F5, Inc. (NASDAQ: FFIV) today announced financial results for
its third quarter ended June 30, 2024.
“We delivered third quarter revenue at the top end of our
guidance range fueled by software growth and continued growth of
our global services offerings,” said François Locoh-Donou, F5’s
President and CEO. “In addition, our continued operating discipline
enabled us to deliver earnings per share well above the high end of
our guidance.”
“F5 is proving itself an invaluable partner as large enterprises
across the globe modernize their IT infrastructures and drive IT
cost savings,” said Locoh-Donou. “F5 is optimizing application
security, delivery, management, and performance across hybrid,
multicloud environments with enhanced automation and meaningful
operational efficiencies. We are also partnering with several large
enterprise customers as they begin to ready their IT infrastructure
to leverage AI at scale.”
Third Quarter Performance Summary
Third quarter fiscal year 2024 revenue totaled $695 million,
compared with $703 million in the third quarter of fiscal year
2023. Software revenue of $179 million grew 3% from the year-ago
period. Systems revenue of $130 million represented a decline of
16% from the prior year. Global services revenue of $387 million
grew 3% from the year-ago period.
GAAP gross profit for the third quarter of fiscal year 2024 was
$559 million, representing GAAP gross margin of 80.4%. This
compares with GAAP gross profit of $561 million in the year-ago
period, which represented GAAP gross margin of 79.8%. Non-GAAP
gross profit for the third quarter of fiscal year 2024 was $578
million, representing non-GAAP gross margin of 83.1%. This compares
with non-GAAP gross profit of $579 million in the year-ago period,
which represented non-GAAP gross margin of 82.5%.
GAAP operating profit for the third quarter was $163 million,
representing GAAP operating margin of 23.4%. This compares with
GAAP operating profit of $104 million in the year-ago period, which
represented GAAP operating margin of 14.7%. Non-GAAP operating
profit for the period was $233 million, representing non-GAAP
operating margin of 33.4%. This compares to non-GAAP operating
profit of $233 million in the year-ago period, which represented
non-GAAP operating margin of 33.2%.
GAAP net income for the third quarter of fiscal year 2024 was
$144 million, or $2.44 per diluted share compared to $89 million,
or $1.48 per diluted share, in the third quarter of fiscal year
2023. Non-GAAP net income for the third quarter of fiscal year 2024
was $199 million, or $3.36 per diluted share, compared to $194
million, or $3.21 per diluted share, in the third quarter of fiscal
year 2023.
Performance Summary Tables
GAAP Measures Non-GAAP Measures ($ in millions except
EPS)
Q3 FY2024 Q3 FY2023 ($ in millions except EPS)
Q3 FY2024 Q3 FY2023 Revenue
$
695
$
703
Gross profit
$
559
$
561
Gross profit
$
578
$
579
Gross margin
80.4%
79.8%
Gross margin
83.1%
82.5%
Operating profit
$
163
$
104
Operating profit
$
233
$
233
Operating margin
23.4%
14.7%
Operating margin
33.4%
33.2%
Net income
$
144
$
89
Net income
$
199
$
194
EPS
$
2.44
$
1.48
EPS
$
3.36
$
3.21
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
For the fourth quarter of fiscal year 2024, F5 expects to
deliver revenue in the range of $720 million to $740 million, with
non-GAAP earnings in the range of $3.38 to $3.50 per diluted
share.
“Based on our visibility to strong fourth quarter software
demand, we now expect fiscal year 2024 revenue toward the top end
of our prior expectations, at approximately $2.8 billion, or
roughly flat with last year,” said Locoh-Donou. “As a result of
continued operating discipline, and with some tax favorability in
our third quarter, we also are raising our earnings growth
expectations for the year. We now expect to deliver approximately
12% non-GAAP earnings per share growth compared to fiscal year
2023.”
