Exhibit 99.1
FOR IMMEDIATE RELEASE
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CONTACT:
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Investor Relations |
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|
John Eldridge |
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(206) 272-6571 |
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j.eldridge@f5.com |
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Public Relations |
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Alane Moran |
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(206) 272-6850
a.moran@f5.com |
F5 Networks Announces First Quarter 2009 Results
SEATTLE, WA—January 21, 2009—F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of $165.6
million for the first quarter of fiscal 2009, down 3.3 percent from $171.3 million in the prior
quarter and up 7.4 percent from $154.2 million in the first quarter of fiscal 2008.
GAAP net income for the first quarter was $21.4 million ($0.27 per diluted share) compared to $19.7
million ($0.24 per diluted share) in the fourth quarter of 2008 and $17.8 million ($0.21 per
diluted share) in the first quarter a year ago.
Excluding the impact of stock-based compensation, non-GAAP net income for the first quarter was
$32.3 million ($0.40 per diluted share), compared to $33.4 million ($0.41 per diluted share) in the
prior quarter and $28.8 million ($0.33 per diluted share) in the first quarter of fiscal 2008.
A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated
Statements of Operations.
“As we announced on January 6th, the primary reason for the revenue shortfall was a
sudden fall-off in North American sales during the last week of December,” said John McAdam, F5
president and chief executive officer. “Our current analysis indicates that most of these deals
were pushed into our second or third quarter of 2009 due to budget constraints. However, several
were postponed indefinitely as customers evaluate their expense budgets in light of the continued
recession.”
McAdam said he was pleased that during the quarter the
company continued to maintain solid margins, achieved its earnings targets, and generated strong
cash flow.
During the first quarter, cash flow from operations was $57.9 million. After repurchasing $20
million of F5 common stock, the company ended the year with $487.4 million in cash and investments.
Given the likelihood of continued uncertainty and further slowing in the overall economy, McAdam
said management has lowered its expectations for the current quarter. For the second quarter of
fiscal 2009, ending March 31st, the company has set a revenue target of $157 million to
$164 million and a
GAAP earnings target of $0.19 to $0.21 per diluted share. Management expects to record a $4.5 to $5.5
million (pre-tax) restructuring charge in the second quarter related to a loss on facility exit,
workforce reduction and accelerated depreciation on tenant improvements. Excluding this
charge and stock-based compensation expense, the company’s non-GAAP earnings target is $0.36 to
$0.38 per diluted share. Both the GAAP and non-GAAP earnings targets for the second quarter reflect the anticipated return to a
normalized effective tax rate, which was lower in the first quarter of fiscal 2009 due to the retroactive
extension of the federal R&D tax credit. A reconciliation of the company’s expected GAAP
and non-GAAP earnings is provided in the following table:
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Three months ended |
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March 31, 2009 |
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| Reconciliation of Expected Non-GAAP Second Quarter Earnings |
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Low |
|
|
High |
|
| |
Net income |
|
$ |
15.2 |
|
|
$ |
16.8 |
|
Stock-based compensation expense, net of tax |
|
|
10.2 |
|
|
|
10.2 |
|
Restructuring charge and accelerated depreciation on leasehold
improvements, net of tax (mid range of estimate) |
|
|
3.2 |
|
|
|
3.2 |
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
28.6 |
|
|
$ |
30.2 |
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|
|
|
|
|
|
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|
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Net income per share — diluted |
|
$ |
0.19 |
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$ |
0.21 |
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|
|
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|
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Non-GAAP net income per share — diluted |
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$ |
0.36 |
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$ |
0.38 |
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About F5 Networks
F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that
make applications secure, fast, and available for everyone. By adding intelligence and
manageability into the network to offload applications and optimize the data storage layer, F5
extends the power of intelligent networking to all levels of application delivery. F5’s extensible
architecture optimizes applications, delivers application reliability and protects the application
and network. Enterprise organizations, service providers and Web 2.0 content providers worldwide
trust F5 to keep their applications running. The company is headquartered in Seattle, Washington
with offices worldwide. For more information, go to www.f5.com.
Forward Looking Statements
Statements in this press release concerning the continuing strength of F5’s business, sequential
growth, the target revenue and earnings range, share amount and share price assumptions, demand for
application delivery networking and storage virtualization products and other statements that are
not historical facts are forward-looking statements. 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 our new traffic management, security, application delivery, WAN
optimization and
storage virtualization offerings; the timely development, introduction and acceptance of additional
new products and features by F5 or its competitors; competitive pricing pressures; increased sales
discounts; uncertain global economic conditions which may result in reduced customer demand for our
products and services and changes in customer payment patterns; 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 share repurchase program; 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. 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 net income excluding stock-based
compensation, which is a non-GAAP financial measure under Section 101 of Regulation G under the
Securities Exchange Act of 1934, as amended. This measure consists of GAAP net income excluding, as
applicable, stock-based compensation. Net income excluding stock-based compensation (non-GAAP) 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. Stock-based
compensation is a non-cash expense that F5 has accounted for since July 1, 2005 in accordance with
the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R),
“Share-Based Payment.”
