F5, Inc. (NASDAQ: FFIV) today announced financial results for
its fourth quarter and fiscal year ended September 30, 2023.
“In our fourth quarter, we delivered 11% software revenue
growth, operating margin improvement, and double-digit earnings per
share growth,” said François Locoh-Donou, F5’s President and CEO.
“Our focus on operating discipline enabled us to deliver fiscal
year 2023 earnings per share in line with the high-end of our
beginning of year expectations despite a challenging macroeconomic
environment and resulting customer spending caution.”
Fiscal Year 2023 Performance Summary
Fiscal year 2023 revenue grew 4% from the year-ago period, to
$2.8 billion, up from $2.7 billion in fiscal year 2022. Global
services revenue grew 7% from the year-ago period while product
revenue grew 1%, reflecting 3% systems revenue growth and software
revenue that was flat with the year-ago period.
GAAP gross profit for fiscal year 2023 was $2.2 billion,
representing GAAP gross margin of 78.9%. This compares with GAAP
gross profit of $2.2 billion in the year-ago period, which
represented GAAP gross margin of 80.0%. Non-GAAP gross profit for
fiscal year 2023 was $2.3 billion, representing non-GAAP gross
margin of 81.5%. This compares with non-GAAP gross profit of $2.2
billion in the year-ago period, which represented non-GAAP gross
margin of 82.6%.
GAAP operating profit for fiscal year 2023 was $473 million,
representing GAAP operating margin of 16.8%. This compares with
GAAP operating profit of $404 million in the year-ago period, which
represented GAAP operating margin of 15.0%. Non-GAAP operating
profit for the period was $850 million, representing non-GAAP
operating margin of 30.2%. This compares to non-GAAP operating
profit of $778 million in the year-ago period, which represented
non-GAAP operating margin of 28.9%.
GAAP net income for fiscal year 2023 was $395 million, or $6.55
per diluted share compared to $322 million, or $5.27 per diluted
share, in fiscal year 2022. Non-GAAP net income for fiscal year
2023 was $705 million, or $11.70 per diluted share, compared to
$623 million, or $10.19 per diluted share, in fiscal year 2022.
F5 repurchased $350 million of its shares in fiscal year 2023,
representing 58% of its free cash flow. As of the end of fiscal
year 2023, F5 had $922 million remaining on its previously
authorized share repurchase program.
Fourth Quarter Performance Summary
Fourth quarter fiscal year 2023 revenue grew 1% from the
year-ago period, to $707 million, up from $700 million in fiscal
year 2022. Global services revenue grew 9% from the year-ago period
while product revenue declined 7%, reflecting 11% software revenue
growth and systems revenue that was down 25% from the year-ago
period.
GAAP gross profit for the fourth quarter of fiscal year 2023 was
$566 million, representing GAAP gross margin of 80.1%. This
compares with GAAP gross profit of $553 million in the year-ago
period, which represented GAAP gross margin of 78.9%. Non-GAAP
gross profit for the fourth quarter of fiscal year 2023 was $585
million, representing non-GAAP gross margin of 82.7%. This compares
with non-GAAP gross profit of $570 million in the year-ago period,
which represented non-GAAP gross margin of 81.4%.
GAAP operating profit for the fourth quarter was $172 million,
representing GAAP operating margin of 24.3%. This compares with
GAAP operating profit of $108 million in the year-ago period, which
represented GAAP operating margin of 15.4%. Non-GAAP operating
profit for the period was $240 million, representing non-GAAP
operating margin of 33.9%. This compares to non-GAAP operating
profit of $191 million in the year-ago period, which represented
non-GAAP operating margin of 27.3%.
GAAP net income for the fourth quarter of fiscal year 2023 was
$152 million, or $2.55 per diluted share compared to $89 million,
or $1.49 per diluted share, in the fourth quarter of fiscal year
2022. Non-GAAP net income for the fourth quarter of fiscal year
2023 was $209 million, or $3.50 per diluted share, compared to $158
million, or $2.62 per diluted share, in fiscal year 2022.
