Appoints global sales leader; announces new dedicated SSL Orchestrator and Access Manager solutions
GAAP net income for the third quarter of fiscal 2018 was
A reconciliation of net income, earnings per share, and other measures on a GAAP to non-GAAP basis is included on the attached Consolidated Income Statements.
“I’m pleased with results for the third quarter,” said
“In our just released Application Protection Report we note that while apps are vital to companies’ digital transformation, they have also become the largest threat vector for security breaches. Application security is a priority for every business and F5 is well positioned to help protect customers’ applications, both on-premises and across multiple clouds. With the announcement today of two new dedicated security products–F5 SSL Orchestrator and F5 Access Manager–we give security professionals advanced resources to help thwart today’s most sophisticated cyber-attacks.”
For the fourth quarter of fiscal 2018, ending
A reconciliation of the company’s expected GAAP and non-GAAP earnings is provided in the following table:
Three months ended | ||||||||
|
||||||||
(in millions, except per share amounts) | ||||||||
Reconciliation of Expected Non-GAAP Fourth Quarter Earnings | Low | High | ||||||
Net income | $ | 108.0 | $ | 109.8 | ||||
Stock-based compensation expense | $ | 39.0 | $ | 39.0 | ||||
Amortization of purchased intangible assets | $ | 2.8 | $ | 2.8 | ||||
Restructuring charges | $ | 24.0 | $ | 24.0 | ||||
Tax effects related to above items | $ | (14.3 | ) | $ | (14.3 | ) | ||
Non-GAAP net income excluding stock-based compensation expense, amortization of purchased intangible assets and restructuring charges | $ | 159.5 | $ | 161.3 | ||||
Net income per share - diluted | $ | 1.77 | $ | 1.80 | ||||
Non-GAAP net income per share - diluted | $ | 2.61 | $ | 2.64 | ||||
Chad Whalen Promoted to Executive Vice President, Worldwide Sales
The company also announced the appointment of
Forward-Looking Statements
This press release contains forward-looking statements including, among
other things, statements regarding the continuing strength and momentum
of F5’s business, future financial performance, sequential growth,
projected revenues including target revenue and earnings ranges, income,
earnings per share, share amount and share price assumptions, demand for
application delivery networking, application delivery services,
security, virtualization and diameter products, expectations regarding
future services and products, expectations regarding future customers,
markets and the benefits of products, and other statements that are not
historical facts and which 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 our new traffic management,
security, application delivery, optimization, diameter and
virtualization 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; uncertain global economic conditions which
may result in reduced customer demand for our products and services and
changes in customer payment patterns; global economic conditions and
uncertainties in the geopolitical environment; overall information
technology spending; litigation involving patents, intellectual
property, shareholder and other matters, and governmental
investigations; 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; F5’s 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, acquisition-related charges, net of taxes,
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 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
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 Consolidated Income Statements entitled “Non-GAAP Financial Measures.”
About F5
F5 (NASDAQ: FFIV) makes apps go faster, smarter, and safer for the world’s largest businesses, service providers, governments, and consumer brands. F5 delivers cloud and security solutions that enable organizations to embrace the application infrastructure they choose without sacrificing speed and control. For more information, go to f5.com. You can also follow @f5networks on Twitter or visit us on LinkedIn and Facebook for more information about F5, its partners, and technologies.