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 29, 2024, 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 five 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, F5’s role as a partner with large
enterprises, F5’s visibility to strong fourth quarter software
demand, the Company’s future financial performance including
revenue, earnings growth, future customer demand, 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 certain non-recurring
right-of-use asset impairment charges, and other related recurring
costs in connection with the exit of its leased facilities. These
charges are not representative of the ongoing activity or costs to
the business. 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 multicloud application security and delivery company
committed to bringing a better digital world to life. F5
partners with the world’s largest, most advanced organizations to
secure every app — on premises, in the cloud, or at the edge. F5
enables businesses to continuously stay ahead of threats while
delivering exceptional, secure digital experiences for their
customers. For more information, go to f5.com. (NASDAQ: FFIV)
You can also follow @F5 on X (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.
SOURCE: F5, Inc.
F5, Inc. Consolidated Balance Sheets (unaudited,
in thousands) June 30, September
30,
2024
2023
Assets Current assets Cash and cash equivalents
$
934,809
$
797,163
Short-term investments
812
6,160
Accounts receivable, net of allowances of $3,685 and $3,561
419,986
454,832
Inventories
78,537
35,874
Other current assets
552,023
554,744
Total current assets
1,986,167
1,848,773
Property and equipment, net
154,238
170,422
Operating lease right-of-use assets
185,253
195,471
Long-term investments
7,298
5,068
Deferred tax assets
343,611
295,308
Goodwill
2,312,362
2,288,678
Other assets, net
425,521
444,613
Total assets
$
5,414,450
$
5,248,333
Liabilities and Shareholders’ Equity Current
liabilities Accounts payable
$
53,618
$
63,315
Accrued liabilities
259,874
282,890
Deferred revenue
1,142,090
1,126,576
Total current liabilities
1,455,582
1,472,781
Deferred tax liabilities
6,146
4,637
Deferred revenue, long-term
630,494
648,545
Operating lease liabilities, long-term
222,486
239,565
Other long-term liabilities
88,997
82,573
Total long-term liabilities
948,123
975,320
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, 58,284 and
59,207 shares issued and outstanding
17,898
24,399
Accumulated other comprehensive loss
(22,257
)
(23,221
)
Retained earnings
3,015,104
2,799,054
Total shareholders' equity
3,010,745
2,800,232
Total liabilities and shareholders' equity
$
5,414,450
$
5,248,333
F5, Inc. Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended June
30, June 30,
2024
2023
2024
2023
Net revenues Products
$
308,489
$
328,175
$
914,510
$
1,009,314
Services
387,006
374,467
1,154,936
1,096,881
Total
695,495
702,642
2,069,446
2,106,195
Cost of net revenues (1)(2)(3)(4) Products
80,813
87,940
248,834
286,590
Services
55,612
53,743
165,093
165,754
Total
136,425
141,683
413,927
452,344
Gross profit
559,070
560,959
1,655,519
1,653,851
Operating expenses (1)(2)(3)(4) Sales and marketing
205,550
207,202
615,277
673,383
Research and development
124,387
128,765
366,169
412,451
General and administrative
65,950
64,775
197,852
201,802
Restructuring charges
93
56,648
8,655
65,388
Total
395,980
457,390
1,187,953
1,353,024
Income from operations
163,090
103,569
467,566
300,827
Other income, net
8,529
2,896
24,385
10,335
Income before income taxes
171,619
106,465
491,951
311,162
Provision for income taxes
27,540
17,489
90,469
68,348
Net income
$
144,079
$
88,976
$
401,482
$
242,814
Net income per share - basic
$
2.46
$
1.48
$
6.82
$
4.04
Weighted average shares - basic
58,584
59,977
58,832
60,133
Net income per share - diluted
$
2.44
$
1.48
$
6.75
$
4.02
Weighted average shares - diluted
59,147
60,314
59,461
60,463
Non-GAAP Financial Measures Net income
as reported
$
144,079
$
88,976
$
401,482
$
242,814
Stock-based compensation expense
54,206
56,472
165,349
183,385
