10-QPeriod: Q3 FY2018

F5, INC. Quarterly Report for Q3 Ended Jun 30, 2018

Filed August 1, 2018For Securities:FFIV

Summary

F5, INC. (FFIV) reported solid financial results for the nine months ended June 30, 2018, with total net revenues growing to $1.6 billion, a 3.0% increase year-over-year. This growth was primarily driven by a 7.0% rise in service revenues, reflecting an expanding installed customer base and recurring maintenance contracts. While product revenues saw a slight decrease of 1.7% for the same period, the company's focus on services demonstrates a shift towards more predictable revenue streams. Net income for the nine months increased by 12.6% to $320.8 million, with diluted earnings per share rising to $5.16. The company maintained a strong liquidity position, with $1.4 billion in cash and investments, and continued to return capital to shareholders through share repurchases, spending $450.1 million on buybacks during the period. However, the company faces ongoing legal proceedings with Radware, Inc., the outcome of which remains uncertain but has not yet required an accrual for loss contingencies.

Financial Highlights

50 data points
Beta

Revenue

$542.20M

83.2% Gross Margin

Net Income

$122.74M

22.6% Net Margin

EPS (Diluted)

$1.99

Total Assets

$2.56B

Cash & Equivalents

$599.27M

Free Cash Flow

$162.22M

Financial Statements
Beta
Revenue$542.20M
Cost of Revenue$91.01M
Gross Profit$451.19M
R&D Expenses$94.06M
Operating Expenses$299.24M
Operating Income$151.95M
Net Income$122.74M
EPS (Basic)$2.01
EPS (Diluted)$1.99
Shares Outstanding (Basic)60.97M
Shares Outstanding (Diluted)61.63M

Key Highlights

  • 1Total net revenues increased by 3.0% to $1.6 billion for the nine months ended June 30, 2018, compared to the prior year.
  • 2Service revenues grew by 7.0% for the nine months ended June 30, 2018, indicating strength in recurring revenue streams.
  • 3Net income increased by 12.6% to $320.8 million for the nine months ended June 30, 2018, showcasing improved profitability.
  • 4Diluted earnings per share rose to $5.16 for the nine months ended June 30, 2018, up from $4.38 in the prior year.
  • 5The company maintained a healthy liquidity position with $1.4 billion in cash and investments as of June 30, 2018.
  • 6F5 spent $450.1 million on share repurchases during the first nine months of fiscal year 2018, demonstrating a commitment to returning capital to shareholders.
  • 7The company's effective tax rate significantly decreased due to the Tax Cuts and Jobs Act of 2017, benefiting net income.

Frequently Asked Questions

The primary driver of revenue growth for F5, Inc. in the nine months ended June 30, 2018, was the increase in service revenues, which grew by 7.0%. This growth is attributed to the expanding installed base of products and increased renewals of maintenance contracts.

F5, Inc. has seen a significant improvement in profitability. Net income for the nine months ended June 30, 2018, increased by 12.6% to $320.8 million, and diluted earnings per share rose to $5.16 from $4.38 in the prior year. This improvement is partly due to a lower effective tax rate following the Tax Cuts and Jobs Act.

F5, Inc. maintains a strong financial position with $1.4 billion in cash and investments as of June 30, 2018. The company is actively returning capital to shareholders, having spent $450.1 million on share repurchases during the first nine months of fiscal year 2018. Management believes its current cash and investment balances, along with operational cash generation, are sufficient to meet operating requirements for at least the next twelve months.

F5, Inc. is involved in ongoing legal proceedings with Radware, Inc. concerning patent infringement claims. While the company believes it has meritorious defenses and intends to vigorously defend itself, the ultimate outcome is uncertain. As of the reporting date, no accrual for loss contingencies has been recorded for these legal proceedings, but potential substantial settlement charges could materially affect the company's financial condition and results.