F5 Networks, Inc. (FFIV)
F4Q08 Earnings Call
October 22, 2008 4:30 pm ET
John McAdam - President and CEO
Andy Reinland - Senior Vice President and Chief Financial Officer
John Rodriguez - Senior VP and Chief Accounting Officer
Mark Anderson - Senior VP of Worldwide Sales
Edward Eames - Senior VP of Business Operations of Global Services
Chris Lynch - Senior VP of Data Solutions
Dan Matte - Senior VP of Marketing
Karl Triebes - Senior VP of Product Development and CTO
Mr. John Eldridge - Director of Investor Relations
Ittai Kidron - Oppenheimer & Co.
Ehud Gelblum - JP Morgan
Erik Suppiger - Signal Hill Group, LLC
Troy Jensen - Piper Jaffray
Ryan Hutchinson - Lazard Capital Markets, LLC
Mark Sue - RBC Capital Markets
Jeff Kvaal - Barclays Capital
Samuel Wilson - JMP Securities
Cobb Sadler - Deutsche Bank Securities
Matthew Robison - Pacific Growth Equities
Bill Choi - Jefferies & Co.
Jason Eider - William Blair & Co.
Jeff Evans - Sanford Bernstein
Tim Long - Banc of America Securities
Rohit Chopra - Wedbush Morgan Securities
Previous Statements by FFIV
» F5 Networks Inc. F2Q09 (Qtr End 03/31/09) Earnings Call Transcript
» F5 Networks, Inc. F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
» F5 Networks, Inc. F3Q08 (Qtr End 06/30/08) Earnings Call Transcript
Thank you, Brian and welcome all of you to our conference call for the fourth quarter and fiscal year 2008. Speakers on today's call are John McAdam, President and CEO and Andy Reinland, Senior Vice President and Chief Financial Officer, John Rodriguez, Senior VP and Chief Accounting Officer; Mark Anderson, Senior VP of Worldwide Sales; Edward Eames, Senior VP of Business Operations of Global Services; Chris Lynch, Senior VP of Data Solutions; Dan Matte, Senior VP of Marketing and Karl Triebes, Senior VP of Product Development and CTO are also with us to answer questions following our prepared comments.
If you have any follow up questions after the call, please direct them to me at 206-272-6571. A copy of today's press release is available on our website, f5.com. In addition, you can access an archived version of today's live webcast from the event's calendar page of our website till January 21. From 4:30 pm today until 5 pm Pacific Time, October 23, you can also listen to a telephone replay at 800-879-7966 or 402-220-5346.
During today's call, our discussion will contain forward-looking statements that 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 press release. Our quarterly release is described in detail in our SEC filings. Please note that F5 has no duty to update any information presented in this call.
One final note, if you are planning to attend our Analysts/Investors Meeting in Seattle on November 4 and have not registered, you can register online at F5.com/analyst-meeting or call Darlene Henderson at 206-272-6170.
Now, I will turn the call over to Andy Reinland.
Thank you, John. Capping another year of growth against the backdrop of a very challenging economic environment, F5's fourth quarter for fiscal year 2008 ended on a relatively positive note. Q4 was our 23rd consecutive quarter of revenue growth. We saw continued improvement in our non GAAP operating margin. We exceeded our GAAP and non GAAP earnings guidance and we generated record cash flow from operations of $59 million for the quarter.
Following my review of results for the fourth quarter in fiscal year 2008, I will provide guidance for Q1 and briefly discuss our goals and outlook for fiscal year 2009. Revenue for our fiscal fourth quarter was $171.3 million, up 18% over the same quarter last year and just over 3% from Q3. Our book-to-bill was greater than one. As we stated on our October 7 call, bookings for our newly released BIG-IP 3600 exceeded our forecast and we are unable to shift all orders for the product by quarter end. If we have been able to shift these orders, revenue would have been within our guided range of $172 million to $174 million and our book-to-bill would have still being greater than one.
Revenue from our core application delivery and networking business was $160.2 million compared to $153 million in Q3 and represented 94% of total revenue. ARX revenue was $4.7 million, down from $5.1 million in the prior quarter and represented 3% of total revenue. Higher past revenue was 4% of total revenue or $6.3 million, down from $7.5 million in Q3. From a geographic perspective, the America has represented 60% of revenue, EMEA accounted for 20%, APAC 12% and Japan 8%.
Results in EMEA reflected a drop-off in sales during the last weeks of the quarter and were below our expectations. By vertical, Telco represented 23% of revenue during the quarter. Technology, including largely internet content providers was 22% and the financial sector accounted for 16%. US Federal government generated 8% of revenue and totaled government was 12%. During Q4, we had one greater than 10% distributor, Avnet Technologies which accounted for 15.8%.
Product revenue of $115.8 million represented 68% of total revenue. Service revenue of $55.5 million was 32%. Continuing down the income statement, gross margin in Q4 was 77.3% including $1.2 million of stock-based compensation. Excluding stock-base compensation, non GAAP gross margin was 78%. Operating expenses were $106.7 million including $13.6 million of stock-base compensation expense and the one-time charge of $5.3 million related to office consolidation at our corporate headquarters.