Amortization and impairment of purchased intangible assets
13,250
13,876
41,187
39,130
Facility-exit costs
1,264
1,527
2,070
5,066
Acquisiton-related charges
656
1,327
3,847
16,109
Restructuring charges
93
56,648
8,655
65,388
Tax effects related to above items
(14,709
)
(25,173
)
(45,861
)
(55,337
)
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
$
198,839
$
193,653
$
576,729
$
496,555
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
$
3.36
$
3.21
$
9.70
$
8.21
Weighted average shares - diluted
59,147
60,314
59,461
60,463
(1) Includes stock-based compensation expense as follows:
Cost of net revenues
$
7,189
$
7,297
$
22,320
$
22,516
Sales and marketing
20,783
22,561
63,800
75,171
Research and development
14,752
16,297
46,283
53,528
General and administrative
11,482
10,317
32,946
32,170
$
54,206
$
56,472
$
165,349
$
183,385
(2) Includes amortization and impairment of purchased
intangible assets as follows: Cost of net revenues
$
11,699
$
10,984
$
34,565
$
30,902
Sales and marketing
1,405
2,672
6,032
7,451
Research and development
94
-
282
-
General and administrative
52
220
308
777
$
13,250
$
13,876
$
41,187
$
39,130
(3) Includes facility-exit costs as follows: Cost of net
revenues
$
125
$
150
$
231
$
501
Sales and marketing
397
481
991
1,630
Research and development
447
542
(37
)
1,720
General and administrative
295
354
885
1,215
$
1,264
$
1,527
$
2,070
$
5,066
(4) Includes acquisition-related charges as follows: Cost of
net revenues
$
-
$
45
$
20
$
212
Sales and marketing
29
349
72
2,513
Research and development
501
330
828
5,331
General and administrative
126
603
2,927
8,053
$
656
$
1,327
$
3,847
$
16,109
F5, Inc. Consolidated Statements of Cash Flows
(unaudited, in thousands) Nine months
ended June 30,
2024
2023
Operating activities Net income
$
401,482
$
242,814
Adjustments to reconcile net income to net cash provided by
operating activities: Stock-based compensation
165,349
183,384
Depreciation and amortization
84,062
83,173
Non-cash operating lease costs
24,776
29,977
Deferred income taxes
(47,237
)
(85,091
)
Impairment of assets
-
3,455
Other
(3,059
)
2,137
Changes in operating assets and liabilities (excluding effects of
the acquisition of businesses): Accounts receivable
34,700
31,507
Inventories
(42,663
)
22,263
Other current assets
3,246
(47,488
)
Other assets
(17,513
)
13,231
Accounts payable and accrued liabilities
(22,353
)
(79,608
)
Deferred revenue
(2,537
)
98,054
Lease liabilities
(32,339
)
(34,200
)
Net cash provided by operating activities
545,914
463,608
Investing activities Purchases of investments
(1,600
)
(1,789
)
Maturities of investments
5,420
103,513
Sales of investments
-
16,085
Acquisition of businesses, net of cash acquired
(32,939
)
(35,049
)
Purchases of property and equipment
(24,352
)
(38,802
)
Net cash (used in) provided by investing activities
(53,471
)
43,958
Financing activities Proceeds from the exercise of
stock options and purchases of stock under employee stock purchase
plan
54,868
59,497
Payments for repurchase of common stock
(400,047
)
(290,041
)
Payments on term debt agreement
-
(350,000
)
Taxes paid related to net share settlement of equity awards
(9,952
)
(11,369
)
Net cash used in financing activities
(355,131
)
(591,913
)
Net increase (decrease) in cash, cash equivalents and
restricted cash
137,312
(84,347
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
376
3,729
Cash, cash equivalents and restricted cash, beginning of period
800,835
762,207
Cash, cash equivalents and restricted cash, end of period
$
938,523
$
681,589
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease
liabilities
$
38,193
$
40,619
Cash paid for interest on long-term debt
-
2,970
Supplemental disclosures of non-cash activities Right-of-use
assets obtained in exchange for lease obligations
$
11,772
$
10,544
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240729735046/en/
Investors Suzanne DuLong +1 (206) 272-7049 s.dulong@f5.com
Media Dan Sorensen +1 (650) 228-4842 d.sorensen@f5.com
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