Network traffic management and security firm F5 Networks Inc. delivered strong fiscal first-quarter results today, but its stock fell sharply on a warning about supply chain constraints throughout the rest of the year.
This quarterly report represents an earnings surprise of 3.58%. A quarter ago, it was expected that this computer networking company would post earnings of $2.77 per share when it actually produced earnings of $3.01, delivering a surprise of 8.66%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
F5 expects to deliver Q2 revenue in the range of $610 to $650 million. François Locoh-Donou, F5’s president and CEO, said the company saw strong demand for their application security and delivery solutions, leading to the 10% revenue growth in Q1.
“Demand for software solutions was particularly strong, with non-GAAP software revenue growing 47% compared to the same period in the prior year,” Locoh-Donou said.
Financial Highlights
First quarter fiscal year 2022 GAAP revenue was $687 million, up 10% from GAAP revenue of $625 million and non-GAAP revenue of $626 million in the year-ago period.
First quarter fiscal year 2022 GAAP and non-GAAP revenue growth was driven by 19% product revenue growth and 2% global services revenue growth over the prior year. Non-GAAP product revenue was driven by 47% software revenue growth and 1% systems revenue growth compared to the year ago period.
GAAP net income for the first quarter of fiscal year 2022 was $94 million, or $1.51 per diluted share compared to first quarter fiscal year 2021 GAAP net income of $88 million, or $1.41 per diluted share.
Non-GAAP net income for the first quarter of fiscal year 2022 was $179 million, or $2.89 per diluted share, compared to $161 million, or $2.59 per diluted share, in the first quarter of fiscal year 2021.
A reconciliation of revenue, net income, earnings per share, and other measures on a GAAP to non-GAAP basis is included in the attached Consolidated Income Statements. Additional information about non-GAAP financial information is included in this release.
Financial Statement
| F5, Inc. | |||||||
| Consolidated Income Statements | |||||||
| (unaudited, in thousands, except per share amounts) | |||||||
| Three Months Ended | |||||||
| December 31, | |||||||
|
|
2021 |
|
|
2020 |
|
||
| Net revenues | |||||||
| Products (1) |
$ |
343,149 |
|
$ |
288,045 |
|
|
| Services |
|
343,951 |
|
|
336,572 |
|
|
| Total |
|
687,100 |
|
|
624,617 |
|
|
| Cost of net revenues (2)(3)(4)(5) | |||||||
| Products |
|
81,662 |
|
|
67,038 |
|
|
| Services |
|
53,411 |
|
|
47,941 |
|
|
| Total |
|
135,073 |
|
|
114,979 |
|
|
| Gross profit |
|
552,027 |
|
|
509,638 |
|
|
| Operating expenses (2)(3)(4)(5) | |||||||
| Sales and marketing |
|
234,035 |
|
|
214,546 |
|
|
| Research and development |
|
130,271 |
|
|
114,191 |
|
|
| General and administrative |
|
65,661 |
|
|
63,153 |
|
|
| Restructuring charges |
|
7,909 |
|
|
– |
|
|
| Total |
|
437,876 |
|
|
391,890 |
|
|
| Income from operations |
|
114,151 |
|
|
117,748 |
|
|
| Other expense, net |
|
(2,431 |
) |
|
(683 |
) |
|
| Income before income taxes |
|
111,720 |
|
|
117,065 |
|
|
| Provision for income taxes |
|
18,161 |
|
|
29,387 |
|
|
| Net income |
$ |
93,559 |
