10-QPeriod: Q1 FY2014

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2013

Filed February 6, 2014For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported its fiscal second quarter 2014 results for the period ending December 31, 2013. The company demonstrated solid revenue growth, with total net revenues increasing by 11.2% year-over-year to $406.5 million. This growth was driven by a healthy expansion in both product and service revenues. Product revenues saw a 6.8% increase, while service revenues grew by an impressive 16.9%, indicating a strengthening recurring revenue stream. While gross profit margin slightly decreased from 83.3% to 82.1%, overall operating income remained stable. The company significantly increased its investment in Research and Development (R&D) by 32.1% and Sales and Marketing by 10.3%, signaling a commitment to future innovation and market expansion. Despite these increased expenses, net income saw a modest decrease of 2.2% to $68.0 million, primarily due to a legal settlement charge. F5 Networks continues to maintain a strong balance sheet with substantial cash and investments, and importantly, no long-term debt, while actively returning capital to shareholders through a significant stock repurchase program.

Financial Highlights

49 data points
Beta

Revenue

$406.45M

82.1% Gross Margin

Net Income

$68.05M

16.7% Net Margin

EPS (Diluted)

$0.87

Total Assets

$2.21B

Cash & Equivalents

$231.33M

Free Cash Flow

$153.95M

Financial Statements
Beta
Revenue$406.45M
Cost of Revenue$72.88M
Gross Profit$333.57M
R&D Expenses$64.13M
Operating Expenses$224.44M
Operating Income$109.13M
Net Income$68.05M
EPS (Basic)$0.88
EPS (Diluted)$0.87
Shares Outstanding (Basic)77.44M
Shares Outstanding (Diluted)77.82M

Key Highlights

  • 1Total net revenues grew 11.2% year-over-year to $406.5 million, driven by increases in both product and service revenues.
  • 2Service revenue demonstrated strong growth of 16.9%, suggesting an increasing contribution from recurring revenue streams.
  • 3Operating income remained stable at $109.1 million, despite increased investments in Sales & Marketing and R&D.
  • 4Significant investment in R&D increased by 32.1% and Sales & Marketing by 10.3%, indicating a focus on future growth and innovation.
  • 5The company repurchased $200 million of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 6F5 Networks maintained a strong liquidity position with $1.235 billion in cash, cash equivalents, and investments, and no long-term debt.

Frequently Asked Questions

For the three months ended December 31, 2013, product revenues were $218.6 million (53.8% of total revenue), and service revenues were $187.9 million (46.2% of total revenue). Year-over-year, product revenues increased by 6.8% and service revenues saw a significant increase of 16.9%.

The company used $200.0 million for common stock repurchases under its share repurchase program. Net cash provided by operating activities was $158.9 million, and cash provided by investing activities was $70.2 million, primarily from investment maturities and sales.

F5 Networks reported a strong financial condition with $1.235 billion in cash, cash equivalents, and investments as of December 31, 2013, and no long-term debt. Management believes these balances, along with cash generated from operations, will be sufficient to meet operating requirements for at least the next twelve months.

Yes, the company significantly increased its investment in Research and Development (R&D) by 32.1% and Sales and Marketing by 10.3%. General and Administrative expenses increased by 3.4%. These increases were primarily driven by higher personnel costs associated with headcount growth.