Live After Hours Trading Volatility F5 Networks Announces Q4 & Fiscal 2012 Results

F5 Networks, Inc. (FFIV) today announced revenue of $362.6 million for the fourth quarter of fiscal year 2012, up 3 percent from $352.6 million in the prior quarter and 15 percent from $314.6 million in the fourth quarter of fiscal year 2011. For fiscal year 2012, revenue was $1.38 billion, up 20 percent from $1.15 billion in fiscal year 2011.

GAAP net income for the fourth quarter was $67.7 million ($0.85 per diluted share) compared to $72.3 million ($0.91 per diluted share) in the third quarter of 2012 and $67.6 million ($0.84 per diluted share) in the fourth quarter a year ago. GAAP net income for the year was $275.2 million ($3.45 per diluted share) versus $241.4 million ($2.96 per diluted share) in fiscal year 2011.
 

Excluding the impact of stock-based compensation and amortization of purchased intangible assets, non-GAAP net income for the fourth quarter was $88.7 million ($1.12 per diluted share), compared to $90.6 million ($1.14 per diluted share) in the prior quarter and $85.2 million ($1.06 per diluted share) in the fourth quarter of fiscal 2011. For fiscal year 2012, non-GAAP net income was $348.6 million ($4.37 per diluted share) versus $308.3 million ($3.78 per diluted share) in fiscal year 2011.
 

The company’s GAAP and non-GAAP net income reflect higher than expected effective tax rates for fiscal year 2012. This resulted from a higher than expected impact of foreign permanent tax differences and a higher blended effective state tax rate which resulted in a GAAP effective tax rate for the fourth quarter of 39.9 percent. The non-GAAP effective tax rate for the quarter was 37.0 percent.
 

A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated

Statements of Operations.
 

“F5 grew sequentially and year over year throughout fiscal 2012,” said F5 president and chief executive officer John McAdam. “But after a strong first half, revenue growth slowed in the second half of the year. Beginning in the third quarter and continuing through Q4, slowing growth in product revenue reflected smaller deal sizes, particularly among large U.S. enterprise and telecommunications customers. Annual U.S. revenue grew just over 16 percent from fiscal 2011. By contrast, international revenue grew nearly 24 percent in fiscal 2012, resulting in overall revenue growth of 20 percent for the year.
 

“We maintained strong product gross margins for the quarter and the year at 83 percent and as a result, we were able to add 540 employees in fiscal 2012, including 125 in Q4, while delivering a non-GAAP operating margin of 39 percent,” said McAdam.
 

During the fourth quarter, the company increased deferred revenue by $13.4 million to $447.3 million, up 30 percent from the fourth quarter of fiscal 2011. Cash flow from operations was $149 million in the fourth quarter and $495 million for the year. After repurchasing approximately 1.7 million shares of F5 common stock during fiscal 2012, the company ended the year with $1.2 billion in cash and investments.
 

“As we enter fiscal 2013, it is difficult to predict what turns the economy will take. But as we look out over the year, we believe that changes in the evolving technology landscape are creating new opportunities for growth and that our technology roadmap and product deliverables will enable us to capitalize on those changes. On October 16, 2012 we introduced BIG-IP 4200v, the first in a series of new appliances that will replace our entry-level and mid-range BIG-IP platforms and extend our market leadership in price/performance and functionality. In addition to these new platforms, we will be introducing significant performance and functionality enhancements to TMOS and new software modules that will expand the array of integrated application delivery functions currently available on our platforms and in virtual editions. We will also expand and upgrade our VIPRION family of chassis products over the next several quarters.
 

“While we are excited about these new products and their potential to drive revenue growth, current macroeconomic conditions and our expectation of normal Q1 seasonality have tempered our outlook for the near term,” said McAdam.
 

For the first quarter of fiscal 2013, ending December 31, the company has set a revenue target of $363 million to $370 million with a GAAP earnings target of $0.86 to $0.88 per diluted share. Excluding stock-based compensation expense and amortization of purchased intangible assets, the company’s non-GAAP earnings target is $1.14 to $1.16 per diluted share.