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F5 Networks, Inc. (FFIV)
Q4 2012 Earnings Conference Call
October 24, 2012, 16:30 PM ET
John McAdam -- President and CEO
Andy Reinland -- EVP and CFO
Karl Triebes -- EVP, Product Development and CTO
Dan Matte -- EVP, Marketing and Business Development
Manny Rivelo -- EVP, Security and Strategic Solutions
John Eldridge -- Director, IR
Paul Silverstein -- Credit Suisse
Jeff Kvaal -- Barclays
Bill Choi -- Janney Capital Markets
Brian Modoff -- Deutsche Bank
Subu Subrahmanyan -- The Juda Group
Erik Suppiger -- JMP Securities
Catharine Trebnick -- Northland Securities
Eric Ghernati -- Bank of America/Merrill Lynch
Ittai Kidron -- Oppenheimer
Amitabh Passi -- UBS
Ryan Hutchinson -- Lazard
Previous Statements by FFIV
» F5 Networks' CEO Discusses F3Q12 Results - Earnings Call Transcript
» F5 Networks' CEO Discusses F2Q2012 Results - Earnings Call Transcript
» F5 Networks' CEO Discusses F1Q12 Results - Earnings Call Transcript
» F5 Networks, Inc. - Shareholder/Analyst Call
I'd now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Sir, you may begin.
Thank you, Victor. Welcome to all of you to our conference call for the fourth quarter and fiscal year 2012. John McAdam, President and CEO; and Andy Reinland, the Executive VP and Chief Financial Officer will be speakers on today's call. Other members of our executive team are also on hand to answer questions following John and Andy's prepared comments. If you have any follow-up questions after the call, please direct them to me at 206-272-6571. If you don't have a copy of today's press release, it's available on our website at f5.com.
In addition you can access an archived version of today's live webcast from the Events Calendar page of our website through January 23. From 4:30 PM today until 5 PM Pacific Time on October 25, you can also listen to a telephone replay at 888-568-0394 or 203-369-3916. During today's call, our discussion will contain forward-looking statements which include words such as believe, anticipate, expect and target.
These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by these statements. Factors that may affect our results are summarized in our quarterly release and described in detail on our SEC filings. Please note that F5 has no duty to update any information presented in this call.
Before we begin the call, I want to remind you that we are holding 2012 analyst/investor meeting in New York on November 15. If you are planning to attend the meeting and have not registered, we invite you to register online through the link on our IR Events Calendar entry on November 15. I hope you can join us in New York for that event.
Now, I'll turn the call over to Andy Reinland.
Thank you, John. F5's fiscal 2012 was a year of solid execution in a difficult macroeconomic environment. We were able to achieve 20% revenue growth, maintain world-class operating margins and delivered record earnings and cash flow. While developing products and services that set the stage for several years of continued revenue growth. Following discussion of results for the fourth quarter and for fiscal year 2012, we will provide guidance for Q1 2013 and outline our general planning assumptions and expectations for the year.
As a reminder, all non-GAAP numbers excludes stock-based compensation expense and amortization of purchased intangible assets. A reconciliation of GAAP to non-GAAP results is included with our press release.
For the fourth quarter of 2012, revenue of 362.6 million was within our guided range of 360 million to 370 million, up 3% from the prior quarter and 15% from the fourth quarter a year ago. Book to bill for the quarter was equal to one. Q4 product revenue of 209.7 million, up 6% from the fourth quarter of last year, represented 58% of revenue.
Service revenue of 152.8 million increased 30% year-over-year and accounted for 42% of revenue. Q4 revenue from our core application delivery networking business was 356.8 million and revenue from our ARX file virtualization business was 5.8 million.
On a regional basis, the Americas grew 8% year-over-year and represented 56% of revenue. EMEA representing 22% of overall revenue grew 29%. APAC at 15% of revenue grew 31% and Japan 7% of revenue grew 13% from a year ago.
By vertical, telco represented 19% of sales during the quarter, technology 17% and financial 20%. Total government was 17% of sales, including 10% from US Federal. During Q4 we had two greater than 10% distributors; Avnet Technologies which accounted for 16.8% of total revenue and Engro Micro which represented 12.8%.
Continuing down the income statement, GAAP gross margin in Q4 was 82.7%, non-GAAP gross margin was 84%. Operating expenses of 188 million were at the low end of our 188 million to 195 million guided range. And non-GAAP operating expenses were 164.6 million. GAAP operating margin was 30.8%. Our non-GAAP operating margin was 38.6%.
Other income for the quarter was 900,000. The Company's GAAP and non-GAAP net income for the quarter reflect the higher than expected effective tax rate. This resulted from a higher than expected impact of foreign permanent tax differences and a higher blended effective state tax rate which increased our GAAP effective tax rate for the fourth quarter to 39.9%, above our expectation of 35.5%.
Our non-GAAP effective tax rate was 37% above our 34% expectation. These higher than anticipated tax rates had an impact of approximately $0.06 to GAAP EPS and $0.05 to non-GAAP EPS. Reflecting the higher tax rate for the quarter, GAAP net income for Q4 was 67.7 million or $0.85 per diluted share below our guided range of $0.90 to $0.93. Non-GAAP net income was 88.7 million or $1.12 per diluted share, also below our guided range of $1.16 to $1.19.