|
|||||||||
Consolidated Balance Sheets | |||||||||
(unaudited, in thousands) | |||||||||
|
|
||||||||
2018 | 2017 | ||||||||
Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 599,268 | $ | 673,228 | |||||
Short-term investments | 485,232 | 343,700 | |||||||
Accounts receivable, net of allowances of |
297,375 | 291,924 | |||||||
Inventories | 31,322 | 29,834 | |||||||
Other current assets | 55,853 | 67,538 | |||||||
Total current assets | 1,469,050 | 1,406,224 | |||||||
Property and equipment, net | 126,108 | 122,420 | |||||||
Long-term investments | 329,412 | 284,802 | |||||||
Deferred tax assets | 35,153 | 53,303 | |||||||
|
555,965 | 555,965 | |||||||
Other assets, net | 45,378 | 53,775 | |||||||
Total assets | $ | 2,561,066 | $ | 2,476,489 | |||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 44,647 | $ | 50,760 | |||||
Accrued liabilities | 163,246 | 187,379 | |||||||
Deferred revenue | 736,032 | 696,404 | |||||||
Total current liabilities | 943,925 | 934,543 | |||||||
Other long-term liabilities | 59,466 | 44,589 | |||||||
Deferred revenue, long-term | 291,675 | 267,902 | |||||||
Deferred tax liabilities | 25 | 63 | |||||||
Total long-term liabilities | 351,166 | 312,554 | |||||||
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, 60,818 and 62,594 shares issued and outstanding |
20,008 | 17,627 | |||||||
Accumulated other comprehensive loss | (21,983 | ) | (17,997 | ) | |||||
Retained earnings | 1,267,950 | 1,229,762 | |||||||
Total shareholders' equity | 1,265,975 | 1,229,392 | |||||||
Total liabilities and shareholders' equity | $ | 2,561,066 | $ | 2,476,489 | |||||
|
|||||||||||||||||||
Consolidated Income Statements | |||||||||||||||||||
(unaudited, in thousands, except per share amounts) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
|
|
||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Net revenues | |||||||||||||||||||
Products | $ | 238,835 | $ | 235,109 | $ | 703,696 | $ | 715,672 | |||||||||||
Services | 303,368 | 282,728 | 895,002 | 836,371 | |||||||||||||||
Total | 542,203 | 517,837 | 1,598,698 | 1,552,043 | |||||||||||||||
Cost of net revenues (1)(2) | |||||||||||||||||||
Products | 45,164 | 43,787 | 132,556 | 129,391 | |||||||||||||||
Services | 45,845 | 45,983 | 135,485 | 133,553 | |||||||||||||||
Total | 91,009 | 89,770 | 268,041 | 262,944 | |||||||||||||||
Gross profit | 451,194 | 428,067 | 1,330,657 | 1,289,099 | |||||||||||||||
Operating expenses (1)(2) | |||||||||||||||||||
Sales and marketing | 165,806 | 160,952 | 503,710 | 490,171 | |||||||||||||||
Research and development | 94,061 | 88,602 | 271,006 | 264,886 | |||||||||||||||
General and administrative | 39,374 | 39,368 | 118,634 | 119,055 | |||||||||||||||
Litigation expense | - | 1 | - | (134 | ) | ||||||||||||||
Total | 299,241 | 288,923 | 893,350 | 873,978 | |||||||||||||||
Income from operations | 151,953 | 139,144 | 437,307 | 415,121 | |||||||||||||||
Other income, net | 2,259 | 2,589 | 7,194 | 6,534 | |||||||||||||||
Income before income taxes | 154,212 | 141,733 | 444,501 | 421,655 | |||||||||||||||
Provision for income taxes | 31,469 | 44,071 | 123,693 | 136,637 | |||||||||||||||
Net income | $ | 122,743 | $ | 97,662 | $ | 320,808 | $ | 285,018 | |||||||||||
Net income per share - basic | $ | 2.01 | $ | 1.53 | $ | 5.21 | $ | 4.42 | |||||||||||
Weighted average shares - basic | 60,970 | 63,935 | 61,531 | 64,539 | |||||||||||||||
Net income per share - diluted | $ | 1.99 | $ | 1.52 | $ | 5.16 | $ | 4.38 | |||||||||||
Weighted average shares - diluted | 61,633 | 64,361 | 62,214 | 65,116 | |||||||||||||||
Non-GAAP Financial Measures | |||||||||||||||||||
Net income as reported | $ | 122,743 | $ | 97,662 | $ | 320,808 | $ | 285,018 | |||||||||||
Stock-based compensation expense (3) | 38,739 | 43,234 | 121,007 | 133,740 | |||||||||||||||
Amortization of purchased intangible assets | 2,803 | 2,788 | 8,413 | 9,483 | |||||||||||||||
Litigation expense | - | 1 | - | (134 | ) | ||||||||||||||
Tax effects related to above items | (14,139 | ) | (12,910 | ) | (33,788 | ) | (40,060 | ) | |||||||||||