Performance Summary Tables
GAAP Measures ($ in millions except EPS)
Q4 FY2023
Q4 FY2022 FY2023 FY2022 Revenue
$707
$700
$2,813
$2,696
Gross profit
$566
$553
$2,220
$2,156
Gross margin
80.1%
78.9%
78.9%
80.0%
Operating profit
$172
$108
$473
$404
Operating margin
24.3%
15.4%
16.8%
15.0%
Net income
$152
$89
$395
$322
EPS
$2.55
$1.49
$6.55
$5.27
Non-GAAP Measures ($ in millions except EPS)
Q4 FY2023 Q4 FY2022 FY2023 FY2022 Gross
profit
$585
$570
$2,293
$2,227
Gross margin
82.7%
81.4%
81.5%
82.6%
Operating profit
$240
$191
$850
$778
Operating margin
33.9%
27.3%
30.2%
28.9%
Net income
$209
$158
$705
$623
EPS
$3.50
$2.62
$11.70
$10.19
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
“We enter fiscal year 2024 in an environment that seems to be
stabilizing. In fact, from a demand perspective, subscription
renewals performed well throughout fiscal year 2023, and we saw
encouraging signs from enterprise customers in our fourth quarter,”
continued Locoh-Donou. “We expect some customer caution will
persist into fiscal year 2024 and that, combined with the $180
million headwind from strong backlog fulfillment in fiscal year
2023, tempers our 2024 revenue growth expectations. We remain
focused on delivering earnings growth and returning cash to our
shareholders.”
For fiscal year 2024, F5 expects revenue that is flat to a
low-single-digit percentage decline from its fiscal year 2023
revenue. The Company remains committed to its profitability
commitment and in fiscal year 2024, expects to deliver non-GAAP
earnings per share growth of 5% to 7% year-over-year, which
represents growth of at least 10% on a tax neutral basis to fiscal
year 2023. Further, the Company also remains committed to using at
least 50% of its annual free cash flow toward share
repurchases.
For the first quarter of fiscal year 2024, F5 expects to deliver
revenue in the range of $675 million to $695 million, with non-GAAP
earnings in the range of $2.97 to $3.09 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, October 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,
profitability, earnings growth, earnings per share expectations,
future customer demand and spending, 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; 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) September 30, September
30,
2023
2022
Assets Current assets Cash and cash equivalents
$
797,163
$
758,012
Short-term investments
6,160
126,554
Accounts receivable, net of allowances of $3,561 and $6,020
454,832
469,979
Inventories
35,874
68,365
Other current assets
554,744
489,314
Total current assets
1,848,773
1,912,224
Property and equipment, net
170,422
168,182
Operating lease right-of-use assets
195,471
227,475
Long-term investments
5,068
9,544
Deferred tax assets
295,308
183,365
Goodwill
2,288,678
2,259,282
Other assets, net
444,613
516,122
Total assets
$
5,248,333
$
5,276,194
Liabilities and Shareholders’ Equity Current
liabilities Accounts payable
$
63,315
$
113,178
Accrued liabilities
282,890
309,819
Deferred revenue
1,126,576
1,067,182
Current portion of long-term debt
-
349,772
Total current liabilities
1,472,781
1,839,951
Deferred tax liabilities
4,637
2,781
Deferred revenue, long-term
648,545
624,398
Operating lease liabilities, long-term
239,565
272,376
Other long-term liabilities
82,573
67,710
Total long-term liabilities
975,320
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, 59,207 and
59,860 shares issued and outstanding 24,399 91,048 Accumulated
other comprehensive loss
(23,221
)
(26,176
)
Retained earnings
2,799,054
2,404,106
Total shareholders' equity
2,800,232
2,468,978
Total liabilities and shareholders' equity
$
5,248,333
$
5,276,194
F5, Inc. Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
Three Months Ended Years Ended September
30, September 30,
2023
2022
2023
2022
Net revenues Products
$
325,324
$
349,968
$
1,334,638
$
1,317,117
Services
381,650
350,065
1,478,531
1,378,728
Total
706,974
700,033
2,813,169
2,695,845
Cost of net revenues (1)(2)(3)(4) Products
88,602
93,259
375,192
319,713
Services
52,362
54,203
218,116
219,914
Total
140,964
147,462
593,308
539,627
Gross profit
566,010
552,571
2,219,861
2,156,218
Operating expenses (1)(2)(3)(4) Sales and marketing
204,832
236,999
878,215
926,591
Research and development
127,834
138,522
540,285
543,368
General and administrative
61,603
69,520
263,405
274,558
Restructuring charges
-
-
65,388
7,909
Total
394,269
445,041
1,747,293
1,752,426
Income from operations
171,741
107,530
472,568
403,792
Other (loss) income, net
3,085
(7,813
)
13,420
(18,399
)
Income before income taxes
174,826
99,717
485,988
385,393
Provision for income taxes
22,692
10,371
91,040
63,233
Net income
$
152,134
$
89,346
$
394,948
$
322,160
Net income per share - basic
$
2.57
$
1.50
$
6.59
$
5.34
Weighted average shares - basic