Management believes that net income excluding stock-based compensation (non-GAAP) provides useful
supplemental information to management and investors regarding the performance of the company’s
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 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 business. Investors
should consider these non-GAAP measures in addition to, and not as a substitute for, financial
performance measures in accordance with GAAP.
The reconciliation of the company’s expected GAAP and non-GAAP second quarter earnings also
excludes a restructuring charge related to a loss on facility exit, workforce reduction and
accelerated depreciation on tenant improvements. This restructuring charge will be incurred during
the quarter ending March 31, 2009 in connection with a reduction in the company’s workforce and the
consolidation of certain of the company’s office space.
F5 believes that presenting its non-GAAP measure of earnings and earnings per share provides
investors with an additional tool for evaluating the performance of the company’s business, which
management uses in its own evaluation of the company’s performance. Investors are encouraged to
look at GAAP results as the best measure of financial performance. For example, stock-based
compensation is an obligation of the Company that should be considered and each line item is
important to financial performance generally. However, while the GAAP results are more complete,
the company provides investors this supplemental measure since, with reconciliation to GAAP, it may
provide additional insight into its operational performance and financial results.
# # # #
F5 Networks, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
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|
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|
| |
|
December 31, |
|
|
September 30, |
|
| |
|
2008 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
122,307 |
|
|
$ |
78,303 |
|
Short-term investments |
|
|
156,180 |
|
|
|
111,883 |
|
Accounts receivable, net of allowances of $6,062 and $4,348 |
|
|
100,472 |
|
|
|
97,057 |
|
Inventories |
|
|
15,562 |
|
|
|
10,148 |
|
Deferred tax assets |
|
|
5,843 |
|
|
|
5,910 |
|
Other current assets |
|
|
22,835 |
|
|
|
20,068 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
423,199 |
|
|
|
323,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash, long-term |
|
|
2,713 |
|
|
|
2,748 |
|
Property and equipment, net |
|
|
46,596 |
|
|
|
47,557 |
|
Long-term investments |
|
|
208,950 |
|
|
|
261,086 |
|
Deferred tax assets |
|
|
43,373 |
|
|
|
46,917 |
|
Goodwill |
|
|
231,892 |
|
|
|
231,892 |
|
Other assets, net |
|
|
29,695 |
|
|
|
25,654 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
986,418 |
|
|
$ |
939,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
24,095 |
|
|
$ |
13,092 |
|
Accrued liabilities |
|
|
51,765 |
|
|
|
48,051 |
|
Deferred revenue |
|
|
132,315 |
|
|
|
125,678 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
208,175 |
|
|
|
186,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
14,010 |
|
|
|
14,822 |
|
Deferred revenue, long-term |
|
|
23,624 |
|
|
|
19,321 |
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
37,634 |
|
|
|
34,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 79,011 and 79,094
shares issued and outstanding |
|
|
475,352 |
|
|
|
477,299 |
|
Accumulated other comprehensive loss |
|
|
(3,202 |
) |
|
|
(6,076 |
) |
Retained earnings |
|
|
268,459 |
|
|
|
247,036 |
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
740,609 |
|
|
|
718,259 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
986,418 |
|
|
$ |
939,223 |
|
|
|
|
|
|
|
|
F5 Networks, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Three months ended |
|
|
Three months ended |
|
| |
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
| |
|
2008 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
107,895 |
|
|
$ |
115,790 |
|
|
$ |
110,205 |
|
Services |
|
|
57,674 |
|
|
|
55,473 |
|
|
|
43,979 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
165,569 |
|
|
|
171,263 |
|
|
|
154,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
23,923 |
|
|
|
26,584 |
|
|
|
24,689 |
|
Services |
|
|
12,100 |
|
|
|
12,329 |
|
|
|
10,550 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
36,023 |
|
|
|
38,913 |
|
|
|
35,239 |
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
129,546 |
|
|
|
132,350 |
|
|
|
118,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
59,438 |
|
|
|
60,461 |
|
|
|
58,178 |
|
Research and development |
|
|
27,102 |
|
|
|
26,367 |
|
|
|
24,332 |
|
General and administrative |
|
|
15,805 |
|
|
|
14,632 |
|
|
|
13,426 |
|
Loss on facility exit and sublease |
|
|
— |
|
|
|
5,271 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
102,345 |
|
|
|
106,731 |
|
|
|
95,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
