10-QPeriod: Q1 FY2016

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2015

Filed January 27, 2016For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported its fiscal second quarter results for the period ending December 31, 2015. The company demonstrated steady revenue growth, with total net revenues increasing by 5.8% year-over-year to $489.5 million. This growth was primarily driven by a significant 14.9% increase in service revenues, offsetting a slight 2.6% decline in product revenues. The company's gross profit margin remained strong at 82.5%. Operating expenses also saw an increase, particularly in Research and Development, reflecting ongoing investment in innovation. Financially, F5 Networks maintained a strong liquidity position with $1.175 billion in cash and investments. A significant portion of cash flow was utilized for share repurchases, with $200 million spent during the quarter under its established repurchase program. The company reported net income of $89.7 million, or $1.28 per diluted share, indicating a slight increase from the prior year. The company reiterated its belief that current cash and investment balances, along with operational cash generation, will be sufficient to meet its operating requirements for at least the next twelve months.

Financial Highlights

49 data points
Beta

Revenue

$489.49M

82.5% Gross Margin

Net Income

$89.72M

18.3% Net Margin

EPS (Diluted)

$1.28

Total Assets

$2.32B

Cash & Equivalents

$433.30M

Free Cash Flow

$190.58M

Financial Statements
Beta
Revenue$489.49M
Cost of Revenue$85.68M
Gross Profit$403.80M
R&D Expenses$81.14M
Operating Expenses$272.85M
Operating Income$130.95M
Net Income$89.72M
EPS (Basic)$1.29
EPS (Diluted)$1.28
Shares Outstanding (Basic)69.55M
Shares Outstanding (Diluted)69.88M

Key Highlights

  • 1Total net revenues increased 5.8% year-over-year to $489.5 million.
  • 2Service revenues grew by 14.9%, driven by increased maintenance contracts, while product revenues saw a slight decrease of 2.6%.
  • 3Gross profit margin remained robust at 82.5%.
  • 4Operating expenses increased, with significant growth in Research and Development (15.8%) and Sales and Marketing (5.8%), reflecting investments in growth.
  • 5Net income was $89.7 million, or $1.28 per diluted share, a slight increase from the prior year.
  • 6The company maintained a strong balance sheet with $1.175 billion in cash and investments.
  • 7$200 million was used for share repurchases during the quarter, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

The primary driver of revenue growth was a significant increase in service revenues, which rose by 14.9% year-over-year. This growth was largely attributed to an expanding installed base of products and a corresponding increase in the purchase and renewal of maintenance contracts.

Product revenues experienced a slight decline of 2.6% year-over-year, while service revenues saw substantial growth. This shift indicates a growing contribution of recurring service revenue to the company's overall top line.

F5 Networks maintains a strong financial position. As of December 31, 2015, the company had $1.175 billion in cash and investments, with no long-term debt. Management believes these resources, combined with operational cash flow, are sufficient to meet its needs for at least the next twelve months.

A significant portion of the company's cash flow is being used for its stock repurchase program. In this quarter, $200 million was used to repurchase outstanding common stock. The company also continues to invest in Research and Development to drive future innovation.