F5 Networks Inc.
) delivered first quarter 2012 earnings per share (
) of 83 cents, edging out the Zacks Consensus Estimate of 81
The outperformance was attributable to solid revenues arising
from the growing demand for the company's products, as well as
market share gains. The company has also witnessed strong demand
from its enterprise customers owing to data center consolidations
in order to reduce expenses.
F5 Networks reported revenues of $322.4 million in the reported
quarter, up 19.9% from $268.9 million in the year-ago period. The
book-to-bill ratio was greater than one.
Revenue during the quarter surpassed the higher end of the
company's guidance of $315.0-$320.0 million. Revenue growth was
driven by strong demand for the new mid-range VIPRION 2400 across
all geographic regions and market verticals, Americas and Telecom
Continuous enhancement of product suites during the quarter led
to a year-over-year growth of 14.6% in the Product segment.
Revenues from the Services segment climbed 29.2% year over year,
fueled by growth in new and renewed service maintenance contracts
booked during the quarter.
Geographically, on a year-over-year basis, Americas grew 20.3%
year over year and represented 59.0% of revenues. EMEA grew 13.9%
year over year, accounting for 21% of revenues. Asia-Pacific and
Japan grew a respective 27.6% and 21.7%, representing 14.0% and
6.0% of revenues, respectively.
By vertical, telco was the strongest verticals, accounting for
23% of the total revenue. Finance came second with 21% of revenues
followed by technology, which represented 17% of revenues, while
Government accounted for 9% (including 4% from U.S. federal).
Gross profit in the reported quarter surged 21.3% from the
year-ago quarter to $266.8 million. Gross margin escalated 100
basis points year over year at 82.8%. The increase was supported by
a stable pricing environment for the company's products and an
improved product mix.
F5 Networks' operating expenses increased 19.2% year over year,
mainly due to a 22.4% rise in sales and marketing expenses
resulting from increased hiring. Despite the substantial rise in
expenses, operating income came in at $99.8 million, up 25.0% from
$79.9 million reported in the year-ago quarter. Operating margin in
the quarter was 30.9%, up from 29.7% in the year-ago quarter. The
margin improvement could be attributed to higher revenues.
Net income was $66.5 million or 83 cents per share compared with
$55.7 million or 68 cents a year ago. The company's earnings also
exceeded its own guided range of 79-81 cents.
All the figures in the quarter include the effect of stock-based
compensation expense. There was no other one-time item in the
Balance Sheet, Cash Flow & Share Repurchase
Cash, cash equivalents and short-term investments totaled
approximately $556.5 million at the end of the December quarter, up
from $542.6 million in the prior quarter. Receivables grew $22.2
million sequentially to $187.9 million. Inventories were $17.5
million versus $17.1 million in the prior quarter.
Total deferred revenue was $380.0 million, compared to $343.3
million in the previous quarter. F5 Networks' balance sheet does
not comprise any long-term debt. Cash flow from operations was
$131.9 million, up from $121.5 million in the prior quarter.
Capital expenditure was $5.9 million versus $9.9 million in the
prior quarter. F5 Networks repurchased 320,100 outstanding shares
for $34.5 million during the quarter.
For the second quarter of fiscal 2012, F5 Networks expects
revenues of $332.0 million to $337.0 million. On a GAAP basis,
earnings per share are expected in the range of 84-86 cents. The
Zacks Consensus Estimate for the first quarter is pegged at 84
cents. Excluding stock-based compensation expense, the company
estimates non-GAAP earnings per share between $1.05 and $1.07.
F5 Networks delivered impressive first quarter results, beating
the Zacks Consensus Estimate on the bottom line. Better execution
and focus on enterprise and service providers has placed F5
Networks well in the application delivery controller (
) market and helped it grab share from
Cisco Systems Inc.
). F5 Networks is also keen on expanding its cloud exposure.
With the rollout of TMOS ver.11, F5 Networks is witnessing
strong demand for its VIPRION products. On the other hand, the
company remains optimistic about its North American business and
seasonal strength in the U.S. federal business.
However, we believe that the positives are not reflected in the
company's guidance and this could be due to the stiff competition
in the networking market, concerns relating to margin
sustainability, Europe-U.S. federal spending and a tightening of
budgets in financial services.
Currently, F5 Networks has a Zacks #4 Rank, implying a
short-term Sell rating.
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): Free Stock Analysis Report
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