59,245
59,751
59,909
60,274
Net income per share - diluted
$
2.55
$
1.49
$
6.55
$
5.27
Weighted average shares - diluted
59,699
60,126
60,270
61,097
Non-GAAP Financial Measures Net income
as reported
$
152,134
$
89,346
$
394,948
$
322,160
Stock-based compensation expense
53,265
59,455
236,650
249,216
Amortization and impairment of purchased intangible assets
14,304
12,701
53,434
57,689
Facility-exit costs
1,560
2,311
6,626
10,321
Acquisiton-related charges
(1,073
)
9,329
15,036
49,410
Restructuring charges
-
-
65,388
7,909
Tax effects related to above items
(11,421
)
(15,488
)
(66,758
)
(74,075
)
Net income excluding stock-based compensation expense, amortization
and impairment of purchased intangible assets, facility-exit costs,
acquisition-related charges, and restructuring charges, net of tax
effects (non-GAAP) - diluted
$
208,769
$
157,654
$
705,324
$
622,630
Net income per share excluding stock-based compensation expense,
amortization and impairment of purchased intangible assets,
facility-exit costs, acquisition-related charges, and restructuring
charges, net of tax effects (non-GAAP) - diluted
$
3.50
$
2.62
$
11.70
$
10.19
Weighted average shares - diluted
59,699
60,126
60,270
61,097
(1) Includes stock-based compensation expense as follows:
Cost of net revenues
$
7,142
$
7,168
$
29,658
$
29,257
Sales and marketing
21,307
24,347
96,478
104,285
Research and development
15,888
17,463
69,416
71,781
General and administrative
8,928
10,477
41,098
43,893
$
53,265
$
59,455
$
236,650
$
249,216
(2) Includes amortization and impairment of purchased
intangible assets as follows: Cost of net revenues
$
11,234
$
9,959
$
42,136
$
39,837
Sales and marketing
2,788
2,389
10,239
16,169
Research and development
63
-
63
-
General and administrative
219
353
996
1,683
$
14,304
$
12,701
$
53,434
$
57,689
(3) Includes facility-exit costs as follows: Cost of net
revenues
$
152
$
274
$
653
$
1,429
Sales and marketing
505
628
2,135
2,811
Research and development
545
901
2,265
3,656
General and administrative
358
508
1,573
2,425
$
1,560
$
2,311
$
6,626
$
10,321
(4) Includes acquisition-related charges as follows: Cost of
net revenues
$
32
$
108
$
244
$
399
Sales and marketing
155
2,683
2,668
14,949
Research and development
(1,296
)
5,430
4,035
22,600
General and administrative
36
1,108
8,089
11,462
$
(1,073
)
$
9,329
$
15,036
$
49,410
F5, Inc. Consolidated Statements of Cash Flows
(unaudited, in thousands) Years Ended
September 30,
2023
2022
Operating activities Net income
$
394,948
$
322,160
Adjustments to reconcile net income to net cash provided by
operating activities: Stock-based compensation
236,650
249,216
Depreciation and amortization
112,702
115,609
Non-cash operating lease costs
38,528
38,735
Deferred income taxes
(108,521
)
(40,244
)
Impairment of assets
3,455
6,175
Other
1,372
1,267
Changes in operating assets and liabilities (excluding effects of
the acquisition of businesses): Accounts receivable
16,704
(130,605
)
Inventories
32,491
(46,310
)
Other current assets
(64,959
)
(144,628
)
Other assets
16,591
(87,008
)
Accounts payable and accrued liabilities
(63,100
)
19,163
Deferred revenue
81,741
191,147
Lease liabilities
(45,193
)
(52,046
)
Net cash provided by operating activities
653,409
442,631
Investing activities Purchases of investments
(1,789
)
(61,284
)
Maturities of investments
111,330
260,357
Sales of investments
16,085
120,578
Acquisition of businesses, net of cash acquired
(35,049
)
(67,911
)
Purchases of property and equipment
(54,184
)
(33,624
)
Net cash provided by investing activities
36,393
218,116
Financing activities Proceeds from the exercise of
stock options and purchases of stock under employee stock purchase
plan
59,959
64,540
Repurchase of common stock
(350,049
)
(500,023
)
Payments on term debt agreement
(350,000
)
(20,000
)
Taxes paid related to net share settlement of equity awards
(13,209
)
(21,025
)
Net cash used in financing activities
(653,299
)
(476,508
)
Net increase in cash, cash equivalents and restricted cash
36,503
184,239
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
2,125
(6,365
)
Cash, cash equivalents and restricted cash, beginning of period
762,207
584,333
Cash, cash equivalents and restricted cash, end of period
$
800,835
$
762,207
Supplemental disclosures of cash flow information
Cash paid for taxes, net of refunds
$
191,569
$
110,036
Cash paid for amounts included in the measurement of lease
liabilities
52,893
58,592
Cash paid for interest on long-term debt
2,970
7,981
Supplemental disclosures of non-cash activities Right-of-use
assets obtained in exchange for lease obligations
$
10,544
$
20,778
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231024792282/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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