GAAP net income for the third quarter was
Excluding the impact of stock-based compensation and amortization of
purchased intangible assets, non-GAAP net income for the third quarter
was
A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated Statements of Operations.
“Results for the third quarter exceeded our expectations,” said
“Product sales during the quarter were driven by growing demand for our BIG-IP 4000 appliances and our new entry-level BIG-IP 2000 series. In late June, we released our new midrange BIG-IP 5000 and BIG-IP 7000 series appliances, and initial customer response has been very encouraging.
“The significant performance and scalability enhancements of the new appliances have helped drive growing sales of our security software, including our new Advanced Firewall Manager and our recently upgraded Application Security Manager and Access Policy Manager. Sales of our other software modules have also grown, and demand for our software-only virtual edition products has increased steadily. Along with major enhancements to TMOS, designed to strengthen our SDN integration and cloud scaling capabilities, we recently introduced new 5-gigabit versions of our virtual edition products which run on all major hypervisors including AWS,” McAdam said.
Positive customer response to the company’s new products has contributed to a strong and growing sales pipeline. In spite of ongoing weakness in the global economy, McAdam said he believes that demand for the new products in combination with other business drivers could be a significant catalyst for continued growth.
For the fourth quarter of fiscal 2013, ending
|
Three months ended |
||||||||
|
|
||||||||
|
Reconciliation of Expected Non-GAAP Fourth Quarter Earnings |
Low |
High |
||||||
| Net income | $ | 73.0 | $ | 75.4 | ||||
| Stock-based compensation expense | $ | 22.0 | $ | 22.0 | ||||
| Amortization of purchased intangible assets | $ | 1.0 | $ | 1.0 | ||||
| Loss on facility sublease | $ | 2.5 | $ | 2.5 | ||||
| Tax effects related to above items |
($ |
6.6 |
) |
($ |
6.6 |
) | ||
| Non-GAAP net income excluding stock-based compensation expense, | ||||||||
| amortization of purchased intangible assets and loss on facility sublease | $ | 91.9 | $ | 94.3 | ||||
| Net income per share - diluted | $ | 0.93 | $ | 0.96 | ||||
| Non-GAAP net income per share - diluted | $ | 1.17 | $ | 1.20 | ||||
About
You can also follow @f5networks on Twitter or visit us on Facebook for more information about F5, its partners, and technology. For a complete listing of F5 community sites, please visit www.f5.com/news-press-events/web-media/community.html.
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
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, amortization of
purchased intangible assets and acquisition-related charges, net of
taxes, 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, amortization of purchased intangible assets
and acquisition-related charges. 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. 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
The reconciliation of the company’s expected GAAP and non-GAAP fourth quarter earnings also excludes an anticipated loss on a facility sublease from net income (non-GAAP). This loss will be incurred during the quarter ending September 30, 2013 in connection with the extension of certain subleases at the company’s corporate headquarters.
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 measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company’s core business and 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. 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 the company’s operational performance and financial results.
For reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, please see the section in our Condensed Consolidated Statement of Operations entitled “GAAP to Non-GAAP Reconciliation.”