Tax on deemed repatriation of undistributed foreign earnings | - | - | 7,000 | - | |||||||||||||||
Remeasurement of net deferred tax assets due to change in |
- | - | 11,584 | - | |||||||||||||||
Net income excluding stock-based compensation expense, amortization of purchased intangible assets, litigation expense, and non-recurring tax expenses and benefits (non-GAAP) - diluted |
$ | 150,146 | $ | 130,775 | $ | 435,024 | $ | 388,047 | |||||||||||
Net income per share excluding stock-based compensation expense, amortization of purchased intangible assets, litigation expense, and non-recurring tax expenses and benefits (non-GAAP) - diluted |
$ | 2.44 | $ | 2.03 | $ | 6.99 | $ | 5.96 | |||||||||||
Weighted average shares - diluted | 61,633 | 64,361 | 62,214 | 65,116 | |||||||||||||||
(1) Includes stock-based compensation expense as follows: | |||||||||||||||||||
Cost of net revenues | $ | 4,947 | $ | 5,384 | $ | 15,940 | $ | 16,155 | |||||||||||
Sales and marketing | 16,153 | 17,577 | 47,186 | 52,737 | |||||||||||||||
Research and development | 11,532 | 13,579 | 36,435 | 41,395 | |||||||||||||||
General and administrative | 6,107 | 6,694 | 21,446 | 23,453 | |||||||||||||||
$ | 38,739 | $ | 43,234 | $ | 121,007 | $ | 133,740 | ||||||||||||
(2) Includes amortization of purchased intangible assets as follows: | |||||||||||||||||||
Cost of net revenues | $ | 2,027 | $ | 2,028 | $ | 6,083 | $ | 7,345 | |||||||||||
Sales and marketing | 251 | 251 | 755 | 754 | |||||||||||||||
General and administrative | 525 | 509 | 1,575 | 1,384 | |||||||||||||||
$ | 2,803 | $ | 2,788 | $ | 8,413 | $ | 9,483 | ||||||||||||
(3) Stock-based compensation is accounted for in accordance with the
fair value recognition provisions of |
|||||||||||||||||||
|
|||||||||
Consolidated Statements of Cash Flows | |||||||||
(unaudited, in thousands) | |||||||||
Nine Months Ended | |||||||||
|
|||||||||
2018 | 2017 | ||||||||
Operating activities | |||||||||
Net income | $ | 320,808 | $ | 285,018 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Realized loss (gain) on disposition of assets and investments | 64 | (463 | ) | ||||||
Stock-based compensation | 121,007 | 133,740 | |||||||
Provisions for doubtful accounts and sales returns | 1,494 | 385 | |||||||
Depreciation and amortization | 44,081 | 45,603 | |||||||
Deferred income taxes | 19,241 | (1,307 | ) | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | (6,945 | ) | (27,295 | ) | |||||
Inventories | (1,488 | ) | 3,007 | ||||||
Other current assets | 11,590 | 1,063 | |||||||
Other assets | (68 | ) | (425 | ) | |||||
Accounts payable and accrued liabilities | (16,423 | ) | 14,270 | ||||||
Deferred revenue | 63,402 | 73,620 | |||||||
Net cash provided by operating activities | 556,763 | 527,216 | |||||||
Investing activities | |||||||||
Purchases of investments | (499,084 | ) | (255,386 | ) | |||||
Maturities of investments | 295,479 | 271,878 | |||||||
Sales of investments | 10,748 | 65,857 | |||||||
Decrease (increase) in restricted cash | 42 | (87 | ) | ||||||
Acquisition of intangible assets | - | (4,000 | ) | ||||||
Cash provided by sale of fixed asset | 1,000 | - | |||||||
Purchases of property and equipment | (36,074 | ) | (31,175 | ) | |||||
Net cash (used in) provided by investing activities | (227,889 | ) | 47,087 | ||||||
Financing activities | |||||||||
Excess tax benefit from stock-based compensation | - | 6,471 | |||||||
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan |
48,818 | 46,959 | |||||||
Repurchase of common stock | (450,064 | ) | (450,065 | ) | |||||
Net cash used in financing activities | (401,246 | ) | (396,635 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
(72,372 | ) | 177,668 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (1,588 | ) | (1,327 | ) | |||||
Cash and cash equivalents, beginning of period | 673,228 | 514,571 | |||||||
Cash and cash equivalents, end of period | $ | 599,268 | $ | 690,912 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005825/en/
Investor Relations
d.melton@f5.com
or
Public
Relations
n.misner@f5.com
Source: