F5, Inc. (NASDAQ: FFIV) today announced financial results for
its first quarter ended December 31, 2023.
“Our team delivered solid first quarter results, including
revenue near the high end and earnings per share above the high end
of our guidance ranges,” said François Locoh-Donou, F5’s President
and CEO. “As a result of our continued operating discipline we
delivered more than 1,000 basis points improvement in GAAP
operating margin and more than 900 basis points improvement in
non-GAAP operating margin year over year. We also delivered strong
earnings growth, with 93% GAAP earnings per share growth and 39%
non-GAAP earnings per share growth compared to last year.”
“Our customers face a growing crisis about how to effectively
manage and secure the ever-increasing number of applications and
APIs that power their businesses. The situation will be exacerbated
by widespread adoption and proliferation of AI, which introduces
more demanding, and more distributed applications to the mix,” said
Locoh-Donou. “F5 is the application and API expert, with deep
expertise built over decades securing, delivering, and optimizing
demanding applications. The product portfolio we have created
through both organic and inorganic innovation in recent years is
designed to assist our customers in addressing exactly these
challenges.”
First Quarter Performance Summary
First quarter fiscal year 2024 revenue declined 1% from the
year-ago period, to $693 million, compared with $700 million in the
first quarter of fiscal year 2023. Global services revenue grew 7%
from the year-ago period while product revenue declined 10%,
reflecting 2% software revenue growth and systems revenue that was
down 22% from the year-ago period.
GAAP gross profit for the first quarter of fiscal year 2024 was
$556 million, representing GAAP gross margin of 80.3%. This
compares with GAAP gross profit of $545 million in the year-ago
period, which represented GAAP gross margin of 77.9%. Non-GAAP
gross profit for the first quarter of fiscal year 2024 was $575
million, representing non-GAAP gross margin of 83.1%. This compares
with non-GAAP gross profit of $563 million in the year-ago period,
which represented non-GAAP gross margin of 80.4%.
GAAP operating profit for the first quarter was $165 million,
representing GAAP operating margin of 23.8%. This compares with
GAAP operating profit of $91 million in the year-ago period, which
represented GAAP operating margin of 13.0%. Non-GAAP operating
profit for the period was $246 million, representing non-GAAP
operating margin of 35.5%. This compares to non-GAAP operating
profit of $185 million in the year-ago period, which represented
non-GAAP operating margin of 26.5%.
GAAP net income for the first quarter of fiscal year 2024 was
$138 million, or $2.32 per diluted share compared to $72 million,
or $1.20 per diluted share, in the first quarter of fiscal year
2023. Non-GAAP net income for the first quarter of fiscal year 2024
was $205 million, or $3.43 per diluted share, compared to $149
million, or $2.47 per diluted share, in fiscal year 2023.
Performance Summary Tables
GAAP Measures Non-GAAP Measures ($ in millions except
EPS)
Q1 FY2024 Q1 FY2023 ($ in millions except EPS)
Q1 FY2024 Q1 FY2023 Revenue
$
693
$
700
Gross profit
$
556
$
545
Gross profit
$
575
$
563
Gross margin
80.3%
77.9%
Gross margin
83.1%
80.4%
Operating profit
$
165
$
91
Operating profit
$
246
$
185
Operating margin
23.8%
13.0%
Operating margin
35.5%
26.5%
Net income
$
138
$
72
Net income
$
205
$
149
EPS
$
2.32
$
1.20
EPS
$
3.43
$
2.47
A reconciliation of GAAP to non-GAAP measures is included in the
attached Consolidated Income Statements. Additional information
about non-GAAP financial information is included in this
release.
Business Outlook
“Customers continue to watch their budgets closely. However, as
we look ahead, we are encouraged by signs of stabilizing demand
trends across all of our major geographic theaters,” concluded
Locoh-Donou.
For the second quarter of fiscal year 2024, F5 expects to
deliver revenue in the range of $675 million to $695 million, with
non-GAAP earnings in the range of $2.79 to $2.91 per diluted
share.
In addition, the Company raised its fiscal year 2024 non-GAAP
earnings per share outlook to growth of 6% to 8% from growth of 5%
to 7%, as a result of a lower expected tax rate for fiscal year
2024.