|
|
||||||||
| Consolidated Balance Sheets | ||||||||
| (unaudited, in thousands) | ||||||||
|
|
|
|||||||
| 2013 | 2012 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 198,280 | $ | 211,181 | ||||
| Short-term investments | 353,045 | 320,970 | ||||||
|
Accounts receivable, net of allowances of |
205,138 | 185,172 | ||||||
| Inventories | 18,260 | 17,410 | ||||||
| Deferred tax assets | 10,617 | 10,362 | ||||||
| Other current assets | 48,969 | 30,986 | ||||||
| Total current assets | 834,309 | 776,081 | ||||||
| Property and equipment, net | 63,720 | 59,604 | ||||||
| Long-term investments | 714,331 | 662,803 | ||||||
| Deferred tax assets | 33,085 | 35,478 | ||||||
| Goodwill | 447,799 | 348,239 | ||||||
| Other assets, net | 54,559 | 28,996 | ||||||
| Total assets | $ | 2,147,803 | $ | 1,911,201 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 28,691 | $ | 27,026 | ||||
| Accrued liabilities | 89,780 | 86,409 | ||||||
| Deferred revenue | 411,477 | 352,594 | ||||||
| Total current liabilities | 529,948 | 466,029 | ||||||
| Other long-term liabilities | 21,391 | 21,078 | ||||||
| Deferred revenue, long-term | 108,278 | 94,694 | ||||||
| Total long-term liabilities | 129,669 | 115,772 | ||||||
| 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, 78,305 and 78,715 shares issued and outstanding |
290,143 | 326,922 | ||||||
| Accumulated other comprehensive loss | (9,347 | ) | (3,829 | ) | ||||
| Retained earnings | 1,207,390 | 1,006,307 | ||||||
| Total shareholders' equity | 1,488,186 | 1,329,400 | ||||||
| Total liabilities and shareholders' equity | $ | 2,147,803 | $ | 1,911,201 | ||||
|
|
||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (unaudited, in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
|
|
|||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net revenues | ||||||||||||||||
| Products | $ | 196,746 | $ | 207,118 | $ | 586,565 | $ | 608,837 | ||||||||
| Services | 173,556 | 145,516 | 499,420 | 405,851 | ||||||||||||
| Total | 370,302 | 352,634 | 1,085,985 | 1,014,688 | ||||||||||||
| Cost of net revenues (1)(2) | ||||||||||||||||
| Products | 32,350 | 34,482 | 93,915 | 101,350 | ||||||||||||
| Services | 32,567 | 25,805 | 92,189 | 72,137 | ||||||||||||
| Total | 64,917 | 60,287 | 186,104 | 173,487 | ||||||||||||
| Gross Profit | 305,385 | 292,347 | 899,881 | 841,201 | ||||||||||||
| Operating expenses (1)(2)(3) | ||||||||||||||||
| Sales and marketing | 121,906 | 112,064 | 363,205 | 329,297 | ||||||||||||
| Research and development | 54,075 | 46,985 | 155,150 | 129,675 | ||||||||||||
| General and administrative | 25,327 | 23,298 | 75,889 | 67,760 | ||||||||||||
| Total | 201,308 | 182,347 | 594,244 | 526,732 | ||||||||||||
| Income from operations | 104,077 | 110,000 | 305,637 | 314,469 | ||||||||||||
| Other income, net | 2,874 | 1,713 | 6,542 | 5,002 | ||||||||||||
| Income before income taxes | 106,951 | 111,713 | 312,179 | 319,471 | ||||||||||||
| Provision for income taxes | 38,773 | 39,377 | 111,096 | 112,002 | ||||||||||||
| Net Income | $ | 68,178 | $ | 72,336 | $ | 201,083 | $ | 207,469 | ||||||||
| Net income per share - basic | $ | 0.87 | $ | 0.91 | $ | 2.56 | $ | 2.62 | ||||||||
| Weighted average shares - basic | 78,516 | 79,135 | 78,636 | 79,188 | ||||||||||||
| Net income per share - diluted | $ | 0.86 | $ | 0.91 | $ | 2.54 | $ | 2.60 | ||||||||
| Weighted average shares - diluted | 78,864 | 79,655 | 79,207 | 79,834 | ||||||||||||
| Non-GAAP Financial Measures | ||||||||||||||||
| Net income as reported | $ | 68,178 | $ | 72,336 | $ | 201,083 | $ | 207,469 | ||||||||
| Stock-based compensation expense (4) | 27,861 | 23,537 | 82,181 | 69,005 | ||||||||||||
| Amortization of purchased intangible assets (5) | 1,032 | 1,894 | 3,098 | 3,233 | ||||||||||||
| Acquisition-related charges (5) | - | - | - | 750 | ||||||||||||
| Tax effects related to above items | (8,650 | ) | (7,191 | ) | (22,576 | ) | (20,530 | ) | ||||||||
|
|
||||||||||||||||
|
Net income excluding stock-based compensation, amortization of purchased intangible assets and acquisition-related charges (non-GAAP) - diluted |
