F5, Inc. (NASDAQ: FFIV) today announced financial results for
its third quarter of fiscal year 2023.
“In an environment that remains challenged by macroeconomic
uncertainty, our team is executing well, delivering third-quarter
revenue at the midpoint of our guidance range and earnings per
share well above the high end of our guidance range,” said François
Locoh-Donou, F5’s President and CEO. “We are seeing some early
signs of demand stabilization as customers look to F5 to help them
secure and optimize the applications and APIs that power their
businesses.”
Third Quarter Performance Summary
Third quarter fiscal year 2023 revenue grew 4% from the year ago
period, to $703 million, up from $674 million in fiscal year 2022.
Global services revenue grew 8% from the year-ago period while
product revenue grew 1%, reflecting 5% systems revenue growth and
software revenue that was down 3% from the year-ago period.
GAAP gross profit for the third quarter of fiscal year 2023 was
$561 million, representing GAAP gross margin of 79.8%. This
compares with GAAP gross profit of $544 million in the year-ago
period, which represented GAAP gross margin of 80.6%. Non-GAAP
gross profit for the third quarter of fiscal year 2023 was $579
million, representing non-GAAP gross margin of 82.5%. This compares
with non-GAAP gross profit of $561 million in the year-ago period,
which represented non-GAAP gross margin of 83.2%.
GAAP operating profit for the period was $104 million,
representing GAAP operating margin of 14.7%. This compares with
GAAP operating profit of $107 million in the year-ago period, which
represented GAAP operating margin of 15.9%. Non-GAAP operating
profit for the period was $233 million, representing non-GAAP
operating margin of 33.2%. This compares to non-GAAP operating
profit of $194 million in the year-ago period, which represented
non-GAAP operating margin of 28.8%.
GAAP net income for the third quarter of fiscal year 2023 was
$89 million, or $1.48 per diluted share compared to $83 million, or
$1.37 per diluted share, in the third quarter of fiscal year 2022.
Non-GAAP net income for the third quarter of fiscal year 2023 was
$194 million, or $3.21 per diluted share, compared to $155 million,
or $2.57 per diluted share, in fiscal year 2022.
GAAP Measures
Q3
FY2023
Q3
FY2022
Revenue
$703M
$674M
Gross profit
$561M
$544M
Gross margin
79.8%
80.6%
Operating profit
$104M
$107M
Operating margin
14.7%
15.9%
Net income
$89M
$83M
EPS
$1.48
$1.37
Non-GAAP Measures
Q3
FY2023
Q3
FY2022
Gross profit
$579M
$561M
Gross margin
82.5%
83.2%
Operating profit
$233M
$194M
Operating margin
33.2%
$28.8%
Net income
$194M
$155M
EPS
$3.21
$2.57
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
“Over the last several years, through the combination of organic
innovation, acquisitions and technology integration, we have
created a converged portfolio uniquely capable of simplifying the
complexities our customers face operating today’s hybrid,
multi-cloud IT environments,” continued Locoh-Donou. “We are
delivering the gross margin improvement and operating leverage we
committed to, and we are confident in our ability to achieve our
target of double-digit non-GAAP earnings growth for fiscal year
2023.”
For the fourth quarter of fiscal year 2023, F5 expects to
deliver revenue in the range of $690 million to $710 million, with
non-GAAP earnings in the range of $3.15 to $3.27 per diluted
share.
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, July 24, 2023, 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 charges in connection with
the exit of facilities as well as other non-recurring lease
activity. These charges are not representative of ongoing costs to
the business and are not expected to recur. 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 apps and APIs 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 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 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.
SOURCE: F5, Inc.
F5, Inc. Consolidated Balance Sheets (unaudited,
in thousands) June 30, September
30,
2023
2022
Assets Current assets Cash and cash equivalents
$
677,498
$
758,012
Short-term investments
13,109
126,554
Accounts receivable, net of allowances of $5,172 and $6,020
439,518
469,979
Inventories
46,102
68,365
Other current assets
537,557
489,314
Total current assets
1,713,784
1,912,224
Property and equipment, net
171,147
168,182
Operating lease right-of-use assets
204,196
227,475
Long-term investments
5,887
9,544
Deferred tax assets
271,171
183,365
Goodwill
2,288,678
2,259,282
Other assets, net
464,293
516,122
Total assets
$
5,119,156
$
5,276,194
Liabilities and Shareholders’ Equity Current
liabilities Accounts payable
$
65,499
$
113,178
Accrued liabilities
274,255
309,819
Deferred revenue
1,149,787
1,067,182
Current portion of long-term debt
-
349,772
Total current liabilities
1,489,541
1,839,951
Deferred tax liabilities
3,883
2,781
Deferred revenue, long-term
641,647
624,398
Operating lease liabilities, long-term
250,077
272,376
Other long-term liabilities
76,505
67,710
Total long-term liabilities
972,112
967,265
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, 59,296 and
59,860 shares issued and outstanding
32,519
91,048
Accumulated other comprehensive loss.