All forward-looking non-GAAP measures included in the Company’s
business outlook exclude estimates for amortization of intangible
assets, share-based compensation expenses, significant effects of
tax legislation and judicial or administrative interpretation of
tax regulations (including the impact of income tax reform),
non-recurring income tax adjustments, valuation allowance on
deferred tax assets, and the income tax effect of non-GAAP
exclusions, and do not include the impact of any future
acquisitions or divestitures, acquisition-related charges and
write-downs, restructuring charges, facility exit costs, or other
non-recurring charges that may occur in the period. F5 is unable to
provide a reconciliation of non-GAAP earnings guidance measures to
corresponding U.S. generally accepted accounting principles or GAAP
measures on a forward-looking basis without unreasonable effort due
to the overall high variability and low visibility of most of the
foregoing items that have been excluded. Material changes to any
one of these items could have a significant effect on our guidance
and future GAAP results. Certain exclusions, such as amortization
of intangible assets and share-based compensation expenses, are
generally incurred each quarter, but the amounts have historically
varied and may continue to vary significantly from quarter to
quarter.
Live Webcast and Conference Call
F5 will host a live webcast to review its financial results and
outlook today, January 29, 2024, at 4:30 pm ET. The live webcast is
accessible from the investor relations page of F5.com. To
participate in the live call via telephone in the U.S. and Canada,
dial +1 (877) 407-0312. Outside the U.S. and Canada, dial +1 (201)
389-0899. Please call at least 5 minutes prior to the call start
time. The webcast replay will be archived on the investor relations
portion of F5’s website.
Forward Looking Statements
This press release contains forward-looking statements
including, among other things, statements regarding F5’s future
financial performance including revenue, revenue growth, gross
margins, operating leverage, earnings growth, future customer
demand and spending, markets, and the performance and benefits of
the Company's products. These, and other statements that are not
historical facts, are forward-looking statements. These
forward-looking statements are subject to the safe harbor
provisions created by the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from those
projected in the forward-looking statements as a result of certain
risk factors. Such forward-looking statements involve risks and
uncertainties, as well as assumptions and other factors that, if
they do not fully materialize or prove correct, could cause the
actual results, performance or achievements of the Company, or
industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to: customer acceptance of offerings; continued disruptions
to the global supply chain resulting in inability to source
required parts for F5’s products or the ability to only do so at
greatly increased prices thereby impacting our revenues and/or
margins; global economic conditions and uncertainties in the
geopolitical environment; overall information technology spending;
F5’s ability to successfully integrate acquired businesses’
products with F5 technologies; the ability of F5’s sales
professionals and distribution partners to sell new solutions and
service offerings; the timely development, introduction and
acceptance of additional new products and features by F5 or its
competitors; competitive factors, including but not limited to
pricing pressures, industry consolidation, entry of new competitors
into F5’s markets, and new product and marketing initiatives by our
competitors; increased sales discounts; the business impact of the
acquisitions and potential adverse reactions or changes to business
or employee relationships, including those resulting from the
announcement of completion of acquisitions; uncertain global
economic conditions which may result in reduced customer demand for
our products and services and changes in customer payment patterns;
litigation involving patents, intellectual property, shareholder
and other matters, and governmental investigations; potential
security flaws in the Company’s networks, products or services;
cybersecurity attacks on its networks, products or services;
natural catastrophic events; a pandemic or epidemic; F5’s ability
to sustain, develop and effectively utilize distribution
relationships; F5’s ability to attract, train and retain qualified
product development, marketing, sales, professional services and
customer support personnel; F5’s ability to expand in international
markets; the unpredictability of F5’s sales cycle; the ability of
F5 to execute on its share repurchase program including the timing
of any repurchases; future prices of F5’s common stock; and other
risks and uncertainties described more fully in our documents filed
with or furnished to the Securities and Exchange Commission,
including our most recent reports on Form 10-K and Form 10-Q and
current reports on Form 8-K and other documents that we may file or
furnish from time to time, which could cause actual results to vary
from expectations. The financial information contained in this
release should be read in conjunction with the consolidated
financial statements and notes thereto included in F5’s most recent
reports on Forms 10-Q and 10-K as each may be amended from time to
time. All forward-looking statements in this press release are
based on information available as of the date hereof and qualified
in their entirety by this cautionary statement. F5 assumes no
obligation to revise or update these forward-looking
statements.