$ | 88,421 | $ | 90,576 | $ | 263,786 | $ | 259,927 | ||||||||
|
Net income per share excluding stock-based compensation, amortization of purchased intangible assets and acquisition-related charges (non-GAAP) - diluted |
$ | 1.12 | $ | 1.14 | $ | 3.33 | $ | 3.26 | ||||||||
| Weighted average shares - diluted | 78,864 | 79,655 | 79,207 | 79,834 | ||||||||||||
| (1) Includes stock-based compensation as follows: | ||||||||||||||||
| Cost of net revenues | $ | 2,966 | $ | 2,706 | $ | 8,860 | $ | 7,828 | ||||||||
| Sales and marketing | 10,259 | 8,537 | 31,533 | 26,945 | ||||||||||||
| Research and development | 8,966 | 7,504 | 25,030 | 19,840 | ||||||||||||
| General and administrative | 5,670 | 4,790 | 16,758 | 14,392 | ||||||||||||
| $ | 27,861 | $ | 23,537 | $ | 82,181 | $ | 69,005 | |||||||||
| (2) Includes amortization of purchased intangible assets as follows: | ||||||||||||||||
| Cost of net revenues | $ | 957 | $ | 1,704 | $ | 2,873 | $ | 2,903 | ||||||||
| Sales and marketing | 75 | 190 | 225 | 330 | ||||||||||||
| $ | 1,032 | $ | 1,894 | $ | 3,098 | $ | 3,233 | |||||||||
| (3) Includes acquisition-related charges as follows: | ||||||||||||||||
| General and administrative | $ | - | $ | - | $ | - | $ | 750 | ||||||||
| $ | - | $ | - | $ | - | $ | 750 | |||||||||
|
(4) Stock-based compensation is accounted for in accordance with the
fair value recognition provisions of |
||||||||||||||||
| (5) Beginning with the second quarter of fiscal 2012, the company will exclude amortization of purchased intangible assets and acquisition-related charges in addition to stock-based compensation expense as a non-GAAP financial measure | ||||||||||||||||
|
|
||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (unaudited, in thousands) | ||||||||
| Nine Months Ended | ||||||||
|
|
||||||||
| 2013 | 2012 | |||||||
| Operating activities | ||||||||
| Net income | $ | 201,083 | $ | 207,469 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Realized (gain) loss on disposition of assets and investments | (190 | ) | 552 | |||||
| Stock-based compensation | 82,181 | 69,005 | ||||||
| Provisions for doubtful accounts and sales returns | 584 | 1,061 | ||||||
| Depreciation and amortization | 29,705 | 24,987 | ||||||
| Deferred income taxes | (3,601 | ) | (1,057 | ) | ||||
| Changes in operating assets and liabilities, net of amounts acquired: | ||||||||
| Accounts receivable | (20,550 | ) | (28,229 | ) | ||||
| Inventories | (850 | ) | 111 | |||||
| Other current assets | (18,069 | ) | (13,852 | ) | ||||
| Other assets | 1,517 | (244 | ) | |||||
| Accounts payable and accrued liabilities | 7,420 | (3,089 | ) | |||||
| Deferred revenue | 72,468 | 90,168 | ||||||
| Net cash provided by operating activities | 351,698 | 346,882 | ||||||
| Investing activities | ||||||||
| Purchases of investments | (744,557 | ) | (780,493 | ) | ||||
| Maturities of investments | 509,381 | 584,085 | ||||||
| Sales of investments | 138,171 | 76,444 | ||||||
| Increase in restricted cash | (713 | ) | (30 | ) | ||||
| Acquisition of intangible assets | - | (250 | ) | |||||
| Acquisition of businesses, net of cash acquired | (124,918 | ) | (128,335 | ) | ||||
| Purchases of property and equipment | (21,434 | ) | (18,544 | ) | ||||
| Net cash used in investing activities | (244,070 | ) | (267,123 | ) | ||||
| Financing activities | ||||||||
| Excess tax benefit from stock-based compensation | 3,656 | 9,426 | ||||||
| Proceeds from the exercise of stock options and | ||||||||
| purchases of stock under employee stock purchase plan | 29,405 | 24,942 | ||||||
| Repurchase of common stock | (150,000 | ) | (134,776 | ) | ||||
| Net cash used in financing activities | (116,939 | ) | (100,408 | ) | ||||
| Net decrease in cash and cash equivalents | (9,311 | ) | (20,649 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (3,590 | ) | (528 | ) | ||||
| Cash and cash equivalents, beginning of period | 211,181 | 216,784 | ||||||
| Cash and cash equivalents, end of period | $ | 198,280 | $ | 195,607 | ||||
Investor Relations
j.eldridge@f5.com
or
Public
Relations
a.moran@f5.com
Source: