01—Abstract
Summary
Summary of the 10-Q filed February 5, 2024. Cited figures are marked; the original filing is the authoritative source.
F5, Inc. reported a net income of $138.4 milliona for the three months ended December 31, 2023, a significant increase from $72.4 million in the prior year period.
This growth was primarily driven by a substantial improvement in operating income, which more than doubled year-over-year, alongside strong service revenue growth. Despite an overall decline in total net revenues (-1.1%b), the company demonstrated effective cost management, with operating expenses decreasing significantly as a percentage of net revenue, leading to a robust increase in profitability. The company also continued its share repurchase program, indicating confidence in its financial position and commitment to returning value to shareholders.
02—Key points
Key Highlights
- Net income more than doubled to $138.4 million compared to $72.4 million in the prior year period.
- Operating income surged by 80.4% to $164.5 million, up from $91.2 million.
- Total net revenues saw a slight decrease of 1.1% to $692.6 million, primarily due to a decline in product revenue, partially offset by strong growth in services revenue.
- Service revenues increased by 7.5% to $386.7 million, driven by maintenance contract renewals.
- Operating expenses were significantly reduced as a percentage of net revenue, decreasing from 64.8% to 56.6%, reflecting successful cost management initiatives.
- The company repurchased $150.0 million of common stock during the quarter, demonstrating a commitment to shareholder returns.
- Cash provided by operating activities increased to $165.3 million, up from $157.6 million in the prior year period, highlighting operational cash generation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, F5, Inc. kept $0.20.
- Revenue$692.6M100.0%
- Cost of revenue−$136.4M19.7%
- Gross profit$556.2M80.3%
- Operating costs−$391.7M56.6%
- Operating income$164.5M23.8%
- Interest, other & tax−$26.1M3.8%
- Net income$138.4M20.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 5, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $692.60M$700.38M | −1.1% |
| Cost of Revenue | $136.39M$155.01M | −12.0% |
| Gross Profit | $556.21M$545.37M | +2.0% |
| R&D Expenses | $119.58M$142.32M | −16.0% |
| Operating Expenses | $391.69M$454.16M | −13.8% |
| Operating Income | $164.52M$91.21M | +80.4% |
| Net Income | $138.38M$72.40M | +91.1% |
| EPS (Basic) | $2.34$1.20 | +95.0% |
| EPS (Diluted) | $2.32$1.20 | +93.3% |
| Shares Outstanding (Basic) | 59.12M60.10M | −1.6% |
| Shares Outstanding (Diluted) | 59.65M60.39M | −1.2% |
05—Questions
Frequently Asked Questions
What drove the significant increase in net income?
The substantial increase in net income was primarily driven by a significant improvement in operating income, which more than doubled year-over-year, due to effective cost management and a reduction in operating expenses as a percentage of revenue. While total revenue saw a slight dip, the growth in higher-margin service revenues and controlled operational spending led to enhanced profitability.
Why did total net revenues decrease slightly despite strong service revenue growth?
Total net revenues decreased by 1.1% primarily due to a decline in product revenues, specifically systems sales. This was partially offset by a 7.5% increase in services revenue, largely attributed to an increase in maintenance contract renewals for existing products. The company noted that customer budget constraints due to macroeconomic uncertainties have led to softer demand for new products.
What is the company doing to manage costs effectively?
F5 has implemented cost management strategies reflected in a significant decrease in operating expenses as a percentage of net revenue, from 64.8% to 56.6%. This was achieved through reductions in sales and marketing, research and development, and general and administrative expenses, including a decrease in headcount in these areas and lower personnel costs.
How is the company returning value to shareholders?
The company actively returned value to shareholders through its share repurchase program, repurchasing $150.0 million of common stock during the quarter. As of December 31, 2023, F5 had approximately $772.4 million remaining authorized under its stock repurchase program.
06—Continue