GAAP to non-GAAP Reconciliation
F5’s management evaluates and makes operating decisions using
various operating measures. These measures are generally based on
the revenues of its products, services operations, and certain
costs of those operations, such as cost of revenues, research and
development, sales and marketing and general and administrative
expenses. One such measure is GAAP net income excluding, as
applicable, stock-based compensation, amortization and impairment
of purchased intangible assets, facility-exit costs,
acquisition-related charges, net of taxes, restructuring charges,
and certain non-recurring tax expenses and benefits, which is a
non-GAAP financial measure under Section 101 of Regulation G under
the Securities Exchange Act of 1934, as amended. This measure of
non-GAAP net income is adjusted by the amount of additional taxes
or tax benefit that the Company would accrue if it used non-GAAP
results instead of GAAP results to calculate the Company’s tax
liability.
The non-GAAP adjustments, and F5's basis for excluding them from
non-GAAP financial measures, are outlined below:
Stock-based compensation. Stock-based compensation consists of
expense for stock options, restricted stock, and employee stock
purchases through the Company’s Employee Stock Purchase Plan.
Although stock-based compensation is an important aspect of the
compensation of F5’s employees and executives, management believes
it is useful to exclude stock-based compensation expenses to better
understand the long-term performance of the Company’s core business
and to facilitate comparison of the Company’s results to those of
peer companies.
Amortization and impairment of purchased intangible assets.
Purchased intangible assets are amortized over their estimated
useful lives, and generally cannot be changed or influenced by
management after the acquisition. On a non-recurring basis, when
certain events or circumstances are present, management may also be
required to write down the carrying value of its purchased
intangible assets and recognize impairment charges. Management does
not believe these charges accurately reflect the performance of the
Company’s ongoing operations; therefore, they are not considered by
management in making operating decisions. However, investors should
note that the use of intangible assets contributed to F5’s revenues
earned during the periods presented and will contribute to F5’s
future period revenues as well.
Facility-exit costs. F5 has incurred certain non-recurring
right-of-use asset impairment charges, and other related recurring
costs in connection with the exit of its leased facilities. These
charges are not representative of the ongoing activity or costs to
the business. As a result, these charges are being excluded to
provide investors with a more comparable measure of costs
associated with ongoing operations.
Acquisition-related charges, net. F5 does not acquire businesses
on a predictable cycle and the terms and scope of each transaction
can vary significantly and are unique to each transaction. F5
excludes acquisition-related charges from its non-GAAP financial
measures to provide a useful comparison of the Company’s operating
results to prior periods and to its peer companies.
Acquisition-related charges consist of planning, execution and
integration costs incurred directly as a result of an
acquisition.
Restructuring charges. F5 has incurred restructuring charges
that are included in its GAAP financial statements, primarily
related to workforce reductions and costs associated with exiting
facility-lease commitments. F5 excludes these items from its
non-GAAP financial measures when evaluating its continuing business
performance as such items vary significantly based on the magnitude
of the restructuring action and do not reflect expected future
operating expenses. In addition, these charges do not necessarily
provide meaningful insight into the fundamentals of current or past
operations of its business.
Management believes that non-GAAP net income per share provides
useful supplemental information to management and investors
regarding the performance of the Company’s core business operations
and facilitates comparisons to the Company’s historical operating
results. Although F5’s management finds this non-GAAP measure to be
useful in evaluating the performance of the core business,
management’s reliance on this measure is limited because items
excluded from such measures could have a material effect on F5’s
earnings and earnings per share calculated in accordance with GAAP.
Therefore, F5’s management will use its non-GAAP earnings and
earnings per share measures, in conjunction with GAAP earnings and
earnings per share measures, to address these limitations when
evaluating the performance of the Company’s core business.
