10-QPeriod: Q1 FY2018

F5, INC. Quarterly Report for Q1 Ended Dec 31, 2017

Filed February 2, 2018For Securities:FFIV

Summary

F5 Networks, Inc. (FFIV) reported its financial results for the quarter ended December 31, 2017. The company demonstrated modest top-line growth, with total net revenues increasing by 1.4% year-over-year to $523.2 million. This growth was primarily driven by a 7.0% increase in service revenues, which offset a 5.1% decline in product revenues. The shift towards services revenue highlights a potential strategic evolution for the company, offering more recurring revenue streams. Profitability remained robust, with net income at $88.4 million, a slight decrease from $94.2 million in the prior year's comparable quarter, resulting in diluted earnings per share of $1.41. The company maintained a strong balance sheet with $1.35 billion in cash and investments and no long-term debt. A significant highlight was the active capital return program, with $150 million used for share repurchases during the quarter, underscoring management's commitment to returning value to shareholders.

Financial Highlights

49 data points
Beta

Revenue

$523.19M

83.3% Gross Margin

Net Income

$88.43M

16.9% Net Margin

EPS (Diluted)

$1.41

Total Assets

$2.49B

Cash & Equivalents

$612.00M

Free Cash Flow

$183.47M

Financial Statements
Beta
Revenue$523.19M
Cost of Revenue$87.39M
Gross Profit$435.80M
R&D Expenses$85.89M
Operating Expenses$293.81M
Operating Income$142.00M
Net Income$88.43M
EPS (Basic)$1.42
EPS (Diluted)$1.41
Shares Outstanding (Basic)62.20M
Shares Outstanding (Diluted)62.55M

Key Highlights

  • 1Total net revenues increased by 1.4% to $523.2 million for the three months ended December 31, 2017, compared to the prior year period.
  • 2Service revenues grew by 7.0% to $295.9 million, driven by increased maintenance contracts and an expanded installed product base.
  • 3Product revenues saw a decline of 5.1% to $227.3 million, indicating a shift in revenue mix towards services.
  • 4Gross profit remained strong at $435.8 million, with a gross margin of 83.3%.
  • 5Net income for the quarter was $88.4 million, resulting in diluted EPS of $1.41.
  • 6The company maintained a healthy cash position, with $1.35 billion in cash and investments as of December 31, 2017.
  • 7$150 million was used for share repurchases during the quarter, demonstrating a commitment to capital return.

Frequently Asked Questions

F5 Networks, Inc. experienced a slight overall revenue increase of 1.4% year-over-year for the quarter ended December 31, 2017. This was primarily driven by a 7.0% increase in service revenues, which compensated for a 5.1% decrease in product revenues. This suggests a growing reliance on service-based revenue streams.

Operating expenses remained relatively stable, increasing by only 0.2% year-over-year to $293.8 million. While sales and marketing expenses saw a slight increase, research and development expenses decreased slightly, and general and administrative expenses also declined. The company is effectively managing its cost structure while investing in its business.

F5 Networks maintains a strong financial position with $1.35 billion in cash and investments as of December 31, 2017, and no long-term debt. The company actively returned capital to shareholders, repurchasing $150 million of its common stock during the quarter. Management expects existing cash and cash generated from operations to be sufficient for at least the next twelve months.

The company is involved in ongoing patent litigation with Radware, Inc., which is proceeding in the Northern District of California. While management believes it has meritorious defenses, the outcome is uncertain and could potentially have a material adverse effect. No accrual for loss contingencies has been recorded for these legal proceedings.