, no long-term debt. The increase in deferred revenue is a positive sign for future revenue streams. Management expressed confidence that existing cash, investments, and operational cash flow are sufficient to meet future requirements, suggesting a stable and positive financial outlook.

The report mentions several risks, including intense competition in the rapidly evolving application delivery networking and file virtualization markets, reliance on key personnel, potential for undetected software or hardware errors, and adverse economic conditions impacting IT spending. Additionally, the company highlighted its exposure to international commerce risks and the continued illiquidity of its Auction Rate Securities (ARS) investments, though it believes these will not materially impact its overall liquidity.