10-QPeriod: Q1 FY2017

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2016

Filed February 1, 2017For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported solid financial results for the quarter ended December 31, 2016. Total net revenues grew by 5.4% year-over-year, driven primarily by an 8.5% increase in service revenues, indicating continued customer reliance on the company's support and maintenance offerings. Product revenue saw a more modest increase of 2.0%. The company maintained strong gross profit margins at 83.5%. Net income increased to $94.2 million, up from $89.7 million in the prior year period, translating to diluted earnings per share of $1.44. Operationally, F5 Networks demonstrated effective cost management, with operating expenses as a percentage of net revenue remaining stable year-over-year at 56.8%. The company's liquidity position remains robust, with cash and investments totaling $1.197 billion as of December 31, 2016. Significant cash flow from operations was bolstered by substantial share repurchases, totaling $150 million during the quarter, demonstrating a commitment to returning capital to shareholders. The company also noted an ongoing legal proceeding with Radware, for which an accrual of $7.0 million was recorded.

Financial Highlights

49 data points
Beta

Revenue

$515.96M

83.5% Gross Margin

Net Income

$94.22M

18.3% Net Margin

EPS (Diluted)

$1.44

Total Assets

$2.40B

Cash & Equivalents

$572.93M

Free Cash Flow

$175.18M

Financial Statements
Beta
Revenue$515.96M
Cost of Revenue$85.26M
Gross Profit$430.70M
R&D Expenses$87.05M
Operating Expenses$293.24M
Operating Income$137.45M
Net Income$94.22M
EPS (Basic)$1.45
EPS (Diluted)$1.44
Shares Outstanding (Basic)65.19M
Shares Outstanding (Diluted)65.64M

Key Highlights

  • 1Total net revenues increased by 5.4% year-over-year to $516.0 million.
  • 2Service revenues grew by 8.5%, signaling strong performance in support and maintenance.
  • 3Gross profit margin remained strong at 83.5%, indicating efficient cost management.
  • 4Net income increased to $94.2 million, resulting in diluted EPS of $1.44.
  • 5The company maintained a healthy cash and investments balance of $1.197 billion.
  • 6Significant share repurchases of $150 million were executed during the quarter.
  • 7An accrual of $7.0 million was made for ongoing litigation with Radware.

Frequently Asked Questions

Revenue growth was primarily driven by an 8.5% increase in service revenues, attributed to a larger installed base of products and increased purchase or renewal of maintenance contracts. Product revenue saw a more modest 2.0% increase.

The company has maintained stable operating expenses as a percentage of net revenue (56.8%). While sales and marketing, R&D, and G&A expenses increased in absolute terms year-over-year, these increases were largely due to personnel costs and stock-based compensation, reflecting continued investment in growth and talent.

F5 Networks maintains a strong financial position with over $1.19 billion in cash and investments and no long-term debt. The company generated significant cash from operations and actively used $150 million for share repurchases, indicating a focus on shareholder returns while maintaining sufficient liquidity for operations and potential strategic investments.

The company is involved in ongoing patent litigation with Radware. A jury verdict resulted in $6.4 million in damages, and the company recorded an accrual of $7.0 million for this litigation. Appeals are ongoing for both F5 and Radware.