(21,936
)
(26,176
)
Retained earnings
2,646,920
2,404,106
Total shareholders' equity
2,657,503
2,468,978
Total liabilities and shareholders' equity
$
5,119,156
$
5,276,194
F5, Inc. Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended June
30, June 30,
2023
2022
2023
2022
Net revenues Products
$
328,175
$
326,482
$
1,009,314
$
967,149
Services
374,467
348,006
1,096,881
1,028,663
Total
702,642
674,488
2,106,195
1,995,812
Cost of net revenues (1)(2)(3)(4) Products
87,940
73,558
286,590
226,454
Services
53,743
57,175
165,754
165,711
Total
141,683
130,733
452,344
392,165
Gross profit
560,959
543,755
1,653,851
1,603,647
Operating expenses (1)(2)(3)(4) Sales and marketing
207,202
226,731
673,383
689,592
Research and development
128,765
138,737
412,451
404,846
General and administrative
64,775
70,823
201,802
205,038
Restructuring charges
56,648
-
65,388
7,909
Total
457,390
436,291
1,353,024
1,307,385
Income from operations
103,569
107,464
300,827
296,262
Other income (expense), net
2,896
(6,221
)
10,335
(10,586
)
Income before income taxes
106,465
101,243
311,162
#
285,676
Provision for income taxes
17,489
18,224
68,348
52,862
Net income
$
88,976
$
83,019
$
242,814
$
232,814
Net income per share - basic
$
1.48
$
1.38
$
4.04
$
3.85
Weighted average shares - basic
59,977
59,965
60,133
60,450
Net income per share - diluted
$
1.48
$
1.37
$
4.02
$
3.80
Weighted average shares - diluted
60,314
60,460
60,463
61,345
Non-GAAP Financial Measures Net income
as reported
$
88,976
$
83,019
$
242,814
$
232,814
Stock-based compensation expense
56,472
61,875
183,385
189,761
Amortization and impairment of purchased intangible assets
13,876
12,701
39,130
44,988
Facility-exit costs
1,527
1,750
5,066
8,010
Acquisiton-related charges
1,327
10,224
16,109
40,081
Restructuring charges
56,648
-
65,388
7,909
Tax effects related to above items
(25,173
)
(14,427
)
(55,337
)
(58,587
)
Net income excluding stock-based compensation expense, amortization
and impairment of purchased intangible assets, facility-exit costs,
acquisition-related charges, restructuring charges and
non-recurring tax expenses and benefits (non-GAAP) - diluted
$
193,653
$
155,142
$
496,555
$
464,976
Net income per share excluding stock-based compensation
expense, amortization and impairment of purchased intangible
assets, facility-exit costs, acquisition-related charges,
restructuring charges and non-recurring tax expenses and benefits
(non-GAAP) - diluted
$
3.21
$
2.57
$
8.21
$
7.58
Weighted average shares - diluted
60,314
60,460
60,463
61,345
(1) Includes stock-based compensation expense as follows:
Cost of net revenues
$
7,297
$
7,203
$
22,516
$
22,089
Sales and marketing
22,561
25,572
75,171
79,938
Research and development
16,297
17,502
53,528
54,318
General and administrative
10,317
11,598
32,170
33,416
$
56,472
$
61,875
$
183,385
$
189,761
(2) Includes amortization and impairment of purchased
intangible assets as follows: Cost of net revenues
$
10,984
$
9,960
$
30,902
$
29,878
Sales and marketing
2,672
2,389
7,451
13,780
General and administrative
220
352
777
1,330
$
13,876
$
12,701
$
39,130
$
44,988
(3) Includes facility-exit costs as follows: Cost of net
revenues
$
150
$
62
$
501
$
1,155
Sales and marketing
481
546
1,630
2,183
Research and development
542
627
1,720
2,755
General and administrative
354
515
1,215
1,917
$
1,527
$
1,750
$
5,066
$
8,010
(4) Includes acquisition-related charges as follows: Cost of
net revenues
$
45
$
96
$
212
$
291
Sales and marketing
349
2,493
2,513
12,266
Research and development
330
5,479
5,331
17,170
General and administrative
603
2,156
8,053
10,354
$
1,327
$
10,224
$
16,109
$
40,081
F5, Inc. Consolidated Statements of Cash Flows
(unaudited, in thousands) Nine Months
Ended June 30,
2023
2022
Operating activities Net income
$
242,814
$
232,814
Adjustments to reconcile net income to net cash provided by
operating activities: Stock-based compensation
183,384
189,761
Depreciation and amortization
83,173
88,398
Non-cash operating lease costs
29,977
29,071
Deferred income taxes
(85,091
)
(28,956
)
Impairment of assets
3,455
6,175
Other
2,137
585
Changes in operating assets and liabilities (excluding effects of
the acquisition of businesses): Accounts receivable
31,507
(116,137
)
Inventories
22,263
(21,732
)
Other current assets
(47,488
)
(106,070
)
Other assets
13,231
(50,400
)
Accounts payable and accrued liabilities
(79,608
)
(33,398
)
Deferred revenue
98,054
136,872
Lease liabilities
(34,200
)
(38,707
)
Net cash provided by operating activities
463,608
288,276
Investing activities Purchases of investments
(1,789
)
(58,514
)
Maturities of investments
103,513
178,372
Sales of investments
16,085
120,564
Acquisition of businesses, net of cash acquired
(35,049
)
(67,911
)
Purchases of property and equipment
(38,802
)
(25,117
)
Net cash provided by investing activities
43,958
147,394
Financing activities Proceeds from the exercise of
stock options and purchases of stock under employee stock purchase
plan
59,497
63,681
Repurchase of common stock
(290,041
)
(500,023
)
Payments on term debt agreement
(350,000
)
(15,000
)
Taxes paid related to net share settlement of equity awards.
(11,369
)
(18,907
)
Net cash used in financing activities
(591,913
)
(470,249
)
Net decrease in cash, cash equivalents and restricted cash
(84,347
)
(34,579
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
3,729
(3,633
)
Cash, cash equivalents and restricted cash, beginning of period
762,207
584,333
Cash, cash equivalents and restricted cash, end of period
$
681,589
$
546,121
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease
liabilities
$
40,619
$
44,115
Cash paid for interest on long-term debt
2,970
4,287
Supplemental disclosures of non-cash activities Right-of-use
assets obtained in exchange for lease obligations
$
10,544
$
614
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230724999733/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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