Investors should consider these non-GAAP measures in addition to,
and not as a substitute for, financial performance measures in
accordance with GAAP.
F5 believes that presenting its non-GAAP measures of earnings
and earnings per share provides investors with an additional tool
for evaluating the performance of the Company’s core business and
is used by management in its own evaluation of the Company’s
performance. Investors are encouraged to look at GAAP results as
the best measure of financial performance. However, while the GAAP
results are more complete, the Company provides investors these
supplemental measures since, with reconciliation to GAAP, it may
provide additional insight into the Company’s operational
performance and financial results.
For reconciliation of these non-GAAP financial measures to the
most directly comparable GAAP financial measures, please see the
section in our attached Condensed Consolidated Income Statements
entitled “Non-GAAP Financial Measures.”
About F5
F5 is a multi-cloud application services and security company
committed to bringing a better digital world to life. F5
partners with the world’s largest, most advanced organizations to
secure and optimize every app and API anywhere—on premises, in the
cloud, or at the edge. F5 enables organizations to provide
exceptional, secure digital experiences for their customers and
continuously stay ahead of threats. For more information, go to
f5.com. (NASDAQ: FFIV)
You can also follow @F5 on X (Twitter) or visit us on LinkedIn
and Facebook for more information about F5, its partners, and
technologies. F5 is a trademark, service mark, or tradename of F5,
Inc., in the U.S. and other countries. All other product and
company names herein may be trademarks of their respective
owners.
F5, Inc. Consolidated Balance Sheets (unaudited,
in thousands) December 31, September 30,
2023
2023
Assets Current assets Cash and cash equivalents
$
822,572
$
797,163
Short-term investments
3,287
6,160
Accounts receivable, net of allowances of $3,879 and $3,561
513,176
454,832
Inventories
35,840
35,874
Other current assets
586,876
554,744
Total current assets
1,961,751
1,848,773
Property and equipment, net
167,113
170,422
Operating lease right-of-use assets
192,174
195,471
Long-term investments
6,170
5,068
Deferred tax assets
307,119
295,308
Goodwill
2,288,678
2,288,678
Other assets, net
425,850
444,613
Total assets
$
5,348,855
$
5,248,333
Liabilities and Shareholders’ Equity Current
liabilities Accounts payable
$
60,084
$
63,315
Accrued liabilities
278,920
282,890
Deferred revenue
1,185,456
1,126,576
Total current liabilities
1,524,460
1,472,781
Deferred tax liabilities
5,210
4,637
Deferred revenue, long-term
644,654
648,545
Operating lease liabilities, long-term
235,001
239,565
Other long-term liabilities
78,553
82,573
Total long-term liabilities
963,418
975,320
Commitments and contingencies Shareholders’ equity
Preferred stock, no par value; 10,000 shares authorized, no shares
outstanding
-
-
Common stock, no par value; 200,000 shares authorized, 58,797 and
59,207 shares issued and outstanding
18,348
24,399
Accumulated other comprehensive loss
(20,668
)
(23,221
)
Retained earnings
2,863,297
2,799,054
Total shareholders' equity
2,860,977
2,800,232
Total liabilities and shareholders' equity
$
5,348,855
$
5,248,333
F5, Inc. Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
Three Months Ended December 31,
2023
2022
Net revenues Products
$
305,859
$
340,558
Services
386,738
359,820
Total
692,597
700,378
Cost of net revenues (1)(2)(3)(4) Products
82,708
98,855
Services
53,681
56,152
Total
136,389
155,007
Gross profit
556,208
545,371
Operating expenses (1)(2)(3)(4) Sales and marketing
198,927
233,105
Research and development
119,575
142,323
General and administrative
64,718
69,991
Restructuring charges
8,472
8,740
Total
391,692
454,159
Income from operations
164,516
91,212
Other income, net
9,882
4,702
Income before income taxes
174,398
95,914
Provision for income taxes
36,016
23,512
Net income
$
138,382
$
72,402
Net income per share - basic
$
2.34
$
1.20
Weighted average shares - basic
59,122
60,096
Net income per share - diluted