27,201 |
|
|
|
25,619 |
|
|
|
23,009 |
|
Other income, net |
|
|
2,879 |
|
|
|
3,513 |
|
|
|
6,132 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
30,080 |
|
|
|
29,132 |
|
|
|
29,141 |
|
Provision for income taxes (1) |
|
|
8,657 |
|
|
|
9,431 |
|
|
|
11,390 |
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
21,423 |
|
|
$ |
19,701 |
|
|
$ |
17,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share — basic |
|
$ |
0.27 |
|
|
$ |
0.25 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares — basic |
|
|
79,337 |
|
|
|
79,754 |
|
|
|
84,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share — diluted |
|
$ |
0.27 |
|
|
$ |
0.24 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares — diluted |
|
|
80,003 |
|
|
|
80,785 |
|
|
|
86,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as reported |
|
$ |
21,423 |
|
|
$ |
19,701 |
|
|
$ |
17,751 |
|
Stock-based compensation expense, net of tax (3) |
|
|
10,907 |
|
|
|
10,328 |
|
|
|
11,075 |
|
Loss on facility exit and sublease, net of tax (2) |
|
|
— |
|
|
|
3,321 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Net income
excluding stock-based compensation and loss on facility exit and sublease (Non-GAAP) |
|
$ |
32,330 |
|
|
$ |
33,350 |
|
|
$ |
28,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share excluding stock-based
compensation and loss on facility exit and sublease (Non-GAAP) — diluted |
|
$ |
0.40 |
|
|
$ |
0.41 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares — diluted |
|
|
80,003 |
|
|
|
80,785 |
|
|
|
86,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock-based compensation as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenues |
|
$ |
1,219 |
|
|
$ |
1,175 |
|
|
$ |
1,054 |
|
Sales and marketing |
|
|
5,967 |
|
|
|
5,623 |
|
|
|
6,431 |
|
Research and development |
|
|
4,286 |
|
|
|
4,106 |
|
|
|
3,986 |
|
General and administrative |
|
|
3,441 |
|
|
|
3,858 |
|
|
|
3,865 |
|
Tax effect of stock based compensation |
|
|
(4,006 |
) |
|
|
(4,434 |
) |
|
|
(4,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,907 |
|
|
$ |
10,328 |
|
|
$ |
11,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Includes loss on facility exit and sublease
as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on facility exit and sublease |
|
|
— |
|
|
$ |
5,271 |
|
|
|
— |
|
Tax effect of loss on facility exit and sublease |
|
|
— |
|
|
|
(1,950 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
3,321 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| (3) |
|
Stock-based compensation is accounted for in accordance with Financial Accounting
Standards Board Statement No. 123(R),
“Share-Based Payments” using the attribution method for recognizing compensation expense. |
F5 Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
| |
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
| |
|
December 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
21,423 |
|
|
$ |
17,751 |
|
Adjustments to reconcile net income to net cash used in operating activities |
|
|
|
|
|
|
|
|
Realized gain on sale of investments |
|
|
(2 |
) |
|
|
(15 |
) |
Stock-based compensation |
|
|
14,913 |
|
|
|
15,336 |
|
Provision for doubtful accounts and sale returns |
|
|
2,976 |
|
|
|
676 |
|
Depreciation and amortization |
|
|
6,476 |
|
|
|
5,490 |
|
Deferred income taxes |
|
|
1,903 |
|
|
|
206 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(6,391 |
) |
|
|
(7,666 |
) |
Inventories |
|
|
(5,414 |
) |
|
|
483 |
|
Other current assets |
|
|
(2,810 |
) |
|
|
1,123 |
|
Other assets |
|
|
(154 |
) |
|
|
(898 |
) |
Accounts payable and accrued liabilities |
|
|
14,058 |
|
|
|
(128 |
) |
Deferred revenue |
|
|
10,940 |
|
|
|
9,636 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
57,918 |
|
|
|
41,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Investment in restricted cash |
|
|
26 |
|
|
|
76 |
|
Purchase of investments |
|
|
(83,199 |
) |
|
|
(201,857 |
) |
Sale of investments |
|
|
90,256 |
|
|
|
174,589 |
|
Acquisition of businesses, net of cash acquired |
|
|
— |
|
|
|
(990 |
) |
Purchase of property and equipment |
|
|
(3,888 |
) |
|
|
(4,875 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
3,195 |
|
|
|
(33,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Tax benefit from nonqualified stock options |
|
|
(2,300 |
) |
|
|
923 |
|
Proceeds from the exercise of stock options and warrants |
|
|
5,440 |
|
|
|
5,918 |
|
Stock Repurchase Program |
|
|
(20,000 |
) |
|
|
— |
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(16,860 |
) |
|
|
6,841 |
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
44,253 |
|
|
|
15,778 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(249 |
) |
|
|
(550 |
) |
Cash and cash equivalents, at beginning of period |
|
|
78,303 |
|
|
|
54,296 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of period |
|
$ |
122,307 |
|
|
$ |
69,524 |
|
|
|
|
|
|
|
|