|
$ |
87,678 |
|
|
| Net income per share – basic |
$ |
1.54 |
|
$ |
1.43 |
|
|
| Weighted average shares – basic |
|
60,810 |
|
|
61,440 |
|
|
| Net income per share – diluted |
$ |
1.51 |
|
$ |
1.41 |
|
|
| Weighted average shares – diluted |
|
61,882 |
|
|
62,282 |
|
|
| Non-GAAP Financial Measures | |||||||
| Net income as reported |
$ |
93,559 |
|
$ |
87,678 |
|
|
| Acquisition-related write-downs of assumed deferred revenue |
|
– |
|
|
1,283 |
|
|
| Stock-based compensation expense |
|
63,757 |
|
|
58,069 |
|
|
| Amortization and impairment of purchased intangible assets |
|
19,437 |
|
|
10,706 |
|
|
| Facility-exit costs |
|
2,742 |
|
|
1,336 |
|
|
| Acquisiton-related charges |
|
16,891 |
|
|
17,665 |
|
|
| Restructuring charges |
|
7,909 |
|
|
– |
|
|
| Tax effects related to above items |
|
(25,264 |
) |
|
(15,273 |
) |
|
| Net income excluding acquisition-related write-downs of assumed deferred revenue, stock-based compensation expense, amortization and impairment of purchased intangible assets, facility-exit costs, acquisition-related charges and restructuring charges (non-GAAP) – diluted |
$ |
179,031 |
|
$ |
161,464 |
|
|
|
Net income per share excluding acquisition-related write-downs of assumed deferred revenue, stock-based compensation expense, amortization and impairment of purchased intangible assets, facility-exit costs, acquisition-related charges and restructuring charges (non-GAAP) – diluted |
$ |
2.89 |
|
$ |
2.59 |
|
|
| Weighted average shares – diluted |
|
61,882 |
|
|
62,282 |
|
|
| (1) GAAP net product revenues |
$ |
343,149 |
|
$ |
288,045 |
|
|
| Acquisition-related write-downs of assumed deferred revenue |
|
– |
|
|
1,283 |
|
|
| Non-GAAP net product revenues |
|
343,149 |
|
|
289,328 |
|
|
| GAAP net service revenues |
|
343,951 |
|
|
336,572 |
|
|
| Acquisition-related write-downs of assumed deferred revenue |
|
– |
|
|
– |
|
|
| Non-GAAP net service revenues |
|
343,951 |
|
|
336,572 |
|
|
| Total non-GAAP net revenues |
$ |
687,100 |
|
$ |
625,900 |
|
|
| (2) Includes stock-based compensation expense as follows: | |||||||
| Cost of net revenues |
$ |
7,545 |
|
$ |
7,342 |
|
|
| Sales and marketing |
|
26,753 |
|
|
25,243 |
|
|
| Research and development |
|
18,583 |
|
|
14,987 |
|
|
| General and administrative |
|
10,876 |
|
|
10,497 |
|
|
|
$ |
63,757 |
|
$ |
58,069 |
|
||
| (3) Includes amortization and impairment of purchased intangible assets as follows: | |||||||
| Cost of net revenues |
$ |
9,959 |
|
$ |
7,382 |
|
|
| Sales and marketing |
|
8,915 |
|
|
2,749 |
|
|
| General and administrative |
|
563 |
|
|
575 |
|
|
|
$ |
19,437 |
|
$ |
10,706 |
|
||
| (4) Includes facility-exit costs as follows: | |||||||
| Cost of net revenues |
$ |
482 |
|
$ |
172 |
|
|
| Sales and marketing |
|
749 |
|
|
406 |
|
|
| Research and development |
|
912 |
|
|
334 |
|
|
| General and administrative |
|
599 |
|
|
424 |
|
|
|
$ |
2,742 |
|
$ |
1,336 |
|
||
| (5) Includes acquisition-related charges as follows: | |||||||
| Cost of net revenues |
$ |
87 |
|
$ |
2,490 |
|
|
| Sales and marketing |
|
6,164 |
|
|
4,771 |
|
|
| Research and development |
|
5,994 |
|
|
4,393 |
|
|
| General and administrative |
|
4,646 |
|
|
6,011 |
|
|
|
$ |
16,891 |
|
$ |
17,665 |
|||