$
2.32
$
1.20
Weighted average shares - diluted
59,653
60,387
Non-GAAP Financial Measures Net income
as reported
$
138,382
$
72,402
Stock-based compensation expense
56,002
62,874
Amortization and impairment of purchased intangible assets
14,315
12,685
Facility-exit costs
1,538
2,006
Acquisiton-related charges
801
7,737
Restructuring charges
8,472
8,740
Tax effects related to above items
(14,783
)
(17,170
)
Net income excluding stock-based compensation expense, amortization
and impairment of purchased intangible assets, facility-exit costs,
acquisition-related charges, and restructuring charges, net of tax
effects (non-GAAP) - diluted
$
204,727
$
149,274
Net income per share excluding stock-based
compensation expense, amortization and impairment of purchased
intangible assets, facility-exit costs, acquisition-related
charges, and restructuring charges, net of tax effects (non-GAAP) -
diluted
$
3.43
$
2.47
Weighted average shares - diluted
59,653
60,387
(1) Includes stock-based compensation expense as follows:
Cost of net revenues
$
7,684
$
7,636
Sales and marketing
21,596
25,721
Research and development
16,018
18,542
General and administrative
10,704
10,975
$
56,002
$
62,874
(2) Includes amortization and impairment of purchased
intangible assets as follows: Cost of net revenues
$
11,233
$
9,959
Sales and marketing
2,788
2,389
Research and development
94
-
General and administrative
200
337
$
14,315
$
12,685
(3) Includes facility-exit costs as follows: Cost of net
revenues
$
156
$
201
Sales and marketing
483
663
Research and development
542
641
General and administrative
357
501
$
1,538
$
2,006
(4) Includes acquisition-related charges as follows:
Cost of net revenues
$
20
$
93
Sales and marketing
65
1,315
Research and development
153
3,768
General and administrative
563
2,561
$
801
$
7,737
F5, Inc. Consolidated Statements of Cash Flows
(unaudited, in thousands) Three months ended
December 31,
2023
2022
Operating activities Net income
$
138,382
$
72,402
Adjustments to reconcile net income to net cash provided by
operating activities: Stock-based compensation
56,002
62,874
Depreciation and amortization
29,266
27,472
Non-cash operating lease costs
8,392
10,167
Deferred income taxes
(11,203
)
(25,070
)
Other
722
358
Changes in operating assets and liabilities: Accounts receivable
(58,713
)
(15,837
)
Inventories
34
9,168
Other current assets
(32,164
)
(20,602
)
Other assets
2,949
(1,252
)
Accounts payable and accrued liabilities
(13,447
)
(19,981
)
Deferred revenue
54,990
68,540
Lease liabilities
(9,892
)
(10,608
)
Net cash provided by operating activities
165,318
157,631
Investing activities Purchases of investments
(1,000
)
(680
)
Maturities of investments
2,913
63,519
Sales of investments
-
12,167
Purchases of property and equipment
(9,048
)
(13,104
)
Net cash (used in) provided by investing activities
(7,135
)
61,902
Financing activities Proceeds from the exercise of
stock options and purchases of stock under employee stock purchase
plan
21,876
22,180
Payments for repurchase of common stock
(150,018
)
(40,005
)
Payments on term debt agreement
-
(350,000
)
Taxes paid related to net share settlement of equity awards
(6,830
)
(7,037
)
Net cash used in financing activities
(134,972
)
(374,862
)
Net increase (decrease) in cash, cash equivalents and
restricted cash
23,211
(155,329
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
2,264
3,079
Cash, cash equivalents and restricted cash, beginning of period
800,835
762,207
Cash, cash equivalents and restricted cash, end of period
$
826,310
$
609,957
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease
liabilities
$
12,982
$
13,665
Cash paid for interest on long-term debt
-
2,970
Supplemental disclosures of non-cash activities Right-of-use
assets obtained in exchange for lease obligations
$
4,846
$
6,193
SOURCE: F5, Inc.
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version on businesswire.com: https://www.businesswire.com/news/home/20240129977135/en/
Investors Suzanne DuLong +1 (206) 272-7049 s.dulong@f5.com
Media Rob Gruening +1 (206) 272-6208 r.gruening@f5.com
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